In its blog post announcing the Fall 2018 Rulemaking Agenda, the CFPB announced that it is “considering how rulemaking may be helpful to further clarify the meaning of ‘abusiveness’ under the section 1031 of the Dodd-Frank Act.”  This statement follows press reports of Acting Director Mulvaney commenting about the possibility of a rulemaking to define the meaning of “abusiveness” under Dodd-Frank, to bring clarity to this aspect of the Bureau’s authority.

Professor Adam Levitin published a blog on Credit Slips in which he argued that such a rulemaking seems like a non-event, since the Bureau never really used the “abusive” prong of Dodd-Frank in any instance in which “unfair” and/or “deceptive” were not also used.  Prof. Levitin notes that the rulemaking process would likely be difficult, and wouldn’t make any difference in the Bureau’s future use of its powers under Dodd-Frank.

Although I enjoy disagreeing with Prof. Levitin, in this instance, I think he has it right.  Having watched the Bureau’s enforcement activity closely over the last seven years, I saw the “abusive” label used in a number of instances, but they all seemed like situations in which “unfair” or “deceptive” were equally applicable.  Moreover, the real problem with CFPB enforcement was not the absence of a definition of the terms “unfair,” “deceptive” or “abusive,” but the fact that the Bureau didn’t seem bound by the definitions of any of the terms, and simply labeled practices to be UDAAP violations without worrying about applying the elements of a statutory test.  The Bureau’s current leadership has signaled that it does not plan to continue this practice, but no rulemaking is required to prevent it – just leadership that respects the limits of its authority under the law.

Professor Levitin makes another observation, too, that I think is worth highlighting.  He notes, correctly, that state attorneys general cannot make claims against national banks or federal savings associations to directly enforce the UDAAP provisions in Dodd-Frank.  However, under § 1042(a)(2) of Dodd-Frank, a state attorney general can bring claims to enforce “a regulation prescribed by the Bureau” under the UDAAP provisions of the statute.  Thus, an “abusive” rulemaking would create an argument that this state attorney general authority has been triggered.

Against this backdrop, I think the practical impact of an “abusive” rulemaking, even if it is completed, is likely to be very limited, and possibly counterproductive.  The “abusive” prong of Dodd-Frank has always been a magnet for expressions of concern about the Bureau’s activities, but I think a rulemaking that attempts to define the term more specifically will be only marginally helpful, at best.  It will be interesting to see if the rulemaking process moves forward, as suggested in today’s Rulemaking Agenda.

On October 17, the Bureau released its Fall 2018 Rulemaking Agenda, but it included a surprise for those interested in fair lending.  Under the section of the associated blog post entitled “Future Planning” appears the following statement:

“The Bureau is considering future [rulemaking] activity with regard to specific areas of consumer financial law of significant public interest.  For example, the Bureau announced in May 2018 that it is reexamining the requirements of the Equal Credit Opportunity Act (ECOA) concerning the disparate impact doctrine in light of recent Supreme Court case law and the Congressional disapproval of a prior Bureau bulletin concerning indirect auto lender compliance with ECOA and its implementing regulations.”

This is a very interesting development, because it suggests that the Bureau’s “reexamination” of disparate impact may not merely be a matter of informal interpretation or enforcement/supervision priorities, but may become enshrined in a rule (presumably an amendment to Regulation B).  If this happens, its effects would likely be more permanent and widespread than a more informal statement of position relating to disparate impact.  A rule, once finalized, would presumably:

  • remain in effect indefinitely, until altered by another notice-and-comment rulemaking;
  • be binding on other federal agencies (like the Department of Justice) and on courts, as an authoritative interpretation of ECOA;
  • survive any leadership change at the Bureau, again subject to the rulemaking process being restarted; and
  • prevent the Bureau from applying any different standard for disparate impact retroactively upon a change in leadership at the agency.

So, a disparate impact rulemaking could be very significant over the long term.  But what direction might such a rulemaking take?

