The bill is included in the Consumer Credit Fairness Act. The statute of limitations requirements will take effect in April.
New York Gov. Kathy Hochul has signed legislation to reduce the statute of limitations to three years for legal actions aimed at recovering debt from consumers.
The bill, part of the Consumer Credit Fairness Act (CCFA), reduces the statute of limitations from six to three years, “compelling creditors to file claims in a timely manner and protecting consumers from excessive interest charges and late fees,” according to a news release from the governor’s office.
The CCFA also:
- Requires a notice to be mailed to the defendants in consumer credit actions by the clerk of the court, ensuring that defendants are given notice of the lawsuit.
- Requires court filings to include more information about the debt targeted in a lawsuit, such as identifying the debt or account and providing proof that the debt is owed to the plaintiff.
- Establishes specific requirements for applications for default judgments in consumer credit actions to prevent debt buyers from suing on expired debt.
Portions of the CCFA will take effect immediately; however, the section on the statute of limitations will take effect 150 days from the date the bill was signed, or April 7, 2022.
The section on statute of limitations is as follows:
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 two 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.
These sections will take effect 180 days after the bill’s approval, or May 7, 2022:
- Section Two: Includes two new subdivisions on finance charges and the definition of original creditor, which means the entity that owned a consumer credit account at the date of default giving rise to a cause of action.
- Section Three: An amendment that reads as follows: “An action upon a contractual obligation or liability, express or implied, except as provided in Section 213a or 214i of this article or article two of the uniform commercial code or Article 36-B of the general business law.”
- Section Five: The civil practice law and rules are amended by adding a new Section 306-d to read as follows: Additional mailing of notice in an action arising out of a consumer credit transaction. (a) At the time of filing with the clerk of the proof of service of the summons and complaint in an action arising out of a consumer credit transaction, the plaintiff shall submit to the clerk a stamped, unsealed envelope addressed to the defendant together with a written notice in clear type of no less than 12-point in size, in both English and Spanish. See Section Five for additional language that must be included in the mailing.
- Section Six: Subdivision(a) of Section 3012 of the civil practice law and rules is amended to read as follows:
Service of pleadings. The complaint may be served with the summons, except that in an action arising out of a consumer credit transaction, the complaint shall be served with the summons. A subsequent pleading asserting new or additional claims for relief shall be served upon a party who has not appeared in the manner provided for service of a summons. In any other case, a pleading shall be served in the manner provided for service of papers generally. Service of an answer or reply shall be made within 20 days after service of the pleading to which it responds.
- Section Seven: Rule 3016 of the civil practice law and rules is amended by adding a new subdivision (j) to read as follows:
Consumer credit transactions. In an action arising out of a consumer credit transaction where a purchaser, borrower or debtor is a defendant, the contract or other written instrument on which the action is based shall be attached to the complaint, however, for the purposes of this section, if the account was a revolving credit account, the charge-off statement may be attached to the complaint instead of the contract or other written instrument. See section seven for the complete information to include in the complaint.
Sections eight, nine, 10, 11 and 12 will also take effect in May. See the text of the CCFA for complete requirements in those sections.
What’s Next in New York?
In addition to New York, efforts to shorten a state’s statute of limitations have been a major issue in five other states considering legislative proposals: Arkansas, Colorado, Illinois, Maine and Virginia.
More than 640 bills were passed in the New York legislature in the last 48 hours of the state’s legislative session, which ended in June.
The New York State Collectors Association (NYSCA) focused its advocacy efforts several bills during the legislative session.
S. 00737A: This law requires debt collectors to inform consumers in each initial communication that written communications are available in large print format. Hochul signed this bill into law in October, ACA International previously reported.
Legislation pending the governor’s signature, S. 05724A, adjusts the rate of interest on money judgments “in actions involving consumer debt where the defendant is natural person,” to be calculated at 2% each year, down from 9%.
New York’s legislative session is one of the busiest tracked by ACA and the NYSCA.
Earlier this year, legislation was introduced in New York that would have implemented a statewide licensing program along with some onerous documentation and collection procedures. ACA and the NYSCA worked closely with a large coalition of accounts receivable management (ARM) industry lobbyists to advocate for amendments. The legislation was eventually tabled and did not receive a vote before the legislature adjourned in June.
From January-June 2021, ACA and its state units identified and tracked more than 860 state-level bills on topics such as medical debt, garnishment and data privacy that would impact the ARM industry if enacted, ACA previously reported.
New York’s session will resume in January unless the governor calls them back for consideration during a special session.
“In addition to lobbying for ARM industry priorities as legislation is introduced, our state legislative teams—led by more than 30 contract lobbyists—implemented new advocacy techniques to adapt to the various COVID-19 restrictions at state capitols and the remote nature of committee meetings, testimony and votes,” said Vice President of State Unit and Government Affairs Andrew Madden.
Much like at the federal level, activity at the state level is ongoing, so continuing to make the ARM industry’s voice heard on these issues is critical, Madden said.
Reaching out and connecting with lawmakers during legislative recesses is an outstanding approach to building relationships with lawmakers and regulators.
“Lawmakers rely on engaged industry professionals to educate them about the real-world impact of their decisions and the congressional and state recesses are the perfect time to connect,” Madden said.
For more information on state-level advocacy or joining your state unit, contact Andrew Madden at [email protected].
ACA also recommends members join the weekly ACA Huddle webinar at 11 a.m. CDT Wednesdays. The ACA Huddle features advocacy, compliance and education updates as well as guest speakers. And one-time registration is available through the ACA events calendar.