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Trio of New York Bills Would Extinguish Debt, Require Licensing and Impose Additional Requirements in Collection Litigation

A trio of bills currently pending in the New York State Senate would extinguish debt, require licensing and impose additional requirements in collection litigation.

New York Senate Bill 691 and Senate Bill 2239 would completely extinguish the right to collect debt arising from a consumer credit transaction upon expiration of the statute of limitations.

Senate Bill 691 goes a bit further by proposing to reduce the statute of limitations in “consumer credit transactions” to three years although it does provide certain exceptions.

In addition, Senate Bill 691 would require certain disclosures to be provided to defendants in lawsuits brought on “consumer credit transactions.” The bill proposes the notice, in both English and Spanish, be provided to the clerk of the court along with a “stamped unsealed envelope addressed to the defendant” at the time the plaintiff files a proof of service of the summons and complaint.

Senate Bill 691 also proposes to require complaints in “consumer credit transactions” to have attached “the contract or other written instrument on which the action is based” and provide itemization of the amount being sought, chain of title and other information.

Finally, Senate Bill 691 proposes that creditors obtain affidavits from the original creditor as well as each assignor in the chain of title providing particular facts concerning the debt.

New York Senate Bill 2343 would require “debt collection agencies” to be licensed on or after Oct. 1, 2020.

New York already has debt collection regulations promulgated by the Department of Financial Services.  Those regulations closely follow the definition of “debt collector” found in the federal Fair Debt Collection Practices Act (FDCPA) with its two-prong approach, plus the addition of purchasers of debt, defining a “debt collector” as “any person engaged in a business:

  1. the principal purpose of which is the collection of any debts, or
  2. any person who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.
  3. Debt collector includes without limitation a buyer of debts who seeks to collect such debts either directly or indirectly.”

The regulatory exemptions from the definition also track the FDCPA but include certain activities related to legal actions.

Senate Bill 2343, on the other hand, takes a different approach and defines a “debt collection agency” as “a person, firm or corporation engaged in business:

  1. the principal purpose of which is to regularly collect or attempt to collect debts owed or due or asserted to be owed or due to another and shall also include
  2. a buyer of delinquent debt who seeks to collect such debt either directly or through the services of another by, including but not limited to, initiating or using legal processes or other means to collect or attempt to collect such debt.”

The legislation includes the same definitional exemptions as the FDCPA but adds “any officer or employee of a debt collection agency,” attorneys except those “regularly engage[d] in activities traditionally performed by debt collectors,” persons employed by public utilities, and persons collecting child support or alimony unless they also regularly collect other types of debt.

In addition to the licensing provisions, a debt collection agency would be required to obtain a “bond, contract of indemnity, or irrevocable letter of credit” in the following amounts:

1-4 employees:  $10,000
5-9 employees:  $25,000
10-20 employees:  $50,000
20+ employees:  $75,000

The penalty for operating as a debt collection agency in violation of the licensing requirements would be $500 “per attempt to collect a debt.”

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Eric Rosenkoetter is a principal at Maurice Wutscher LLP, where he provides counsel to businesses and consumer financial services firms nationwide. For many years, he has focused his practice on various aspects of financial services law. As a litigation attorney, he has conducted every aspect of the litigation process, including countless depositions, motion proceedings, bench and jury trials, and appeals in various courts. In addition, he has significant experience as a compliance and transactional attorney, providing strategic, business growth, legislative, compliance and regulatory advice to national corporations and trade associations. For example, he has drafted consumer contracts and disclosures designed to state-specific statutory requirements, and developed “Best Practices” guides and state-by-state compliance grids, for national financial services companies. He also conducted research and crafted a metrics report for a national trade association with analysis designed to counter the claims of advocacy groups. Eric’s experience also includes working for a national corporation as Executive Counsel, Chief Compliance and Ethics Officer, and Director of Legislative Affairs, and as a federal lobbyist and Director of Government and Public Affairs for a national financial services trade association. In the government sector, Eric presided over approximately 6,000 state administrative hearings, served as a staff attorney for the Missouri Senate, and handled litigation in 33 counties as a regional managing attorney. Eric frequently speaks to audiences on topics relevant to the financial services industry including regulatory compliance, data privacy law and related advocacy initiatives. For more information, see

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