Collectors Receive Clarification on New York City ARM Rules

In the spring of 2009, the New York City Council passed Local Law No. 15, which significantly amended licensing and debt collection requirements for debt collectors and asset buyers operating in New York City. The Department of Consumer Affairs subsequently issued proposed rules implementing Local Law No. 15. The rules went into effect April 24, 2010, when the New York City (NYC) Department of Consumer Affairs promulgated the final rules applying the changes to the City’s debt collection laws.

Local Law No. 15 amends the definition of a debt collection agency to include asset buyers and any attorney-at-law or law firm engaging in traditional debt collection activity. Additionally, the Law provides in any permitted communication with a consumer, a debt collection agency, must provide (1) a call-back number to a phone that is answered by a natural person; (2) the name of the agency; (3) the original creditor of the debt; (4) the name of the person to call back; and (5) the amount of the debt at the time of the communication. Local Law No. 15 also places restrictions on verification requirements, settlements and prohibits the collection of time-barred debt unless specific disclosures are provided.

The final rules implementing Local Law No. 15 either implement the requirements described in Local Law No. 15 or impose new requirements on debt collection practices. The final rules set forth various requirements related to verification, collecting time-barred debt, settlements, providing a call back number to a natural person and record retention.

Specific information about the final rules and Local Law No. 15 is available on ACA’s Web site.

Trade associations, including ACA International, DBA International, NARCA and the Commercial Lawyers Conference of New York, began communicating with the department to seek guidance and clarification regarding how debt collectors and asset buyers can comply with the final rules.

As part of these discussions, ACA and DBA sent a joint letter to the department formally seeking clarification of various provisions of the final rules as well as Local Law No. 15. Other trade associations submitted separate requests as well.

On June 7, 2010, ACA and DBA received a letter from the New York City Department of Consumer Affairs responding to the joint letter. The letter provides clarification regarding Local Law No. 15 and the final rules on various topics including: the definition of communication; the use of a trade name and alias; providing a call back number; and call recording.

Definition of Communication
Section 20-493.1 of the NYC Code requires a debt collection agency provide in any permitted communication with the consumer (1) a call-back number to a phone that is answered by a natural person; (2) the name of the agency; (3) the original creditor of the debt; (4) the name of the person to call back; and (5) the amount of the debt at the time of the communication.

ACA sought clarification regarding whether “communication” under the NYC Code is defined as under Section 1692a(2) [803(2)] the FDCPA and whether it includes voice mail messages, e-mail or text messages. The NYC Department states “communication” under Section 20-493.1 of the Code refers to “the conveying of information regarding a debt directly or indirectly to any person through any medium,” to the extent such communication is permitted by other City, State and/or Federal law. Therefore, the Code conforms with the definition of “communication” set forth in Section 803(2) of the FDCPA.

The department also confirmed the term, “communication” includes any voice mail message, e-mail, or text message, provided the communication is permitted by City, State and/or Federal law. Based on the Department’s interpretation, collection agencies will have to provide the specific disclosures set forth in Local Law No. 15 and the rules when engaging in any form of communication with a consumer, including leaving a message on a consumer’s voice mail.  

Trade Name
Section 20-493.1(a)(ii) of the NYC Code requires a debt collection agency provide in any permitted communication with the consumer the name of the agency. ACA sought guidance regarding whether an agency is permitted to use a d/b/a or other business name provided the name is registered with the New York Secretary of State or with Department as part of the agency’s license application. The Department stated a debt collection agency may use a trade name only if it is contained in the debt collection agency’s application for a license from the Department and is in compliance with § 20-113 of the NYC Code.

Call Back Number
Section 20-493.1(a)(iv) of the NYC Code requires debt collection agencies provide in any permitted communication with the consumer the name of a natural person to call back. ACA sought clarification regarding whether this provision relates solely to oral communication or if it includes other forms or communication as well, such as the initial collection notice.

The Department stated the law is not limited to oral communication. Rather, the provision explicitly applies to “any permitted communication.” The Department went on to state the call back number provision makes no exception for an initial communication. Based on the Department’s interpretation, a call back number has to be provided in any communication between a debt collector and a consumer, including the first written communication between a debt collection agency and a consumer.

ACA also requested clarification regarding whether or not Section 20-493.1(a)(iv) permitted the use of an alias when providing a call back number. The Department stated the provision allows an alias to be listed provided the collection agency complies with Section 5-77(d)(16) of the Rules and any other relevant laws or regulations. Section 5-77(d)(16) of the Rules allows a debt collector to use an alias provided the collector only uses the name in communications with respect to a debt and the debt collector’s employer has the name on file so the true identity of the debt collector can be ascertained.

Providing the Amount of Debt
Section 20-493.1(a)(v) of the Code requires a debt collection agency provide in any permitted communication with the consumer the amount of the debt at the time of the communication. ACA interpreted this provision to require a debt collection agency to provide accurate information concerning the amount of the debt when actually and directly speaking with the consumer as disclosing this information at other times could violate the FDCPA’s prohibition on third-party disclosure.

The department stated the provision requires a debt collection agency to state, in any permitted communication, whether written or oral, the amount of the debt at the moment of the communication. The department did not interpret the provision to require debt collection agencies to violate any other city, state or federal law.

ACA also inquired about the level of accuracy required by Section 20-493.1(a)(v) given the total amount of debt often fluctuates as a result of interest and other considerations. The department stated the amount stated to the consumer must be the total amount of the debt at the time of the communication. The department clarified the term “amount of debt” means the total amount of the debt, including all interest and fees, at the time of the communication.

Call Recording
Section 2-191 of the rules requires a debt collection agency to record complete conversations with all consumers or with a randomly selected sample along with contemporaneous notes. ACA sought clarification regarding whether the call recording requirement only applies to calls made to consumers located in New York City. The department confirmed the Rules only apply to consumers located in New York City and stated a consumer’s location should be based on his or her address.

For more information about New York City’s laws and rules regulating debt collection agencies, please visit the department’s website.