The CPB's Debt Collection Information Center

The CPB has been advocating on the State and federal level for reform to outdated laws that leave consumers vulnerable to unscrupulous debt collectors. Recently, a Commentary from the CPB's Chairperson and Executive Director Mindy A. Bockstein appeared in the Albany Times Union.

Debt collection problems continue to be a top consumer complaint received by federal and state consumer protection agencies. The federal Fair Debt Collection Practices Act (FDCPA), which was passed in 1977, is intended to prevent abusive, deceptive, and unfair debt collection practices in the marketplace. The FDCPA applies to those who collect debts owed to creditors. This includes personal loans for family members, cars, homes, credit card and medical bills.

Under federal law, a debt collector is a person who is in the business of collecting any debts or enforcing security interests, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or claimed to be owed or due another.¹

Below is information for consumers to learn about their rights regarding debt collectors

Consumer Rights Under the Federal Fair Debt Collection Practices Act

• 15 U.S.C. § 1692 et seq.

The federal law prohibits a debt collector from engaging in the following activities:

Contacting the consumer at unreasonable times or places, for example, before 8 AM or after 9 PM, unless previously agreed upon, or at work, if the consumer expresses to the debt collector that his or her employer disapproves.
Contacting the consumer’s friends, relatives, employer or others to tell such people that the consumer owes money. The debt collector can contact these people to find the location of the consumer.
Harassing consumers by threatening to harm their reputation, using profane language, or making repeated telephone calls.
Making any false statement, including that the consumer will be arrested.
Threatening to have money deducted from the consumer’s paycheck or to sue him or her, unless the debt collector or creditor actually intends to do so and it is legal to proceed.

Debt collectors are also prohibited from:

Giving false information about the consumer to anyone, including a credit bureau;
Using a false name, or engaging in any unfair practices such as collecting any amount greater than the consumer’s debt (unless the state permits such a charge);
Depositing a post-dated check prematurely;
Using deception to make the consumer accept collect calls or pay for telegrams;
Taking or threatening to take a consumer’s property (unless this can be done legally); or,
Contacting the consumer by postcard.

State Debt Collection Law

• N.Y. General Business Law §§ 349, 600, 601, 603

New York State law differs from the FDCPA, but the premise is the same -- to protect consumers who owe debts or are believed to owe debts from harassment, improper contact, and threats. If the New York statutory provisions are violated by debt collectors or creditors, the New York State Attorney General is authorized to proceed against the violators. However, New York courts have found that, in instances where the collection of consumer debt has overlapped with deceptive and unfair practices, under the New York Consumer Protection Act (N.Y. General Business Law § 349), a consumer can file a private lawsuit against the company.²

Under the New York State Debt Collection Law³ no creditor can:

Pretend to be a law enforcement officer, or a representative of any governmental agency of the State; or
Disclose, or threaten to disclose information affecting the debtor’s reputation for creditworthiness knowing that this information could be false or that the existence of the debt has been disputed; or
Communicate or threaten to communicate the nature of a consumer claim to the debtor’s employer prior to obtaining final judgment against the debtor. However, a principal creditor, (any person, firm, corporation or organization to whom a consumer claim is owed, due or asserted to be due or owed) may communicate with the debtor’s employer to execute a wage assignment agreement if the debtor consented to such an agreement; or
Communicate with the debtor, or any member of his family or household, with such frequency, or at such unusual hours, or in such a manner as can reasonably be expected to abuse or harass the debtor; or
Threaten any action which the principal creditor in the usual course of business does not in fact take; or
Use a communication which simulates in any manner legal or judicial process or which gives the appearance of being authorized, issued, or approved, by a government, governmental agency, or attorney when it is not.

Validating a Debt

If a consumer/ debtor makes the request in writing, a debt collector must validate the debt before continuing to collect on the account. Validating a debt could consist of obtaining a printout of the account statement, which informs the consumer of the services provided, the dates on which the charges were incurred, and the amount of debt. A debt collector may be entitled to rely on the information provided by its client. Sending a copy of the contract may not be sufficient.

If a consumer disputes the debt, the debt collector must notify the credit reporting agencies of this fact. Otherwise, this is a violation of the Fair Credit Reporting Act, which a consumer could report to the Federal Trade Commission (FTC), or bring an individual lawsuit.

Debt Collection Procedures Related to Identity Theft

• N.Y. General Business Law §§ 604, 604-a, 604-b

Recently, New York State law was amended to prohibit debt collection against debtors who are victims of identity theft. Under the law, the debtor who is alleging to be a victim of identity theft must present notification to the “principal creditor”, or any other debt collector pursuing collection, that includes a copy of a valid police report alleging the debtor is a victim of identity theft, and a written statement that the debtor claims to be a victim of identity theft.

Upon notification by the consumer that the debt arose from identity theft, the principal creditor must temporarily stop attempts to collect the debt and pursue an investigation of the case. The principal creditor must review the information in good faith, and then determine whether it establishes that the debtor is not responsible for the debt in question. The principal creditor’s determination shall be made in a manner consistent with the provision of 15 U.S.C. 1692f(1).⁴ If the principal creditor decides the information provided is insufficient to establish that identity theft is the cause for the debt in question, such creditor may continue debt collection activities. However, the principal creditor must notify the debtor in writing of the determination before beginning any further debt collection activities.

If the principal creditor recognizes the debtor/consumer as a victim of identity theft and ceases collection activities, the principal creditor must within five (5) business days of the decision to cease collection activities, notify any consumer reporting agencies to which the principal creditor has furnished adverse information about the debt in question. These agencies then must delete such information and notify the creditor that debt collection activities have been terminated based upon the debtor’s claim of identity theft. When a principal creditor violates any provisions of the Act it is subject to enforcement by the NYS Attorney General. Violations of the Act will result in penalties which may include an injunction to cease any further violation, without showing any proof of harm or damage; or a monetary fine between five hundred ($500) and one thousand dollars ($1,000) per violation.

Contacts for Consumer/Debtor Complaints

To file a complaint, contact the Office of the New York State Attorney General, the Federal Trade Commission (FTC), the New York State Consumer Protection Board, or the district attorney of any county. Contact information is below:

New York State Attorney General
Consumer Frauds & Protection Bureau
120 Broadway, New York, NY 10271
1-800-771-7755
oag.state.ny.us

Federal Trade Commission
Consumer Response Center
Washington, D.C. 20508
1-877-382-4357
ftc.gov

New York State Consumer Protection Board
5 Empire State Plaza, Suite 2101
Albany, New York 12223
1-800-697-1220
nysconsumer.gov

¹ 15 U.S.C. § 1692 et seq. (2008).
² See In re Scrimpsher, 17 B.R. 999 (Bankr. N.D.N.Y. 1982) (interpreting New York law).
³ N.Y. Gen. Bus. Law § 600 et seq. (2008).
⁴ 15 U.S.C. 1692f provides that a debt collector may not use unfair or unconscionable means to collect or attempt to collect any debt. Subdivision (1) prohibits the collection of any amount (including interest, fee, charge, or expense incidental to the principal obligation) unless such amount is expressly authorized by the agreement creating the debt or authorized by law. (2008).