Senate Bill S686

                                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.