The New York City Department of Consumer and Worker Protection (NYC DCWP) just released an updated proposed amendment to its rules relating to debt collection. This updated amendment changes significantly more than the first proposed amendment released by NYC DCWP last year. Interestingly, this update contains revisions that are similar to the New York Department of Financial Services (NYDFS) proposed amendments to New York’s debt collection law, 23 NYCRR 1, that NYDFS released last year. After receiving a number of comments to the proposal, including a comment from TrueAccord, NYDFS paused the rulemaking and has not yet released any revised proposal. Both of these departments, NYDFS and NYC DCWP should change their proposed amendments to give New Yorkers the same digital communication benefits all non-New Yorkers receive.
The NYC DCWP and NYDFS proposed amendments are designed in part to align with the federal Consumer Financial Protection Bureaus’s Debt Collection Rule, Regulation F, that took effect in November 2021. Even though consumers often prefer to communicate digitally, the NYDFS and NYC DCWP updated proposals are more strict than Regulation F, particularly as it relates to the proposed restrictions on digital communications. While attempting to provide additional protections for consumers when debt collectors reach out using digital channels, these NYDFS and NYC DCWP restrictions create unintended consequences that raise barriers for NY consumers to correspond with collection agencies in their channel of preference and hinder communication efforts. The effect will raise the number of lawsuits brought against NYC consumers and ultimately increase the cost of credit for all consumers across the US to offset New York losses.
As a company that predominantly leverages digital communications for virtually all aspects of our customer interactions, TrueAccord has unique experience and information from serving over 20 million consumers, which showcases the benefits of digital communication in collections. Small edits to these proposed amendments can have the same desired impact (protecting consumers from a barrage of digital debt collection messages) without limiting the ability of debt collectors to proactively reach out—in fact, both the federal debt collection rule, Regulation F, and Washington, DC’s recent debt collection law amendments restrict the frequency of outbound digital communications and include specific requirements for opt-outs on all communications with severe penalties for failing to honor a consumer’s request.
In this two part blog series, we explore the provisions in these proposed amendments that focus on restrictions on digital communications, the unintended consequences to consumers when laws require opt-in instead of opt-out rules for debt collectors, and how the proposals could be changed to accomplish the same result without placing barriers on consumers ability to communicate in their channels of preference—read part two here. This first installment focuses on the provisions of the law, consumers preference for digital communications, and the small changes that could be implemented before these amendments are final. The second installment seeks to provide information about the benefits of digital communications for consumers in all other states and jurisdictions—except New York. If you are impacted by the current NYC proposal, consider speaking at the upcoming hearing (virtually or in person). Information on how to register is below.
Proposed New York State and New York City Amendments
Three proposed amendments, two different departments, two different jurisdictions, and potential unintended consequences that can harm consumers. Let’s start by evaluating the different proposals by jurisdiction.
New York’s Approach to Digital Communications
The New York debt collection law, 23 NYCRR 1, which took effect in 2019, already restricted the ability of a debt collector to reach out proactively to consumers via email without first having direct express consent from the consumer. This means that a debt collector must first call a consumer to obtain consent before the collector could send an email message about the account. While a debt collector can send proactive emails in an effort to obtain consent, to comply with the law these emails cannot reference the reason why a consumer would want to opt-in to communicate by email with the company, (i.e. about a past due account) and cannot even reference information about the account. So, they ultimately sound like spam.
For example, if a consumer received a message from a company they do not know, without any information about why the company is reaching out and asking for consent to email, why would a consumer opt-in?
The result, not surprisingly, is that New York consumers who had already opted in to communicate via email about the account with the creditor would, after falling behind on payments and being referred to a debt collector, only receive phone calls and letters from debt collectors.
