The New York Department of Financial Services (“DFS”) has updated its FAQ on the debt collection regulations that took effect on March 3, 2015. We analyzed the regulations in a client alert and covered an earlier version of the FAQ in a previous blog post.
Among other issues, the new FAQ addresses New York’s “substantiation” procedure for charged-off debts, which has similarities and differences to the “validation” of debts process under the federal Fair Debt Collection Practices Act (“FDCPA”).
The new FAQ notes that, if a debt collector is unable to provide the consumer with evidence to substantiate the debt within the 60-day timeframe required by the New York regulations, one option is to simply extinguish the debt. However, a “debt collector cannot satisfy the obligation to provide substantiation by returning the debt to the creditor. Debt collectors who do not own the debt and therefore cannot extinguish the debt can avoid potential violations by ensuring that the debt can be substantiated before commencing collections or receiving assurance from the creditor that the debt can be extinguished if substantiation is requested but cannot be provided.”
Thus, debt collectors should consider this issue before they accept accounts, in order to avoid a situation in which they are unable to either substantiate the debt or extinguish it.
The new FAQ also confirms that it is permissible to combine disclosures required under the New York regulation with federal FDCPA disclosures in one communication, provided that both New York and federal deadlines are respected and that the New York disclosures are “clear and conspicuous.”
The new FAQ notes that the phrase “clear and conspicuous,” as used in the New York regulation, “is a fact-specific standard. Facts could necessitate that a disclosure be on the front page of a communication by a debt collector, but not necessarily in every case. Debt collectors should consider factors such as the prominence of the disclosure, the proximity to related information, whether the disclosure is likely to be seen, and whether the information is readable and understandable.”
The complete FAQ is available here.