NYC Debt Collection Rules Don’t Usurp State

     ALBANY, NY – A New York City law regulating debt collection does not usurp the state’s authority to regulate the legal industry, the New York Court of Appeals ruled on Tuesday.
     The law in question, Local Law 15, was adopted in 2009 and added law firms that do debt collection and asset buyers to the list of entities regulated by the city. However, it excluded attorneys and law firms that collect debt on behalf of clients through litigation.
     The law requires regulated firms to provide debtors with call-back numbers and other information, and mandates a fine of up to $100 for violations.
     Two law firms, Eric M. Berman PC and Lacy Katzen LLP, sued the city over the law, arguing it encroached on the state’s authority to regulate lawyers. A federal judge sided with the law firms in 2012, but two years later, the Second Circuit ruled that the law did not appear to regulate attorneys collecting debts.
     But the three-judge panel wasn’t entirely comfortable decided the case and asked the New York State Court of Appeals for assistance on two questions: whether the law encroached on state authority to regulate lawyers, and whether it conflicted with the New York City charter, which designates the Department of Consumer Affairs as the go-to agency to license debt collectors.
     In the ruling announced Tuesday, Chief Judge Jonathan Lippman concluded that Local Law 15 did neither, noting that it “does not impose an additional requirement for attorneys to practice law” and “can be seen as complementary to and compatible with” current judiciary laws regulation attorneys.
     “It may be more difficult, in certain cases to determine where to draw the line between debt collection and practice of law,” Lippman wrote in the 4-2 ruling.
     He was joined by judges Susan Phillips Read, Eugene Pigott, Jr., and Sheila Abdus-Salaam. Judge Jenny Rivera abstained from the case.
     The court declined to reach the second question – whether Local Law 15 violated the city’s charter -but Lippman wrote that “the city should not be prevented from taking permissible steps to curb abusive debt collection practices.”
     Fair debt collection lawsuits by aggrieved consumers complaining of midnight calls and at-work harassment is nothing new, and New York City has regulated collection agencies since 1984. Local Law 15 was designed, attorneys for the city argued, to tackle a growing niche industry of law firms performing collection duties, some of which may use such high-pressure tactics.
     In a dissenting opinion, Judge Eugene Fahey said many lawyers have to call consumers for debt-collection purposes, often on a daily basis.
     “Local Law 15, by its plain terms, could be interpreted to apply to any attorney who regularly represents creditors in collecting debts,” he wrote.
     Fahey was joined in the dissent by Judge Leslie Stein.
     Fahey called the distinction in Local Law 15 between a lawyer acting as a debt collector and a lawyer collecting debt via litigation “a distinction without a difference,” noting that debt collection is an activity that is part of the practice of law. “Statewide uniformity in the field of licensing attorneys and the practice of law is of the utmost importance,” Fahey wrote. “Taken to its logical extreme, if this field were open for local government regulation, New York City could require its own bar exam for attorneys … or Buffalo could develop its own rules of professional conduct.”

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