NEW YORK, N.Y. (10/23/13)--The New York State Department of Financial Services last week suggested a series of bold reforms to enhance consumer debt collection regulations.
The department suggestions follow the release of proposed rules that would require the use of standardized affidavits in consumer credit actions seeking default judgments. The proposed rules were released by the New York Office of Court Administration.
Reforms suggested by the department include:
- Creating stronger affidavits to stop "robo-signing" and ensure debt collectors actually review a consumer's file;
- Requiring debt collectors to include important information about these debts in the affidavit;
- Requiring debt collectors to include documentation evidencing the debt with the complaint;
- Requiring debt collectors to send consumers a pre-complaint notice before commencing a collection lawsuit;
- Demanding demonstrable proof of service when a debt collector moves for a default judgment; and
- Providing consumers an opportunity to vacate a default judgment if a debt collector violates the court's rules.
These reforms would help curb litigation abuse by debt collectors, the department suggested in a letter to Chief Administrative Judge of the Courts A. Gail Prudenti.
The Consumer Financial Protection bureau has also been active on the debt collection front. Noting that the Federal Trade Commission receives more complaints about the debt collection industry than any other specific industry, the bureau this spring has said it is considering debt collection actions and could develop a proposed rule to strengthen federal consumer protections for prepaid cards.
In July, the CFPB released a bulletin explaining that under the Dodd-Frank Act, debt collectors are statutorily prohibited from committing unfair, deceptive, or abusive acts or practices. A second bulletin containing guidance for creditors, debt buyers, and third-party collectors was also unveiled. Resources for consumers faced with debt-collection woes were also released: The CFPB provided a compilation of five letters that borrowers can use when replying to collectors. The letters may help consumers get valuable information about claims being made against them, or may help them protect themselves from "inappropriate or unwanted collection activities."