Subchapter 30 - DEBT COLLECTION AGENCIES¶
§ 20-488 Legislative declaration. The council hereby finds the presence of consumer related problems with respect to the practices of debt collection agencies whose sole concern is the collection of debts owed to their clients. While the majority of those engaged in this business are honest and ethical in their dealings, there is a minority of unscrupulous collection agencies in operation that practice abusive tactics such as threatening delinquent debtors, or calling such people at outrageous times of the night. These actions constitute tactics which would shock the conscience of ordinary people. Due to the sensitive nature of the information used in the course of such agency's everyday business, and the vulnerable position consumers find themselves in when dealing with these agencies, it is incumbent upon this council to protect the interests, reputations and fiscal well-being of the citizens of this city against those agencies who would abuse their privilege of operation. It is herein declared that the city should license debt collection agencies.
§ 20-489 Definitions. a. "Debt collection agency" shall mean a person engaged in business the principal purpose of which is to regularly collect or attempt to collect debts owed or due or asserted to be owed or due to another and shall also include a buyer of delinquent debt who seeks to collect such debt either directly or through the services of another by, including but not limited to, initiating or using legal processes or other means to collect or attempt to collect such debt. The term does not include: (1) any officer of employee of a creditor while, in the name of the creditor, collecting debts for such creditor; (2) any officer or employee of a debt collection agency; (3) any person while acting as a debt collection agency for another person, both of whom are related by common ownership or affiliated by corporate control, if the person acting as a debt collection agency does so only for persons to whom it is so related or affiliated and if the principal business of such person is not the collection of debts; (4) any person while serving or attempting to serve legal process on any other person in connection with the judicial enforcement of any debt; (5) any attorney-at-law or law firm collecting a debt in such capacity on behalf of and in the name of a client solely through activities that may only be performed by a licensed attorney, but not any attorney-at-law or law firm or part thereof who regularly engages in activities traditionally performed by debt collectors, including, but not limited to, contacting a debtor through the mail or via telephone with the purpose of collecting a debt or other activities as determined by rule of the commissioner; (6) any person employed by a utility regulated under the provisions of the public service law, acting for such utility; (7) any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity (i) is incidental to a bona fide fiduciary obligation or a bona fide escrow agreement; (ii) concerns a debt which was originated by such person; (iii) concerns a debt which was not in default at the time it was obtained by such person as a secured party in a commercial credit transaction involving the creditor; (8) any officer or employee of the United States, any state thereof or any political subdivision of any state to the extent that collecting or attempting to collect any debt owed is in the performance of his or her official duties; (9) any non-profit organization which, at the request of consumers, performs bona fide consumer credit counseling and assists customers in the liquidation of their debts by receiving payments from such customers and distributing such amounts to creditors. b. The term "child support" means a sum to be paid by either or both parents pursuant to court order or decree or pursuant to a valid agreement between the parties for care, maintenance and education of a child. c. The term "consumer" means any natural person obligated or allegedly obligated to pay any debt. d. The term "debt" means any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment, or any obligation or alleged obligation arising out of a judgment or valid agreement for the payment of child support.
§ 20-490 License required. It shall be unlawful for any person to act as a debt collection agency without first having obtained a license in accordance with the provisions of this subchapter, and without first being in compliance with all other applicable law, rules and regulations.
§ 20-491 License term; fees. a. All licenses issued pursuant to this subchapter shall be valid for two years unless sooner suspended or revoked. The commissioner shall establish by regulation the expiration date of such licenses. b. The annual fee for a license or renewal thereof shall be seventy-five dollars.
§ 20-492 Applications. a. Each person applying for a debt collection agency license or renewal thereof shall file an application in such form and detail as the commissioner may prescribe and shall pay the fee required by this subchapter. b. In addition to any other information required, the commissioner shall require the following information: 1. The name and address of the applicant. 2. The applicant who is a non-resident of the city shall provide the name and address of a registered agent within the city or designate the commissioner as his or her agent upon whom process or other notification may be served. c. Any debt collection agency subject to the provisions of section 20-494.1 shall furnish to the commissioner a current version of the disclosure form required under section 20-494.1 (e) together with a copy of such agency's standard contract for child support payment debt collection services upon applying for a debt collection agency license or renewal thereof. Any contract for child support payment debt collection services shall not be deemed valid or in force and effect until the department has completed a review of and approved a debt collection agency's standard contract, which review shall be completed and approval or disapproval provided within ninety days after submission of such contract to the department. Any amendment or modification of such standard contract or disclosure form shall be provided to the commissioner within sixty days following such amendment or modification.
