New York DFS Clarifies New Debt Collection Regulations

By: Steven M. Kaplan, Gregory N. Blase, Christopher E. Shelton

Responding to industry questions about New York’s new debt collection regulations, most of which take effect on March 3, 2015, the Department of Financial Services has published a detailed FAQ on its website. We previously analyzed the regulations in a client alert.

As we anticipated in our alert, the FAQ confirms that “debt servicers, including companies that service student loans, home equity loans or mortgages … who collect or attempt to collect a debt that was not in default at the time it was obtained for collection are not” subject to the regulations. This parallels how the federal Fair Debt Collection Practices Act (“FDCPA”) is interpreted.

The FAQ highlights that: “Some sections of [the new regulations] apply only to debts that have been charged-off, and others apply to any debt.” The FAQ also responds to various detailed questions about the new procedure for “substantiating” a charged-off debt. See Part IV of our alert for a summary of the provisions specific to charged-off debt, which have a later effective date of August 30, 2015.

Additionally, the FAQ notes that the regulations require debt collectors to provide the following disclosure under certain circumstances: “suing on a debt for which the statute of limitations has expired is a violation of the Fair Debt Collection Practices Act, 15 U.S.C. § 1692 et seq.” However, the FAQ does not address concerns that this might not be a completely accurate statement of current federal law.

The complete FAQ is available here. We understand that Department of Financial Services may provide additional guidance on the debt collection regulations in future.