New York City Requires Debt Buyers to Register as Collection Agencies

Last week, the New York City Council passed legislation that would require debt purchasers to register and operate under the same rules as collection agencies, regardless of whether they actually engaged in debt collection activity.

In a session last Wednesday that also saw the Council create a “bed bugs task force” to keep the city’s hotel beds safe from the insect nuisance, a unanimous vote of 46-0 passed the accounts receivable management proposal more strictly defining how debt buyers are regulated in New York City. The legislation also obligates debt collectors to provide specific information regarding the account in their communications with debtors.

The newly passed rules, which are scheduled to be presented for Mayor Michael Bloomberg’s signature on Wednesday of this week, change the way debt buyers are regulated as they deal with accounts from the city’s 8 million residents.

New York City has separately regulated debt collection agencies for years. But under old regulations, debt buyers did not fall under the rules unless they actively engaged in debt collection activity. The new rules apply to companies that purchase accounts, even if they outsource collections to third parties.

In addition to bringing debt buyers into the collection agency regulatory universe, the bill lays out specific information that must be shared with consumers. Agencies will now be required to identify the original creditor, itemize the money owed, provide background information on the obligation and give confirmation in writing when the debt is settled.