One possibility would be to remove the “effects test” language from Regulation B (§ 1002.6(a)) and state affirmatively that there is no disparate impact theory of liability under ECOA.  There is certainly support in the statutory language, and the reasoning of Inclusive Communities, for that result.  Indeed, this conclusion was the one highlighted in the House Financial Services Committee’s Unsafe at Any Bureaucracy report, including a chart that shows the distinctions between ECOA and other federal statutes illustrating that there is no language in ECOA to support a disparate impact theory of liability.

Another idea might be to follow the path of the HUD disparate impact rulemaking under the Fair Housing Act, to carefully define the elements of a disparate impact claim in a way that limits application of the theory to more well-settled situations and which gives appropriate deference to reasonable business justifications.  We blogged about the HUD rulemaking most recently here.

A third potential would be to flesh out the “robust causality” requirement discussed in Inclusive Communities to require significant proof beyond statistical analysis for any disparate impact claim, which again could serve to curb what the Supreme Court labeled “abusive” claims of disparate impact.

We don’t know what the Bureau may do in this regard, or whether the foreshadowing of an ECOA rulemaking will actually be carried through to completion, but if it is, it could be a very significant, long-term development for fair lending law.


Earlier this month, the Federal Reserve invited comment on actions it can take “to promote ubiquitous, safe, and efficient faster payments in the United States by facilitating real-time interbank settlement of faster payments.”  Comments are due by December 14, 2018.

More specifically, the Fed is seeking comment on two potential actions.  One action is the Fed’s development of a service for real-time interbank settlement of faster payments 24 hours a day, seven days a week, 365 days a year.  The second action is the creation of a liquidity management tool that would enable transfers between Federal Reserve accounts on a 24x7x365 basis to support services for real-time interbank settlement of faster payments, regardless of whether those services are provided by the private sector or the Federal Reserve Banks.

According to a Federal Reserve Board Governor, there is a growing gap between the transaction capabilities in the digital economy for payments that are fast, convenient, and accessible to all and the underlying settlement capabilities.  There is a growing demand for payments to be as instantaneous as the apps on smartphones, but these payments currently rely on a patchwork of systems that can result in inefficiencies and delays, as well as uneven access.  Faster payments would allow consumers and businesses to send and immediately receive payments at any time of the day and on any day of the year, and provide funds recipients the ability to use the funds anywhere they choose.  In many circumstances, the underlying infrastructure cannot ensure that a fast payment is fully complete before the recipient seeks to use the funds.

Interbank settlements can be performed on a deferred basis or in real-time.  Most settlement arrangements for faster payments currently settle funds between banks on a deferred basis, a buildup of obligations results, presenting risks to the financial system in times of stress.  A 24/7 payment-by-payment interbank settlement in real-time, referred to as “real-time gross settlement,” offers clear benefits in minimizing risk and maximizing efficiency.  It would provide banks with access to a settlement system that settles each payment as soon as it is sent.  It would also provide important benefits to households and small business owners who face cash flow constraints.

While membership in a payment system can offer benefits to participating financial institutions such as meeting customer desires for faster, more convenient, or cross-border payment methods, it can also entail risks.  The OCC issued a 2017 interpretive letter that required a bank seeking to enter into membership in a payment system to submit a written notice to its examiner-in-charge providing relevant information regarding the proposed membership and engage in on going monitoring to ensure its involvement can be conducted in a safe and sound manner.

In addition to the Fed’s request for comment, there were two other recent noteworthy payments-related developments.  Last month, the Fed published final amendments to Regulation CC (Availability of Funds and Collections of Checks) to update the liability provisions of Reg. CC to address the nearly-complete conversion of the nation’s check collection system from a paper to an electronic environment. The amendments are effective on January 1, 2019.

Also last month, the National Automated Clearing House Association (NACHA) announced that its members has approved the following three new rules to expand the capabilities of Same Day ACH for all financial institutions and their customers:

  • Effective September 18, 2020, same-day ACH transactions can be submitted to the ACH Network for an additional two hours every business day.
  • Effective March 20, 2020, the same-day ACH per-transaction dollar limit is increased to $100,000.
  • Effective September 20, 2019, the speed of funds availability for certain same-day and next-day ACH credits is increased by making funds from same-day ACH credits processed in the existing first window available by 1:30 p.m. local time and funds from certain other ACH credits available by 9 a.m. local time by the receiving bank.

