Crain’s New York writes about a surge in debt collection litigation in recent years. While the article conflates a few things such as regulatory rollback that started after lawsuits started coming back, and new lawsuits with one from 2006, we can’t help but wonder what’s driving the new increase in lawsuits filed in NYS.
One possible factor is the tight regulation over communication methods, introduced by the NYS’s Department of Financial Services. The DFS requires that collectors request express consent to email consumers, even if they initially provided their email to the creditor. NYS stands out in doing so, contrary to other states and what we believe will be the CFPB’s position. This approach to email renders digital communications 20 times less effective even though consumers often say it is their preferred method – much more than phone calls.
Between limited digital communications and the decline in phone call effectiveness, we can’t help but suspect this limited ability to contact consumers is leading lenders to resort to lawsuits. If indeed that is the case, it’s a cautionary tale of unintended consequences. Limiting consumer choices, not allowing access to digital channels, stops any possible innovation in the debt collection space – and that innovation is gravely needed to improve consumer protection and respond to consumer choice.