The New York City Department of Consumer and Worker Protection has adopted new rules requiring debt collectors to provide consumers with language preference disclosures and an affirmative obligation to request and record the consumer’s language preference. Debt collectors will not be required to translate a collection communication.
The rules were adopted on May 28, 2020 and become effective June 27. However, the agency recently stated that it is providing a 60-day enforcement grace period beginning from the effective date of the rules (June 27).
The rules, while likely well-intentioned, lack clear standards for their implementation and are bound to cause confusion as debt collectors quickly struggle to implement them. One thing is clear: nothing in the text requires debt collectors or collection agencies to communicate in a non-English language. However, voluntarily doing so now comes with heightened regulatory risk.
- New Written Disclosures Are Problematic
“Debt collectors who are not a creditor or employed by a creditor” are already required by New York City rules to make particular written disclosures to consumers either in the initial written communication “in connection with collection of a debt” or within five days of the initial communication.
The new rules add two additional disclosures. The notice must now include “a statement informing the consumer of any language access services available, including whether the consumer may obtain from the debt collector a translation of any communication into a language other than English.” The notice must also include “a statement that a translation and description of commonly-used debt collection terms is available in multiple languages on the Department’s website, www.nyc.gov/dca.”
The first disclosure is problematic. The rules never define a “language access service” yet the disclosure must inform the consumer of “any language access services available” from the debt collector. Presently, only entities receiving federal funding are required to provide language access services, so many federal, state and local governments do provide language access services. Language access services do differ and there is no “one-size-fits-all” approach. An entity’s language access services are developed after conducting a language access assessment which, according to guidance issued by the U.S. Department of Justice (DOJ) (67 FR 41455) considers:
- the number or proportion of limited English proficiency (LEP) persons being serviced;
- the frequency that the entity comes in contact with LEP persons;
- the importance of the information to the LEP person (including the consequences to the LEP person in not having the information in the person’s primary language); and,
- the entity’s available resources and costs for providing language services.
The assessment can take some time to perform and since existing guidance is directed to governmental agencies, there are few resources, let alone accepted guidance, available to private entities.
- Disclosures on Public Websites
If a “debt collector” has “a website accessible to the public” the rules also require that it disclose “clearly and conspicuously” the same disclosures required for “initial written communications.” In the past, the agency has stated that in the context of a letter “clear and conspicuous” meant the disclosure had to be made on the letter’s first page.
- Requesting and Recording Language Preference as a Condition to Collection
The rules make it an “unconscionable and deceptive trade practice” for a debt collector to collect a debt “after the institution of debt collection procedures . . .without first requesting and recording the language preference of such consumer.” “Debt collection procedures” is a pre-existing term under the rules and is defined as collection attempts after:
- the creditor has ceased sending periodic statements, if “required” to do so or if the creditor has threatened a legal action;
- the creditor has ceased sending bills or threatend a legal action, if the account is one where a billing statement is not required and there is no finance charge, but where the balance must be paid at the end of the billing period; or
- in the case of all other credit, where the unpaid balance has been accelerated if a demand for payment in full is made.
The issue here will be whether one request is sufficient, or must the debt collector continually ask the question until the consumer identifies a language preference? Although the rules do not explicitly provide that a debt collector cannot collect a debt if, after making the request the consumer does not respond, a recent industry discussion with the agency suggests they may be taking a more restrictive approach. The agency recently stated it would issue “Frequently Asked Questions” to address this and many other issues raised by the rules.
- False, Partial or Inaccurate Translations
If the debt collector provides “translation services,” the rules make it an unconscionable and deceptive trade practice to make a “false, inaccurate or partial translation of any communication.” (emphasis added). Like so many other phrases of the rules, “translation services” are undefined. And, since translation services are not required in the first place, a debt collector who voluntarily provides such a service might now reconsider doing so in light of the extraordinary risk.
- Transfer of “Language Preference” Information
The rules make it an unfair and deceptive practice to falsely represent or omit “a consumer’s language preference when returning, selling or referring for litigation any consumer account.” This is the first reference to a “consumer’s account” anywhere in the New York City rules. The pre-existing rules define “debt” in much the same way as the federal Fair Debt Collection Practices Act. And the rules are directed to the debt collector’s conduct regarding “debt.” Whether “consumer’s account” has a different meaning is not known because it is not defined.
- Requirement for Requesting and Reporting Preferred Language
The rules also require a “collection agency” to maintain a “record indicating the language preference of the consumer, except where the debt collector is not aware of such preference despite reasonable attempts to obtain it.” And, “maintain . . . [a]n annual report, in a form made publicly available on the Department’s website, identifying, by language, (i) the number of consumer accounts on which an employee collected or attempted to collect a debt owed or due or asserted to be owed or due in a language other than English; and (ii) the number of employees that collected or attempted to collect on such accounts in a language other than English.”
- Collection Agencies, Debt Collectors and Creditors Are Different Entities
New York City’s debt collection rules separate collection agencies and debt collectors by definition. While collection agencies have a record retention requirement, debt collectors have disclosure requirements and are subject to violation for “false, partial or inaccurate” translations and the requirements imposed on transfer of language preference.
The term “debt collector” is defined as “an individual who, as part of his or her job, regularly collects or seeks to collect a debt owed or due or alleged to be owed or due.” (emphasis added). A “debt collection agency” is “a person engaged in business 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 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.”
Although subtle, the differences are significant enough to include as debt collectors the persons employed by creditors who collect debt. As promulgated, the new rules do not impose the preferred language disclosures on debt collectors in the employ of a creditor. Creditors (other than debt buyers) are not collection agencies.
Webinar – 1 Hour RMAI Education Credit
I will discuss the new rules with Marina Banje, Senior Compliance Counsel of Cavalry Portfolio Services, LLC, and my partner Eric Rosenkoetter during a webinar now available on demand. With just a few days to go before the rules become effective, we will explore implementation of the disclosure and reporting requirements and share our thoughts on how the agency might be viewing the many ambiguous requirements the new rules impose. Click here to register.