A disparity between New York’s new three-year statute of limitations for consumer credit transactions, which takes effect April 7, and the New York Department of Financial Services’ existing required out-of-statute debt disclosure has created confusion for debt collectors.
03/22/2022 1:15 P.M.
4 minute read
New York’s Consumer Credit Fairness Act (CCFA), which reduces the statute of limitations, takes effect April 7.
Among other changes to the New York law, the CCFA adds Section 214-i to the state’s Civil Practice Law & Rules (CVP). This new provision of the CVP creates a three-year statute of limitations for debts arising from “consumer credit transactions.” Formerly, this class of debts fell under six-year limitations period set forth in CVP Section 213.
In addition, new CVP Section 214-i prohibits revival of debts arising from “consumer credit transactions.” Specifically, it states that after the three-year limitations period has expires “any subsequent payment toward, written or oral affirmation of or other activity on the debt does not revive or extend the limitations period.” Accordingly, after the bill’s April 7 effective date, a consumer’s partial payment on a an out-of-statute debt arising from a “consumer credit transaction” will not revive debt.
But while Section 214-i expressly precludes revival, the CCFA does not address the out-of-statute disclosure set forth in 23 NYCRR Section 1.3(b)(5), which requires that where “a debt collector knows or has reason to know that the statute of limitations for a debt may be expired, [then] before accepting payment on the debt, the debt collector must provide the consumer with clear and conspicuous notice, in the same medium (such as via telephone or electronic communication) by which the debt collector will accept payment, that . . . . if the consumer makes any payment on a debt for which the statute of limitations has expired or admits, affirms, acknowledges, or promises to pay such debt, the statute of limitations may restart.”
As applied to debts arising from consumer credit transactions, the dissonance between new CVP section 214-i, which prohibits revival and 23 NYCRR 1.3(b)(5), which requires a statement that revival may apply will likely cause consumers some measure of confusion. Debt collectors will need to take care as to how they convey the anti-revival provision of CVP 214-i while, for now, retaining the express disclosure required by 23 NYCRR 1.3(b)(5).
The remaining disclosures required by 23 NYCRR 1.3(b) do not appear to be in tension with new CVP Section 214-i.
The entirety of new CVP Section 214-i, as added by the CCFA, states:
Section 214-i. Certain actions arising out of consumer credit transactions to be commenced within three years.
An action arising out of a consumer credit transaction where a purchaser, borrower or debtor is a defendant must be commenced within three years, except as provided in Section 213-a of this article or Article 2 of the uniform commercial code or Article 36-B of the general business law.
Notwithstanding any other provision of law, when the applicable limitations period expires, any subsequent payment toward, written or oral affirmation of or other activity on the debt does not revive or extend the limitations period.
For comparison, 23 NYCRR Section 1.3(b), as promulgated by the NYDFS, provides:
(b) If a debt collector knows or has reason to know that the statute of limitations for a debt may be expired, before accepting payment on the debt, the debt collector must provide the consumer with clear and conspicuous notice, in the same medium (such as via telephone or electronic communication) by which the debt collector will accept payment, that:
(1) the debt collector believes that the statute of limitations applicable to the debt may be expired;
(2) suing on a debt for which the statute of limitations has expired is a violation of the Fair Debt Collection Practices Act, 15 U.S.C. Section 1692 et seq.;
(3) if the consumer is sued on a debt for which the statute of limitations has expired, the consumer may be able to stop the lawsuit by responding to the court that the statute of limitations has expired;
(4) the consumer is not required to provide the debt collector with an admission, affirmation, or acknowledgment of the debt, a promise to pay the debt, or a waiver of the statute of limitations; and
(5) if the consumer makes any payment on a debt for which the statute of limitations has expired or admits, affirms, acknowledges, or promises to pay such debt, the statute of limitations may restart.
ACA has been working with members, other stakeholders, and the NYDFS on agency’s proposed revised regulations, which all involved expect will add language to the out-of-statute debt notice required under 23 NYCRR 1.3(b) to cure the discrepancy with new CVP Section 214-i. Until the new regulations have been finalized and adopted, however, debt collectors attempting to collect out-of-statute debts in New York should contact their own legal counsel for guidance on how to communicate with consumers about out-of-statute debts.
For more state law updates, join the weekly ACA Huddle, sponsored by Connect International, Solutions by Text, Pay N Seconds, QBE, Prodigal, BeeSeen Solutions, TCN, and Collectors Insurance Agency.
On May 19, ACA will host the Hot Topic “State Specifics for Collectors,” which is part of a quarterly series to help trainers, compliance officers and collectors in the ARM industry gain a better understanding of the most important state requirements. Speakers Nick Prola, general counsel and director of compliance at Professional Finance Company Inc., Stefanie Jackman, partner at Troutman Pepper, and Abigail Pressler, general counsel for NCB Management Services Inc., will explore what’s new regarding state laws and what’s coming up.