The New York Department of Financial Services (DFS) has amended several provisions of itsThird-Party Debt Collector and Debt Buyer Regulations and issued additional guidance in the form of new frequently asked questions (FAQs). The regulations are now fully effective. Certain provisions were effective March 3, 2015, and the remainder became effective on August 30, 2015. The amendments will be effective upon their publication in the New York Register on September 9, 2015.
The DFS regulations cover debts arising from consumer loans and exclude credit that a seller of goods or services provides in order for a consumer to purchase goods or services directly from the seller. The regulations also do not cover the collection of debt through litigation or when enforcing a money judgment.
Theamendments revise three sections of the regulations:
- Section 1.2(a)(2) dealing with initial disclosures is amended to clarify that the notice regarding exempt income does not have to be in writing if it is contained in the initial communication or the consumer has paid the debt.
- Section 1.4(c) dealing with the requirement to substantiate charged-off debts is amended to remove language which allowed a copy of a judgment against the consumer to be used to substantiate a debt.
- Section 1.5(a)(2) dealing with the notice of exempt income which must be provided within five days of agreeing to a debt payment schedule or other agreement to settle a debt is amended to clarify that the types of income listed “may” be exempt.
The DFS also added 13 new FAQs to the existing 17 FAQs. The new FAQs, which were released over the past several months, include the following:
- Three new FAQs deal with the substantiation requirement. They clarify that a debt collector that fails to provide the required information within 60 days of receipt of a substantiation request can avoid a violation of the regulations by extinguishing the debt within the 60-day period; cannot satisfy the obligation to substantiate a debt by returning it to the creditor; and can have the original creditor provide the required information but remains responsible for ensuring that the information is provided within the 60-day period.
- A new FAQ clarifies that a bank that acquires another bank and its debts remains the “original creditor” for purposes of the regulations but a bank that simply acquires debts may not be the “original creditor” and, depending on the circumstances, could be a “debt collector.”
- A new FAQ clarifies that a disclosure required by the New York regulations can be combined with disclosures required by the Fair Debt Collection Practices Act (FDCPA) as long as the New York disclosures are provided within the required timeframe and, taking into account other information being provided, are presented in a clear and conspicuous manner.
Attorneys in Ballard Spahr’s Consumer Financial Services Group regularly advise clients on compliance with the FDCPA and state debt collection laws and defend clients in FDCPA lawsuits and enforcement matters. They also prepare clients for their first Consumer Financial Protection Bureau examinations. The Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws, and its skill in litigation defense and avoidance. Further, the Group regularly defends debt collectors and debt buyers in individual and class action litigation brought in New York state and federal courts, as well as enforcement actions brought by the DFS, New York Attorney General, and New York City Department of Consumer Affairs.
For more information, please contact Consumer Financial Services Group Practice Leader Alan S. Kaplinsky, John L. Culhane, Jr., Justin Angelo, or Heather S. Klein.
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