Creates a private right of action for improper debt collection procedures; allows plaintiffs to recover punitive damages and reasonable attorneys' fees.
TITLE OF BILL: An act to amend the general business law, in relation to allowing a private right of action for improper debt collection
SUMMARY OF SPECIFIC PROVISIONS: This bill amends section 602 of the general business law to create a private right of action for a debtor for improper debt collection procedures based on the following:
1. Any person who violates this article shall be guilty of a misdemeanor, and each violation shall be a separate offense.
2. A debtor can bring a private right of action for violations of this article. The person shall be liable to the debtor for any actual damages the debtor sustained as a result of the violation of the article.
JUSTIFICATION: This bill adds significant new protection to debtors in this state. It expressly provides for a private right of action in debt collection cases. Given that a private right of action was not expressly provided for in article 29-H of the General Business Law, which regulates debt collection practices, intermediate state courts decided the issue with varying results. In I.F.C. PERSONAL MONEY MANAGERS V. VADNEY, 133 Misc. 2d 841, 508 N.Y.S. 2d 845 (Sup. 1986), and KOHLER V. FORD MOTOR CREDIT CO., 112 Misc. 2d 480, 447 N.Y.S. 2d 215, a private right of action was found where creditors employed improper debt collection practices. However, in LANE V. MARINE MIDLAND BANK, 112 Misc. 2d 200, 446 N.Y.S. 2d 873, the court held that there is no private right of action in debt collection cases. A private right of action could arguably have been brought in debt collection actions under different provisions of the General Business Law. However, the New York Court of Appeals in VARELA V. INVESTORS INSURANCE HOLDING CORP., 81 N.Y. 2d 958,598 N.Y.S. 2d 761 (1993), definitively settled the issue.
This bill overrules the VARELA decision wherein the Court held that article 29-H of the General Business Law, which regulates debt collection practices, does not create a private right of action but authorizes only the District Attorney and the Attorney General to commence an action for violation of its provision. The Court's rationale was based on the Legislature's failure to expressly provide for a private right of action in this article, while providing for such in other provisions.
Presently, debtors are being harassed by creditors through their friends and relatives and also at their work place. Creditors are also using scare tactics towards the children of the debtors as a means of a collection procedure. As a result, many children become afraid of being homeless or having their parents taken away from them. On the other hand, some debtors are faced with losing their jobs because they are receiving too many harassing phone calls at their work place. Creditors continue to harass debtors by any means necessary, because they can get away with it. This bill shall reduce the frequency of
harassment by creditors towards debtors by expressly creating a private right of action and imposing fines for improper debt collection procedures.
PRIOR LEGISLATIVE HISTORY: S.2458 of 2009 02/20/09 REFERRED TO CONSUMER PROTECTION 06/18/09 AMEND AND RECOMMIT TO CONSUMER PROTECTION 06/18/09 PRINT NUMBER 2458A 01/06/10 REFERRED TO CONSUMER PROTECTION
FISCAL IMPLICATIONS: None.
EFFECTIVE DATE: This act shall take effect on the thirtieth day after it shall have become a law.
STATE OF NEW YORK ________________________________________________________________________ 686 2011-2012 Regular Sessions IN SENATE (PREFILED) January 5, 2011 ___________Introduced by Sen. SAMPSON -- read twice and ordered printed, and when printed to be committed to the Committee on Consumer Protection AN ACT to amend the general business law, in relation to allowing a private right of action for improper debt collection THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Section 602 of the general business law, as added by chap- ter 753 of the laws of 1973, is amended to read as follows: S 602. Violations and penalties. 1. Except as otherwise provided by law, any person who shall violate the terms of this article shall be guilty of a misdemeanor, and each such violation shall be deemed a sepa- rate offense. 2. The attorney general or the district attorney of any county may bring an action in the name of the people of the state to restrain or prevent any violation of this article or any continuance of any such violation. 3. A DEBTOR SHALL HAVE A PRIVATE RIGHT OF ACTION AGAINST ANY PERSON OR PERSONS, OTHER THAN BANKING INSTITUTIONS AS DEFINED IN SECTION NINE-F OF THE BANKING LAW, AND THEIR AFFILIATES, IN VIOLATION OF THIS ARTICLE. SUCH PERSON OR PERSONS SHALL BE LIABLE TO THE DEBTOR FOR ANY ACTUAL DAMAGES THE DEBTOR SUSTAINED AS A RESULT OF THE VIOLATION OF THIS ARTI- CLE, ANY PUNITIVE DAMAGES AWARDED BY THE COURT, AND REASONABLE ATTOR- NEY'S FEES. S 2. This act shall take effect on the sixtieth day after it shall have become a law.EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD04131-01-1