The state of New York recently passed the Consumer Credit Fairness Act (CCFA). This act strengths the consumer protections of other local laws and the federal Fair Debt Collection Practices Act. The CCFA reduces the statute of limitations from six years to three years and adds notification requirements for creditors and debt collectors that sue borrowers.It also prevents the statute of limitations from restarting if a borrower makes a payment or acknowledges a debt. Finally, under the CCFA, debt collectors must be able to prove they own the debt when they sue to collect on it.
Written by Attorney John Coble.
Updated April 12, 2022
Many New Yorkers live paycheck to paycheck. If you’re one of them, the last thing you need is a debt collector harassing you. The good news is that there are federal, state, and local laws in place to protect you from certain debt collection activities. A new state law that goes into effect this spring strengthens many of these protections. This article explains the state and federal debt collection laws that protect New Yorkers.
Updated New York State Debt Collection Laws
City, state, and federal laws protect New York consumers from unfair, abusive, and deceptive practices by debt collectors. New York City has its own debt collection protection laws. Whenever a debt collector or debt collection agency communicates with a resident of New York City, they must comply with city, state, and federal laws.
New York debt collection regulations for the state changed in 2014. More recently, the legislature passed the Consumer Credit Fairness Act (CCFA), which strengthens the consumer protections of the 2014 regulations. Some provisions of this important New York state law went into effect in April and others go into effect in May of this year. As its name implies, the CCFA focuses on consumer debt. This includes credit card debt and personal loans but not business debt.
The federal Fair Debt Collection Practices Act (FDCPA) is the primary federal law governing debt collectors. It only applies to third-party debt collectors, but statute of limitations provisions apply to original creditors (like a credit card company) as well as debt collectors. Most of the CCFA notice and documentation requirements also apply to both original creditor and third-party debt collectors.
How the CCFA Affects the Statute of Limitations
The statute of limitations establishes a time limit for a creditor to sue you to collect on a debt. If a creditor or debt collector sues you but the statute of limitations for the debt has expired, you can use this as a defense. Debt that’s past its statute of limitations is also called “time-barred” debt. The court will dismiss a debt collection lawsuit if the debt is time-barred.
The statute of limitations for consumer credit transactions in New York state is currently six years. On April 7, 2022, new CCFA rules took effect that reduce the statute of limitations from six years to three years. That’s the first important change.
The CCFA also addresses the long-standing issue of original creditors and debt collectors tricking debtors into restarting the statute of limitations. In the past, if you made a payment on the time-barred account or even acknowledged you owed the money, the statute of limitations could be restarted.
To address this, New York City started requiring debt collectors to include a disclaimer when they try to collect on time-barred debt. The state’s 2014 regulations have a similar requirement. Both are in place so borrowers know the risks of restarting the statute of limitations by paying or acknowledging a debt. But as of April 7, 2022, neither debt collectors nor original creditors can restart the statute of limitations if borrowers make a payment or acknowledge a debt past its statute of limitations.
The New CCFA Notice Requirements
If you get sued by a debt collector but you’re never notified of the collection lawsuit, how you can defend yourself? Many debt collectors have sued borrowers and gotten default judgments without giving proper notice of the lawsuit. Simply put, a default judgment means you lose because you didn’t show up. The CCFA includes a new notice requirement for both original creditors and debt collectors that’s intended to prevent this. It takes effect May 7, 2022.
Under the new provision, plaintiffs (the people who bring the lawsuit) must file a notice with the court that will then be sent by the court clerk to the borrower — called the defendant. Since this notice comes directly from the court, it provides an additional layer of protection against a defendant losing a case simply because they didn’t know about it.
The CCFA notice required under New York law must:
Be in both English and Spanish,
Include the name of the original creditor, unless the original creditor is the one filing the lawsuit to collect debts,
Include a statement that you should file an answer as soon as possible,
Include a statement explaining the consequences of not responding to the lawsuit.
If this letter is returned as undeliverable, the court can’t issue a default judgment for the defendant’s failure to answer the lawsuit.
If a debt collector or original creditor files a motion for summary judgment, they need to file a similar notice with the clerk of the court. The clerk will then mail the notice to the defendant. These notice requirements will help ensure defendants in consumer debt collection actions have every opportunity to defend their cases, and they know their options for legal assistance.
