New Protections for New Yorkers Against Debt Collection Abuses

The New York Department of Financial Services recently released new regulations that will better protect New Yorkers from the debt collection industry’s rampant abuses. Once the majority of the regulations go into effect on March 3, 2015 (a few of the regulations will begin in August), New York will have some of the strongest laws in the country when it comes to debt collection.

The Scope of the Problem: Debt Collectors Gone Wild

According to Governor Cuomo, in 2014 New York consumers filed more than 20,000 complaints about debt collection practices. Common complaints include harassment, aggressive collection tactics, and trying to collect the wrong amount or from the wrong person.

Many of those complaints were levelled against debt buyers – companies that buy old debts for pennies on the dollar and then try to collect them. Debt buyers often do little to verify that the debt is in fact owed. As a result, debt buyers often try to collect debts that have already been paid or settled or for which the time period to sue has passed. Debt buyers rarely give consumers any information about the debt – so consumers don’t know when it was allegedly incurred, who the original creditor was, how much the original debt was, and so on. (Learn more about how debt buyers operate.)

The complaints in New York complaints mirror those in the rest of the country; the problem abusive and unfair tactics in debt collection is widespread. The federal Consumer Financial Protection Bureau has taken notice and is attacking the problem in its own way. But it’s particularly heartening to see a state such as New York take the bull by the horns and promulgate such tough regulations. Let’s hope other states follow suit.

The New York Debt Collection Regulations

Here’s a summary of a few of the most important new rules that will soon govern debt collectors in New York.

Required Disclosures

Within five days of first contacting a consumer about a debt, a debt collector or debt buyer must provide the consumer with general information about his or her rights as well as actions the collector cannot take when collecting the debt.

The collector or debt buyer must also give the consumer information about the debt including: the name of the original creditor and an itemized accounting of the debt.

And finally (and this is a big one) if the debt collector knows or has reason to know that that statute of limitations (the time period in which the collector must bring a lawsuit to enforce the debt) may have expired, it must tell the consumer this, along with what this means if the collector sues or the consumer makes a payment anyway.

Substantiation of Debts

If the consumer disputes that he or she owes the debt, the debt collector must provide information on how to request “substantiation” of the debt. Once the consumer requests substantiation, the collector must then provide documents and statements about the debt, such as the judgment, original contract, the charge-off statement, a description of the chain of title from the original creditor to the present owner of the debt, and records of payments and settlements.

The collector must stop collection efforts until it provide substantiation.

Will the debt buyer industry have to change? Because debt buyers often don’t have information about the debts they collect (remember, they often buy them in bulk), it will be interesting to see how they deal with this new regulation. The law makes clear that the collector cannot resume collection until it provides the required documents and statements.  It follows that debt buyers will probably be barred from collecting some of the debts in their portfolios. Does this mean debt buyers start looking more closely at the debts they buy and demand better records and information from the sellers?  Let’s hope so.  Although any such change will probably occur only after a number of debt buyers get slapped by NY prosecutors for violating the regulations.

Written Confirmation of Payment or Settlement

If the collector and consumer agree upon a debt payment schedule, the collector must confirm this in writing. Written confirmation is also required once the consumer pays off the debt.

Email Communications

The debt collector may correspond through email if the consumer consents. This may be a good option for consumers that want to keep track of the debt and the status of collection but don’t want to receive annoying or harassing telephone calls.

Governor Cuomo’s press release characterized this provision as the consumer’s “right” to receive email communications. But the language of the statute says the collector “may” use email, which seems to indicate that the collector can choose not to use email.

Getting More Information

For more detailed information about the regulations, see Nolo’s article New York Laws Regulating Debt Collectors and Debt Buyers. You can also find the full text of the regulations here.

IRS Sponsors “Free File”

IRS and the Free File Alliance have teamed up on software which is available to taxpayers for return preparation, including capability in handling the health care law implications which will be pervasive.  Starting on January 20, folks will be able to take advantage.

The Free File Alliance is a consortium of 14 leading tax software companies which make their branded products available for free.  Says IRS Commissioner Koskinen, “For 12 years, this partnership between the IRS and the Free File Alliance has helped taxpayers save both money and time.”

