Updated Debt Collection Rules in New York

Aug 12, 2014
new-rules-500x2531No honest consumer intentionally defaults on a loan, but there are often unforeseen and extenuating circumstances that occur causing a loan to end up in default. When this happens, creditors have various options open to them to help them recover all or part of the funds owed.

One avenue is using the services of debt collectors, of which there are different types including:

  • creditors (businesses to whom money is directly owed) may have their own debt collection department;
  • firms that collect debts owed to third parties;
  • debt collectors who have purchased the defaulted account from the original creditor (or another debt collector); and
  • law firms who work on debt collection actions.

Any of these may have a collection agency merchant account which accepts card payments (whether credit or debit) toward paying off the debt.

Play by the Rules

While there have been harrowing tales of people being hounded by debt collectors, both federal and state laws regulate and restrict several debt collection procedures. On July 16, 2014, the New York Department of Financial Services (DFS) released the revised debt collection regulations for debt buyers and third party debt collectors.

The revised proposed rules would oblige a debt collector to substantiate not only consumer disputes for defaulted debts, but also charged-off debts. The rules also state that creditors must have documentation detailing the ownership of the debt in order to win a default judgment. The rules, when finalized, would also require a sworn statement from the creditor that the statute of limitations on a debt has not expired. In cases where it has, the proposed regulations would also impose further obstacles on collectors seeking to collect on debts barred by the statute. Specifically, the debt collector would first have to send the consumer a written notice which explicitly states that it is a violation of the Fair Debt Collection Practices Act to sue on an expired debt, before accepting payment on it.  Consumers should still bear in mind that debt does not disappear simply because it has gone beyond a specified time limit.

Some Other Revisions

  • The definition of a “charge-off” as “the accounting action taken by an original creditor to remove a debt obligation from its financial statements by treating it as a loss or expense.”
  • The requirement that a debt collector substantiates consumer disputes for “charged-off” debts.  The collector now has 60 days in which to provide written substantiation.
  • Excluding certain collectors from the definition of “debt collector,” including persons involved in a collection action related to or during litigation.
  • Exempting the collector from providing required disclosures if the consumer satisfies the debt within five days of the initial communication.
  • Removing the requirement that a statute of limitations notice warn the consumer that a failure to pay a time-barred debt may adversely affect one’s credit history, credit score, and ability to obtain credit.

The update also clarifies that only the consumer has the right to initiate electronic communication and that emails will not be allowed to employer-operated addresses. Consumers must explicitly affirm that they are not providing a work-based email address.

 To get started with your collection agency merchant account, contact EMB today!

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Having a merchant account allows an account holder to take advantage of merchant cash advances. When a merchant is approved for an advance, the business agrees to receive a lump sum of cash in exchange for an agreed-upon percentage of future credit card sales.

Pricing varies depending on the merchant’s industry, past credit card processing history, the type of business seeking the account, average ticket sales, and average transaction volumes.

Yes, EMB works with merchants who are building their credit, as well as those who have poor credit. EMB also approves merchants that have no credit card processing history and businesses that have lost their merchant accounts due to high chargebacks.

Several factors influence a merchant’s risk level. Though only one factor likely will not get a merchant classified as high risk, a combination of these may: business size, location, and industry, credit score, credit card processing history, a industry’s reputation for excessive chargebacks, a prior history of high chargeback ratios, and whether a merchant exclusively sells online.

Virtual terminals are stationed on a merchant’s website, making it easy for customers to make a payment or purchase online. Merchants or a payment processor can easily set up virtual terminals, so online businesses can accept credit and debit card and e-check transactions.

A merchant account is a business account with an acquiring bank. Without this business account, which actually works more like a line of credit, a merchant cannot accept and process credit and debit card transactions. Businesses need a merchant account to accept major credit cards via a static point-of-sale terminal, mobile card reader, or through a virtual payment gateway.

After filling out EMB’s simple online application and submitting any necessary, requested documents, many merchants get approved within 24 and 48 hours.

EMB specializes in working with high-risk merchants. EMB works with many merchants, including but not limited to businesses in these industries: gambling and gaming, adult entertainment, nutraceuticals, vaping and e-cigarettes, electronics, tech support, travel, high-end furniture, weight loss programs, calling cards, e-books and software, and telecommunications.

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