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How New York State Protects Consumers from Illegal Debt "Settlement" and Collection-- Part I

Written by: Ronald Anthony Sarno

Reputation Level 20

Posted over 2 years ago. Applies to New York, 4 helpful votes, 0 comments

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New Yorkers Need to Know What is Wrong about Debt Settlement Companies!

According to the New York State Attorney General’s office debt settlement companies are for profit companies that allege they can eliminate consumers’ debts by negotiating settlements with creditors for a fraction of the outstanding debt. Many of these companies accomplish little for consumers and charge very hefty fees. Many debt settlement companies make promises that they simply cannot keep. Often they leave NY consumers in a worse financial state then when they first hired the “debt settlement” company. These shyster companies advise consumers to stop paying debts and, instead, to place money into savings account so that enough money will accumulate to allow a settlement offer to be made at a later date to any creditors. Almost all NY consumers who sign-up with such debt settlement companies soon find the companies’ promises are empty. Creditors are under absolutely no obligation to settle for less money. They often refuse to do so.

Know what you should and should not be doing with a "Debt Settlement" company!

Here are some tips from the NY Attorney General: • Be suspect of debt settlement companies which promise to obtain settlements for much less money than you owe. Many debt settlement companies misrepresent their typical results and their success rates. • Avoid debt settlement companies that require (usually large) payments in advance of obtaining the promised settlement. • Remember: debt settlement plans often do not stop creditors from charging interest, late fees, or other penalties on outstanding debts, and do not prevent creditors from bringing collection lawsuits. If you get a summons and complaint from a creditor, it is proof that your debt settlement company is NOT doing what it promised you. Also, failure to make required payments on your debts will negatively affect your credit score. • Creditors are under no legal obligation to accept a settlement offer for less than the outstanding balance owed. • Few consumers who enroll in debt settlement ever succeed.

Critical Information about Debt Collection Companies from NY Attorney General

Debt Collection companies: There are two types of debt collectors: • firms that collect debts owed to third parties and • creditors (firms to whom you owe money directly). The Federal Fair Debt Collection Practices Act (FDCPA) regulates both debt collectors who contact you on behalf of your creditor and debt collectors who contact you because they have purchased your defaulted account from the original creditor (or another debt collector), and are now trying to collect from you. Keep in mind that lawyers are NOT exempt from these rules. In NY and across America law firms who regularly work on debt collection actions are also governed by the FDCPA. In addition, all debt collectors operating in New York, whether acting on behalf of a third party or on behalf of themselves, are required to follow New York State law (Article 29-H of the General Business Law) governing debt collection practices. Both federal and state laws regulate and restrict various debt collection practice

Debt Collection: The First Two Rules from the New York Attorney General:

New York rules on debt collection according to the Attorney General Office: 1. How May Debt Collectors Contact You? A debt collection agency may contact you in person, by telephone or in writing. They must disclose the purpose of the contact. Debt collection agencies are restricted, however, from contacting you at inconvenient times or places (for example, before 8 AM or after 9 PM), unless you agree. A debt collection agency is prohibited from contacting you at your place of employment if the agency knows that your employer disapproves. Any debt collection service which does this is violating the law and should be reported to the Attorney General’s Office. 2. What If You Do Not Owe the Debt? To dispute a debt, you must write a letter to the debt collection agency within thirty days of their initial contact with you. If you dispute a debt, the debt collection agency is prohibited by law from contacting you again until it sends you verification of your debt.

The Third Rule on Recognizing Harassment from the New York Attorney General

3. How Can You Stop Debt Collectors From Contacting You? To stop a debt collection agency from contacting you, you must write a letter to the debt collection agency to ask that they stop contacting you. Once a debt collection agency receives your letter, the agency may not contact you any further except to inform you that there will be no further contact or that the agency or the creditor intends to takes some specific action. However, submitting a letter asking a debt collection agency to stop contacting you does not prevent the agency from instituting legal action against you to collect the debt. However if they continue to contact you by phone or letter they are violating the law.

