CONSUMER AFFAIRS SUBPOENAS DEBT COLLECTION
TO CHECK COMPLIANCE WITH NEW CHILD SUPPORT RULES
FOR IMMEDIATE RELEASE
June 22, 2004
The New York City Department of Consumer Affairs
(DCA) has subpoenaed records from fifty licensed debt collection
agencies to check compliance with new disclosure and fee
requirements for agencies collecting child support payments.
The action was triggered when more than half (408) of the
763 licensed agencies did not respond to a DCA mailing requesting
that each verify whether child support services are provided.
Of the 355 that responded, only two acknowledged that they
collect child support payments. DCA will continue to subpoena
records of all licensed agencies that do not submit proper
Parents who depend on debt collection
agencies to help them get the child support payments theyre
entitled to shouldn't be exploited by agencies that sock
them with high fees and unclear contract terms, said
DCA Commissioner Gretchen Dykstra. Mayor Bloomberg
made it clear last week that his administration is committed
to protecting the City's children that rely on these payments,
and holding private collection agencies accountable is just
one way of ensuring that. We're skeptical that only two
agencies actually provide these services and have requested
records to make sure. New York has the toughest debt collection
law in the country -- companies that choose to thumb their
nose at their responsibilities risk serious penalties, including
losing their license.
All licensed debt collection agencies that
solicit child support payments must adhere to strict fee
limits and restrictions, and submit a copy of their contract
and disclosure form to the DCA. The subpoenas solicit all
documents prepared in regards to child support collections
in the last four months, with violators facing maximum penalties
of $1,000 per violation and possible license revocation.
Under Local Law 70, debt collection agencies
collecting child support must:
Be licensed by the DCA.
Provide a written disclosure form clearly stating that the
consumer is under no obligation to use their services and
that the New York City Office of Child Support Enforcement
Services (OCSE) provides child support collection services
at no cost.
Disclose all fees.
Provide all contracts in writing.
Debt collection agencies collecting child
support are also prohibited from:
Charging an application fee.
Charging interest or a fee for its services
that exceeds 15% of each child support payment collected.
Charging any interest or fee for a current
child support payment.
Charging an early-termination fee.
Designating a current payment of child
support as arrears and/or prohibiting the cancellation
of a contract until arrears are paid.
Charging a fee for legal services unless
paid to an independent firm and agreed upon in writing
by the potential client.
Entering into contracts for periods longer
than 12 consecutive months.
Renewing a contract without written consent
of all parties or if there has been no collection activity
for the preceding six months.
According to the Office of Child Support Enforcement
Services (OCSE), a division of the Citys Human Resources
Administration, there are currently 290,000 total cases
in New York City with child support orders. This year the
agency collected more than $500 million in child support
payments on behalf of the Citys children at no cost.
For more information on the Citys free
child support collection services, call 3-1-1 or OCSE directly
at 212-226-7125, or visit OCSEs Customer Service Office
in lower Manhattan at 151 West Broadway, 4th floor between
8:00AM and 5:00PM, Monday to Friday.
Debt collection agencies, whether located
in New York City or outside, that collect from City residents,
must be licensed by the DCA. The DCA has received 450 complaints
so far this year about debt collection agencies. For a copy
of the DCAs Debt Collection Guide or to file a complaint,
call 3-1-1 or visit the DCA online at www.nyc.gov/consumers.