The New York City Department of Consumer Affairs has issued a proposed rule to implement Local Law No. 15. See our previous Alert on Local Law No. 15 dated March 17, 2009. The rule would establish various requirements, including a requirement for debt collection agencies to maintain records necessary for the Department to enforce compliance with the applicable laws and rules.

Documentation Verifying a Debt

Local Law No. 15 provides that after receiving a verification request from a consumer, a debt collection agency must provide the consumer with written documentation identifying the original creditor and an itemization of the principal and charges due. Under the proposed rule, the written documentation identifying the original creditor must be a copy of the original debt document or a written confirmation of the indebtedness to the originating creditor. The itemization must provide (i) the total amount remaining due on the total principal balance of the indebtedness to the originating creditor and (ii) each additional charge or fee claimed or alleged to be due that separately (a) lists the total for each item and (b) identifies and describes the basis of the consumer’s obligation to pay it.

Time-Barred Debt Disclosure

Local Law No. 15 prohibits a debt collection agency from attempting to collect a time-barred debt unless the agency first provides information on the consumer’s legal rights with respect to the debt. The proposed rule requires a specific notice warning the consumer that the statute of limitations bars the creditor from taking legal action on the debt and that a voluntary payment may restart the statute of limitations. The proposed rule also establishes requirements with respect to the type-size, color and location of the notice.

Written Confirmation of Debt Payment Schedule or Settlement Agreement

Local Law No. 15 requires a debt collection agency to provide written confirmation of any debt payment schedule or settlement agreement reached with the consumer. Under the proposed rule, the document must, among other things, identify the originating creditor of the debt, the debt collection agency, the employee of the agency who concluded the schedule or agreement, the name and address of the consumer, the date on which the schedule or agreement was made, the specific amount and date on which each payment is due, the address where the payments are to be mailed, any other terms of the schedule or agreement and the conditions for satisfying the outstanding balance.

Recordkeeping Requirements

The proposed rule requires a debt collection agency to maintain detailed records that will enable the Department to enforce compliance with the disclosure and documentation requirements of the applicable laws and rules, such as with regard to purchased debts, a record of the name and address of the seller, the date of the sale and the amount of the debt at that time and recordings of complete conversations with all consumers (or with a randomly selected sample of at least 5% of all calls made or received by the debt collection agency) along with a copy of contemporaneous notes of conversations with consumers.

ACA Comments

In comments submitted to the Department, ACA International (ACA) has provided several recommendations, including:

  • Expanding the time-barred debt notice to include language informing the consumer that a failure to pay may affect the consumer’s ability to obtain credit or employment
  • Not requiring debt collection agencies to record telephone calls with consumers because of the significant administrative and financial burdens of implementing recording programs
  • Delaying the effective date and enforcement of the rule for at least one year to give debt collection agencies a sufficient amount of time to review and understand the rule and develop and implement necessary changes to internal policies and procedures
  • Requiring debt collection agencies to verify debts only upon written requests

Feel free to contact us for a copy of the proposed rule or additional information on the proposed rule and ACA comments or assistance with your federal, state or local compliance needs, including time-barred debt.

  • Mike Tomkies and Chuck Gall