On Monday, New York Governor Kathy Hochul signed the “Consumer Credit Fairness Act” (SB 153) into law which will transform debt collection litigation practices on consumer credit transactions in the Empire State. This bill notably applies to originators as well as the collection industry. The provisions of the bill take effect on May 6, 2022, except for the lowering of the statute of limitations on consumer credit transactions from six to three years which takes effect on April 6, 2022. A consumer credit transaction is defined as “a transaction wherein credit is extended to an individual and the money, property, or service which is the subject of the transaction is primarily for personal, family or household purposes.” RMAI encourages members who collect on accounts of New York residents to share this Member Alert with their legal, compliance, and operational personnel.
The following is a summary of the Consumer Credit Fairness Act’s provisions:
- Reduces the statute of limitations from six to three years on consumer credit transactions. It should be noted that many accounts already had a three, four or five-year limitations period because of the New York State Court of Appeals decision in PRA v. King involving the state borrowing statute. For those who have accounts with limitations periods above three years, businesses will need to decide on whether to expedite litigation before April 6, 2022.
- Prohibits the revival of a debt that is beyond the statute of limitations through the making of a payment. This is a requirement of the RMAI Receivables Management Certification Program and therefore should not cause any disruptions in the activities of certified businesses.
- Requires the mailing of a notice by the court clerk after filing proof of service of the summons and complaint. This requires the plaintiff to submit to the clerk a stamped, unsealed envelope addressed to the defendant together with a written notice in clear type of no less than twelve-point in size, in both English and Spanish. The Chief Administrative Judge is charged with issuing a Spanish translation of the notice and maintaining and publishing the URL address for the web page containing consumer resources.
- Requires specific data to be included in the complaint. Similar to other states, New York will require, among other things, identifying the name of the original creditor, the last four digits of the account number, the date of last payment, itemization of the debt, and chain of title. All of the items being required are consistent with purchase requirements of the RMAI Receivables Management Certification Program.
- Requires the provision of form affidavits. The form affidavits are similar to the affidavits adopted by the New York Office of Court Administration (OCA) in 2014. The new statute will require the OCA to update their forms.
RMAI had been actively opposing this bill since it was first introduced in 2009. After years of industry offers to negotiate the bill being rejected, the sponsors finally expressed a desire to discuss our concerns. As a result, after 13 months of negotiations, the industry was successful in: (1) removing language which would have expunged all debt at the expiration of the statute of limitations; (2) removing pre-charge-off itemization requirements on revolving lines of credit; (3) changing the point of reference on data and documents for credit cards from origination to charge-off; (4) clarifying a provision of existing law, that some judges were misinterpreting, to make clear that creditors are not required to inform consumers when their accounts are sold in order for the successor parties in interest to be able to collect on those accounts; and (5) extending the effective date by six months to provide the industry time to adjust operational controls as well as accelerate any legal actions under existing law.
This Member Alert is intended for members of the Receivables Management Association International, is for informational purposes only, and is in no way intended to provide legal advice. Members are encouraged to consult with an attorney of their choice for legal advice concerning this matter.