You would think state regulators would be monitoring debt collectors already, but it turns out there were gaps in the law that allowed some debt collectors to go about their business unsupervised. The result, as you can imagine, was many people—including some who had completed New York bankruptcy—suffering abuse. The state’s Department of Financial Services recently announced it has plugged the hole in the law, increasing protections for more of the state’s debtors. The change in the law comes just a few weeks after The New York Times reported on creditors that didn’t correct New York bankruptcy debtors’ credit scores after receiving discharges.
Here are a few ways the new law regulates debt collectors:
- Debt collectors are now required to provide debtors with information about their rights and specific information about the debts they are trying to collect. For debts that have been charged-off, i.e. resold by the original creditor, the collector must tell the debtor the amount he or she owed at the time of the charge-off, as well as any new interest, charges, or fees. This will help the collector prove that it rightfully owns the debt.
- Debtors can demand debt collectors substantiate that the debts are owed. If a debtor asks, whether orally or in writing, for the collector to prove that the debt is real, the collector must cease its collections and provide documentation within 60 days.
- Debt collectors are now required to inform debtors that their debts might be “zombie debts.” Going forward, if a debt collector believes the statute of limitations has expired on a debt, it must inform the debtor that this is the case and that the debtor may be able to tell a court as much to prevent a judgment. The goal is to ensure that even if debtors are not represented by legal counsel, they still know whether the statute of limitations has run out.
- Debtors will now receive written confirmation of any debt settlement agreements and satisfaction of debts, which will help debtors prove the debt has been paid off if the debt is resold again.
- Debtors may now communicate with collectors via e-mail to reduce the incidence of annoying phone calls.
As with many consumer protection laws, it’s likely that debt collectors will try to find ways around them. For example, they may try to use some kind of shell game to create plausible deniability that they didn’t sincerely know that a debt’s statute of limitations had expired. Debtors should also think twice about giving out their e-mail addresses to debt collectors, as they can use those to target debtors through other means. For instance, if they throw the e-mail address into a search engine, they may be able to find a debtor’s Internet presence, e.g. on Facebook, and use that to find debtors who are otherwise difficult to get to.
The Department of Financial Services’ press release on the new regulations can be found here.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.
