2015 State Collections Regulations Year in Review

Linda Straub Jones

2015 brought us a plethora of “new”!

• A liquid believed to be water was discovered on Mars!
• The Apple Watch was released!
• A new Dwarf Lemur Species was found in Madagascar!

But of specific note to the collections industry, it also brought new State-level collections rules.  Below is a summary of the New York, West Virginia, and Illinois new rules for the collections industry:

New York

New York State’s Department of Financial Services’ new debt collection regulations were initially proposed in 2013 and went into effect in March 2015.  Additional debt verification, disclosure and communication requirements went into effect August 2015.   Below are the hi-lights:

• Debt collectors will need to provide disclaimers to the consumer if it is believed that the debt may be beyond the statute of limitations
• The changes in the collection law only pertain to third party debt collectors and debt buyers; attorneys are specifically exempted as long as they are acting in a legal capacity. Creditors, process servers, and government officials are exempt from the new rules.
• Within five days after initial communication with a consumer (or in the initial communication if desired), a debt collector must provide written disclosures to the consumer that explain restricted behavior under the FDCPA.  They must also provide a list of funds exempt from judgment (such as Social Security payments), and various pieces of information about the debt, such as:
  • The name of the original creditor
  • An itemized accounting of the debt including details of the balance as of charge-off, interest since charge-off, non-interest charges and fees since charge-off, total payments made since charge-off
• If a consumer disputes a debt orally, the debt collector must make reasonable efforts to inform the consumer how the consumer can make a “written request for substantiation” of the debt in writing and provide the consumer with such instructions in writing within 14 days. This information must be conveyed during the initial conversation where the consumer makes the dispute.
• Once a debt substantiation request is received, the debt collector has 60 days to provide written validation, during which time all collection efforts must cease. Details of what must be contained in the written validation are outlined in the new law.
• Use of Email to communicate about a debt:
  • While the new rules say that communicating by Email is OK, if the consumer wishes to communicate that way, it specifically says work email accounts are not OK.  The consumer must voluntarily provide their Email account, and consent in writing to the Email communication.

The full text of the New York law can be found here:
http://www.dfs.ny.gov/legal/regulations/adoptions/dfsf23t.pdf

West Virginia

West Virginia House of Delegates passed SB 542 in March 2015.  The bill made changes to the state’s Consumer Credit and Protection Act relating to debt collection.  Hi-lights of the changes are:

• Phone calls – the law specifically states that unanswered telephone calls will not be treated the same as calls where there is an actual conversation.
• Clarifies that a debt collector may not engage a person in a telephone conversation without disclosing the caller’s identity.
• A call frequency provision was added expanding the number of calls to a consumer per week to 30 from 10.
• Allowed delinquency charges on precomputed consumer credit sales or consumer loans not paid in full within 10 days after the scheduled due date were increased.
• Venue of a civil action brought by a consumer is now limited to certain courts to eliminate “venue shopping”.
• A provision was added to address consumers who are represented by an attorney.  Written (paper or electronic) communication must be given to the debt collector from the consumer or their attorney before the debt collector would be considered in violation of the collection law for speaking with the consumer.
• Extends the time limit on when an action can be brought.  It was one year after the due date of the last scheduled payment of the agreement pursuant to which the charge was paid and is now four years after the violation occurred.
• Puts limits on monetary damages per violation.

The full text of the West Virginia law can be found here:
http://www.legis.state.wv.us/Bill_Status/bills_text.cfm?billdoc=sb542%20intr.htm&yr=2015&sesstype=RS&i=542

Illinois

The Illinois Collection Agency Act was updated in August 2015.  However, they were then updated in November 2015 to correct some of the amendments made in August.  Updates include:

• A new expiration date for the Act itself.  The Act was set to expire on Jan. 1, 2016 until the amendments passed in the state legislature. The amendments are now in effect, and the law is effective through Jan. 1, 2026.
• All references to debt collectors are removed from the amended Collection Agency Act, which now refers only to collection agencies.  The new definition removes any doubt as to whether commercial collection agencies must be licensed in Illinois.
• The amended Illinois Collection Agency Act also changes the definition of “debtor” to clarify that the Act applies to both consumer and commercial collection efforts.
• Validation notice amendments: Must now include full name and address of the original creditor if different than the current creditor in the initial notice to the consumer. UPDATED in November to say that this is only necessary if requested by the consumer, in writing, within 30 days of the validation notice.
• A collection agency with an expired license may reinstate it at any time within five years with a renewal application and fee payment. The Collection Agency Act includes additional flexibility for collection agency license holders if they or a business partner owning 50 percent or more of interest in the agency have a license that expires while they are on active duty.
• The Secretary Financial and Professional Regulation may suspend the license of a collection agency without a hearing if the continuation of the agency’s practice “would constitute an imminent danger to the public.” However, a hearing must begin within 30 days after the suspension and completed as expeditiously as possible.
• New requirements for unlicensed practices to cease and desist as well as license suspensions.
• The civil penalty for acting as a collection agency without a license was increased from a maximum of $5,000 to a maximum of $10,000.
• Additionally, the amended Act adds e-mail and Internet communication to the types of interstate communications that are exempt from the state’s licensing requirements, provided such communications are made by a collection agency located in another state which requires a license and extends these same privileges to agencies licensed and located in Illinois. 

Other corrective legislation – November 2015:

• Amends section 9.1 (Communication with persons other than debtor) to provide that when seeking location information from third parties, collection agencies and debt buyers must provide the name of their employer “only if expressly requested”.
• Amends several sections to apply only to debt incurred primarily for personal, family or household purposes
• Adds that if a collection agency or debt buyer can demonstrate compliance with comparable provisions of the FDCPA, then they are immune from civil liability under sections 2, 9.1, 9.2, or 9.3 of the ICCA.

The full text of the Illinois Collection Agency Act can be found here:
http://www.ilga.gov/legislation/ilcs/ilcs3.asp?ActID=1355&ChapterID=24