Folks who earned $60,000 or less last year are eligible to choose from among 14 software products.  Check out IRS IR 2015-4 for more info.

New Considerations for Gift Planning

Recent law changes should cause many folks to rethink which is more important:  estate/gift planning versus income tax planning.  Fewer estates will now be subject to the death tax, and even if it does apply, the top rate of 40% is more favorable than in the past.

Gifting has long been a staple of estate planning — get rid of value during life time, and save the death tax on not only the value as of the gift date, but also the appreciation in value from gift date to death date.  And annual exclusion gifts have been particularly favored for a variety of reasons.

But consider that gifts of appreciated property carry a potential income tax cost to the beneficiary, because the donor’s income tax basis becomes the donee’s basis.  No different than before.  Sale by the donee triggers an income tax liability to him or her right away.  Also, an appreciated asset held by the donor until death allows a stepped up basis to the heir, thus wiping out income tax on pre-death appreciation altogether.

Push a pencil before deciding whether estate tax savings may outweigh income tax cost in each situation.

Rethinking Transgender Discrimination Under Title VII of the Civil Rights Act

SLGBT flagaks & Co. is facing a discrimination lawsuit by a former sales associate who alleges that she was harassed and fired for being transgender. Last month, Saks & Co. filed a motion asking a  federal Texas court to dismiss the case on grounds that Title VII of the Civil Rights Act does not protect transgender employees from discrimination.

This prompts the question: Is it illegal to discriminate against transgender employees under Title VII of the Civil Rights Act? Thirty years ago, the answer might have been a clear “no.” In support of its motion, Saks relied on a line of federal circuit court cases beginning in 1984, which expressly state that discrimination based on an individuals’ gender identity is not discrimination based on “sex” within the meaning of Title VII. Based on this, Saks argued that it’s “well-settled” that transgender individuals are not protected under federal antidiscrimination laws.

However, the answer might not be as clear-cut as Saks hopes. In recent years, the U.S. has seen a changing tide when it comes to LGBT issues. An increasing number of states and cities have passed laws to prohibit discrimination based on gender identity and sexual orientation (although Texas isn’t one of them). The Defense of Marriage Act was also struck down by the U.S. Supreme Court, paving the way for federal recognition of state-sanctioned same-sex marriages. LGBT issues have also been increasingly highlighted in pop culture through television shows, movies, books, and the media.

Perhaps most importantly, though, Saks’s position is in direct opposition to that of the Equal Employment Opportunity Commission (EEOC), the federal agency responsible for enforcing Title VII of the Civil Rights Act. The EEOC’s position is that discrimination based on “sex” includes discrimination based on gender identity (and sexual orientation for that matter). In a landmark decision in 2012, the EEOC ruled that discriminating against a transgender employee is the same as discriminating against an employee based on sex-stereotypes, which is illegal under Title VII. Since then, the EEOC has filed cases against a Florida employer and a Michigan employer for discriminating against transgender individuals.

Just last month, the Department of Justice followed suit. In a memo issued in December of 2014, the Attorney General announced that it will consider discrimination against transgender employees by state and local public employers to be illegal sex discrimination under Title VII.

For now, we’ll have to see how the issue plays out in court. But, regardless of what the Texas courts decide, the issue won’t be resolved nationwide unless the U.S. Supreme Court takes up the issue or Congress amends Title VII to specifically protect transgender employees.

 

ObamaCare and 2014 Taxes

If you purchased your health insurance coverage via one of the now famous “exchanges” in 2014, get ready for a new, related tax filing obligation with which you may be burdened.

You should soon receive from your exchange IRS Form 1095-A (“Health Insurance Marketplace Statement”).  And particularly if you expected at the outset to be entitled to a subsidy to help pay for your coverage, you will need Form 1095-A to allow you to compute and properly claim the premium tax credit, and to reconcile the actual credit amount with your original estimate, as you complete your 2014 individual income tax return.

Be aware that if your premium tax credit was originally estimated before you knew exactly how much income you would have in 2014, the credit may not be as much as you expected.  It gets complicated; check out the instructions to Form 1095-A and the related Form 8962.