Relates to provisions concerning debt collection procedures

Summary Of Specific Provisions: This bill would implement several protections against improper and abusive debt collection practices. The bill would largely align New York law with the federal Fair Debt Collection Practices Act. Specifically, the bill would:

- provide that-creditors and debt collectors may only communicate with debtors between the hours of 8:00 a.m. and 9:00 p.m. local time;

- require creditors and debt collectors to send a notice.to the last known address of a debtor advising the debtor when his or her debt is being sold or transferred;

- govern how debt collectors may communicate with any person other than the consumer for the purposes of acquiring location information about the consumer in order to collect a debt;

- govern how debt collectors may communicate with a consumer after the institution of debt collection procedures;

- prohibit debt collectors from engaging in threatening or abusive conduct, making false, deceptive, or misleading representations, or using any unfair or unconscionable means to collect or attempt to collect a debt;

- require debt collectors to send the consumer a written notice titled "debtor's rights" within five days after the initial communication in connection with a debt, which shall contain information about the debt and a statement regarding the consumer's ability to dispute the debt;

- provide that if the consumer, within thirty days of receiving the "debtor's rights" notice, notifies the debt collector in writing that the debt is disputed the debt collector shall cease collection activities until the collector obtains and mails to the consumer verification of the debt;

- provide for a private right of action for actual damages, punitive damages up to $2,500, and reasonable attorney's fees, for a violation of this article; and

- provides a safe harbor for unintentional violations, absent any actual damage to the consumer, and a two year statute of limitation.

Justification: Many consumers today are finding themselves the subjects of debt collection proceedings. Creditors and debt collectors in pursuit of collection often fail to inform the consumers of the important details related to the debt, such as where the debt originated, or the name and address of the original creditor. This creates a frustrating process for a debtor who disputes all or part of

the claimed debt. In addition, consumers are sometimes subjected to persistent and abusive debt collection tactics.

In the past four years, the Consumer Protection Board has received approximately 3,894 debt collection complaints and/or inquiries. This bill would provide consumers with adequate recourse to address the kinds of improper practices described in those complaints, while still allowing businesses to collect upon the debts owed to them.

The debt collection industry has changed significantly since Article 29-H of the General Business-Law was enacted in 1973, and the federal Fair Debt Collection Practices Act (FDCPA) was enacted in 1977. Debts are often sold to third parties without consumers' knowledge, and consumers are left to determine the validity of collection claims from unknown entities. Indeed, a recent Federal Trace Commission (FTC) report noted that "The most significant change in the debt collection business in the past decade, however, has been the advent and growth of debt buying (i.e. the purchasing, collecting, and reselling of debts in default)." The report recommended that the FDCPA should be amended to reflect the advent and expansion of the debt buying industry. This bill would address this problem by requiring that debt collectors provide notice to consumers when their debt is sold. This would allow consumers to determine the source and legitimacy of debt collection notices they receive from third parties with whom they have not had prior contact.

Consumers also need recourse against improper debt collection practices. Thus, the statute would incorporate the provisions of the FDCPA into state law, and provide consumers with a private right of action to enforce the terms of this statute, and the right to recover actual damages.

By largely aligning New York and federal law, this bill would provide a consistent set of rules for debt collectors to follow, while giving consumers adequate remedies for stopping abusive practices.

Prior Legislative History: New bill.

Fiscal Implications For State And Local Governments: None.

Effective Date: 1st of January after having become law.