NYDFS Proposes Amendments to Debt Collection Regulation

On October 29, the New York Department of Financial Services issued proposed amendments to 23 NYCRR 1, its regulation titled “Debt Collection by Third-Party Debt Collectors and Debt Buyers.”  The proposed amendments would make significant changes to the sections of the current regulation dealing with initial disclosure requirements, statute of limitations disclosures, substantiation requirements, and telephone and electronic communications.  They would also align the DFS regulation with several of the CFPB’s requirements in Regulation F.  Regulation F is set to become effective on November 30, 2021.

Required initial disclosures by debt collectors

23 NYCRR 1 currently requires debt collectors to provide certain written information, within five days of the initial communication (unless the initial communication was in writing and included the notice).  The proposed amendments revise the information about the debt that must be included in the initial disclosures.  They require a debt collector to disclose:

•  Name of the creditor to which the debt was originally owed or alleged to be owed

• Account number or a truncated version of such number

• Merchant brand, affinity brand, or facility name associated with the debt

• Name of the creditor to which the debt is currently owed

• Date of default

• Date of last payment

• For a debt not reduced to judgment, the applicable statute of limitations expressed in years

• Itemized accounting of the debt, including current amount due

Additionally, these amendments require a debt collector to send, either in the initial notice or within five days of it:

• Information about the debt

• A notice that the debt collector is prohibited from engaging in abusive, deceptive, and unfair debt collection efforts

• A notice that the consumer has the right to dispute the validity of the debt, including instructions on how to dispute

• A notice that some forms of income are protected from debt collection

Disclosures for debts for which the statute of limitations may be expired

Under the current regulation, a debt collector must provide specific disclosures to the consumer before it accepts payment when it knows or has reason to know that the statute of limitations for a debt may be expired.  The proposed amendments require a debt collector to include the disclosures in all communications, including the initial disclosures, when it seeks to collect on a debt for which it has determined that the statute of limitations has expired.  (The proposal would change the required disclosures to inform the consumer that the applicable statute of limitations “has expired” rather than that it “may be expired.”)

The proposed amendments would also add a prohibition on oral communications—telephone calls or other means—by a debt collector with a consumer regarding a debt for which the debt collector has determined that the applicable statute of limitations has expired unless the debt collector has directly received from the consumer “prior written and revocable consent” or has the express permission of a court of competent jurisdiction.

Substantiation of consumer debts

Currently, 23 NYCRR 1 allows debt collectors 60 days to provide written substantiation of a charged-off debt to a consumer if the consumer disputes the validity of the debt in writing and requests substantiation documentation.  The proposed amendments reduce this period to 30 days but would require the dispute to have been made in writing to trigger the debt collector’s obligation to provide written substantiation.  The proposed amendments also add the requirement that a debt collector must provide substantiation by hard copy through the mail.  If the consumer has consented to receive electronic communications from the debt collector, the debt collector would be required to provide substantiation both by mail and electronically.  Debt collectors also currently must retain any requests for substantiation, as well as all documentation sent to the consumer, “until the debt is discharged, sold, or transferred.”  The proposed amendments would require documentation to be retained for the longer of either seven years, or until the debt is discharged, sold, or transferred.

Communication by telephone or through electronic mail

The proposed amendments would add significant limits on both telephone and electronic communications.  The proposed amendments add requirements that a debt collector must comply with to correspond with a consumer electronically to collect a debt.  Such requirements include that the consumer must have voluntarily provided contact information for electronic communications (e.g., email address, a telephone number for text messages) and have given written revocable consent for electronic communications from the debt collector in reference to a specific debt.

With regard to telephone calls, the proposed amendments cap the number of calls a debt collector can make to a consumer absent the consumer’s prior written and revocable consent given directly to the debt collector.  Specifically, the proposed amendments would allow a debt collector to make no more “than one telephone call and three attempted telephone calls per seven-day period per consumer.”  (The one phone call cap can be exceeded in specified circumstances, including when a call is made in response to the consumer’s request to be contacted.)  Because the proposed caps apply on a per consumer basis, they are stricter than those in Regulation F, which allow seven attempts in seven days per debt.

Comments on the pre-proposed amendments were due by November 8.  The DFS will next publish the proposed amendments in the New York State Register, with any changes made based on comments received on the pre-proposal.