July 7, 2009
Amy Cleary
(718)-383-7474
 
Assemblyman Joe Lentol: Legislation aims to
curb
abusive debt collection practices
 
Assemblyman Joe Lentol
(D-North
Brooklyn) announced the Assembly has
passed a package of bills he supported that will protect consumers from
improper debt collection practices and implement penalties for those
who
violate the law.
 
“We are facing
historically
difficult times. People who have never struggled to pay their bills are
now
being forced to consider defaulting on their debt,” Lentol said. “This
package
of bills will help protect debtors from unscrupulous debt collection
practices,
punish debt collectors who violate the law, and give people the
information
they need to get back on firmer financial ground.”
 
Informing consumers about
their rights
 
            Consumers
who cannot manage their debt may have their financial information
turned over
to debt collectors. Debt collectors’ profit margin depends on how much
they can
reclaim from a debtor, and some use deceitful practices or practices
that
border on harassment, both of which violate the law. “An effective way
to end
abuse and provide benefits to consumers and businesses is to inform
consumers
of the limitations placed on debt collectors by New
York
law,” Lentol said.
 
            Legislation
included in the package of bills would provide a “Debtor’s Bill of
Rights” to
consumers who are in default (A.271-A). The notice would contain
information
such as when a debt collector may contact a debtor, as well as the fact
that a
debt collector cannot threaten to contact your employer unless they
have
obtained a judgment against you.
 
            “Consumers
deserve to be treated fairly and reasonably, even when they have
outstanding
debts,” Assemblyman Lentol said. “At the same time, if outstanding
debts are not
paid, the cost of business increases – hurting business, competition
and the
consumer. By providing debtors a written notice of their rights, we can
curb
the abuses of the law and give consumers the confidence to deal with
their
financial problems.”  
             
Giving consumers the right
to take action for improper debt collection
 
           
Presently,
debtors often are harassed by debt collectors through their friends and
relatives, and also their work place, as a means of collection. The
Assembly
passed legislation intended to reduce harassment by debt collectors by
allowing
debtors a private right of action in debt collection cases (A.3532-A).
Any
person found guilty of improper debt collection practices under this
legislation will face potential reparations, including the payment of
actual
damages, punitive damages and attorneys’ fees.
 
            “Aggressive
collection tactics, outright harassment and dirty tricks intended to
beat debtors
into submission simply need to stop,” Lentol said. “Debt collectors
shouldn’t
be able to harass individuals by any means necessary –
without any consequences.”
 
Requiring debt collection
agencies be licensed by the state
 
           
Federal and
state laws regulate how debt collectors may communicate with debtors,
and
prohibit the use of unfair collection practices. Despite these legal
protections, the number of consumer complaints regarding methods of
debt
collection continues to rise. To protect consumers and maintain a high
level of
integrity in the debt collection
industry, the Assembly passed legislation requiring third-party debt
collectors
and debt buyers to obtain a license from the Department of State
(A.3926-C).
Licenses would be valid for two years and cost $500.
 
            Other
provisions of the bill include:
 
·       
requiring all licensed applicants to
submit a
summary of the methods used to confirm the validity of the debts being
collected, their record-keeping policy, and whether debts will be sold;
·       
authorizing the secretary of state
to refuse an
issuance of a license to any applicant found to have violated New
York’s Fair Debt Collection Practices Law or
the
federal Fair Debt Collection Practices Act;
·       
requiring debt collection agencies
to obtain
surety bonds between $10,000 and $75,000, depending on the number of
people
employed by the agency; and
·       
imposing penalties on violators;
debtors who
have been sued by an unlicensed debt collection agency can move for
dismissal
of the suit.
 
             Consumer
complaints received by the Federal
Trade Commission regarding third-party debt collectors grew for the 11th
consecutive year in 2008, and consumers filed more complaints against
third-party
collectors than any other industry, Assemblyman Lentol said. This
legislation
will provide all New York consumers the debt collection protections
currently
offered in at least 29 states, and in the cities of Buffalo and New
York.
           
Enhancing consumer
protections and closing gaps in current law
 
            Another
bill Lentol supported would implement
several new and enhanced consumer protections in debt collection
proceedings,
including reducing the statute of limitations on consumer credit
actions from
six years to three years and barring debt collectors from trying to
collect
debts on which the statute of limitations has expired (A.7558-A).  
 
Also included in the
package is
legislation stating that debt collection agencies that are attempting
to
collect outstanding debts of deceased individuals from surviving family
and
household members must inform those individuals that they are not
legally
obligated to repay the debts of the deceased (A.7889-B).
 
“Recent
investigations have shown that debt collection companies often
pursue debt collections after the legal statute of limitation has
expired, or
worse, after the debtor is known to be deceased,” Lentol said.  “In
this precarious economic climate, it is
unacceptable that deceptive debt collectors are seizing every
opportunity to
squeeze the last penny out of those who are desperately trying to pay
their
bills.”
 
Aligning New York with federal law
 
            The
Assembly also passed legislation
that would implement protections against improper and abusive debt
collection
practices and align New
York law with the federal
Fair Debt Collection Practices Act (A.8840-B).
Specifically, the bill would:
 
·       
provide
that creditors and debt collectors may only communicate with debtors
between
the hours of 8 a.m. and 9
p.m. local time;
·       
require
creditors and debt collectors to send notice to the last known address
of a
debtor when a debt is being sold or transferred;
·       
govern
how debt collectors communicate with a person other than the consumer
for the
purpose of collecting a debt, and how debt collectors communicate with
the
consumer after the institution of debt collection procedures;
·       
prohibit
debt collectors from engaging in threatening or abusive conduct in an
attempt
to collect a debt;
·       
require
debt collectors to cease collection activities until the collector
obtains and
mails verification of the debt if the debt is disputed in writing by
the
consumer; and
·       
provide
for a private right of action for damages against violators.
 
            “The
debt collection industry has changed significantly in recent years –
debts are
now often sold to third parties without consumers’ knowledge, leaving
consumers
to determine the validity of collection claims. Creditors and debt
collectors
often fail to inform consumers of important details related to the
debt,” Assemblyman
Lentol said. “By aligning New
York and federal law, we
are providing a consistent set of rules for debt
collectors to follow, while giving consumers adequate remedies for
stopping
abusive practices.”
 
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