Senate Bill S4238A

                                BILL NUMBER:S4238A

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.

EFFECTIVE DATE:
This act shall take effect on the thirtieth day after it shall have
become a law.