Lawsky Proposes Requirements for New York Debt Collection

Courts should require collectors of consumer debts to document the disputed loans and prove borrowers were notified of proceedings before rulings are made, according to Benjamin M. Lawsky, superintendent of the New York State Department of Financial Services.

Lawsky made the recommendation in a letter today to a state administrative judge, saying proposed changes in court rules should seek to end so-called robosigning of affidavits and ensure debt collectors actually review the cases. His agency is also asking courts to let plaintiffs vacate a default judgment if a debt collector violates these rules.

Abusive debt-collection practices have drawn more than 13,000 complaints from state residents, Lawsky’s office said in July. The firms have been cited for seeking to collect debts from the wrong consumers or for the wrong amount of money, Lawsky said.

The New York court system proposed rules in September that would require standardized affidavits in certain consumer credit cases to ensure greater transparency during the collection process.

“The proposed rules could go much further to address the significant debt-collection litigation abuses that have a profound impact on New Yorkers and the state court system,” Lawsky said.

To contact the reporter on this story: Keri Geiger in New York at kgeiger4@bloomberg.net

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