The Fourth Rule for Consumers from the New York Attorney General:

4. What should you do when you experience financial problems? There is nothing to be ashamed about if you are experiencing difficulties meeting all your financial obligations. It is important, however, that you reach out for assistance if you believe you can not pay these debts or you are experiencing credit-related financial problems or debt collection phone calls, consider contacting a not-for-profit credit counseling agency that is licensed by the New York State Banking Department for assistance. Generally, these organizations offer assistance for free or at minimal expense in paying back your debts.

Other Prohibited Activities According to the New York Attorney General

Other Prohibited Practices: Debt collection agencies are prohibited from: • collecting an amount greater than what you owe; • depositing a post-dated check prior to the date on the check; • contacting you by postcard; • threatening to take possession of your property through non-judicial action, when there is no right to do so.

False and Misleading Representations according to the New York Attorney General

False or Misleading Representations: Debt collection agencies are prohibited from: • false representations that they are government representatives; • false representations that they will seize, garnish or sell any property or wages unless such action is lawful; • false representations that you have committed a crime or that you will be arrested or imprisoned; • false representations that papers resembling official documents are from a court or governmental agency, when they are not; • false representations about the amount of the debt; • false representations that the debt collector is employed by a credit bureau; • false representations that they are attorneys or that there is the involvement of an attorney in collecting a debt; (to find out if someone is really an attorney call 212-428-2800 or access the web site www.nycourts.gov and click onto attorneys.) • threats to communicate false credit information with any other person such as an employer or neighbor

Sample Letter Protesting a Debt from a Collection Company Introduction

This is a recommended letter to send a debt collection agency especially when you believe there is an error in the demand. Always send such a letter certified mail r/r/r + regular mail and always keep a copy for yourself. Maintain a folder on all of the correspondence so if the matter comes to litigation you can show your efforts and how the company responded:

Sample Protest Letter part 1:

Initial Debt Collection Dispute Letter Today's Date Your Name Your Address Collector's Name Collector's Address Dear {insert name of collector or company}, I am writing in response to your (letter or phone call) dated {insert date}, (copy enclosed) because I do not believe I owe what you say I owe. This is the first I've heard from you, or any other company on this matter therefore, in accordance with the Fair Debt Collection Practices Act, Section 809(b): Validating Debts: (b) If the consumer notifies the debt collector in writing within the thirty-day period described in subsection (a) that the debt, or any portion thereof,

Sample protest letter part 2:

is disputed, or that the consumer requests the name and address of the original creditor, the debt collector shall cease collection of the debt, or any disputed portion thereof, until the debt collector obtains verification of the debt or any copy of a judgment, or the name and address of the original creditor, and a copy of such verification or judgment, or name and address of the original creditor, is mailed to the consumer by the debt collector.

Debt Reply Letter - part 3

I respectfully request that you provide me with the following information: (1) the amount of the debt; (2) the name of the creditor to whom the debt is owed; (3) Provide a verification or copy of any judgment (if applicable); (4) Proof that you are licensed to collect debts in (insert name of your state) Be advised that I am fully aware of my rights under the Fair Debt Collection Practices Act and the Fair Credit Reporting Act. For instance, I know that: • because I have disputed this debt in writing within 30 days of receipt of your dunning notice, you must obtain verification of the debt or a copy of the judgment against me and mail these items to me at your expense; • you cannot add interest or fees except those allowed by the original contract or state law. • you do not have to respond to this dispute but if you do, any attempt to collect this debt without validating it, violates the FDCPA;

Debt reply letter - part 4:

Also be advised that I am keeping very accurate records of all correspondence from you and your company including recording all phone calls and I will not hesitate to report violations of the law to my State Attorney General, the Federal Trade Commission and the Better Business Bureau. I have disputed this debt; therefore, until validated you know your information concerning this debt is inaccurate. Thus, if you have already reported this debt to any credit-reporting agency (CRA) or Credit Bureau (CB) then, you must immediately inform them of my dispute with this debt. Reporting information that you know to be inaccurate or failing to report information correctly violates the Fair Credit Reporting Act § 1681s-2. Should you pursue a judgment without validating this debt, I will inform the judge and request the case be dismissed based on your failure to comply with the FDCPA.

Debt reply letter - part 5

Finally, if you do not own this debt, I demand that you immediately send a copy of this dispute letter to the original creditor so they are also aware of my dispute with this debt. Signature here Your Printed Name