New York City Adopts Significant New Debt Collection Restrictions and Requirements

New York City has adopted significant new restrictions and requirements on the collection of debts from New York City consumers. These new requirements, which take effect on September 1, 2026, include certain provisions applicable to creditors, including financial institutions, collecting their own debts.

The New York City Department of Consumer and Worker Protection (the “Department”) issued the new rules in a Notice of Adoption amending Title 6 of the Rules of the City of New York (the “Amended Rules”). While the Amended Rules apply generally to covered debt collectors, as defined below, this advisory focuses specifically on the requirements that impact financial institutions that engage in debt collection activities.

I. Overview of Requirements Affecting Financial Institutions

The following is an overview of the requirements impacting financial institutions:

• Definition of "Debt Collector": Original creditors, including banks and credit unions, are subject to these rules when engaged in debt collection procedures.
• Communication Frequency Limits: Debt collectors are limited to three communications per account within a seven-day period.
• Electronic Communication Consent Requirements: Debt collectors must obtain revocable written consent before using electronic communications (email, text, etc.) to collect debt, with certain exceptions for original creditors.
• Validation Notice and Verification of Debt Requirements: Debt collectors must provide validation notices and comply with verification procedures, with an exemption for entities subject to the Fair Credit Billing Act (“FCBA”).
• Consumer Reporting Notice Requirements: Debt collectors must provide notice before furnishing negative information to consumer reporting agencies, with an exemption for entities subject to the Fair Credit Reporting Act (“FCRA”).
• Time-Barred Debt Disclosures: Debt collectors must provide specific written disclosures when collecting on time-barred debt.

Financial institutions must comply with these requirements unless state or federal law prohibits compliance with such requirements.

II. Definition of “Debt Collector” and Application to Original Creditors

Unlike the federal Fair Debt Collection Practices Act (“FDCPA”) and its implementing regulation, Regulation F, which exclude original creditors from the definition of “debt collector,” the Department expressly includes original creditors, such as banks and credit unions, within the scope of entities subject to these requirements. Under the Amended Rules, the term “debt collector” means any person, including any natural person or organization, including a debt collection agency, who:

• Is engaged in any business the principal purpose of which is the collection of any debts, or
• Regularly collects, or attempts to collect, directly or indirectly, debts owed or due or asserted to be owed or due to another person, or debts owed or due or asserted to be owed or due to the person collecting or attempting to collect the debts.
• The term also includes a buyer of debts who seeks to collect on such debts either directly or indirectly, as well as any creditor that, at any time, in collecting its own debts, uses any name other than its own that would suggest or indicate that someone other than such creditor is collecting or attempting to collect such debts.

The Department declined industry requests to exclude original creditors, such as financial institutions collecting their own debts, from the definition of “debt collector.” Although federal regulations under the FDCPA and New York State law generally exclude financial institutions collecting their own debts, the Department maintains that continued applicability of these rules to original creditors helps protect New York City consumers from unconscionable and unfair trade practices, regardless of whether the debt collector originated the debt.

Under the Amended Rules, an original creditor becomes subject to the requirements once it engages in "debt collection procedures." The term “debt collection procedures” means any attempt by any person, including an original creditor, to collect a debt after any of the following:

• With respect to accounts for which creditors are required to send periodic statements, the creditor has ceased sending those statements, or taken or threatened to take legal action against the consumer;
• With respect to 30-day accounts for which periodic statements are not required, the creditor has ceased sending bills for the debt or taken or threatened to take legal action against the consumer; or,
• With respect to all other types of credit, the creditor has accelerated the unpaid balance of the debt or demanded the full balance due.

Financial institutions should note that these requirements only apply to activities undertaken after an entity has initiated "debt collection procedures" as specifically defined above, not to day-to-day business practices related to consumer accounts that are not subject to debt collection. Therefore, financial institutions may continue routine customer service interactions and general account administration without triggering compliance obligations under the Amended Rules.

