Debt Collectors Praise New Regulation In NY
New York finalized new debt collection regulations on Wednesday, making them some of the most debtor-friendly in the country.
The state Department of Financial Services wrote and revised the new regulations with the help of both consumer advocates and debt collectors, pleasing both constituencies.
The rules are aimed at cracking down on an industry widely seen as under-regulated and full of bad actors. Officials say they have received more than 20,000 consumer complaints so far this year. Complaints range from harassing phone calls to incorrect debt amounts.
"An example would be someone trying to collect on debts they don't legitimately have the right to collect on or debts that were already paid," said Jan Stieger, Executive Director of DBA International, a debt collection trade group.
Stieger and others in the industry say the Department of Financial Services's new rules are welcomed by legitimate debt collectors because they make it harder for unscrupulous collectors to operate.
Stieger adds that having all debt collectors follow the same disclosure rules will make it easy for them to collect debts. A common industry practice of buying and reselling debts, Stieger says, confuses consumers into thinking the debt is not theirs.
"The increased documentation will help the consumer get to the point where they actually recognize the debt. Because it very well may be a debt that they owe, but they may not recognize it," Stieger said.
Starting in January, debt collectors will be required to tell debtors their rights at the first point of contact. Collectors will also be required to notify consumers if the statute of limitations on debts has run out before they accept a payment.
The regulations also require collectors to provide documentation when a debt is settled and offer the option for consumers to communicate by email.
New York is second only to California in reshaping debt collection rules to favor debtors.
Connecticut recently passed legislation requiring debt collectors to be licensed and also forbids collecting debts past their statute of limitations. Connecticut officials say future legislation is forthcoming.
States have taken the lead in regulating debt collectors. The U.S. Consumer Financial Protection Bureau, however, is currently in the process of rewriting their debt collection rules, which were last updated in 1977.