NY DFS Announces First Case Under State’s Debt Collection Rule

The New York Department of Financial Services has announced its first-ever regulatory action taken in enforcing the state’s debt collection regulation, accusing a collection law firm of not substantiating “hundreds” of debts within the 60-day required timeframe.

A hearing has been scheduled for Jan. 12, 2021 to determine whether the firm — Forster & Garbus — committed the violations. A copy of the statement of charges and hearing notice can be accessed by clicking here.

Even though the law firm maintains a policy for complying with the substantiation requirements of the law, the DFS said it found “dozens” instances where the substantiation was not provided, “hundreds” of incidents where consumers were not provided with sufficient documentation to comply with the requirements, and “dozens” of incidents where consumers were not provided with the substantiation within the 60-day timeframe. Each violation is punishable by a civil fine of $1,000.

“Consumer protection is the center of everything we do at DFS,” said Superintendent of Financial Services Linda A. Lacewell, in a statement. “It is especially important for New Yorkers to have access to appropriate and accurate financial information during this stressful time – so they can protect their rights and make financial decisions in their own best interest.”

The Department cited a handful of examples of the law firm’s non-compliance, including:

  • In response to many requests for substantiation, Respondent merely provided consumers with the application and a document entitled “Statement of Purchased Account,” which failed to clearly identify the creditors who purchased and sold the consumer’s student loan debt.
  • In other instances, Respondent failed to provide the underlying transaction documents, such as a loan application, which created the student loan debts to be collected.
  • Respondent often failed to provide complete chain of title, omitting assignments, sales and transfers of title of the incurred student loan debt.
  • In some instances, in response to substantiation of debt requests, Respondent merely provided a court document, such as a court judgment, with little or no other documentation.

The alleged incidents of non-compliance occurred between September 2015 and August 2020, according to the Department’s statement of charges.

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