New York’s legislature granted final approval last Thursday to Gov. Andrew Cuomo’s proposed 2021 Executive Budget, ending a months-long policy battle to focus instead on the ongoing war with the coronavirus (“COVID-19”). The approved budget, however, is substantially different than the one originally proffered by Gov. Cuomo on January 21, 2020. As New York continues to grapple with the short- and long-term effects of the COVID-19 pandemic, many of the State’s intended policy initiatives for the upcoming year have been postponed or cancelled due to the overwhelming administrative and financial strain that the virus has inflicted on the State’s systems.
Among the abandoned proposals was a bill to license consumer debt collectors which, if enacted, would have required certain covered parties attempting to recover consumer debt to first obtain a license from the New York Superintendent of Financial Services before engaging in any debt-collection activity. Under the current law, the New York State Department of Financial Services (“DFS”) has limited authority to compel debt collectors to provide data that regulators typically collect to ensure compliance with consumer laws and regulations, resolve or even acknowledge consumer complaints, or appear before administrative hearings. The proposed debt collector licensing bill, which originally was introduced in December 2019, was intended to be part of Gov. Cuomo’s broad initiative to increase the authority of the State’s financial regulator to regulate, investigate, and prosecute debt collectors. In addition to mandating licenses for consumer debt collectors, the Governor’s proposal also targeted certain debt collection practices, including banning confessions of judgment in consumer loans.
Although the deletion of the licensure bill from the 2021 budget undoubtedly will delay the Governor’s plan to reform New York’s debt collection law, the bill is likely to reemerge on the State’s legislative agenda once the pandemic subsides.
Troutman Sanders will continue to monitor and report on any development related to the licensure of debt collectors operating in New York.