New Debt Collection Guidance from New York

Six months after rolling out new debt collection rules requiring collectors to - among several measures - produce loan documents or a court judgment upon request, the New York State Department of Financial Services on Tuesday released additional guidance.

The regulatory agency, clarifying whether Fair Debt Collection Practices Act disclosures and New York State disclosures can be included in the same communication to debtors, said both can be provided as long as the disclosure required by the DFS rule is timely and clearly presented.

The additional guidance reviews several other questions, including those related to “substantiation” legal requirements and concerns about purchased debts. For a full list of new questions answered by the DFS, click here. The original text of the rules is available here.

The DFS makes it clear that if substantiation is requested by the consumer but cannot be provided, a violation of the regulation could be avoided if the consumer’s debt is forgiven. 

Collectors who are incapable of forgiving the debt can avoid a violation of the rule by ensuring the debt can be substantiated before starting collections or receiving assurance from the creditor that the debt can be extinguished if substantiation is requested but cannot be provided. 

A collector also can have the original creditor provide the substantiation, but would still be responsible for ensuring the information is provided within the time frame required by the rule. A collector cannot satisfy the obligation to provide substantiation by simply returning the debt to the creditor.

The clarifications are available on the New York DFS website. The department announced the publication of the supplemental guidance during a "Debt Collection Dialogue" hosted Monday by the Federal Trade Commission in Buffalo, N.Y. 

In New York state last year, regulators received more than 20,000 complaints about collection practices.  

New York Superintendent of Financial Services Benjamin Lawsky said the department's regulations will help guide an industry that has gone largely unregulated despite thousands of consumer complaints each year. He has repeatedly said the industry is filled with too many unsavory people who will do whatever it takes to abuse and deceive consumers, such as trying to collect debts that already have been paid, settled or have surpassed the statue of limitations.Many of the rules went into effect in March. Certain disclosure, debt verification and communication requirements are set to go into effect in August. Most of the new requirements were announced last summer, Collections & Credit Risk reported.