NYC Department of Consumer and Worker Protection Enacts New Debt Collection Rules, by Richard J. Perr, Esq., Justin Russell, Esq., and Monica M. Littman, Esq., 9-12-24

The New York City Department of Consumer and Worker Protection (“DCWP”) enacted new rules that introduce rigorous requirements for how debt collection agencies conduct their collection practices with consumers located in New York City.

Key Regulatory Changes and Their Impact on Your Agency

 The new rules necessitate significant adjustments across several aspects of your agency’s collection operations. Below, is an outline of the most significant changes and the specific actions needed to ensure compliance.

 Enhanced Consumer Disclosures

 What’s New:

1. Debt collectors are now required to provide detailed, clear, and conspicuous disclosures at the very outset of any debt collection communication. This includes:

1. • Information on time-barred debts under Section 5-77 of the Rules of the City of New York.
   • Mandatory validation notices that outline a consumer’s rights and the specifics of the debt.

Action Required:

1. Update Disclosure Templates: Revise all communication templates for New York City residents to include the required disclosures.
2. Focus on Clarity: Ensure that all written and verbal communications are easily understandable by consumers, and that all necessary disclosures are included.

 Stricter Record-Keeping Requirements

 What’s New:

1. Under the amended Section 2-193 of Title 6 of the Rules of the City of New York, agencies must maintain comprehensive records for each consumer account, including:

1. • Copies of all communications and attempted communications with consumers.
   • Detailed logs of all consumer interactions, including language used and medium of communication.
   • Records of consumer disputes, requests for verification, and complaints.

Action Required:

1. Update to Record-Keeping Systems: Implement or enhance your agency’s systems to ensure that all records are stored securely, are easily identifiable and retrievable, and can meet established requirements to be made available upon notice and request.
2. Maintain Comprehensive Logs: Ensure that logs include detailed information on every interaction with consumers, specifying dates, times, methods, and outcomes of each communication.

 Limits on Communication Frequency and Method

 What’s New:

1. The new regulations, particularly Section 5-77(b), place strict limits on how often and through what methods debt collectors can contact consumers. This includes:

1. • A maximum of three communication attempts within any seven-day period across any medium.
   • Restrictions on contacting consumers via modern communication channels like email, text messages, and social media without explicit consent.

Action Required:

1. Audit and Adjust Contact Strategies: Review and modify your agency’s current practices to ensure compliance with the new limits. This may involve reconfiguring automated systems to prevent excessive contact, including text messaging or dialing campaigns.
2. Obtain and Document Consent: Ensure that your agency documents consent from creditors on placement, and consent from NYC consumers before contacting them via electronic means such as email or text.

 Revised Debt Validation and Dispute Processes

 What’s New:

1. The rules now require that debt collectors follow a more structured process when handling disputes and validating debts:

1. • Consumers must be given a 45-day period to dispute a debt after receiving a validation notice. This will also require updates to your agency’s letters, as it extends the 30-day period prescribed by the FDCPA.
   • Debt collection activities must cease immediately upon receipt of a dispute or verification request and can only resume after providing proper validation as per Section 5-77(f).

Action Required:

1. Refine Dispute Resolution Process: Ensure your agency and its representatives understand the new timelines and requirements for responding to consumer disputes. This includes promptly pausing collection activities and ensuring timely delivery of debt validation.
2. Automate Dispute Tracking: Use your agency’s system of record to track disputes and ensure that no collection activities occur until the dispute is resolved.

 Language Access and Communication

 What’s New:

1. The regulations also emphasize communicating with consumers in their preferred language:

1. • Agencies must provide validation notices and other critical communications in the consumer’s preferred language if known and must maintain records of these communications as stipulated by the amended Section 2-193.
   • This can be an extensive change to agencies’ letters and form communications.

Action Required:

1. Implement Language Access Services: If not already in place, agencies should establish language services to accommodate non-English-speaking consumers. This includes translation of documents and real-time interpretation services.
2. Document Language Preferences: Ensure your agency’s system of record captures consumers’ language preferences across all communications and mediums.

 Next Steps for Compliance

The new regulations will officially take effect on December 1, 2024. To ensure your agency is fully compliant by this date, we recommend taking the following steps:

1. Comprehensive Training: Equip your agency’s operations, representatives and team members handling New York City consumer accounts with the knowledge and tools they need to comply with the new regulations. Regular training sessions will be crucial to keep everyone informed and prepared.
2. System Changes/Communication Template Revisions: Evaluate and upgrade your agency’s record-keeping and communication systems to handle the increased requirements of the new rules, including updating disclosures, and dispute procedures, and controls for consent and revocation.
3. Policy Revisions: Review and revise your agency’s internal policies to align with the latest regulations. Ensure that all procedures, from initial consumer contact to dispute resolution, meet the new standards.
4. Monitor and Audit Compliance: Regularly audit your agency’s practices to identify and rectify any potential compliance issues before the December 1 deadline.

Conclusion

These new regulations represent a significant shift in how collections must be conducted with consumers located in New York City. Agencies should take proactive steps now to ensure it is in compliance with these new rules.

Kaufman Dolowich is here to support you through this transition. If you have any questions or need further assistance in preparing for these changes, please contact the attorneys in our Financial Services and Institutions team.