This postponement, made in response to industry concerns and a legal challenge from ACA International, Inc. and Independent Recovery Resources, Inc., also aligns the effective date with the new enforcement timeline. The recent amendments, however, mark a significant shift in the scope of NYC’s debt collection rules, expanding regulatory obligations to include creditors collecting their own debts. To clarify these changes, NYC DCWP held a Q&A session on November 7, where it was confirmed that the amended rules would indeed apply to creditors—even though the updated definition of “debt collector” seemed to suggest otherwise. 

The Original Rule: Who Was Previously Covered? Under the previous NYC debt collection regulations, a “debt collector” was defined as any person or organization primarily engaged in collecting debts owed to a third party. This rule aligned with the federal Fair Debt Collection Practices Act (FDCPA), which also exempts original creditors from its definition of “debt collector.” The NYC rule required third-party debt collectors to adhere to strict guidelines for consumer communication, dispute resolution, and transparency, including: Providing specific disclosures to consumers at the outset of the collection process. Restricting the times and frequency of debt collection calls. Prohibiting false representations or deceptive practices. However, creditors collecting their own debts were not subject to these requirements, as they were not classified as “debt collectors” under the NYC regulation. This exemption meant that companies could directly pursue debt collection without the added obligations placed on third-party collectors. 

What’s Changed in the Amended Rule? The recent amendments broaden the definition of “debt collector” to include creditors collecting their own debts, even though the language of the statute still defines a “debt collector” as any person or entity engaged in collecting debts “owed or due to another person.” Many creditors initially assumed the amended rule would maintain the original scope by excluding them from compliance requirements. However, NYC DCWP clarified during the November 7 Q&A that the intent of the amended rule is to include all creditors collecting on their own behalf. To address the confusion, NYC DCWP has proposed an additional amendment that will explicitly state that creditors collecting their own debts are considered “debt collectors” under NYC regulations. This amendment is expected to be finalized by November 12, 2024. 

What Does This Mean for Creditors and Debt Collectors? The expanded definition means that creditors collecting their own debts will now be subject to the same compliance standards as third-party collectors. This includes requirements for: Disclosures at the beginning of the collection process, including the amount owed and contact details. Restrictions on call frequency and time, designed to protect consumers from excessive communication. Prohibitions on misleading representations and practices that might pressure consumers unfairly.

 Key Takeaways for Affected Businesses The NYC DCWP’s amendments represent a shift toward more stringent regulation across all debt collection practices in the city. Creditors and debt collectors alike should prepare for the April 1, 2025, enforcement date by updating compliance practices to meet the revised standards. NYC DCWP’s clarification underscores its commitment to consumer protection by ensuring consistency in debt collection practices, regardless of whether the collector is a third party or an original creditor. 

If you have questions about these changes or need assistance navigating compliance under the amended rules, please reach out to our team for tailored guidance.