Strengthen Debt Collection Rules

Section 1. Article 29-H of the general business law, as added by chapter 753 of the laws of 1973, subdivision 9 of section 601 as amended and subdivision 10 of section 601 and subdivision 3 of section 602 as added by chapter 342 of the laws of 2011, is amended to read as follows:

ARTICLE 29-H

DEBT COLLECTION PROCEDURES Section 600. Definitions.

601. Prohibited creditor practices.

602. [Violations and penalties] Creditor responsibilities.

603. [Severability] Prohibited debt collection practices.

603-a. Selling or transferring of debts.

603-b. Private right of action.

603-c. Violations and penalties.

603-d. Severability.

§ 600. Definitions. As used in this article, unless the context or subject matter otherwise requires: 1. "[Consumer claim] Debt" or "consumer debt" means any obligation or alleged obligation of a natural person for the payment of money [or its equivalent which is or is alleged to be in default and which arises] arising out of a consumer transaction wherein credit has been offered or extended to a natural person, and the money, property [or], insurance, service or services which [was] are the subject of the transaction [was] are primarily for personal, family or household purposes, whether or not such obligation has been reduced to a judgment. The term includes an obligation of a

EXPLANATION--Matter in italics (underscored) is new; matter in brackets

[ ] is old law to be omitted.

LBD11895-01-7

A. 8099 2

natural person who is a co-maker, endorser, guarantor or surety as well as the natural person to whom such credit was originally extended.

2. "Debtor" means any natural person who owes or who is asserted to owe a [consumer claim] consumer debt.

3. "[Principal creditor] Creditor" means any person, firm, association, corporation, [or] organization [to whom] or other business entity that offers or extends credit, creating a consumer [claim is] debt owed, due or asserted to be due or owed, [or any assignee for value of said person, firm, corporation or organization] but such term does not include any person, association, firm, corporation, organization or other business entity to the extent that it receives an assignment or transfer of a debt in default solely for the purpose of facilitating collection of such debt for another.

4. "Communication" means the conveying of information regarding a debt directly or indirectly to any person through any medium.

5. "Consumer" means any natural person obligated or allegedly obligated to pay any debt arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.

6. "Debt collector" means an individual, association, firm, corporation, organization or other business entity who, as part of his or her job, regularly collects or seeks to collect from a consumer a debt owed or due to another or alleged to be owed or due.

The term does not include:

(a) any officer or employee of a creditor while, in the name of the creditor, collecting debts for such creditor;

(b) any officer or employee of the United States, any state or any political subdivision of any state to the extent that collecting or attempting to collect any debt owed is in the performance of his or her official duties;

(c) any person while serving or attempting to serve legal process on any other person in connection with the judicial enforcement of any debt;

(d) any individual employed by a nonprofit organization which, at the request of consumers, performs bona fide consumer credit counseling and assists consumers in the liquidation of their debts by receiving payments from such consumers and distributing such amounts to creditors;

(e) any person while acting as a debt collector for another person, both of whom are related by common ownership or affiliated by corporate control, if the person acting as a debt collector does so only for persons to whom it is so related or affiliated and if the principal business of such person is not the collection of debts; or

(f) any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity (i) is incidental to a bona fide fiduciary obligation or a bona fide escrow arrangement; (ii) concerns a debt which was originated by such person; (iii) concerns a debt which was not in default at the time it was obtained by such person; or (iv) concerns a debt obtained by such person's secured party in a commercial credit transaction involving the creditor.

7. "Location information" means a consumer's place of abode and his or her telephone number at such place, or his or her place of employment.

8. "Verification of the debt" means a copy of the last bill or notice of collection sent from the creditor to the debtor, any judgment levied in conjunction with such debt, and, if applicable, a copy of the judg-

A. 8099 3

ment release and a copy of the written communication advising the debtor that his or her debt has been sold or transferred.

§ 601. Prohibited creditor practices. No [principal] creditor, as defined by this article, or his or her agent shall:

1. Simulate in any manner a law enforcement officer, or a representative of any governmental agency of the state of New York or any of its political subdivisions; or

2. Knowingly collect, attempt to collect, or assert a right to any collection fee, attorney's fee, court cost or expense unless such [changes] charges are justly due and legally chargeable against the debtor; or

3. Disclose or threaten to disclose information affecting the debtor's reputation for credit worthiness with knowledge or reason to know that the information is false; or

4. Communicate or threaten to communicate the nature of a consumer [claim] debt to the debtor's employer prior to obtaining final judgment against the debtor. The provisions of this subdivision shall not prohibit a [principal] creditor from communicating with the debtor's employer to execute a wage assignment agreement if the debtor has consented to such an agreement; or

