On November 8, 2021, New York Governor Kathy Hochul signed into law the Consumer Credit Fairness Act (the “Act”). How does the Act change consumer debt collection?
- With some exceptions, the Act shortens a creditor’s time to file suit based on a consumer credit transaction, from 6 years to 3 years.
- After that 3 year period expires, a payment or affirmation of the debt will not revive or extend the time to sue.
- A collection lawsuit based on a consumer credit transaction must include:
- a copy of the agreement for the debt, or a copy of the charge-off statement for a revolving credit account;
- an “Additional Notice of Lawsuit” provided by the Act; and
- a stamped, unsealed envelope addressed to the defendant at the same address where he is served. The court will mail that notice. If that notice is returned to the court as undeliverable and the defendant does not respond to the lawsuit, default judgment will not be entered.
- As a result:
- Creditors willing to settle still may need to file a lawsuit to preserve their claims.
- A debtor who does not receive mail where he can be served, and who cannot be served where he receives mail, could become judgment-proof.
Who does the Act affect? In addition to collection agencies and banks, the Act affects small businesses like home improvement contractors and others who sell on credit to consumers.
In light of these and other legal developments, creditors need competent counsel to pursue their claims effectively.
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Doug Goldstein, Attorney at Law 