Updated rules published Wednesday by the New York State Department of Financial Services (DFS) include better disclosures for collection communications, provisions for email communication, protections against time-barred debt collection and stronger debt verification procedures.
The changes, geared to third-party collection firms and debt buyers, were published in the New York State Register and are subject to a 30-day comment period.
The updates seek to clarify collectors and debt buyers requirements for providing information, particularly if an account has been charged off. They make clear that only a consumer has the right to initiate electronic communication and that emails will not be allowed to employer-operated addresses.
Past provisions removed from the update include dropping from the definition of "debt collector" any person performing collection related to or during litigation.
Benjamin Lawsky, superintendent of DFS, began cracking down on the collection industry one year ago when he first proposed rules to tighten record-keeping requirements and other collection practices for banks, collection agencies and debt buyers.
The reforms added to a groundswell of regulatory pressure on the collection industry, including mounting scrutiny from lawsuits and enforcement actions by the Consumer Financial Protection Bureau, the Office of the Comptroller of the Currency, the Federal Trade Commission and state attorneys general.
The rules introduced at that time included:
Requiring that collectors provide borrowers with better information and disclosures about the amounts that are owed, including a breakdown of each charge added to the debt and each payment made after the debt was written off.
Requiring collectors to inform borrowers in every communication if the statute of limitations has expired on a debt
Providing borrowers with written confirmation of any debt settlement agreement, and with written confirmation and acknowledgement when those agreements are fulfilled, to prevent borrowers "from being pursued for debts that they already paid off."
Allowing borrowers to communicate with collectors by email.
Banks historically have filed lawsuits to compel borrowers to repay defaulted credit card loans, but they also sell debts to outside collection agencies for cents on the dollar. Those debt buyers then file their own suits seeking repayment.
Consumer advocates have long raised concerns about the amount of documentation that banks keep or provide to third-party debt buyers to support such lawsuits, and allegations of "robo-signing" and incomplete paperwork have been rampant.