5. Disclose or threaten to disclose information concerning the existence of a debt known to be disputed by the debtor without disclosing that fact; or

6. Communicate with the debtor or any member of his or her family or household at any time other than between the hours of 8:00 A.M. and 9:00 P.M. local time or with such frequency [or at such unusual hours] or in such a manner as can reasonably be expected to abuse or harass the debtor; or

7. Threaten any action which the [principal] creditor in the usual course of his or her business does not in fact take; or

8. Claim, or attempt or threaten to enforce a right with knowledge or reason to know that the right does not exist; or

9. Use a communication which simulates in any manner legal or judicial process or which gives the appearance of being authorized, issued or approved by a government, governmental agency, or attorney at law when it is not; or

10. If such [principal] creditor or agent sends more than fifty information subpoenas per month, fail to keep complete records concerning all information subpoenas sent by such [principal] creditor or agent. Such records shall be maintained for five years. Contemporaneous records shall be kept that set forth with specificity the grounds for such [principal] creditor or agent's reasonable belief, which must be certified and accompany each information subpoena pursuant to rule fifty-two hundred twenty-four of the civil practice law and rules, that the party receiving the subpoena has in its possession information about the debtor that will assist the creditor in collecting his or her judgement. In addition to any other penalty that [my] may be imposed, failure to maintain records in accordance with this subdivision shall subject such [principal] creditor or agent to a civil penalty of not more than fifty dollars per subpoena, up to a maximum of five thousand dollars per violation, in an action brought by the attorney general.

§ 602. Creditor responsibilities. Every creditor or his or her agent shall send a notice to the last known address of the debtor advising the debtor when his or her debt is being sold or transferred, prior to or contemporaneous with the sale of the debt. A copy of this notice shall be transmitted to the person, firm, organization or entity to whom the

A. 8099 4

creditor or his or her agent has agreed to sell or transfer the debt, along with a copy of any notice in regard to the debt provided to the creditor in accordance with paragraph (b) of subdivision seven of section six hundred three of this article. A creditor shall provide a copy of such notice to any debt collector hired to collect such debt.

§ 603. Prohibited debt collection practices. It is an unconscionable and deceptive trade practice for a debt collector to attempt to collect a debt owed, due, or asserted to be owed or due except in accordance with the following:

1. Acquisition of location information. Any debt collector communicating with any person other than the consumer for the purpose of acquiring location information about the consumer in order to collect a debt shall:

(a) identify himself or herself, state that he or she is confirming or correcting location information about the consumer, and, only if expressly requested, identify his or her employer;

(b) not state or imply that such consumer owes any debt;

(c) not communicate with any such person more than once, unless requested to do so by such person or unless the debt collector reasonably believes that the earlier response of such person is erroneous or incomplete and that such person now has correct or complete location information. For the purposes of this paragraph, the debt collector need not count as a communication returned unopened mail or a message left with a party other than the person the debt collector is attempting to reach in order to acquire location information about the consumer, as long as the message is limited to a telephone number, the name of the debt collector and a request that the recipient telephone the debt collector;

(d) not communicate by post card;

(e) not use any language or symbol on any envelope or in the contents of any communication effected by the mails or telegram that indicates that the debt collector is in the debt collection business or that the communication relates to the collection of a debt, provided that a debt collector may use his or her business name or the name of a department within his or her organization as long as any name used does not connote debt collection; and

(f) if the debt collector knows the consumer is represented by an attorney with regard to the subject debt and if the debt collector has knowledge of the attorney's name and address or can readily ascertain such attorney's name and address, not communicate with any person other than that attorney for the purpose of acquiring location information about the consumer unless the attorney fails to provide the consumer's location within a reasonable period of time after a request for the consumer's location from the debt collector and:

(i) informs the debt collector that he or she is not authorized to accept process for the consumer, or

(ii) fails to respond to the debt collector's inquiry about the attorney's authority to accept process within a reasonable period of time after the inquiry.

2. Communication in connection with debt collection. (a) Without the prior written consent of the consumer given directly to the debt collector after the institution of debt collection procedures, or without permission of a court of competent jurisdiction, a debt collector shall not communicate with the consumer in connection with the collection of any debt:

A. 8099 5

(i) orally, at any time other than between the hours of 8:00 A.M. and 9:00 P.M. local time or any unusual place known, or which should be known, to be inconvenient to the consumer;

(ii) at the consumer's place of employment. If the debt collector has received consent from the consumer to communicate with the consumer at the consumer's place of employment, the debt collector may communicate with the consumer, unless the debt collector knows or has reason to know that the consumer's employer or supervisor prohibits the consumer from receiving such a communication, or