Debt collection agencies, which employ more than 5,000 people in Western New York, would have to apply for licenses under an Assembly reform package that aims to stop a surge of ruthless collection tactics.
"This year the Assembly is putting forth the effort to highlight this issue," said Queens Assemblyman Michael N. Gianaris, a member of the Committee on Consumer Affairs and Protections.
The five bills in the legislative package have all cleared committee hearings and are ready for floor debate.
The reform package comes amid a consumer outcry about collection tactics. Complaints about hired or "third-party" collectors have quadrupled in four years to 69,000 at the Federal Trade Commission, while state and municipal consumer bureaus also see surges. The number one complaint at the federal level is that collectors demand spurious debts, or more than the amount really owed. But industry leaders say the reforms could make it more difficult for legitimate agencies to do business, while bad apples would continue to flout the rules.
"There's already a lot of rules and regulations we need to obey or we will be sued by consumers' attorneys," said Eric Najork, legislative chairman of the New York State Collectors Association. His firm, Collections Bureau of the Hudson Valley, has about 75 workers collecting medical and other debts.
Currently, only Buffalo and New York City license collectors in New York, which is one of 16 states that lack a statewide license requirement.
In addition to creating a license and bonding requirement, the proposed new regulations would:
Require collectors to send a "Debtors Bill of Rights" along with their first dunning notice.
Strengthen the protections against seizure of bank accounts that contain Social Security and public assistance funds, which are supposed to be exempt from debt collection.
Require collectors to provide the name and address of the original creditor.
Create a "private right of action" under state law allowing debtors to bring their own lawsuit against a collector, rather than waiting for the Attorney General to take action.
Currently, U.S. debtor protection law allows private lawsuits against collectors in federal court. The measure forbids harassment, unfounded threats and disclosing debts to neighbors. But the U.S. Fair Debt Collection Practices Act doesn't apply to "first-party" collectors -- the banks and other lenders that originate debt.
Under the Assembly proposals, agencies could be denied a license for violations of debtor protection laws. Firms would have to obtain $10,000 to $50,000 in bonding to cover potential fines and state investigative costs.