III. Communication Frequency Limit

The Amended Rules impose more restrictive communication frequency limits than federal law. Specifically, the Amended Rules provide that a debt collector may not "communicate or attempt to communicate, including by leaving limited-content messages, with the consumer with excessive frequency." "Excessive frequency" means any communication or attempted communication made by the debt collector to a consumer by any medium in connection with debt collection within a seven-consecutive-calendar-day period either:

• More than three times in total, or
• Any time after the consumer responded to a prior communication within such period.

Where a debt collector is attempting to collect on multiple debts from the same consumer, excessive frequency is calculated separately for each distinct account.

This limit does not apply to communications in the ordinary course of business unrelated to debt collection.

IV. Electronic Communication Consent Requirements

The Amended Rules impose specific requirements on debt collectors seeking to contact consumers via electronic communication (e.g., email, text message, social media). A debt collector may only use a specific electronic medium if the communication is private and direct to the consumer and one of several conditions is met.

For original creditors, including banks and credit unions, a notable exception exists. An original creditor may use electronic communication if it obtained consent from the consumer prior to the institution of debt collection procedures, and the consumer has not since revoked such consent. This exception recognizes that financial institutions often have pre-existing electronic communication channels with their customers.

V. Validation Notice and Verification of Debt Requirements

The Amended Rules impose validation notice and verification requirements on all debt collectors, except those required to comply with the FCBA who provide consumers with a dispute process substantially the same as outlined in the FCBA and its implementing regulations. Within five days after the initial communication with a consumer in connection with debt collection, a debt collector must send a written validation notice containing required information, unless the information was contained in an initial written communication or the consumer has already paid the debt.

If an original creditor cannot verify within the required period, it must mail a Notice of Unverified Debt and may not resume collection unless and until it provides verification.

VI. Consumer Reporting Notice Requirements

The Amended Rules require debt collectors to provide notice before furnishing negative information about a debt to a consumer reporting agency. However, this requirement does not apply to a debt collector that is required to comply with Section 623(a)(7) of the FCRA and who provides notice to a consumer in compliance with that section. Section 623(a)(7) of the FCRA requires financial institutions that furnish negative information about a consumer to a consumer reporting agency to provide notice to the consumer. This notice must be given in writing either before or within 30 days after furnishing the negative information, informing the consumer that such information has been or will be reported to a consumer reporting agency.

Most banks and credit unions are subject to this federal requirement and may therefore rely on this exemption, if applicable.

VII. Time-Barred Debt Disclosure Requirements

If a debt collector seeks to collect on a debt for which the statute of limitations has expired, specific written disclosures are required. Before contacting the consumer about the time-barred debt by any other means, the debt collector must deliver by U.S. mail or other delivery service a written notice disclosing that the time to sue on the debt has expired, that it is a violation of federal law to sue on such debt, and that the consumer is not required to admit owing the debt, promise to pay, or waive the statute of limitations. The notice must also warn that if the consumer makes a payment, the creditor's right to sue may restart.

VIII. Conclusion

Banks, credit unions, and other entities that engage in debt collection from New York City consumers should review their policies and procedures to ensure compliance with the Amended Rules prior to the September 1, 2026 effective date. While certain exemptions exist for entities subject to the FCBA and FCRA, many requirements, including the communication frequency limits, electronic communication consent requirements, and time-barred debt disclosures, may apply fully to financial institutions.

Please note this is a general overview of developments in the law and does not constitute legal advice. Nothing herein creates an attorney-client relationship between the sender and the recipient. If you have any questions about the Amended Rules, please feel free to contact Joseph D. Simon at (516) 357-3710 or via email at jsimon@cullenllp.com, Elizabeth A. Murphy at (516) 296-9154, or via email at emurphy@cullenllp.com, David Curatolo at (516) 357-3773 or via email at dcuratolo@cullenllp.com, or Gabriela Morales at (516) 357-3850 or via email at gmorales@cullenllp.com.