New York City’s recently passed collection law, Int. No. 660-A, could present a country-wide threat for the debt collection industry if other legislative bodies use the new rules as a model for their collection laws.
The amended law passed in mid-March. (“NYC to Require Debt Buyers to Register as Collection Agencies,” March 17, 2009).
Eric Berman, president of the Commercial Lawyers Conference of New York and director of the National Association of Retail Collection Attorneys (NARCA), expressed his discontent with New York City’s amended law.
Berman told insideARM that it is an “unneeded, unnecessary and unconstitutional regulation.”
The amended law is slated to take effect in July. If that happens, Berman says that other cities and states will try to mimic it, because it could be a potential source of revenue. “The Consumer Bar is really excited about it because it has severe penalties,” he said.
Of particular interest is the requirement that passive debt buyers and collection attorneys obtain licensure as “debt collectors” from the New York City Department of Consumer Affairs.
The law will leave debt buyers, debt collection agencies and collection law firms at the whim of the Department of Consumer Affairs, and will give the department the power to make additional rules that go beyond the Fair Debt Collection Practices Act (FDCPA), Berman said.
Accounts receivable management companies doing business in New York City could find themselves liable for fines under the new rules and, separately, the FDCPA; a concept that Berman says amounts to double jeopardy.
Berman charges the law as a violation of the “separation of powers” clause in the U.S. constitution. “Being regulated by more than one body can create problems,” he said.
In testimony before the City Council in February – in advance of the bill’s passage – Berman also argued that the amendment violates the Federal Government’s right to regulate interstate commerce. He noted that, “Even if these amendments were legal, their effect would be to increase the difficulties consumers have in obtaining loans and paying their debts, and drive lenders and other financial institutions from doing business in New York City.”
Berman and others have formed the Coalition for Fair Debt Collection Practices – which Berman chairs – to fight the bill. He said that there are many other provisions that are unfair to debt collection attorneys.
One confusing stipulation included in the law is that lawyers do not need to be licensed in NYC to sue debtors, but they do need to be licensed and subject to the NYC Department of Consumer Affairs if they choose to contact a debtor in any other way to resolve an account.
The Coalition for Fair Debt Collection Practices is currently seeking funds to file a suit against New York City to overturn the law. For more information, contact Eric Berman at 631.486.4900 or by email: firstname.lastname@example.org.