New York’s First Proposed Amendment
December 2022 NYDFS released its first proposed amendment to its debt collection rules. Comments were due February 13, 2023. The first New York proposed amendment also never became final. The amendment included the following:
- Revised definitions of communication, creditor and debt and a new definition of electronic communication
- Revised requirements for the validation notice, including that the initial communication must be made in writing to avoid having to send another written communication within 5 days of the initial communication
- Revised requirement that the validation notice cannot be made by electronic communication but may be made in the form requested by a consumer to section 601-b of the General Business Law
- Revising the disclosure requirements for debts that have passed the statute of limitations for the purpose of filing a lawsuit
- Revisions to the substantiation requirements, including a 7 year retention period and requirement to provide full chain of title
- Revisions to the requirement for a debt collector to obtain consent from a consumer before emailing, including, extending the consent requirement to text messages, requiring the consent to be given in writing and retained for 7 years, requiring electronic communications to include clear and conspicuous opt-outs, requiring collectors to honor such opt-outs, and explaining opt-outs are effective upon receipt
- New provisions covering the relationship with other laws, clarifying, for example, that local laws are not inconsistent with this law if they afford greater protections
- New section on severability making clear that if any court rules one section of the law to be invalid, it does not invalidate the other sections of the law
The proposed changes to Section 1.6(b) seek to extend the prohibition on a debt collector to reach out proactively to consumers via email without first having direct express consent from the consumer to text messages. This limits the only digital channel currently available for proactive outbound debt collection communications with consumers in New York.
New York City’s Approach to Digital Communications
New York City’s debt collection laws did not contain any restrictions on digital communications. But, after the New York law restricting proactive emails took effect in 2019, New York City consumers who had already opted in to communicate via email about the account with the creditor would, after falling behind on payments and being referred to a debt collector, only receive phone calls and letters from debt collectors.
New York City’s First Proposed Amendment
November 2022 NYC DCWP released its first proposed amendment to its debt collection rules, comments were due December 5, 2022. These first NYC proposed amendments contained changes to align their laws with those of New York, however, the proposals never became final. The amendments included the following:
- Revised the out of statute disclosure agencies must provide on communications with consumers whose accounts have passed the statute of limitations for the filing of a lawsuit to recover the debt
- Revised requirements for debt collectors to maintain records of attempted communications, complaints, disputes, cease and desist requests, calls, including what calls are recorded and not recorded, credit reporting, unverified debt notices, and communication preferences (if known) as well as unsubscribes or opt-outs from particular channels
- New definitions for attempted communication, electronic record, electronic communication, clear and conspicuous, language access services and limited content message
- New prohibition on electronic communications unless the debt collector sent the initial communication with the validation notice by mail and the consumer opted in to electronic communications with the debt collector directly and clear and conspicuous opt-outs without penalty or charge on all electronic communications
- Revised unconscionable and deceptive practices to include: adding attempted communications anywhere communications appeared, such as adding attempted communications to the excessive frequency prohibition
- New prohibition on social media platform communications unless the debt collector obtains consent and communicates privately with the consumer
- New rules on requirements prior to furnishing information to credit reporting agencies
- Revised validation notice disclosures and obligations for translating, if notices are offered in different languages
New York City’s Revised Amendment
November 2023 NYC DCWP released an updated NYC proposed amendment. Comments can be submitted through November 29, 2023. A hearing will be held that same day at 11AM. The updated version contains all of the changes suggested in the first proposal as well as:
- Additional revisions to what information is required to be maintained in debt collection logs that would require major changes to all collection software systems
- Additional new definitions for covered medical entity, financial assistance policy, itemization reference date, original creditor and originating creditor
- Clarifies that any communications required by the rules of civil procedure in a debt collection lawsuit do not count toward frequency restrictions
- New disclosures for medical debts as well as specific treatment of medical accounts, such as validation procedures and verification of covered medical entity obligations prior to collections
These amendments align the New York City law to that of New York. If these amendments become final, New York will be an opt-in jurisdiction instead of an opt-out jurisdiction, meaning debt collectors must communicate by telephone or letter to obtain consent to text or email, even when a consumer already opted into digital communications about their account. This puts New Yorkers at a disadvantage from consumers in all other states who are able to communicate electronically under the provisions of the federal Fair Debt Collection Practices Act (FDCPA) and Regulation F.
