Commercial Debt Collection Statutes for New York City

Commercial-Debt Collection Statutes for New York City, New York:

a. “Debt collection agency” shall mean a person engaged in business the principal purpose of which is to regularly collect or attempt to collect debts owed or due or asserted to be owed or due to another.

c. The term “consumer” means any natural person obligated or allegedly obligated to pay any debt.

d. The term “debt” means any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment, or any obligation or alleged obligation arising out of a judgment or valid agreement for the payment of child support.

New York City, N.Y., Code § 20-489(a), (c)-(d) (West, WESTLAW through Local Law 51 of 2004 and Chs. 1-755 of the Laws of New York for 2004).

The term “Debt collection agency” does not include:

• (1) Any officer or employee of a creditor while, in the name of the creditor, collecting debts for such creditor;
• (2) Any officer or employee of a debt collection agency;
• (3) Any person while acting as a debt collection agency for another person, both of whom are related by common ownership or affiliated by corporate control, if the person acting as a debt collection agency does so only for persons to whom it is so related or affiliated and if the principal business of such person is not the collection of debts;
• (4) Any person while serving or attempting to serve legal process on any other person in connection with the judicial enforcement of any debt;
• (5) Any attorney-at-law collecting a debt as an attorney on behalf of and in the name of a client;
• (6) Any person employed by a utility regulated under the provisions of the public service law, acting for such utility;
• (7) Any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity:
  • (i) Is incidental to a bona fide fiduciary obligation or a bona fide escrow agreement;
  • (ii) Concerns a debt which was originated by such person;
  • (iii) Concerns a debt which was not in default at the time it was obtained by such person as a secured party in a commercial credit transaction involving the creditor;
• (8) Any officer or employee of the United States, any state thereof or any political subdivision of any state to the extent that collecting or attempting to collect any debt owed is in the performance of his or her official duties;
• (9) Any non-profit organization which, at the request of consumers, performs bona fide consumer credit counseling and assists customers in the liquidation of their debts by receiving payments from such customers and distributing such amounts to creditors.

New York City, N.Y., Code § 20-489(a) (West, WESTLAW through Local Law 51 of 2004 and Chs. 1-755 of the Laws of New York for 2004).

What is the Fair Debt Collection Practices Act?

The U.S. Congress enacted the FDCPA in 1977 and added it to the Consumer Credit Protection Act in 1978. Its purpose is to eliminate abusive practices of third-party debt collectors. To that end, the Act establishes guidelines for the conduct of debt collectors, defines the rights of consumers, and prescribes penalties for violations.

The FDCPA defines “debt collectors” as “any person who uses any instrumentality of interstate commerce or the mails in any business the principal purpose of which is the collection of any debt … asserted to be owed or due another.”

“Consumers” and “debt” covered under the FDCPA are defined as specifically referring to personal, family or household transactions. Therefore, debts owed by businesses or by individuals for business purposes (commercial debts) are not subject to the FDCPA.

So, if the FDCPA does not apply to commercial debt collection by third parties, how are commercial collectors regulated?

There are no U.S. federal laws, similar to the FDCPA, that regulate third-party commercial (business-to-business) debt collection or provide guidelines for the conduct of commercial debt collectors.

Who is protecting the rights of commercial creditors and debtors?

Commercial Collection Agency Association

The premier body governing the activities of commercial debt collectors is the Commercial Collection Agency Association (CCAA), an arm of the Commercial Law League of America (CLLA). These organizations are not government bodies, nor do they have any jurisdiction over non-members. However, both require high standards of practice and ethics in order for a commercial collection agency to become a certified member.

The Commercial Collection Agency Association was established in 1972 to “improve the quality and reputation of the commercial collection industry.” It currently has more than 200 members. Approximately 100 core members represent the most prestigious commercial collection agencies in the United States.

The CCAA is an arm of the Commercial Law League of America (CLLA), the oldest creditor’s rights organization in the country established in 1895.

Membership in the CCAA

• The agency must have been in business at least four years prior to application for membership.
• 80% of the agency’s business must be commercial (business-to-business).
• The agency must maintain a separate Trust Account into which all monies belonging to creditors are placed. This Trust Account is reviewed twice annually by the Executive Director of the CCAA.
• The agency must agree to abide by the CCAA Code of Ethics, which sets ethical standards for dealing with creditors, debtors, and attorneys.
• Executives of the agency must meet continuing educational requirements and attend regular CCAA meetings. The member agency must complete sixty continuing educational credits annually.
• The agency must post a surety bond of at least $300,000 for the protection of the creditors it serves.
• One person in the agency must also be a member of the Commercial Law League of America.
• The agency must agree to random periodic site visits from the CCAA Executive Director.
• The agency must be in compliance with all local and state licensing requirements and regulations governing commercial collection firms.

Primarily, the Commercial Law League of America and its Commercial Collection Agency Association have assumed responsibility for looking after the needs and rights of creditors and their customers/debtors. State governments that require licensing and bonding of commercial debt collectors also play an important role.

However, since membership in the CCAA is not compulsory, and some firms may provide collection services in a state but never get licensed, it is up to creditors to ensure they (and their debtors) are receiving the most ethical and highest level of commercial collection service.

Burt And Associates is a member of both CCAA and CLLA. Also, we are licensed and bonded in all 50 states (where required).