“Start Spreading the News”: Recent New York Regulations Impact Debt Collection and Default Servicing

By: Steven M. Kaplan, Gregory N. Blase, Christopher E. Shelton

Last month, the New York Department of Financial Services (“DFS”) finalized a regulation with a number of novel requirements affecting debt collection (including servicing delinquent loans) in New York. Previously, debt collection in New York was subject to (1) relatively limited requirements set by New York statute and several municipal ordinances, and (2) the federal Fair Debt Collection Practices Act (“FDCPA”). While parts of the new DFS regulation are modeled on the FDCPA, other requirements depart drastically from the federal framework. Areas of novel regulation include disclosures to consumers regarding statutes of limitations and charged-off debts, as well as restrictions on sending emails to consumers. The Consumer Financial Protection Bureau (“CFPB”) is drafting a debt collection regulation to supplement the FDCPA, and it remains to be seen whether the New York regulation becomes a bellwether of changes at the federal level or by other states.

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