§ 20-493 Powers and duties of the commissioner. a. The commissioner may make and promulgate such rules and regulations as may be necessary for the proper implementation and enforcement of subchapter. b. In addition to any other powers of the commissioner, not in limitation thereof, the commissioner shall have the power to enforce the provisions of this subchapter, to investigate any violation thereof, and to investigate the business, business practices and business methods of any debt collection agency, if in the opinion of the commissioner, such investigation is warranted. Each debt collection agency shall be obliged upon the request of the commissioner to supply such information as may be required concerning its business practices or methods or its proposed business practices or methods. c. For the purpose of enforcing the provisions of this subchapter, and in conducting investigations relating to any violation thereof, and for the purpose of investigating the business or business practices or methods of any debt collection agency, the commissioner, or the commissioner's designee, shall have the power to compel the attendance of witnesses and the production of books and records, in accordance with the provisions of chapter one of this title. d. For the purpose of this subchapter, licensees may be held responsible for statements, representations, promises or acts of their employees or their agents within the scope of their authority; provided, however, that licensees shall not be held responsible for the statements, representations, promises or acts which are contrary to instructions or which constitute gross negligence or intentional torts unless specifically authorized by the licensee.
20-493.1 Required collection practices. In addition to any practices required under any federal, state or local law, a debt collection agency shall: a. In any permitted communication with the consumer, provide: i. a call-back number to a phone that is answered by a natural person, ii. the name of the agency, iii. the originating creditor of the debt, iv. the name of the person to call back, and v. the amount of the debt at the time of the communication. b. Confirm in writing to the consumer, within five business days, any debt payment schedule or settlement agreement reached regarding the debt.
20-493.2 Prohibited collection practices. In addition to any practices prohibited under any federal, state or local law, a debt collection agency shall not: a. Attempt to collect or contact a consumer regarding a debt after such consumer requests verification for such debt until such agency furnishes such consumer written documentation identifying the creditor who originated the debt and itemizing the principal balance of the debt that remains or is alleged to remain due and all other charges that are due or alleged to be due; b. Contact a consumer about or seek to collect a debt on which the statute of limitations for initiating legal action has expired unless such agency first provides the consumer such information about the consumer's legal rights as the commissioner prescribes by rule.
§ 20-494 Penalties. a. Any person who, after notice and hearing shall be found guilty of violating any provision of this subchapter, shall be punished in accordance with the provisions of chapter one of this title and shall be subject to a penalty of not less than seven hundred dollars nor more than one thousand dollars for each violation provided further, however, that any such person found guilty of having acted as a debt collection agency in violation of section 20-490 of this subchapter shall be subject to an additional penalty of one hundred dollars for each instance in which contact is made with a consumer in violation of such section. b. In addition to any other penalties, if a person is found to have committed repeated, multiple or persistent violations of any provision of this subchapter, such person may be responsible for the cost of the department's investigation.
§ 20-494.1 Prohibited and required practices relating to the collection of child support payments. a. For purposes of this section the following terms shall have the following meanings: 1. "Current payment of child support" shall mean a payment made pursuant to a schedule arising out of a judgment or valid agreement for the payment of child support which is made within thirty days of such payment's due date. 2. "Potential client" shall mean a person seeking child support debt collection services from a debt collection agency. b. Any agreement or contract for the collection of child support payments shall be in writing and shall not extend beyond twelve consecutive months. Renewal of such contracts shall not be automatic and shall require the consent in writing of all parties to the contract. c. No debt collection agency that collects child support payments shall: 1. charge interest or otherwise impose a charge or fee for its services that exceeds fifteen percent of each child support payment collected. 2. charge interest or otherwise impose a charge or fee with respect to child support payments collected primarily through the efforts of a governmental entity. 3. charge interest or otherwise impose a charge or fee for a current payment of child support. 4. impose a charge or fee for the costs of an application. 5. impose a charge or fee for legal services unless paid to an independent firm, practitioner or agency for actual costs incurred and unless agreed upon in writing by the potential client. 6. impose a charge or fee for the termination of a contract for the collection of child support. 7. impose a charge or fee that does not bear a reasonable relationship to the amount of child support actually collected. 8. designate a current payment of child support as arrears. 