The New CCFA Documentation Requirements for Lawsuits
In the past, third-party debt collectors have won lawsuits — often through default judgments — even though they had no proof they owned the debt and could legally collect on it. A final important change under the CCFA requires debt collectors and debt buyers to prove they can legally collect on a debt. They do this by including certain information in the complaint, which is the initial filing of a lawsuit that explains why the plaintiff is suing the defendant.
Under the CCFA, the plaintiff must provide the original contract or a charge-off statement for revolving accounts like credit cards. They also have to include certain information about the debt on the complaint, including:
The name of the original creditor, unless the plaintiff is the original creditor.
The last four digits of the account number printed on the most recent monthly statement that shows a purchase, payment, or balance transfer.
The date and amount of the last payment. If no payment was ever received, that must be stated.
An itemization of the amount owed. This must be broken down by the principal, finance charges, fees by the original creditor, collection costs, attorney’s fees, interest, and any other charges.
In cases brought by a third-party debt collector, the complaint must also include the following:
The date on which the debt was sold or assigned to the plaintiff,
The names and dates of transfer for each debt collector in the chain of custody between the original creditor and the debt collector bringing this lawsuit, and
The amount due at the time the original creditor sold or assigned the debt.
These extra provisions exist for third-party debt collectors because debts often change hands several times before a debt collector finally sues the debtor. Sometimes, there’s been an improper exchange of the debt and the plaintiff doesn’t actually own the debt. In this case, the plaintiff doesn’t have the right to sue and the lawsuit can be dismissed.
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The Fair Debt Collection Practices Act (FDPCA)
The FDCPA is enforced by the Federal Trade Commission (FTC) and the Consumer Financial Protection Bureau (CFPB). You can also enforce the FDCPA by exercising your right to sue abusive debt collectors that violate the act. You can recover the amount of your actual damages plus up to $1,000 at the court’s discretion.
The FDCPA prohibits third-party debt collectors from harassing or abusing borrowers, using false or misleading representation, and other unfair practices. It requires debt collectors to provide proof of the debt when a borrower requests it. As a general rule, debt collectors aren’t allowed to contact your neighbors, family, or other third parties regarding your debt.
The CFPB’s Regulation F provides the rules for the FDCPA. Important amendments to Regulation F took effect on Nov. 30, 2021. Before the November 2021 amendments, there was no regulation stating that suing a debtor for a time-barred debt is an FDCPA violation. Now there is. The new regulation also says that even the threat of a lawsuit on a time-barred debt is a violation of the FDCPA. Before taking legal action based on a mere threat of a time-barred collection lawsuit, seek legal advice from a New York consumer lawyer.
Other FDCPA Amendments That Went Into Effect on November 30, 2021
Before the new regulations went into effect, the law was vague as to how often a debt collector could contact you. The law said debt collectors couldn’t repeatedly call to annoy, abuse, or harass someone.
The new amendments in Regulation F define what “repeatedly” means by limiting debt collectors to calling seven times per debt per week. The new rule also says that debt collectors can’t engage in a conversation with you about a particular debt more than once a week. If you don’t want to hear from the debt collector, you can tell them to stop contacting you and they have to do that.
Under the new regulations, debt collectors can now contact you by email, text, or social media. If you tell a debt collector to stop contacting you, you must specify which types of contact you want them to stop. If you tell them not to text, they can still call you. You have to make it clear not to contact you by any means. Beware of the worst-case scenario though: If they can’t contact you anymore, they may decide to sue you.
New Yorkers are protected by city, state, and federal laws that regulate debt collectors’ behavior. The CCFA will provide enhanced protections when it goes into effect this spring. Under the CCFA, the statute of limitations will be reduced from six years to three years, and the statute of limitations can’t be restarted by making a payment on a time-barred debt or admitting to owing it. Debt collectors and original creditors must also provide new notices to the court clerk who will send them on to borrowers who are being sued.
If you’re sued for a time-barred debt, you must answer the lawsuit. You can use the statute of limitations to have the creditor’s claim dismissed. If the lawsuit is brought by a debt collector, you can counter-sue for a violation of the FDCPA. You can also sue a debt collector for the threat of a lawsuit on a time-barred debt for violating the FDCPA. For any violation of the FDCPA, it’s a good idea to file a complaint with the CFPB, the New York City Department of Consumer Affairs (NYC residents only), and the New York attorney general.