New York Governor Kathy Hochul signed the Consumer Credit Fairness Act (the Act) into law. The Act will likely have substantial impact on debt collection lawsuits filed by creditors or debt collectors in New York. The Act not only reduces the statute of limitations for filing a debt collection action, but imposes new filing and notice requirements upon parties filing a debt collection action.

First, the Act significantly shrinks the statute of limitations for most debt collection law suits arising out of consumer credit transactions, from six years to three years. Further, consumer payments towards the debt, or a consumers written or oral affirmation of ownership of the debt will no longer reinstate or extend the limitations period. Previously, a consumer’s affirmation of a debt or payments toward the debt could reinstate or extend the six-year limitations period. The new, three-year statute of limitations will go into effect on April 6, 2022.

Second, the Act incorporates several new requirements regarding the filing and prosecution of a debt collection action. Creditors or debt collectors filing a debt collection action must include the contract or written instrument the action is based upon, or, for a revolving credit account, the charge-off statement. Complaints filed will be required to include additional information about the debt. For certain types of debts, additional information like collection costs and fees imposed by the original creditor must also be included with the complaint.

Third, the Act imposes new notice requirements on creditors or debt collectors filing an action to pursue to the collection of a consumer debt. The additional notice must include the names of the creditor or debt collector, the consumer, the original creditor, the case index number, and the consumer’s rights and responsibilities regarding the judgment, among other requirements.

Finally, the Act also enacts additional affidavit requirements when a third-party debt collector seeks a default judgment collecting upon a consumer debt. The Act requires the application for default judgment to attach an affidavit from the original creditor. Any subsequent assignors or sellers of the debt must also file an affidavit of sale. In addition, the plaintiff creditor must include an affidavit of a witness who can verify the chain of title of the debt. All parties requesting the default judgment must also attach an affidavit stating the statute of limitations on collecting the debt has not expired. The new filing requirements are effective May 6, 2022. To view source, click here.

Print & Mail Coalition Files Amicus Brief in Support of Preferred Collection and Management Services
Identifies Key Points Not Considered in The Ruling

May 28, 2021 – Following the 11th Circuit’s panel decision in Hunstein v. Preferred Collection and Management Services, Inc., the Print & Mail Coalition (the “Coalition”) filed an amicus brief in support of the defendant’s petition for a rehearing en banc. The Coalition represents 12 independent businesses specializing in the production and delivery of printed and electronic collection communications.

The Coalition’s amicus brief addresses two oversights by the panel, which left uncorrected, would leave intact a significant misreading of the Fair Debt Collection Practices Act and eliminate the print and mail industry, and other service providers from servicing debt collectors. The issues raised by the Coalition are:

• Whether the panel erred by accepting, without consideration, the parties’ legal conclusion that Preferred engaged in a communication with CompuMail. The Coalition’s argument is that CompuMail is not a person under the statute, but a medium through which collectors convey debt information.
• Whether the panel decision overlooked Regulation F and the CFPB’s interpretation of the FDCPA as not prohibiting a debt collector’s use of a print and mail vendor.

The brief explains that the print and mail industry serves as an important communication conduit between businesses and consumers, and acts as an extension of operations for corporate America and the United States Postal Service. Additionally, the Coalition asserts that panel’s decision imposes significant harm to millions of consumers, who rely on written correspondence from debt collectors about their credit transactions, repayment obligations, their legal rights, and credit reporting consequences.

The deadline for amicus briefs to be filed is June 1, 2021. However, there is no specified date or timeline for the court to rule on the defendant’s request for rehearing or review of the amicus briefs.

Leading Print & Mail Vendors Join Forces to Support the Accounts Receivables Management Industry

Banding Together to File an Amicus Brief in the Wake of The 11th Circuit Court of Appeals Decision

April 29, 2021 – Following the 11th Circuit’s decision in Hunstein v. Preferred Collection and Management Services, Inc., a group of accounts receivable management (ARM) vendors quickly convened and formed a Print & Mail Coalition (the “Coalition”) to ensure alignment and a unified response to this significant industry ruling. This is the first time that these individual firms have joined together, acting not as individual firms or competitors, but as a powerful, collective force to promote a positive result for the overall ARM industry.

The Coalition is currently working together to analyze the case, digest its potential impact, and determine effective strategies to help all clients adapt their business practices, as needed.
The Coalition supports the defendant’s request for a rehearing. To that end, the Coalition, with the assistance of well-known industry defense and compliance attorneys, intend to offer a strong legal response. The collective response will be documented in an amicus brief that will be presented to the court in support of a request for a rehearing. The group meets regularly to make certain its reasoning is accurate, effective, and aligned with the arguments of the defendant, the relevant trade associations, and the industry at large. Importantly, the Coalition is advocating for the print and mail industry and the clients it serves.

The Coalition is in direct communication with ACA International (ACA), the Receivables Management Association International (RMAI), and The iA Institute’s Consumer Relations Consortium (CRC). The goal is to ensure that Coalition efforts and positions are operationally and legally consistent with those held by these industry associations and their collective memberships.

The individual Coalition firms have been supporting their clients’ business objectives for years. While the firms often compete for business, they are united in supporting this critical effort as one voice. Although this case presents challenges, the Coalition expects to meet those challenges alongside their clients and as a partner to their success. The Coalition believes the ARM industry plays a critical role in the American economy and will remain unified and committed to legal and operational solutions that simultaneously promote business efficiencies and consumer protection.

Complying with the Fair Debt Collection Practices Act

The Third Circuit Court of Appeals said that a collection agency violated the Fair Debt Collection Practices Act (FDCPA) when it sent a collection letter with the debtor’s account number visible through the transparent address window of an envelope and reversed a district court on the issue that “implicates a core concern animating” the FDCPA.

That section of the law prohibits using “any language or symbol, other than the debt collector’s address” on an envelope containing a debt collection letter. Although the account number in question was not on the envelope itself, the position of the number on the letter made it visible through the envelope’s window.

On appeal, Convergent argued that Douglass’s account number is a meaningless string of numbers and letters, and its disclosure has not harmed and could not possibly harm Douglass. But the Circuit panel found that “the account number is not meaningless — it is a piece of information capable of identifying Douglass as a debtor.” Going so far as to note that the FTC Staff Commentary was “unpersuasive,” the opinion read, “The account number is a core piece of information pertaining to Douglass’s status as a debtor and Convergent’s debt collection effort. Disclosed to the public, it could be used to expose her financial predicament.

“Section 1692(a) of the FDCPA explains that Congress enacted the law in response to ‘abundant evidence’ of abusive debt collection practices that cause manifest harms to individuals, among them ‘invasions of individual privacy,'” Senior Judge Anthony Scirica said on behalf of the unanimous three-judge panel.

The case initially cited the presence of a visible QR Code as a potential violation. The QR Code could also be seen through the window, and when scanned, revealed slightly more information than was visible in print, including the debtor’s account balance. But Douglass no longer pressed the QR Code issue, so the 3rd Circuit panel did not decide whether that was a violation of the FDCPA.

The U.S. Supreme Court has yet to offer guidance in this area. Until it does so, the best practice for debt collectors in the wake of this Third Circuit decision may be to assume that any language that might identify a letter’s recipient as a debtor, and which is in any way visible to a person handling the mail, violates the FDCPA and should be avoided.

 

For more information on the case please refer to Douglass v. Convergent Outsourcing