NYC Collection Law Could Signal Problems for the ARM Industry
An attorney is launching a protest against a recently amended debt collection law in NYC, claiming that it violates U.S. laws and will be detrimental for both the ARM industry and consumers.
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.
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Comment from Michael Scharf on April 17, 2009 at 12:27PM EST
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
Comment from Eric Berman on April 18, 2009 at 3:59PM EST
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.
Comment from Anonymous on April 19, 2009 at 11:37AM EST
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.
Comment from L.I. Pro on April 20, 2009 at 7:46AM EST
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.
Comment from DONALD DALY on April 20, 2009 at 10:41AM EST
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.
Comment from Ron West, Cold Spring Harbor, NY on April 21, 2009 at 7:30PM EST
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.
Comment from Anonymous on April 24, 2009 at 3:41PM EST
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?
Comment from David Mertz, CS Partners on April 28, 2009 at 5:46PM EST
The entire debt collection industry is in denial. This legislation - which will likely be adopted in similar form by states around the country in the next 18 months - is a response to abuses of law and consumers.
The best case scenario coming out of Eric Berman and his group's fight with NYC is NYC will simply refine its law to be in compliance with the result of the litigation.
In the mean time (two to three years go by as this law is litigated), the law will likely go into effect and almost every collection attorney, debt buyer and/or collector is going to have a difficult time meeting the requirements of the law in just being able to use a legal strategy to collect debt.
Wouldn't it be more effective response to have an honest and frank discussion of why NYC would pass such a law and what the industry can do to address the issues which are at the root of this regulation? The first step to solving the problem is even acknowledging the problem exists.
Then develop a response which addresses the issues in a way which enhances the ability for industry members to collect debt, reduces the cost of collection, reduces regulatory risk, and enables the industry to collect debt in NYC.
And, finally, work with Washington to craft an amendment to the FDCPA which would standardize collection laws and requirements across the country in alignment with this developed response and cut off the state by state bleeding.
Or the industry can continue to fight these losing battles one by one across the country.
Recently ACA and DBA have issued alerts requesting funds from industry members to fight NYC and other legislative initiatives. And, at the same time, the ACA Executive Committee has rejected a proposal to address the underlying issues in a pro-active way.
It appears the leadership of the industry has chosen it's course. Unfortunately, it appears the chances of failure for the course of action selected are far greater than the chances of success.