This morning the New York Department of Financial Services released 12 additional Frequently Asked Questions – bringing the total to 28 – to provide guidance to industry on the November 14, 2014 regulation governing debt collectors, including third-party debt collectors and debt buyers. Many of the rules went into effect in March 2015, while some debt verification, disclosure, and communication requirements will go into force in August 2015.
Industry groups, including the Consumer Relations Consortium (CRC), have requested FAQs to assist them in implementing the new regulation. In recent months, the CRC has met with NYDFS Superintendent Joy Feigenbaum to discuss areas of concern, and has also offered suggested FAQs that could serve the intended needs of consumers while also offering clarity to businesses. In this case, at least one of those submissions was adopted (see the last item, regarding quarterly accounting).
Among other things, these new FAQs provide:
- Clarification that utility bills and tort claims are excluded from the rule
- Guidance on clear and conspicuous, suggesting there is flexibility to use the reverse side of a letter with proper disclosure
- In Questions 18 and 19 of the full FAQ (#s 2 and 3 below) the Department clearly says closing and returning an account is insufficient, and provides guidance on how to comply. This provides some important direction, and underscores that the regulation, while targeted at debt collectors, is intended to also direct creditor business practices (i.e., do not send an account to a service provider for collections if you cannot substantiate the debt).
These are the new additions released today:
- Does “clear and conspicuous” disclosure of required information mean that information must be provided on the front page of a mailing?
A. “Clear and conspicuous” is a fact-specific standard. Facts could necessitate that a disclosure be on the front page of a communication by a debt collector, but not necessarily in every case. Debt collectors should consider factors such as the prominence of the disclosure, the proximity to related information, whether the disclosure is likely to be seen, and whether the information is readable and understandable.
- In lieu of providing information required in 23 NYCRR 1.4(c) to substantiate a debt, can a debt collector issue a satisfaction of the debt in order to avoid being in violation of the regulation?
A. Yes. Failure to provide the required information within 60 days of receipt of the request for substantiation is a violation of the rule enforceable by the Department. However, if a debt collector extinguishes the debt within the 60-day time period and there is no longer a debt for which to provide substantiation, the debt collector would not be in violation of the rule if substantiation were not provided within 60 days.
- If a debt collector cannot provide substantiation of a debt and is not the owner of a debt, and therefore cannot forgive the debt, can the debt collector return the debt to the creditor?
A. A debt collector cannot satisfy the obligation to provide substantiation by returning the debt to the creditor. Debt collectors who do not own the debt and therefore cannot extinguish the debt can avoid potential violations by ensuring that the debt can be substantiated before commencing collections or receiving assurance from the creditor that the debt can be extinguished if substantiation is requested but cannot be provided.
- Can a third-party debt collector have the original creditor provide documents responding to a request for substantiation of a debt?
A. Yes, a debt collector may have the original creditor provide the required information. However, the debt collector, who received the request is still responsible for ensuring that the information is provided within the time frame required by the rule.
- If a consumer is represented by an attorney for purposes of the debt, should the debt collector send the required notices to the attorney of record or to the consumer directly?
A. A debt collector should send required notices to the attorney of record representing a consumer for the purposes of the debt.
- Does the definition of debt include tort claims or utility bills?
A. 23 NYCRR 1 only applies to obligations or alleged obligations of a consumer for the payment of money or its equivalent which arise out of a transaction wherein credit has been extended to a consumer. Typically, in the collection of tort claims or utility bills, no credit has been extended, and the rule would not apply.
- Is a bank an original creditor if the bank purchases a portfolio of debts from another bank?
A. If the bank acquires another bank and its debts, it remains the original creditor pursuant to the rules. A bank may not be the original creditor if it simply acquires debts. However, the rules only apply to companies “engaged in a business the principal purpose of which is the collection of any debts, or any person who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” Those circumstances may not apply to a bank.
- If a specific timeline in the regulation refers to “days” and not “business days,” does this mean that the requirement refers to “calendar days”?
- May a debt collector combine a disclosure required by the FDCPA and a disclosure required in 23 NYCRR 1 in one communication?
A. Yes, disclosures may be provided in the same communication as long as a disclosure required pursuant to 23 NYCRR 1 is provided within the required time frame and, taking into account other information being provided, is presented in a clear and conspicuous manner.
- What information should be included in the accountings required in 23 NYCRR 1.5(b)?
A. The accounting should be useful to indicate what the consumer paid in the prior period and what is still owed. The accounting should include information typically found on an account statement such as interest and fees and how payments may be allocated between principal and other charges.
- If a debt collector and consumer agree to a debt payment plan that would satisfy the debt at less than the total amount due, do statements provided to the consumer making payments pursuant to the payment plan need to include the total balance due as if there was no settlement agreement?
A. The required statement must clearly and conspicuously show the amount the consumer owes under the payment plan or settlement agreement. The debt collector is not required to include the total balance due if there was no payment plan or settlement agreement, but may include such information
- Under 23 NYCCR 1.5(b), may the debt collector provide the quarterly accounting of the debt on a calendar quarter basis, regardless of when a payment or settlement arrangement is entered?
A. Yes. As long as the consumer receives the accounting no less frequently than on a quarterly basis, the timing of the quarters may begin from the date of the agreement or on a calendar quarter basis.