Are the DFS’ latest debt collection rules a harbinger of things to come?


In May, we wrote that the New York Department of Financial Services (“DFS”) would soon be issuing revised debt collection regulations for debt buyers and third party debt collectors. On July 16, the DFS released the revised proposed regulations.

Among other things, the revised proposed rules would require a debt collector to substantiate not only consumer disputes for defaulted debts, but also charged-off debts. The proposed regulations would also impose additional obstacles on collectors seeking to collect debts barred by the statute of limitations. Specifically, the debt collector, before accepting payment on a time-barred debt, would first have to send the consumer a written notice which explicitly states that “suing on an expired debt is a violation of the Fair Debt Collection Practices Act.” For more on the proposed regulations, see our alert.

The DFS’ laser-like focus on the collection of charged-off and time-barred debts likely has implications for debt collectors nationwide. In April, CFPB General Counsel Meredith Fuchs indicated that time-barred debt is a major focus of the CFPB’s upcoming debt collection rules. Given that the DFS and the CFPB have acknowledged they collaborate closely, it would not be surprising if many aspects of the DFS’ proposed regulations are adopted by the CFPB in its upcoming debt collection rule.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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