The “borrower defense” final rule (Final Rule) issued by the Dept. of Education in November 2016 took effect at noon yesterday after Judge Randolph D. Moss of the D.C. federal district court refused to grant the renewed motion for a preliminary injunction filed by the California Association of Private Postsecondary Schools (CAPPS) seeking to preliminary enjoin the arbitration ban and class action waiver provisions in the Final Rule.  CAPPS had sought to block the provisions from taking effect pending the resolution of the lawsuit filed by CAPPS against the ED and Education Secretary Betsy DeVos to overturn the Final Rule.  Judge Moss found that CAPPS had filed to show that any of its members was likely to suffer an irreparable injury in the absence of an injunction.

Shortly before the Final Rule’s initial July 1, 2017 effective date, CAPPS filed a motion for a preliminary injunction to which the ED responded by issuing a stay of the Final Rule under Section 705 of the Administrative Procedure Act (APA).  The Section 705 stay was followed by the ED’s issuance of an interim final rule delaying the effective date until July 1, 2018 and the promulgation of a final rule further delaying the effective date until July 1, 2019 (Final Rule Delay).

On September 12, 2018, Judge Moss issued an opinion and order in Bauer v. DeVos, another case challenging the Final Rule in which he ruled that the ED’s rationale for issuing the Section 705 stay was arbitrary and capricious and that in issuing the Final Rule Delay, the ED had improperly invoked the good cause exception to the Higher Education Act’s negotiated rulemaking requirement.  The case consolidated two separate lawsuits filed after the ED’s issuance of the Section 705 stay, with one filed by two individual plaintiffs and the other by a coalition of nineteen states and the District of Columbia.  Both lawsuits were subsequently amended to challenge not only the Section 705 stay but also the other actions taken by the ED to delay the Final Rule’s effective date.  While Judge Moss vacated the Section 705 stay, he stayed the vacatur until 5 p.m. on October 12, 2018.

After the ED filed a notice with the court in June 2017 regarding its initial delay of the Final Rule’s effective date until July 1, 2018, CAPPS withdrew its motion for preliminary injunction.  Following the court’s decision in Bauer, CAPPS filed its renewed motion for a preliminary injunction.  In his decision denying CAPPS’ motion, Judge Moss stated that on October 12, the court extended the stay of the vacatur until noon on October 16.

The Final Rule broadly addresses the ability of a student to assert a school’s misconduct as a defense to repayment of a federal student loan.  It does not apply to private loans.  The Final Rule includes a ban on all pre-dispute arbitration agreements for borrower defense claims by schools receiving Title IV assistance under the Higher Education Act (HEA) and a new federal standard for evaluating borrower defenses to repayment of Direct Loans (i.e. federal student loans made by the ED).  Both mandatory and voluntary pre-dispute arbitration agreements are prohibited by the rule, whether or not they contain opt-out clauses, and schools are prohibited from relying on any pre-dispute arbitration or other agreement to block a borrower from asserting a borrower defense claim in a class action lawsuit until the court has denied class certification and the time for any interlocutory review has elapsed or the review has been resolved.  The prohibition applies retroactively to pre-dispute arbitration or other agreements addressing class actions entered into before July 1, 2017.

It would seem that because the Final Rule is now effective, the new federal standard it establishes for evaluating defenses to repayment would be applicable in actions seeking to collect on Direct Loans disbursed on or after July 1, 2017 or to recover amounts previously collected on such loans.  However, because the arbitration ban and class action provisions of the Final Rule are requirements with which a school must comply as a condition of receiving Title IV assistance, the ED presumably could waive such requirements (as well as other provisions subject to ED enforcement such as the actions and events in the Final Rule that can trigger a requirement for a school to provide a letter of credit or other financial protection to the ED to insure against future borrower defense claims and other liabilities to the ED.)

