The 4-1-1 on the Consumer Credit Fairness Act

TABLE OF CONTENTS

    A new NY law – the Consumer Credit Fairness Act – directly affecting debt collectors in the state starts to go into effect on April 7, 2022. What does the law entail, and how will it affect your collection operations? Don’t be concerned; we’ve put up this helpful tutorial that breaks down the legislation and its critical provisions so you can learn. Continue reading to learn more about the Consumer Credit Fairness Act!

    What is the Consumer Credit Fairness Act?

    The Act includes several modifications to New York’s Civil Practice Law and Rules (CPLR). It enhances consumer rights in the event of a debt collection dispute. Signed into law on November 8, 2021, by Governor Kathy Hochul, the Act has significant ramifications for debt collection lawsuits filed in New York state courts by both creditors and third-party debt collectors alike.

    What are the most significant changes to the CPLR?

    While the Act entails numerous obligations on the part of the debt collection agency, the following highlights the essential aspects:

    • The statute of limitations for most debt collection cases linked to a consumer credit transaction reduces from six to three years.
    • The limitations period does not restart or extend when a consumer pays part of the debt, or makes an oral or written affirmation of ownership.
    • A supporting affidavit from the original creditor, any prior assignors or purchasers of the debt, and a witness for the collector who verifies the chain of title for the debt must be submitted if a third-party collection agency files for a default judgment.
    • The contract upon which the action is based must be included in the complaint.
    • The complaint must also contain the original creditor’s name, the last four digits of the account number, and the date and amount of the last payment.
    • When filing the proof of service for a complaint, a plaintiff must provide a completed “additional notice of lawsuit” to the court clerk. The clerk will then send it to the consumer.
    • Any plaintiff who seeks a default judgment must submit an affidavit stating that the statute of limitations to collect the debt has not elapsed.

    The Bottom Line

    Review the NY Senate Bill 153 here to get complete details surrounding the Consumer Credit Fairness Act. The above changes, except for the statute of limitation extension, which takes effect April 7, 2022, come into full force on May 7, 2022. While the legislation’s primary purpose is to protect New York consumers from abusive debt collection practices, this new law encompasses all creditors and third-party debt collectors, for better or worse. There’s no way around it – this act will change the way legitimate debt collection agencies in NY state operate, and it’s important for businesses to be aware of the changes.
    Payment Savvy is the leading debt collection payment processor in the business, so we wanted to make sure our clients are up-to-date on what this upcoming change means for them. If you have any questions about how this new law will impact your business, please don’t hesitate to reach out to us. We’re here to help!

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    Chad Deatherage

    Chad Deatherage

    Chad is a serial entrepreneur and founded Payment Savvy in 2011 armed with the goal of providing high-risk establishments with a pioneering and tailored payment processing solution that allows them to flourish. Having decades of knowledge in the financial services and debt recovery industries, he ensures every client receives the same level of expertise, resourcefulness, and strategic vision no matter the size of the organization. Always willing to push the envelope, Chad’s forward-thinking and leadership skills are responsible for Payment Savvy being on the map as an industry-leading payment processor.

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