New York State recently implemented new, stronger laws regulating debt collectors – including debt collectors that pursue student loan borrowers. The changes go above and beyond what is required under federal debt collection laws and make New York one of the strongest states in the country for consumer protection.
Strengthening consumer debt collection laws is critical for student loan borrowers. Nearly one in four borrowers are delinquent or in default on their student loans, and that figure has been stubbornly persistent despite the addition of new repayment programs and increasing scrutiny on student loan servicing. It doesn’t help that federal student loan collectors have enormous powers to pursue defaulted borrowers. Private student loan lenders often engage in aggressive tactics as well, and may resort to filing lawsuits against student loan borrowers.
Here’s a summary of some of the major new rules in New York protecting student loan borrowers and other consumers:
Enhanced Initial Debt Disclosure Requirements
Debt collectors must provide clear written notification of consumer rights, as well as information about the underlying debt (including the name of the original creditor and itemized accounting), within five days of the debt collection agency’s initial communication with the borrower. This is especially critical for student loan borrowers, who often see their federal and private student loans change hands several different times during the delinquency and default process.
Regulation of Debts Beyond the Statute of Limitations
While federal student loans do not have a statute of limitations (a specified timeframe on the collection of a debt), private student loans do. The strengthened New York debt collection rules require debt collectors to notify borrowers if the debt is beyond the applicable statute of limitations. Since making a payment on an expired debt can “undo” the statute of limitations defense and re-start the clock, requiring that borrowers be notified is hugely important.
Stronger Debt Validation Requirements
Under the New York regulations, a debt collector must comply with a consumer’s request to substantiate the debt (also known as “validating” the debt) with additional documentation, even if the request is made orally. The debt collector is obligated to comply with the consumer’s request within 60 days, and must cease collection activities in the interim period.
Required Settlement Documentation
The New York rules require that when a debt collector and consumer reach a settlement agreement, the debt collector must provide to the consumer – in writing – confirmation of the settlement agreement, including all material terms and conditions, within 5 days. The rules also require that the debt collector provide confirmation that the debt has been settled within 20 days of receipt of the final payment. This is intended to protect consumers from being subsequently pursued for debts that they thought they had settled.
Interested in reading the enhanced New York debt collection rules yourself? Check it out.