Debt collection continues to be one of the most active areas in consumer finance law.  In this week’s podcast, Ballard Spahr attorneys will discuss the challenges facing the debt collection industry in private litigation and how to address them.  We’ll talk about how new technology is changing the industry, assess the effect of the CFPB’s new leadership on debt collection enforcement, and offer thoughts on whether the Bureau’s expected rulemaking will provide relief from current legal uncertainties.

To listen and subscribe to the podcast, click here.


The CFPB’s Fall 2018 rulemaking agenda has been published by the Office of Information and Regulatory Affairs (OIRA) as part of its Fall 2018 Unified Agenda of Federal Regulatory and Deregulatory Actions.  (OIRA is part of the Office of Management and Budget.)  It represents the CFPB’s second rulemaking agenda under the Trump Administration and Acting Director Mick Mulvaney’s leadership.  The agenda’s preamble indicates that the information in the agenda is current as of August 30, 2018 and identifies the regulatory matters that the Bureau “reasonably anticipates having under consideration during the period from October 1, 2018, to September 30, 2019.”

As signaled by Mr. Mulvaney in comments made earlier this week, the preamble indicates that the Bureau is considering “whether rulemaking or other activities may be helpful to further clarify the meaning of ‘abusiveness’ under section 1031 of the Dodd-Frank Act.”  Such rulemaking is included on the CFPB’s list of “long-term actions” that is part of the unified agenda.

The preamble further states that the future activity being considered by the Bureau includes “reexamining the requirements of the Equal Credit Opportunity Act (ECOA) in light of recent Supreme Court case law and the Congressional disapproval of a prior Bureau bulletin concerning indirect auto lender compliance with ECOA and its implementing regulations.”  The preamble references the CFPB’s May 2018 statement that was issued following such Congressional disapproval in which the CFPB announced that it was reexamining the ECOA requirements.  However, unlike the “abusiveness” rulemaking, the ECOA rulemaking is not included on the CFPB’s list of long-term actions or otherwise listed in its rulemaking agenda.

With regard to the CFPB’s rulemaking to reconsider its final payday/auto title/high-rate installment loan rule (Payday Rule), the Fall 2018 agenda estimates the issuance of a notice of proposed rulemaking (NPRM) in January 2019.  (The Spring 2018 rulemaking agenda had estimated issuance of a NPRM in February 2019.)  The Payday Rule’s compliance date is August 19, 2019.  In the preamble, the CFPB states that it expects to issue a NRPM “by no later than early 2019 that will address reconsideration of the rule on the merits as well as address changes to its compliance date.”

In addition to reconsidering the Payday Rule, the other key rulemaking initiatives listed on the Spring 2018 agenda are:

  • Debt Collection. The agenda states that the Bureau “expects to issue [a NPRM] addressing such issues as communication practices and consumer disclosures by spring 2019.”  It estimates the issuance of a NPRM in March 2019.
  • Business Lending Data.  Dodd-Frank Section 1071 amended the ECOA to require financial institutions to collect and maintain certain data in connection with credit applications made by women- or minority-owned businesses and small businesses.  Such data includes the race, sex, and ethnicity of the principal owners of the business.  In May 2017, the CFPB issued a RFI and a white paper on small business lending in conjunction with a field hearing on small business lending.  In the Spring 2018 agenda, the Section 1071 rulemaking was included in the list of current rulemakings, with an estimated March 2019 date for prerule activities. The Fall 2018 agenda reclassifies the Section 1071 rulemaking as a long-term action item.  In the preamble, the CFPB attributes the rulemaking’s new status to the Bureau’s “need to focus additional resources on various HMDA initiatives.”
  • HMDA/Regulation C.  The CFPB states that it expects to issue final guidance in late 2018 to govern the disclosure of loan-level HMDA data in 2019.  However, to address HMDA data disclosure in future years, the CFPB states that it has decided to add a new notice-and-comment rulemaking to its agenda and estimates a May 2019 date for issuance of a NRPM.  The agenda estimates a March 2019 date for the CFPB’s issuance of a NRPM “to address some or all” of the issues related to various HMDA projects under consideration, such as revisiting the Bureau’s 2015 HMDA rule and its August 2018 interpretive rule regarding amendments made to HMDA by the Economic Growth, Regulatory Relief, and Consumer Protection Act.