9. prohibit the termination of a contract for the collection of child support payments until arrears are paid. 10. include any terms in a contract for the collection of child support that conflict or are inconsistent with the terms set out in this subchapter. d. an agreement for the collection of child support shall terminate automatically if no payment of child support has been collected by such debt collection agency for a period of six consecutive months. e. Any debt collection agency that collects child support payments shall provide to a potential client a written disclosure form at the same time as such agency first furnishes such potential client with any informational or promotional materials, application or contract for services, regardless of the manner in which such materials are provided including, but not limited to, in-person contact, fax, regular mail, internet or other electronic means, containing, but not limited to, the following information prominently disclosed in a meaningful sequence: 1. No obligation. A potential client shall be advised that such client is under no obligation to hire a debt collection agency to collect child support payments on behalf of such client and that: (i) New York city's office of child support enforcement (OCSE) provides child support enforcement services at no cost to families regardless of income and (ii) OCSE's powers include, but are not limited to, garnishments against wages, liens on bank accounts and property, tax refund intercepts and the initiation of incarceration proceedings. 2. Fees. (i) Application fees. A potential client shall be advised that child support debt collection agencies are prohibited by law from charging a fee for the costs of an application. (ii) Prohibition against collection fees for child support payments that are not in arrears. A potential client shall be advised that debt collection agencies are prohibited by law from collecting fees for child support payments that are not in arrears and that it is unlawful for such an agency to designate a current payment of child support as arrears. (iii) Legal fees. A potential client shall be advised that child support debt collection agencies are prohibited by law from charging for legal services unless such fees are paid to an independent firm, practitioner or agency for actual costs incurred and unless agreed upon in writing by the potential client. (iv) Early termination penalty. A potential client shall be advised that child support debt collection agencies are prohibited from imposing a charge or fee for the termination of a contract. (v) Additional fees. A potential client shall be advised regarding any additional fees or potential additional fees, including but not limited to, the services for which such fees may be imposed, how such fees are calculated and when such fees are billed. A potential client shall also be advised that any fees must bear a reasonable relationship to the amount of child support actually collected. (vi) A potential client shall be advised that child support debt collection agencies are prohibited by law from imposing any contract terms that conflict or are inconsistent with the provisions specified in the required disclosure form required under section 20-494.1 (e). 3. Contract terms and renewals. (i) A potential client shall be advised that, by law, contracts for the collection of child support payments shall not be entered into for periods of longer than twelve consecutive months. (ii) A potential client shall be advised that renewal of such contracts shall not be automatic and shall require the written consent of all parties to the contract. (iii) A potential client shall be provided a summary of all contract termination provisions, including, but not limited to, the specific date on which such contract shall terminate. If no specific date is provided in the contract, the debt collection agency shall describe how and when such contract will terminate. (iv) A potential client shall be advised that, by law, a contract cannot be renewed if, upon the renewal date, there has been no collection activity for the immediately preceding six consecutive months. f. Any debt collection agency that collects child support payments shall furnish to the commissioner a current version of the disclosure form required under section 20-494.1 (e) together with a copy of such agency's standard contract for child support payment debt collection services within sixty days following the effective date of the local law that added such section. g. As a condition to the issuance of a license to provide child support payment debt collection services, each applicant shall furnish to the commissioner a surety bond in the sum of five thousand dollars, payable to the city of New York, executed by such applicant and a surety approved by the commissioner. Such bond shall be conditioned upon the applicant's compliance with the provisions of this subchapter and any rules or regulations promulgated hereunder, and upon the further condition that such applicant will pay to the city any fine, penalty or other obligation within thirty days of its imposition, or any final judgment recovered by any person who received child support payment debt collection services from a licensee thereunder and was damaged thereby. The commissioner may, by rule, increase the amount of the surety bond required by this section to an amount not to exceed twenty-five thousand dollars. The commissioner may by rule authorize an applicant to, in lieu of a bond, deposit cash to satisfy the requirements of this section in an amount equal to the sum of the surety bond required by this section. h. The commissioner may by rule establish a fund to be administered by the comptroller and authorize an applicant for a license to provide child support payment debt collection services to, in lieu of a bond or cash equivalent, make contributions to such fund to satisfy the requirements of subdivision g of this section. The commissioner may promulgate such rules or regulations as are necessary for the administration of such fund including, but not limited to, rules setting forth the conditions for participation in the fund, the contributions required to be made to the fund and the circumstances under which disbursements will be made from the fund. i. The commissioner may promulgate such rules as may be necessary to carry out the provisions of this section.