MFY Urges CFPB to Issue Strong Rules on Debt Collection

The Consumer Rights Project submitted comments to the Consumer Financial Protection Bureau (CFPB) in anticipation of federal rules governing debt collection practices.  To be effective, the rules should adopt the protections already existing in New York City, and expand upon them by, among other things, (1) more closely regulating the debt buying industry; (2) improving protections for consumers with limited English proficiency; (3) requiring debt collectors to possess key information at all stages of the collection process; (4) facilitating consumers’ ability to exercise their rights to verification and to cease contact; (5) banning unfair practices, such as the collection of time-barred debts; (6) promoting transparency for ongoing settlement and payment plans; (7) ensuring fair litigation conduct; and (8) encouraging private enforcement of the Fair Debt Collections Practices Act.  Finally, the rules should expressly cover all debt collectors, including original creditors and collection attorneys.  MFY applauds the CFPB’s interest in protecting consumers across the country from unfair, abusive and deceptive collection efforts, and appreciate the opportunity to serve as a sounding board for our clients’ experiences. 

Statewide Forms for Debt Collectors Seeking Default Judgments

In December 2013, MFY submitted comments regarding rules proposed by the Office of Court Administration (OCA) that would implement statewide forms for debt collectors to use when seeking default judgments in consumer credit actions.  Although MFY supports OCA’s initiative in addressing the meager amount of proof required to obtain default judgments in these cases, we oppose the proposed amendments because as currently drafted they actually serve to exacerbate the existing problems affecting tens of thousands of consumers, and we offer suggestions for improving such applications. 

Debt Collection Rules

In October 2013, MFY submitted comments regarding debt collection rules proposed by the New York State Department of Financial Services (DFS).  Overall, MFY supports the implementation of rules and believes they will help alleviate some of the debt collection problems faced by our clients.  However, we have some concerns about the length and content of the rules and offer suggestions for improving and clarifying them.

2013-2014 Legislative Agenda

Enact the Consumer Credit Fairness Act

 Enact the Consumer Credit Fairness Act to strengthen the pleading requirements in debt collection cases, enhance notice requirements, and require greater information when applying for a default judgment, thereby leveling the playing field for pro se litigants and reducing the number of judgments based on inaccurate information. 

Ensure that Adult Homes and Nursing Homes are Prepared for Emergencies

 Hurricane Sandy had a devastating effect on residents of New York’s nursing homes and adult care facilities. Many facilities were evacuated after the storm under chaotic circumstances. Residents were displaced for weeks and months in difficult conditions. This legislation would address the shortfalls in this system by incorporating lessons learned from Hurricane Sandy and establishing new state-wide protocols for planning and evacuation of facilities housing people who are elderly or have disabilities. 

Require Banks to Negotiate in Good Faith with Homeowners Facing Foreclosure

 Make CPLR Rule 3408, currently set to sunset in February 2015, permanent.  Homeowners in foreclosure will continue to be afforded access to Settlement Conferences in which the parties are required to negotiate in good faith.  Advocates seek to enhance the process by, among other things, authorizing the tolling and/or barring collection of interest, costs and fees when plaintiff causes undue delay, and awarding defendants’ costs, attorney’s fees and damages in those circumstances.  This amendment to the current statute also seeks to reduce protracted motion practice in IAS Parts and minimize the need for evidentiary hearings related to the parties’ obligation to negotiate in good faith.

Establish a Homeowner Bill of Rights

Establish a Homeowner Bill of Rights in New York State drawing from the core provisions in the National Mortgage Settlement, Office of the Comptroller of the Currency settlements, Consumer Finance Protection Board regulations, and New York State Department of Financial Services regulations, among others (all of which are set to expire in the next two years); extend the protections of these settlements and regulations to home loans not currently covered; and provide homeowners a private right of action for violation of the Homeowner Bill of Rights.

Protect Tenants from Frivolous Lawsuits

 Amend New York State General Business Law section 349 to clarify that landlords are committing deceptive business practices when they bring frivolous lawsuits, charge illegal rents and fees, and engage in other bad practices in order to harass, exploit, and mislead tenants.  This will allow tenants to go to court to enjoin a landlord from future deceptive conduct and provide for both damages and attorney’s fees.

Protect the Rights of Rent-Stabilized Tenants

Amend New York State law  to provide that rent-stabilized leases can be exempted by a debtor in bankruptcy, ensuring that rent-regulated tenants seeking a  fresh financial start do not lose their homes in the bankruptcy process.

Require the NYC Police Department to Create Crisis Intervention Teams

 Pass a New York State law creating a pilot program to assess the need and create an action plan for the New York City Police Department to develop specially-trained Crisis Intervention Teams (CIT) to respond to incidents related to so-called “emotionally disturbed persons” to minimize unnecessary arrest, hospitalization, injury and death of people with mental illness and reduce risk of injury to police officers and community members.