1. Statutory authority: The Superintendent's authority for the promulgation of this rule derives from Sections 202, 301, 302, and 408 of the Financial Services Law (“FSL”).

Section 202 of the FSL established the office of the Superintendent and designated the Superintendent of Financial Services as the head of the Department of Financial Services (“Department”).

FSL Sections 301 authorizes the Superintendent to take such action as the Superintendent deems necessary to protect and educate users of financial services and products.

FSL Section 302 authorizes the Superintendent to prescribe rules and regulations involving financial products and services and in effectuating the provisions of the Financial Services Law.

FSL Section 408 authorizes the Superintendent to enforce state and federal fair debt collection practices laws.

2. Legislative objectives: The New York Legislature granted the Department of Financial Services authority to regulate financial products or services offered or sold to consumers, with some exceptions, in order to eliminate financial fraud, abuse and unethical conduct and educate and protect users of financial products and services. Further, the Legislature empowered the Department with the authority to enforce state and federal fair debt collection practices laws.

Debt collection is a necessary step in the consumer debt cycle. Debt collection companies are hired to collect on debts from credit cards, mortgages, and medical bills, among other transactions that occur every day. The practices employed by debt collection companies impact the financial transactions of New York consumers and business owners. The Department has found that many debt collection companies operating in New York employ abusive and misleading collection practices. Often debts are given to third-party debt collectors or sold to debt buyers with little information about the debt. This results in collection efforts that may be for the wrong amount of money or targeted against the wrong consumer. The Legislature empowered the Department to enforce state and federal fair debt collection practices laws. These rules build upon these laws to instruct debt collectors as to what information must be provided to alleged debtors in order to ensure that the consumer and the debt collector have information identifying the correct identity of the debtor and the accurate amount owed, among other things.

Further, most consumers are unrepresented by counsel when dealing with debt collectors and may not understand their rights. Consumers may receive threats of a lawsuit without understanding that the statute of limitations on that lawsuit has expired, or may not understand how to invoke that defense should a debt collector sue. Consumers may also not understand their rights under fair debt collection practices laws, including the protection from harassing phone calls. This rule requires debt collectors to inform consumers of these rights.

3. Needs and benefits: In creating the Department, the Legislature tasked the Department with regulating the debt collection industry. This rule establishes the Department’s oversight of debt collectors and sets basic rules for debt collection in New York, including disclosures that must be provided to consumers and information that must be provided when a debt is disputed. The statutory authority allows for regulation of debt collection, but provides little guidance for debt collectors. These regulations clarify for debt collectors and consumers what are required practices for debt collection in New York. Without these regulations, the statutory authority would have little impact on the marketplace and would not allow for sufficient oversight of debt collection practices in New York. This regulation is intended to provide a safe and sound financial market in New York, ensuring that debt collectors pursue the correct debtor for the correct debt and that consumers are aware of their rights when being solicited for payments.

4. Costs: Costs of compliance will vary depending on the structure of the debt collector, including the kinds of debts typically collected and whether the debt collector purchases debts to collect or collects debts owed to another. For debt collectors operating throughout the state, this rule should have a limited cost, since this rule is similar to the requirements set by the New York City Department of Consumer Affairs on debt collectors operating in the city. Costs should also be minimized since the disclosure rules primarily expand on the information provided in disclosures already required by state and federal fair debt collection practices acts and would not require many more communications. Costs to the Department will be minimal since the Department already accepts consumer complaints regarding debt collection. The only new costs to the Department would arise from any investigations to enforce the rule.

5. Local government mandates: The rule imposes no new programs, services, duties or responsibilities on any county, city, town, village, school district, fire district or other special district.

6. Paperwork: Section 2 of the rule requires additional information to be provided to the consumer at the start of any collection effort. However, under federal law, an initial disclosure must already be mailed, and this would only expand upon this mailing, requiring no new paperwork. Section 3 similarly only requires information be provided on a document when a collection effort is made after the expiration of the statute of limitations, and adds no new paperwork. Section 4 requires information be provided when a debt is disputed. Currently state and federal law requires documents be provided in certain disputes, but the documents provided is undefined. This Section would provide clarity for what documentation is required, not necessarily more documentation. Section 4 does expand, beyond the current law, which disputes qualify for verification, which could require additional paperwork. Section 5 requires that debt collectors provide written confirmation of any settlement agreement. Section 6 may reduce paperwork for debt collectors since this allows, in certain cases, for debt collectors to communicate with consumers by electronic mail.

7. Duplication: This rule will not duplicate any existing state rule. Portions of this rule are similar to New York City debt collection rules, which would already apply to some New York debt collectors.

8. Alternatives: This rule addresses basic debt collection practices performed by debt collectors and the most common consumer complaints regarding abusive or misleading debt collection practices. The Department has determined that there are no other viable alternatives to this rule.

9. Federal standards: This rule expands upon the requirements of the federal Fair Debt Collection Practices Acts. The federal rules set minimum debt collection standards and allow for states to expand upon these requirements. Further, the federal rule inadequately addresses the abusive and deceptive debt collection practices this rule is intended to alleviate.

10. Compliance schedule: Sections 2(b), and 4(a) of this rule will take effect 180 days after adoption. Otherwise this Part will be effective immediately upon adoption.

1. Effect of rule: This rule sets standards for debt collection practices in New York, including necessary disclosures to consumers and requirements to verify a debt when an alleged debtor disputes the validity or amount of the debt. Many debt collectors operate in New York, but the Department does not have an exact number of debt collectors or their size. The New York State Collectors Association, a trade group of New York debt collectors, claims 147 members, but it is not known how many are “small businesses,” as defined in section 102(8) of the State Administrative Procedure Act. This rule has no anticipated affect on local governments.

