NYC Collection Law Could Signal Problems for the ARM Industry
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: eberman@ericbermanpc.com.
So here’s the real question… Is this an attempt to resolve a “real” problem for consumers, or is this just some “smart” city bureaucrat’s way of raising revenue? /sarcasm off
Thank you INSIDEARM for your article. This law is no joke. It will have a tremendous impact on all consumer collections in New York City. Other parts of the law not discussed in the article, include validation requriements far beyond the FDCPA and provide severe penalties for any violation as solely determined by the New York City Department of Consumer Affairs. For instance, a penalty of $100 per contact, that is $100 for each and every letter and phone call made to a New York City resident consumer, can be added to all the other penalties in the Bill. There is no maximum. Please help us fight this Bill.
The new NYC laws are not only affecting licensing, they are affecting the regular day to day business of the collection agencies. I read the new laws and it seems to me that the city’s goal is to drive the collection agencies out of business by implementing laws that make it harder and harder to operate.
All the City Council and Mayor are doing is pandering to their constituency.
I’m concerned about the level of “regulation” that will be forthcoming, now that the DCA people have finally had their way.
I don’t see this as any more of a threat than FDCPA. Debt buyers have always been more agressive than the 3rd party agencies and their action has given the industry a black eye. It is way past time debt buyers were held accountable to the laws the rest of us have supported and agreed to since 1977.
Nothing ever gets better in this Country anymore. The gov’t wants to run everything but when they can’t collect taxes, parking tickets, student loans etc., they contract it out to private entities and then try to make the process more cumbersome. Mass., Tx and Fla all debtors havens. Now NYC maybe becoming the worst.
Consumer collection agencies have been licensed in NYC for well over 20 years. This law merely extends tht licensing to debt buyers and attorney non-legal activity such as writing letters and making phone calls. In short, when they are acting as a collection agency.
The arguments about Interstate Commerce and the Separation of Powers etc., have been well tested in courts through out the country and are not germane to this issue.
The fact remains that states and municipalities have the right to pass laws that protect their citizens.
The only onus on debt buyers and attorneys is to pay a nominal licensing fee and comply with the FDCPA and NYC debt collection regulations which are not in conflict or more onerous than the FDCPA.
If collection agencies need to comply why not debt buyers and attorneys?