New York City's Debt Collection Rules Under Local Law No. 15

Author: Gregory M. La Sorsa

Back in the spring of 2009, the New York City Council passed what is known as Local Law No. 15, a law that made significant changes in licensing and debt collection requirements for various debt collectors and asset buyers in New York City. Shortly thereafter, the Department of Consumer Affairs issued their version of proposed rules for Local Law No. 15. Those rules were not officially published until March of 2010.

The adoption notice was published in the City Record on March 25, of 2010 and the rules were made effective on April 24, 2010. Under Section 1, Chapter 2 of Title 6 of the Rules of the City of New York, the new amendment of subchapter S reads as follows: Under Section 2-190, The creditor who originated the debt shall provide a copy of the debt document issued by the original creditor or an original confirmation as evidence of the transaction that created the debt. Computerized documents or other electronic evidence created after the default will not qualify as a confirmation.

Under Section 2-190 (b), the written documentation which itemizes the principal balance on the debt must consist of a final statement of account which is issued by the original creditor. The document must include: 1) the total amount due on the principal balance, 2) each additional charge or fee that is allegedly due, 3) a list that totals each charge or fee and the date that each charge or fee was incurred, 4) it must describe the basis for the consumer's obligation to pay the debt.

Under Section 2-191, the collector or collection agency is required to disclose the consumer's legal rights under New York's statute of limitations regarding debt payment as is covered under §20-493.2 of the Prohibited Collection Practices of the Administrative Code. What's more, the Administrative Code is to be included in each permitted communication for each debt that a debt collection agency attempts to collect that is beyond the state's statute of limitations.

When a debt collector attempts to collect a debt that is beyond the state's statute of limitations, the collector must state that the legal time limit (statute of limitations) for suing the debtor to collect the debt has expired. In the state of New York, the statute of limitations for debt collection is 6 years.
There are specific requirements under Local Law No. 15. Under Local Law 15, which was passed in 2009, the definition of a debt collection agency was expanded to include asset buyers who purchase debt for collection, as well as attorneys or law firms that engage in traditional debt collection activities.
In order for a debt collection agency or an asset buyer or a law firm to be permitted to communicate with the consumer, they must provide their call back number where the phone is answered by a live person, they must provide the name of their agency or firm, the original creditor of the debt, the name of the person to be called back, and, when they communicate with the debtor, they are required to provide the amount of the debt.

For a debt collection agency to contact a consumer about their debt where the statute of limitations has expired for commencing legal action, they are required by law to first provide the consumer certain information about their legal rights as they pertain to their statute of limitations.

There are certain requirements for settlements in New York City. If the debtor and the collector come to an agreement on a debt settlement, then the collector must provide written documentation about the settlement agreement. In the agreement it must include: 1) the original creditor for the debt, 2) the debt collection agency's information, 3) the attorney or employee for the agency who made the agreement or their direct supervisor, 4) the consumer's name and address, 5) the exact amount and date of each payment, 6) the address where the payments are to be mailed, 7) any other relevant terms and conditions to the agreement.

Once the consumer has paid their debt according to the agreement, it is the responsibility of the debt collection agency or law firm to provide a written confirmation to the consumer within 21 days of receiving the payment, stating clearly that the debt has been satisfied. Additionally, the confirmation must include the original creditor, as well as the original account number for the satisfied debt.
If you are a creditor, namely a hospital, a chiropractor, a dental office, an ambulance company, or an urgent care facility that hasn't been paid on a debt, it's important to note that your statute of limitations to file a debt collection lawsuit for a consumer transaction is 6 years, counting from the date of default, which is about 30 days after the last payment received.

In recent years, the healthcare industry has been hit hard by the economic downturn. With so many people unable to afford healthcare, the rising costs of the health industry are causing more insurance companies to deny claims for services rendered. If your company is in the health industry and you are having difficulty collecting on a debt, then it would be in your best interests to contact an attorney that is intimately familiar with New York's debt collection laws, as well as all the provisions of the Fair Debt Collections Practices Act. Consumers have certain protections under the law; however, so does health care providers who offer their critical health-related services. If you have encountered difficulty collecting from insurance companies and getting paid for your services, then don't hesitate to contact a knowledgeable attorney who can help you collect on your delinquent accounts that are adversely affecting your bottom line.

Posted in: Law