New York - A Credit rebuilder's paradise

[Anonymous]

As many of you know, as a credit rebuilder you have to use every tool at your disposal. Each negative account removed from one of your reports is a small battle won in the credit war. It is solely because of this site I have been able to have some good traction with my derog removals. 

For the latest I utilized the 5 year New York paid charge off/ collection law. I had an account that had been charged off and was showing on my report with a $0 balance because it was sold to a debt collector. I had settled with the debt collector for pennies on the dollar a few years ago and tried to have it removed back then with no luck. 

The original account had been about 5.5 years since first delinquency so I disputed referencing the 5 year rule. Keep in mind this was for the original charge off not a debt collection account. The debt collector never put a collection account on report they just sued immediately, lol and was surprised when I showed up. Just got the notification today the investigation was complete and the account has been deleted. Very pleased.

In a few months once the rest of my debt passes the statute of limitations I'll settle with them (not trying to poke the bear) and then get them removed immediately since they are past 5 years as well. 

[FireMedic1]

Nice. Piece by piece the credit wall will fall down. Congrats!

[Anonymous]

Agreed completely - when I started rebuilding and found out about the Purge Law, I couldn't believe that I had finally found a good reason to live in this godforsaken state lol. It has definitely accelerated my improvements too

[RobertEG]

In addition to the shortened five year exclusion period for collectors or charge-offs that have been paid, the New York Department of Financial Services (the "Department") issued new regulations on December 3, 2..., which are codified at 23 NYCRR Part 1. 

The following provides highlights of the new regulation:

• General Application:  The new regulation only applies to consumer debt that is debt owed by a natural person that was incurred for personal, family, or household purposes.  Commercial or business debt, including debt incurred by a natural person for his or her business, is not subject to the new regulation.  Moreover, the new regulation "does not cover collection of a debt through litigation or when enforcing a money judgment."  See NYS Register, pg. 20 (Dec. 3, 2014).
• Key Exclusions:  Similar to the federal Fair Debt Collection Practices Act ("FDCPA"), the new regulation provides several exclusions from the definition of a "debt collector."  These include, but are not limited to: officers or employees of a creditor collecting its own debts; collecting for an affiliate so long as the collecting entity is not principally engaged in debt collection; a process server; mortgage servicers; creditors collecting debt they originated; and assignees of debt if the debt was not in default at the time it was assigned.
• Required Initial Disclosures:  The new regulation requires that when a debt collector first contacts a debtor, the debt collector must provide general information on the rights of debtors and, for charged-off debts, specific information about the debt that they are attempting to collect, the amount owed at charge-off, the total post-charge-off interest, charges, and fees.  23 NYCRR § 1.2(b).  These disclosures, which go beyond the requirements of the federal FDCPA, must be provided within five days after the initial communication with the consumer.  23 NYCRR § 1.2(a).
• Debts Where the Statute of Limitations Has Expired:  The new regulation requires debt collectors to "maintain reasonable procedures for determining the statute of limitations applicable to a debt it is collecting and whether such statute of limitations has expired."  23 NYCRR § 1.3(a).  If a debt collector attempts to collect on a debt for which the statute of limitations has expired, the collector, prior to accepting payment, must provide notice that it believes that the statute of limitations may be expired and that, if the consumer is sued on such a debt, the consumer may be able to prevent a judgment by informing the court that the statute of limitations has expired, and that if the consumer makes a 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.  These debt collection Miranda warnings are designed to address what the Department calls "Zombie Debts."  This issue was also addressed at length in the 2012 Annual Report on the Fair Debt Collection Practices Act of the Consumer Financial Protection Bureau ("CFPB"), and has been the subject of significant supervisory attention by both the CFPB and the Federal Trade Commission.  Moreover, the CFPB's examination manual on debt collections requires examiners to determine whether the debt collector is attempting to collect on time-barred debt.
• Substantiation of Consumer Debts:  Currently, consumers may dispute a debt in writing and request verification within 30 days of the first collection attempt.  Under the new regulations, a consumer can request "substantiation" of the debt at any time during the collection process.  Once the debt collector receives a request for substantiation, it must cease collection and provide documentation proving the validity of the debt and the creditor's right to collect the debt within 60 days.  23 NYCRR § 1.4.
• Debt Payment Procedures:  The new regulation requires that within five business days of agreeing to a debt payment schedule, or other agreement to settle a debt, the debt collector must provide the consumer with a written confirmation of the debt payment schedule or other agreement to settle the debt, and a notice of certain sources of income that are immune from garnishment under federal and state laws, e.g., Social Security payments, public assistance, spousal and child support, disability and workers' compensation benefits, among others.  23 NYCRR § 1.5.
• Email Communications:  Following the required initial disclosures, the debt collector may communicate with the consumer via email where the consumer has voluntarily provided an email account that is not an account furnished or owned by the consumer's employer, and the consumer has consented to receive such email correspondence from the debt collector.  23 NYCRR § 1.6

