The New York State General Assembly this week passed the Consumer Credit Fairness Act designed to curb abusive debt collection lawsuits.

"There is an epidemic of unfair debt collection lawsuits in New York State," said Assembly Speaker Sheldon Silver. "In many instances, these actions are brought against low and moderate income New Yorkers who are not aware a lawsuit has been filed against them, leaving them with little recourse and ruining their credit for many years.

"Unfortunately, the justice system is being abused by unscrupulous third-party debt buyers and harming vulnerable New Yorkers. This bill would institute several measures to address these abusive debt collection practices and combat this menace."

The bill also aims to cut in half the statute of limitations in the state.

Some specifics of the bill include:

  • requiring notice of a pending consumer credit action to be mailed to the defendants by the clerk of the court;
  • requiring court filings to include more information about the debt targeted in a lawsuit, such as identifying the debt or account and providing proof that the debt is owed to the plaintiff;
  • lowering the statute of limitations for consumer credit transactions from six years to three years, and eliminating the right to collect the debt once the statute of limitations is expired; and
  • terminating the ability of debt buyers to sue on expired debt.

"Abusive debt collection lawsuits exploit gaps in our state's laws," said Judiciary Committee Chair Helene Weinstein. "This bill takes important steps to close these loopholes to protect consumers and helps to address the long-term impact of economic abuse, including identity theft, which is often suffered by domestic violence victims at the hands of their abusers.
"All New Yorkers, particularly our working families and seniors, deserve fair treatment and full disclosure when dealing with debt collection procedures," added Codes Committee Chair Joseph Lentol. "Through the approval of this legislation, we will put an end to abusive debt collection practices by making the process more transparent and equitable."

Claudia Wilner, senior staff attorney at NEDAP, a member of New Yorkers for Responsible Lending, said, "We now call upon the Senate to pass [the legislation] this legislative session to put an end to abusive debt collection practices. New Yorkers, particularly those who are low-income, elderly, disabled or domestic violence survivors, have been harassed by these unscrupulous debt collectors for far too long."

The bill next goes to the New York Senate. The Act has been introduced iin the past and a similar bill passed the Assembly in both 2009 and 2010 but failed to make it out of Senate committees.

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