July 1, 2021
State and Federal stays on evictions and foreclosures are ending, and consumers may begin receiving debt collection letters. Consumers should be knowledgeable about what a debt collection agency is, and whether the debt collection letters they receive violate either the Federal Debt Collection Practices Act (“FDCPA”) or the New York City Administrative Code (“NYCAC”).
Under the FDCPA, a debt collector is “any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debts, or who regularly collects or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due another.” (FDCPA § 1692a(6)). The term debt collector also includes any person collecting his own debt, but using any other name other than his own. A debt collector must be collecting a consumer debt for the FDCPA to apply. There are also many exceptions to the term debt collector, including an employee of the creditor attempting to collect the creditor’s debt in the name of the creditor, an officer of the United States or any state attempting to collect a debt in performance of their duties.
Pursuant to the FDCPA, when a debt collector is attempting to collect a debt, it must meet very strict guidelines when communicating with the consumer. If its communications do not comply with the FDCPA the consumer is entitled to compensation from the debt collector, and any subsequent legal action may even be dismissed depending on how the debt collector failed to comply with the FDCPA.
Under the NYCAC, the City of New York imposes even stricter guidelines that a debt collection agency must follow. For example, under NYCAC § 20-490, a debt collection agency must be licensed in the City of New York to engage in the practice of collecting debts. Under NYCAC § 20-489(5), a debt collection agency includes law firms that “regularly engage[] in activities traditionally performed by debt collectors.” Therefore, if you receive a letter from a creditor’s attorneys, they could be considered debt collectors too. If the debt collection agency or the attorney’s office is not licensed by the City of New York, they are not legally allowed to collect another person’s debts within the five boroughs.
Both the FDCPA and NYCAC require a debt collector to send a letter to the consumer notifying him of the debt, and it must state that the consumer has 30 days to dispute the debt, upon which the debt collector must send another letter validating the debt before the debt collector may continue to pursue further collection of the debt (FDCPA § 1692g(b); NYCAC § 20-493.2(a)). There are many other requirements that such communications must meet, including specific language required by the FDCPA and the NYCAC. Without including that required language, the debt collector or its attorneys may be in violation of the FDCPA and the NYCAC.
As the Covid-19 pandemic comes to an end, and as stays on evictions and foreclosures lift, this issue will become more prominent. Because many people have been financially affected by the pandemic, creditors will seek to collect the debts they are owed, and many will use debt collectors to achieve their goal. If you or anyone you know receives a debt collector’s letter, you should seek legal advice on whether that letter is compliant with both the FDCPA and the NYCAC.