New York City Mayor Michael R. Bloomberg and Department of Consumer Affairs (DCA) Commissioner Jonathan Mintz this week announced new collection regulations designed to stop abusive collection tactics.

The regulations state that any collection agency attempting to collect from a New Yorker must provide proof the debt is owed at the consumer’s request. The collector must offer a copy of the original debt documentation, a copy of the final account statement of the originating debt, a document itemizing the remaining amount due - including any additional fees or charges claimed to be due - and the basis of the consumer’s obligation to pay them.

DCA has received 2,667 collection complaints in the past three years, according to a fact sheet the agency provided. In that time, the agency restored $4.2 million in wrongful debt, charging back on average $1,559 per violating company, according to the fact sheet.

The New York attorney general's office seeks restitution for debtors ensnared in illegal collection practices. DCA has forced some violating companies to pay fines or surrender their licenses. Between January 2008 and March 2010, at least 32 paid a median fine of $300, according to testimony given by Johnson Tyler, an attorney for South Brooklyn Legal Services, which helps low-income people fight illegal debt collectors. During that time, at least 11 had their licenses revoked.

Some advocates feel that civil penalties like those may not be enough. Carolyn Coffey, co-author of a 2008 report looking at collector's abuse of the court system, says these agencies sometimes view fines as the cost of doing business. "...a criminal charge, that's something different," she adds.

 

Other provisions of the newly introduced regulations include disclosing the consumer’s rights regarding the statute of limitations, and providing written confirmation of the debt payment schedule or settlement within 21 days of the agreement. Also, collection agencies must provide New Yorkers with a phone number that must be answered by a live operator and not an answering service.

“New Yorkers have long had strong protections when it comes to debt collection – in fact, the strongest local protections in the country,” Bloomberg said, in a prepared statement.“As the national recession worsened, exploitative debt collection schemes have become more brazen. Collectors get lists online and harass everyone with the same name on the list, putting every person they call on the defensive. The measures we are announcing today will help stop this rising tide of wrongful and financially harmful collection tactics, and protect New Yorkers from their often damaging consequences.”

“Wrongful debt collection is more than just annoying and stressful,” adds Consumer Affairs Commissioner Jonathan Mintz. “Such wrongful collection attempts can cause serious and long-term damage to a family’s finances, including seized bank accounts, damaged credit ratings, and more."

During 2009, the City’s Department of Consumer Affairs erased more than $1 million in debt that New Yorkers didn’t legally owe but were pressed to pay anyway. Wrongful debt collection topped the list of complaints to DCA for the second consecutive year. Last year, the city received more than 830 complaints against collectors.

Any business collecting debts from New York City residents must be licensed by DCA and must follow strict guidelines set by New York City Law. Currently, there are approximately 1,700 licensed debt collectors from all over the country attempting to collect debts from New York City residents.

For more information, see this related story about the New York attorney general's office cracking down on process servers.

Collections & Credit Risk wants your feedback on this story. Contact Darren Waggoner at darren.waggoner@sourcemedia.com or 815.463.9008.


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