New York Debt Collection Laws & Compliance Guide

At Midwest Service Bureau, we collect in New York under our documented compliance program. This guide covers the critical compliance framework for debt collection in the Empire State.

Licensing Requirements in New York

New York has a multi-layered licensing system:

• NYC DCWP License: Agencies operating in or collecting from New York City residents must obtain a license from the Department of Consumer and Worker Protection. Agencies that collect child support debts must also file a $5,000 surety bond
• No statewide license: New York State does not license or register collection agencies statewide; DFS rule 23 NYCRR Part 1 sets disclosure and substantiation requirements for third-party collectors and debt buyers
• Background checks: Principals and key personnel must pass character and fitness reviews
• Out-of-state agencies: Need a local license where one applies, such as a DCWP license to collect from New York City residents

The DFS has issued extensive debt collection guidance including requirements for substantiation of debts before collection, proper crediting of payments, and communication standards. Non-compliance can result in civil monetary penalties and consent orders.

Statute of Limitations on Debt

The Consumer Credit Fairness Act (CCFA), effective April 2022, significantly changed New York's statute of limitations landscape:

• Consumer credit transactions: 3 years (CCFA — reduced from 6 years)
• Written contracts (non-consumer): 6 years (CPLR § 213)
• Oral contracts (non-consumer): 6 years (CPLR § 213)
• Promissory notes (non-consumer): 6 years (CPLR § 213)
• Open accounts (non-consumer): 6 years (CPLR § 213); 4 years for the sale of goods (UCC § 2-725)
• Domestic judgments: 20 years (CPLR § 211)

The CCFA's 3-year statute for consumer credit transactions is one of the shortest in the nation and applies to credit cards, personal loans, auto loans, and other consumer credit products. The clock runs from the date of default.

Under New York law, once the statute of limitations on a consumer credit debt expires, no later payment, written or oral affirmation, or other activity on the debt revives or extends it (CPLR § 214-i). This is a significant consumer protection that prevents inadvertent statute revival.

The Consumer Credit Fairness Act (CCFA)

The CCFA introduced sweeping reforms to debt collection litigation in New York:

• Detailed pleading requirements: Collection lawsuits must include the name of the original creditor, the last four digits of the account, the date of default, an itemization of the amount claimed, and proof of the chain of title for purchased debt
• Additional notice of lawsuit: In a consumer credit lawsuit, the plaintiff must give the court clerk a notice in English and Spanish that the clerk mails to the consumer; no default judgment may be entered until at least 20 days after that mailing (CPLR § 306-d)
• Service requirements: Default judgments cannot be entered without proof of proper service, including specific attempts at personal service
• Statute of limitations affidavit: A request for a clerk's default judgment must include an affidavit that, after reasonable inquiry, the plaintiff or its attorney has reason to believe the statute of limitations has not expired (CPLR § 3215(j))

Prohibited Practices Under New York Law

New York General Business Law Article 29-H and the NYC rules impose extensive prohibitions:

• Harassment: Threatening violence, using profane language, making excessive phone calls (NYC limits collection calls to specific frequencies), or calling before 8:00 a.m. or after 9:00 p.m.
• False representations: Misrepresenting the amount or legal status of the debt, falsely threatening arrest or criminal prosecution, impersonating attorneys or government officials
• Unfair practices: Collecting unauthorized fees, adding interest not permitted by the original agreement, or accepting post-dated checks under threat
• Communication violations: Contacting employers except to verify employment, disclosing the debt to third parties, or continuing collection after a cease communication request
• Litigation abuse: Filing suit on time-barred debts, seeking default judgments without proper service, or filing in an improper venue

New York provides for actual damages, statutory penalties, and attorney's fees. The DFS can impose substantial civil monetary penalties, and the NYC DCWP can levy fines of up to $2,000 per violation ($5,000 for subsequent violations).

Key New York Statutes for Debt Collection

• Consumer Credit Fairness Act: CPLR § 214-i — 3-year statute for consumer credit transactions
• General Business Law Article 29-H: GBL §§ 600-603 — debt collection practices
• NYC Administrative Code: § 20-489 et seq. — NYC-specific collection regulations
• DFS Regulations: 23 NYCRR Part 1 — debt collection guidelines
• Income execution: CPLR § 5231 — wage garnishment procedures
• Exemptions: CPLR § 5205 — personal property exemptions; CPLR § 5206 — homestead exemption

Wage Garnishment Rules in New York

New York provides more protective garnishment limits than federal law:

• Maximum garnishment: 10% of gross income, never more than 25% of disposable earnings or the amount by which weekly disposable earnings exceed 30 times the state minimum wage (CPLR 5231(b))
• The first $510 per week in New York City, Long Island and Westchester ($480 in the rest of the state) is completely exempt in 2026: 30 times the $17.00 / $16.00 state minimum wage
• For individuals earning below 30 times the minimum wage, wages cannot be garnished at all
• Social Security, SSI, disability, veterans' benefits, unemployment, and public assistance are fully exempt
• If exempt payments were directly deposited into a bank account in the 45 days before a restraint or execution, $3,425 in that account is exempt, and identifiable exempt funds stay exempt (CPLR § 5205(l), as adjusted April 1, 2024)

Property Exemptions in New York

• Homestead: Up to $102,400 to $204,825 depending on county (CPLR § 5206, as adjusted April 1, 2024)
• Personal property: $1,325 in personal property, bank account or cash if no homestead exemption is claimed (CPLR § 5205(a)(9), as adjusted April 1, 2024)
• Motor vehicle: Up to $4,000 in equity
• Tools of trade: $4,075 exemption (CPLR § 5205(a)(7), as adjusted April 1, 2024)
• Retirement accounts: IRAs, 401(k)s, and qualified plans are exempt (CPLR § 5205(c)), except additions made within 90 days before the claim was brought or that are voidable transactions
• Necessary household furnishings: Exempt from execution

Compliance Best Practices for New York Collections

• Maintain a NYC DCWP license (and any other local license) where applicable
• Comply with CCFA's detailed pleading requirements for all collection lawsuits
• Track the 3-year statute for consumer credit transactions separately from the 6-year general statute
• Include all mandatory disclosures in collection communications
• Maintain complete chain-of-title documentation for purchased debts
• Apply New York's more protective 10% gross wages garnishment limit

For professional, compliant debt collection services in New York, learn more about our nationwide debt collection services or call us at (800) 362-0272.