Debt collection in New York is wrought with controversy. While the laws have indicated the creditor’s duty to provide both the debtor and the court with adequate information regarding the charges, citizens each year are faced with the surprise freezing of their bank accounts and the garnishment of their wages.
Creditors, on the other hand, are making bank with false evidence and lawsuits to which the debtor is not kept privy. Although some cases do go dismissed, there are several that are so convincing they pass under the eye of the court.
In early 2014, however, change erupted in the state’s policy. No longer would creditors have complete control over the debtor, and no longer would debtors be kept in the dark of ignorance.
Types of Debt Collecting Agencies
There are two types of debt collectors:
- Firms, which collect the debts one might owe to a third party
- Creditors, the “third parties” mentioned above, places to which one owes money directly.
According to the Federal Fair Debt Collection Practices Act (FDCPA), creditors are required to remain in contact with both the debtors and the courts involved. They must also regularly engage in work with both parties.
In New York, debt collectors must also follow state law regarding debt collection, in addition to the Federal policies outlined above.
Change Shakes New York’s Debt Collection Methods
In April 2014, Jonathan Lippman put his gavel down and called to legislation new laws regarding the collection of debt in New York State. Following years of hearing complaints of unfair collection practices, he finally announced new court procedures to an audience in the state’s Capital.
Among the alterations include protocols which make it more difficult for debt collection agencies to win default judgments, as well as guidelines which are more protective of debtors. The policies should aid in the reduction of bankruptcy declarations and foreclosures, both major issues following the economic recession of 2008.
Time for Progress
Debt is no small problem for the citizens of New York. While its average are close to the rest of the country, its delinquencies with regards to mortgage payments are the third-highest in the nation. Student loan debt, too, comprises almost ten percent of the state’s total debt.
The collection methods tend to be no better. More often than not, creditors procure their documentation of the debtor from a third party, to avoid paying the fees associated with obtaining the evidence directly from the company to which the debtor owes money. They are then turned into judges without origin, history, or even amount.
The results? The debtor is usually not informed of his or her proceedings until the process is over and done. He or she remains unaware until he or she goes to make a purchase; only then is the debtor aware his or her bank account has been frozen, or his or her wages are being garnished.
75-year-old Virginia Jenkins, a retired department store employee, is an example of these nefarious methods of debt collection. In March 2014, she received notice from her bank stating her life savings had been frozen and she was scheduled to pay a $6,000 judgment against her unintentional delinquency. Not once had Jenkins been issued any previous court papers, nor had she charged such a large amount onto her card.
“You have creditors who know the law like the back of their hand,” she stated, “and who know how to manipulate it.”
Luckily, the courts found the creditor’s evidence to be insufficient for any sort of charge, and the suit was dismissed.
Mrs. Jenkins was one of the lucky ones. Each year in New York, there are filed more than 100,000 lawsuits that provide far less than ample evidence; and it would be a mistake to believe each of these are found to be unworthy of continuing through due process. According to Lippman, they are “big judgments that…have no basis in fact,” and should “reach evidentiary standards under the law.”
After the Legislation
Following the ruling, there is to be initiated a closer connection between the creditors and the courts. Before beginning a trial against a debtor, the creditor will have to:
- Provide documents that detail the ownership of the debt, as well as
- A stamped envelope bearing the debtor’s address.
Only then will the debtor be contacted, allowing then him or her the option of continuing with the process. The method allows debtors to take responsibility, and it no longer puts them under the complete control of their creditors. As Lippman decreed, there will be no more “robo-signing” or “affidavits riddled with hearsay allegations.”
Do not think though, the new rules will take some debtors off of the chopping block. It will only give them the opportunity to “own up” to their debts, an action that, hopefully, will be considered morally “right.”
The policies went into effect on June 15th, 2014.