BILL NUMBER: S6751

SPONSOR: SALAZAR
 
TITLE OF BILL:  An act to amend the general business law, in relation
to debt relief from predatory debt collectors

 
PURPOSE OR GENERAL IDEA OF BILL:

This bill provides consumers with a private right of action if a princi-
pal creditor employs deceptive acts or practices in collecting a debt
and also reinforces the state's public policies of deterring deceptive
acts and practices and in providing meaningful debt relief to consumers.

 
SUMMARY OF PROVISIONS:

Section 1 amends section 602 of the general business law by adding a new
subdivision 4 providing consumer debtors with a private right of action
against principal creditors who engage in deceptive acts or practices in
collecting a debt. In addition to establishing the potential remedy of
extinguishing the debt allegedly owed, in whole or in part, the court
would be required to extinguish the debt in its entirety if the debtor
              

has assets less than that of the principal creditor who has employed
deceptive acts or practices. The bill further expressly states the
public policy of the state to deter deceptive acts and practices in debt
collection as well as in providing meaningful debt relief for consumers.
The court may award attorney's fees to a prevailing debtor.

Section 2 provides the effective date.

 
JUSTIFICATION:

Predatory lending and debt collection practices continue to be prevalent
and cause harm to many consumers in New York State. Federal and state
law already provide significant protections to consumers, however the
General Business Law has been interpreted as not permitting a private
cause of action for consumers who have been subjected to deceptive debt
collection acts and practices. Varela v. Investors Insurance Holding
Corp., 81 NY 2d 958 (1993). This bill creates new rights for consumers
including the right to have a debt completely extinguished if the assets
of the debtor are less than those of the principal creditor, if there
have been deceptive acts or practices as well as the right of the
consumer to obtain attorney's fees if they prevail in an action against
a principal creditor. By permitting the complete extinguishing of a debt
when there have been deceptive acts or practices, this bill accomplishes
two goals: (1) providing complete relief to a debtor who has been
subjected to predatory practices, and (2) establishing significant
disincentive for creditors to engage in such practices.

 
PRIOR LEGISLATIVE HISTORY:

 
FISCAL IMPLICATIONS:

None.

 
EFFECTIVE DATE:
This act shall take effect immediately.