New Yorkers filed over 20,000 complaints concerning debt collectors this year, according to New York Governor Andrew Cuomo, who earlier this month announced new measures to crack down on abusive and deceptive debt collection practices. The substance of these complaints ranged from harassment over the phone, to attempts to collect an incorrect amount of money, to contacting the wrong debtor entirely. In response, the New York Department of Financial Services (DFS) is the latest regulator to issue tougher regulations imposing new obligations on third-party debt collectors.
The New York regulations (like the Fair Debt Collection Practices Act (FDCPA)) apply to third-party collectors—for now. A DFS spokesperson noted that the DFS “decided to concentrate our first steps on third-party debt collectors, where the majority of the abuses have taken place.” But American Banker reported last week the reach of many efforts to regulate debt collection may soon broaden to include “first-party” collectors—that is, creditors collecting their own debts. The Consumer Financial Protection Bureau (CFPB) has already begun to use Dodd-Frank UDAAP enforcement authority to indirectly apply FDCPA requirements to first-party collectors. For instance, last month the CFPB entered into a consent order with DriveTime Automotive Group, an auto dealer and lender that collected debts in-house. The CFPB found that DriveTime made overly aggressive debt collection calls and provided inaccurate data to credit reporting agencies, and that these actions—which the FDCPA prohibits among third-party collectors—amounted to unfair practices under the CFPA. The CFPB is set to release its proposed rules for debt collection in April 2015, and it would not be surprising if the proposed measures drop—at least in part—the old distinction between third-party collection and the collection of debts in-house.
Read more at American Banker (subscribers only).