New York Federal Court Strikes Down NYC Regulation of Attorneys Engaged in Debt Collection

A City of New York regulation that sought to regulate attorneys who practiced debt collection law, was struck down Wednesday by a Federal Court sitting in the Eastern District of New York because it violated New York’s Constitutional separation of powers.

In Eric Berman, P.C. v.  City of New York the court found that New York City had exceeded its authority under New York law by enacting a regulation which dictated how licensed New York attorneys may provided debt collection legal services. The regulation attempted to distinguish attorneys who regularly send debt collection letters — what it described as attorneys who “regularly engage[] in activities traditionally performed by debt collectors” —  as not being engaged in the practice of law and thus subject to regulation by a government entity other than New York’s Judiciary. We have the decision available here: Berman v City of New York.

In rejecting this argument, the Federal court wrote:

when an attorney contacts a debtor on behalf of a client, she acts as an officer of the court, and is subject to the supervision and control of the New York judiciary. With respect to attorneys authorized by state law to practice in the courts of New York, the [City of New York] can have no role as gatekeeper.

As we reported earlier this year, the State of New Jersey’s Supreme Court took a similar position — finding that an attorney is engaged in the practice of law even if she is only sending debt collection letters under law firm letterhead.

We’ll do a further analysis of this decision in the coming days.

 

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Donald Maurice provides counsel to the financial services industry, successfully litigating matters in the state and federal courts in individual and class actions. He has successfully argued before the Third, Fourth and Eighth Circuit U.S. Courts of Appeals, and has represented the financial services industry before several courts including as counsel for amicus curiae before the United States Supreme Court. He counsels clients in regulatory actions before the CFPB, and other federal and state regulators and in the development and testing of debt collection compliance systems. Don is peer-rated AV by Martindale-Hubbell, the worldwide guide to lawyers. In addition to being a frequent speaker and author on consumer financial services law, he serves as legal counsel to DBA International and as chair of the ABA's Bankruptcy and Debt Collection Subcommittee. He serves on the governing Board of Regents of the American College of Consumer Financial Services Lawyers and on the Governing Committee of the Conference on Consumer Finance Law .