Opt-Out Jurisdictions Offer Consumers the Same Protections
The rest of the United States have approached debt collection attempts via digital communications very differently from New York. For all consumers outside of New York, debt collectors may send proactive debt collection communications via email or text messages. The laws require all digital communications contain clear and conspicuous opt-out methods (unsubscribe flows in emails and “reply STOP to opt-out” in text messages) with strict penalties for debt collectors who do not honor a consumer’s request to opt-out of digital communication channels. Digital communications also fall under the frequency limitations of the FDCPA and Regulation F.
Only one other jurisdiction to date has created additional restrictions related to digital communications that exceed the protections in the FDCPA and Regulation F. Washington, DC amended their debt collection law Protecting Consumers from Unjust Debt Collection Practices Amendment Act of 2022, and the changes that took effect in January 2023. DC remains an opt-out jurisdiction with specific requirements for opt-outs on all email and text communications with severe penalties for failing to honor a consumer’s request, but also added a specific frequency limitation on digital communications. Debt collectors are only permitted to send a consumer one digital communication per week—one email or one text message (one time in a seven day period). A debt collector may only communicate digitally more than one time per week after a consumer opts-in to additional digital communications.
As a result in these opt-out jurisdictions, consumers can still receive the digital communications they prefer without having to have phone calls attempting to get them to opt-in to digital communications, like the consumers in New York. Additionally, with these opt-out jurisdictions consumers learn about their account faster, can explore options on their own time, and receive the additional benefits that come with early communication about their debts—such as setting up a payment plan, having a credit reporting tradeline updated or deleted, providing evidence of fraud or identity theft, and disputing all or portions of the balance. New York consumers who do not answer their phones are less likely to receive these benefits that come with knowing there is a debt in collection and the options to resolve.
Ultimately, New York still has time to amend their proposals to ensure their consumers receive the same treatment as all other consumers in the US.
Consumers Prefer Digital Communication
By and large, consumers prefer to communicate with their collection agencies digitally—they already predominantly communicate with their banks, creditors, and lenders digitally, so digital collection is a smooth transition. For example, almost all TrueAccord communications with consumers (93%) happen digitally with no agent interaction because the digital communications contain links to online pages where consumers can take action on their accounts. In fact, more than 21% of consumers resolve their accounts outside of typical business hours—before 8AM and after 9PM—when it is presumed inconvenient to contact consumers under the FDCPA. In fact, consumers often post publicly about their positive experience with digital collections:
We believe restricting digital methods to reach and serve consumers will disadvantage vulnerable populations of consumers who primarily conduct most of their affairs digitally. According to the Pew Research Center, “reliance on smartphones for online access is especially common among younger adults, lower-income Americans and those with a high school education or less.” As the consumer described above, TrueAccord’s approach of sending digital communications helps consumers easily navigate to our website and perform actions at their convenience online.
We will continue to explore the impact of these proposed amendments in the second blog post of this series, including how:
- Limiting digital communication use hurts all consumers
- Multiple opt-in requirements burden consumers
- Non-digital communications can be disruptive to consumers
- Email and text messages are a step forward in consumer protection
Register to Speak at the Upcoming Hearing
Sign up to speak for up to three minutes at the hearing by emailing Rulecomments@dcwp.nyc.gov. You do not have to be present at the hearing to speak if you join the video conference using this link, https://tinyurl.com/z3svub58, meeting ID: 255 089 803 499 and passcode: 8HGNSw.
Read Part Two of Our Series: New Yorkers Should Receive the Same Digital Communications Benefits All Non-New Yorkers Receive
Discover the unintended harms New Yorkers face if digital communications are restricted by proposed amendments to New York and New York City’s debt collection laws and the digital communication benefits consumers get in all other states here»»