A New York City law regulating collections doesnt usurp the state's authority to regulate the industry, the New York Court of Appeals ruled Tuesday.
Local Law 15, adopted in 2009, added law firms that perform debt collection and debt buyers to the list of entities regulated by the city. But it left out attorneys and law firms that collect debt on behalf of clients through litigation.
Law firms Eric M. Berman PC and Lacy Katzen LLP sued the city, arguing the law encroached on the state's authority to regulate lawyers. A federal judge sided with the law firms in 2012 but the Second Circuit two years later ruled that the law didn't appear to regulate attorneys collecting debts.
Not completely comfortable deciding the case, the three-judge panel asked the New York State Court of Appeals for help on two questions. First, does the law encroach on state authority to regulate lawyers? Second, does it conflict with the New York City charter, which designates the Department of Consumer Affairs as the go-to agency to license debt collectors.
Chief Judge Jonathan Lippman, in Tuesdays ruling, concluded that Local Law 15 did neither, noting that it "does not impose an additional requirement for attorneys to practice law" and "can be seen as complementary to and compatible with" current judiciary laws regulation attorneys.
"It may be more difficult, in certain cases to determine where to draw the line between debt collection and practice of law," Lippman wrote in the 4-2 ruling.
New York City has regulated collection agencies since 1984. Local Law 15 requires regulated firms to provide debtors with call-back numbers and other information, and mandates a fine of up to $100 for violations. It was designed, attorneys for the city argued, to tackle a growing niche industry of law firms performing collection duties.
In a dissenting opinion, Judge Eugene Fahey said many lawyers have to call consumers for debt-collection purposes, often on a daily basis.
"Local Law 15, by its plain terms, could be interpreted to apply to any attorney who regularly represents creditors in collecting debts," he wrote. "Statewide uniformity in the field of licensing attorneys and the practice of law is of the utmost importance. Taken to its logical extreme, if this field were open for local government regulation, New York City could require its own bar exam for attorneys ... or Buffalo could develop its own rules of professional conduct."
