ACA in coordination with Independent Recovery Resources, Inc., a women-owned small business in New York, is pushing back against the egregious actions of New York City Mayor Eric Adams and the New York City Department of Consumer and Worker Protection (“DCWP”) that violate the constitutional rights of ACA members, and harm New York creditors and consumers. ACA and Independent Recovery Resources, Inc. filed a lawsuit in the U.S. District Court for the Eastern District of New York for declaratory and injunctive relief in response to the DCWP’s duplicative and expansive debt collection rules set to take effect for ACA members, many that are small businesses, Dec. 1. “ACA is pleased to have engaged Sarah Auchterlonie and her litigation team at Brownstein Hyatt Farber Schreck LLP to represent ACA and Independent Recovery Resources, Inc. in this matter,” said ACA CEO Scott Purcell. “Their sound litigation experience addressing regulatory overreach as well as their strong understanding of the Constitution are a perfect match to help preserve the debt collection industry’s needs as well as New Yorkers’ access to credit at reasonable interest rates.”
With the DCWP moving forward with the proposed rules, ACA is seeking to set aside the proposal because it violates multiple provisions of the U.S Constitution and is preempted by federal and state law.
“When the government overreaches and becomes unreasonable in its demands, a trade association like ACA can collectively represent its members and attempt to achieve positive remedies using the judicial branch of the government to ensure regulators follow the law,” Purcell said.
The DCWP did not articulate any specific reason, data, studies, or facts that support any changes to the existing rules, according to the lawsuit. The DCWP lacks evidence or data that explains problems the rule attempts to solve as well as reasoning that existing state and federal debt collection regulations are insufficient.
New York City’s disregard for the law and refusal to fully consider the impact of its rushed and overbroad rules harms small businesses throughout New York and the consumers they serve.
The DCWP provided 76 business days for regulated entities to implement the sweeping changes, when the Consumer Financial Protection Bureau provided a full year to implement significant federal debt collection requirements in Regulation F.
“Debt collectors play a significant role in helping New Yorkers gain access to credit with reasonable interest rates,” Purcell said. “By infringing on our members’ constitutional rights, especially our small business members, the DCWP directly reduces the ability for New York consumers to have resolution to their accounts and restore their financial quality of life. This is especially true for consumers with the lowest credit scores and therefore the greatest need for reasonably priced credit. We’re standing up to ensure our members’ constitutional rights are not infringed upon, and in doing so, helping to preserve access to credit for the New Yorkers who need it the most.”
In the lawsuit, ACA outlines that:
- The rules discriminate based on the content and speaker of targeted speech and fail to justify that restriction of protected speech in violation of the First Amendment.
- The rules violate the First Amendment’s petitions clause because they restrict access to courts based on the identity of the petitioner.
- The rules mandate that collectors engage in unnecessary, irrational speech, in violation of the First Amendment, to both their own detriment and the detriment of consumers.
- The rules violate the Fourteenth Amendment’s due process clause by promulgating confusing, contradictory, and vague requirements that leave collectors with little guidance as to what actions are permitted or unpermitted.
- The rules are preempted by federal law that states that additional state regulations are not permitted if they fail to provide consumers with more protection (which the rules fail to do).
- Finally, the rules violate the Constitution of the State of New York because comprehensive state laws and regulations foreclose additional municipal regulations on the subject of default judgments. To read more click here.