2. Compliance requirements: Section 2 of the rule requires additional information to be provided to the consumer at the start of any collection effort. However, under federal law, an initial disclosure must already be mailed, and the rule would only expand upon this mailing, requiring no new paperwork. Section 3 similarly only requires information be provided on a document when a collection effort is made after the expiration of the statute of limitations, and adds no new paperwork. Section 4 requires information be provided when a debt is disputed. Currently state and federal law require documents be provided for certain disputes, but the content of the documents to be provided is undefined. This Section would provide clarity for what documentation is required, not necessarily more documentation. Section 4 does expand, beyond the current law, which disputes qualify for verification, which could require additional paperwork. Section 5 requires debt collectors provide written confirmation of any settlement agreement. Section 6 may reduce paperwork for debt collectors since this section allows, in certain cases, for debt collectors to communicate with consumers by electronic mail.

3. Professional services: Small businesses to which this regulation applies will not need any additional services beyond the staff currently needed for their business. The debt collection business model will remain unchanged; debt collectors will only need to perform their functions in a more consumer friendly, deliberate manner.

4. Compliance costs: This rule should have minimal initial and annual costs to regulated businesses. Debt collectors will continue to attempt to collect from consumers in the same manner. The disclosures required should have a negligible effect on compliance costs. There may be some cost to maintaining documentation proving the validity of a debt and providing this to consumers if there is a dispute. The Department does not have an estimate of the cost of this documentation, however, debt collectors operating in New York City already must maintain most of this information. The costs may be higher for debt collectors who purchase the debts in comparison to debt collectors hired to collect debts on behalf of another.

5. Economic and technological feasibility: Small businesses to which this regulation may apply will not incur an economic or technological impact as a result of this rule. Debt collectors must already maintain information evidencing a debt, and must provide alleged debtors with written disclosures under state and federal laws. This rule merely sets standards for what information and disclosures must be provided to consumers, but debt collectors should not have any problems with meeting the economic and technological requirements of these rules.

6. Minimizing adverse impact: This rule applies equally to all debt collectors, regardless of their size. The rule does not impose any adverse or disparate impact on small businesses. This rule does not affect local governments.

7. Small business and local government participation: Small businesses and local governments will have an opportunity to participate in the rule making process when the rule is published in the State Register.

1. Types and estimated number of rural areas: Debt collectors to which this regulation applies do business in every county of New York State, including rural areas defined in section 102(10) of the State Administrative Procedure Act. This regulation will apply to all debt collectors operating in New York, including those located in rural areas.

2. Reporting, recordkeeping, and other compliance requirements; and professional services: The rule imposes the same reporting, recordkeeping, and other compliance requirements for all debt collectors, in rural and non-rural areas. Section 2 of the rule requires additional information to be provided to the consumer at the start of any collection effort. However, under federal law, an initial disclosure must already be mailed, and this would only expand upon this mailing, requiring no new paperwork. Section 3 similarly only requires information be provided on a document when a collection effort is made after the expiration of the statute of limitations, and adds no new paperwork. Section 4 requires information be provided when a debt is disputed. Currently state and federal law require documents be provided for certain disputes, but the content of the documents to be provided is undefined. This Section would provide clarity for what documentation is required, not necessarily more documentation. Section 4 does expand, beyond the current law, which disputes qualify for verification, which could require additional paperwork. Section 5 requires that debt collectors provide written confirmation of any settlement agreement. Section 6 may reduce paperwork for debt collectors since this section allows, in certain cases, for debt collectors to communicate with consumers by electronic mail.

3. Costs: There are no expected costs of compliance that would vary between debt collectors in rural and non-rural areas. A full assessment of the costs of this rule is not clear since the costs will vary depending on the structure of the debt collector, including the kinds of debts typically collected and whether the debt collector purchases debts to collect or collects debts owed to another. For debt collectors operating throughout the state, this rule should have a limited cost, since these rules are similar to the requirements set by the New York City Department of Consumer Affairs on debt collectors operating in the city. Costs should also be minimized since the disclosure rules primarily expand on the information provided in disclosures already required by state and federal fair debt collection practices acts, and would not require many more mailings. Costs to the Department will be minimal since the Department already accepts consumer complaints regarding debt collection. The only new costs to the Department would arise from any investigations to enforce the rule.

4. Minimizing adverse impact: The requirements of this rule will apply equally to all debt collectors, whether they are located in rural or non-rural areas.

5. Rural area participation: This notice is intended to provide entities in rural and non-rural areas with the opportunity to participate in the rule making process. Interested parties will have the opportunity to comment on the proposed rule for 45 days following publication in the State Register.

1. Nature of impact: This rule sets standards for debt collection practices in New York, including necessary disclosures to consumers and requirements to verify a debt when an alleged debtor disputes the validity or amount of the debt. This rule should not have an impact on jobs and employment opportunities in New York. Debt collectors will need to comply with the rule, but this should not have a negative impact on how many employees are needed to collect debts in New York.

2. Categories and numbers affected: The debt collection industry employs many New York residents, however, this rule should not affect the numbers of jobs or employment opportunities.

3. Regions of adverse impact: This rule regulates debt collectors operating in New York, no matter where the company is located. There should be no disproportionate impact on any region.

4. Minimizing adverse impact: There should be no adverse impact on existing jobs or employment opportunities, so the Department has not needed to take into account minimizing any impact on jobs.