The effective date of the new regulation is March 3, 2015, except for section 1.2(b) (relating to disclosure requirements), and section 1.4 (relating to substantiation of debts).  In the preamble to the final rulemaking, published in the New York Register, the Department confirmed that the new regulation does not create a private right of action – i.e., consumers cannot sue debt collectors for failing to comply with the rule – but the rule may be enforced by the Department, "and may be enforceable by other regulators and prosecutors."  The new regulation does not supplant other New York State fair debt collection laws, unfair or deceptive acts or practices ("UDAP") laws, or local debt collection ordinances.  Moreover, even if consumers do not have an explicit private right of action under the new regulation, debt collectors should be mindful that the failure to adhere to the standards set forth in the regulation may support a UDAP violation claim.  See, e.g., FDIC Compliance Manual, pg. VII-1.5 (June 2014) (noting that while the federal FDCPA does not apply to creditors, the failure to observe its standards may support a UDAP claim).

[OmarGB9]

Congrats on the rebuild!

Is there anything like this for the state of Texas? That would be amazing if there is.

[Anonymous]

"Once the debt collector receives a request for substantiation, it must cease collection and provide documentation proving the validity of the debt and the creditor's right to collect the debt within 60 days."

 @RobertEG, I have two questions regarding this, if you could answer:

1) is a request for substantiation considered to be a dispute, or a form of dispute, or is it a separate entity?

2) what happens if the collector fails to provide substantiation within 60 days? Are they required to self-delete from the bureaus?

Thank you in advance.

[RobertEG]

A request for substantiation is effectively equiv to a debt validation request.

It is a debt collection practices issue, and not an issue of the accuracy of credit reporting, which is done under the FCRA.

The  term "dispute" is generally used for contesting the accuracy of credit reporting, and the term debt validation is generally used for DV requests under the FDCPA or under the NYS code.

A request for substantiation is not a dispute of the accuracy of credit reporting, which is done under FCRA 611(a), and it is recommended that you use that language, and not use the term "dispute" to avoid confusion.

If the debt collector fails to comply with any provisions of the New York state regs, you can file a complaint with the Office of the AG for NYS, who has authority over admin of the regs.

[Anonymous]

Thank you for clarifying

[Anonymous]

Wait wait wait......

does this law apply if one were to move to NYS from a different state?

ie collections/co paid from accounts in Florida but now a NYS resident?!?!? 

[RobertEG]

It applies if you are a current NYS resident at the time it reaches 5 years.

There is no requirement under the statute that they consumer was a NYS resident when the debt was paid, only that the consumer is a current resident and that the debt was previously paid.

New York State General Business Law Section 380-j

“(f)(1) Except as authorized under paragraph two of this subdivision, no consumer reporting agency may make any consumer report containing any of the following items of information.

(i) bankruptcies which, from date of adjudication of the most recent bankruptcy, antedate the report by more than fourteen years;

(ii) judgements which, from date of entry, antedate the report by more than seven years or until the governing statute of limitations has expired, whichever is the longer period;  or judgments which, from date of entry, having been satisfied within a five year period from such entry date, shall be removed from the report five years after such entry date;

(iii) paid tax liens which, from date of payment, antedate the report by more than seven years or, a paid, satisfied or vacated tax lien involving a purchaser, transferee or assignee in a bulk sale transaction who has been deemed liable by the state tax commission for sales taxes due from a seller, transferrer or assignor under subdivision (c) of section eleven hundred forty-one of the tax law, where the receipt by a credit reporting agency from such purchaser, transferee or assignee of a notice, or true copy thereof, from the state tax commission to such purchaser, transferee or assignee that his liability has been wholly paid or satisfied or no longer exists, antedates the report by more than thirty days;

(iv) accounts placed for collection or charged to profit and loss which antedate the report by more than seven years;  or accounts placed for collection or charged to profit and loss, which have been paid and which antedate the report by more than five years; “