senate Bill S686

Creates a private right of action for improper debt collection procedures

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Bill Status


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor
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actions

  • 05 / Jan / 2011
    • REFERRED TO CONSUMER PROTECTION
  • 04 / Jan / 2012
    • REFERRED TO CONSUMER PROTECTION

Summary

Creates a private right of action for improper debt collection procedures; allows plaintiffs to recover punitive damages and reasonable attorneys' fees.

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Bill Details

Versions:
S686
Legislative Cycle:
2011-2012
Current Committee:
Senate Consumer Protection
Law Section:
General Business Law
Laws Affected:
Amd ยง602, Gen Bus L
Versions Introduced in Previous Legislative Cycles:
2009-2010: S2458A
2007-2008: A1865

Sponsor Memo

BILL NUMBER:S686

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.

view bill text
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                   686

                       2011-2012 Regular Sessions

                            I N  S E N A T E

                               (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

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