In addition to DFA Section 1071 rulemaking, the key long-term actions items listed in the Fall 2018 agenda are:

  • Inherited Regulations.  These are the existing regulations that the CFPB inherited from other agencies through the transfer of authorities under the Dodd-Frank Act.  The CFPB indicates that it expects to focus its initial review on the subparts of Regulation Z  that implement TILA with respect to open-end credit and credit cards in particular. By way of example, the CFPB states that it expects to consider adjusting rules concerning the database of credit card agreements it is required to maintain by the CARD Act “to reduce burden on issuers that submit credit card agreements to the Bureau and make the database more useful for consumers and the general public.” The CFPB states it may launch additional projects after reviewing the responses it received to its RFIs on the inherited regulations and rules issued by the CFPB.
  • Consumer reporting.  The Fall 2018 agenda indicates that the Bureau will evaluate potential additional rules or amendments to existing regulations governing consumer reporting, with possible topics for consideration to include the accuracy of credit reports, including the processes for resolving consumer disputes, identity theft, or other issues.
  • Consumer Access to Financial Records.  In November 2016, the CFPB issued a RFI about market practices related to consumer access to financial information.  The Fall 2018 agenda states that the Bureau will continue to monitor market developments and evaluate possible policy responses to issues identified, including potential rulemaking.  Possible topics the Bureau might consider include specific acts or practices and consumer disclosures. In addition, the Bureau plans to consider “whether clarifications or adjustments are necessary with respect to existing regulatory structures that may be implicated by current and potential developments in this area.”
  • Regulation E Modernization.  The Fall 2018 agenda states that the Bureau “will evaluate possible updates to the regulation, including but not limited to how providers of new and innovative products and services comply with regulatory requirements” and that “potential topics for consideration might include disclosure provisions, error resolution provisions, or other issues.”

Three items no longer mentioned in the CFPB’S agenda are overdrafts, “larger participant” rules, and student loan servicing.  The CFPB designated these items as “inactive” when it issued its Spring 2018 agenda.

The New York Attorney General, on October 12, 2018, filed a notice of an appeal to the Second Circuit from Judge Preska’s dismissal on September 12, 2018 of all of the NYAG’s federal and state law claims, and her subsequent September 18 order amending the September 12 order to provide that the NYAG’s claims under Dodd-Frank Section 1042 were dismissed “with prejudice.”  (Section 1042 authorizes state attorneys general to initiate lawsuits based on UDAAP violations.)

On September 14, the CFPB filed an appeal with the Second Circuit from Judge Preska’s June 21, 2018 decision, as amended by her September 12 order, in which she ruled that the CFPB’s single-director-removable-only-for-cause structure is unconstitutional, struck the CFPA (Title X of Dodd-Frank) in its entirety, and dismissed the CFPB from the case.  That was followed on September 25 by RD Legal Funding’s filing of a cross-appeal with the Second Circuit from Judge Preska’s June 21 decision, as subsequently amended, in which Judge Preska had ruled that the NYAG had stated federal and state law claims against RD Legal Funding.  (Although Judge Preska’s various orders resulted in the dismissal of all of the CFPB’s and NYAG’s claims, RD Legal Funding may have filed the cross-appeal to preserve its ability to challenge Judge Preska’s June 21 ruling that the NYAG had stated claims against RD Legal Funding should the Second Circuit conclude that the CFPB’s structure is constitutional or that the structure is unconstitutional but that the proper remedy is to sever the Dodd-Frank for-cause removal provision rather than strike all of Title X.)

The Bureau’s constitutionality is now before two circuits, the Second and Fifth Circuits.  In April 2018, the Fifth Circuit agreed to hear All American Check Cashing’s interlocutory appeal from the district court’s ruling upholding the CFPB’s constitutionality.  Also, a petition for certiorari was recently filed in the U.S. Supreme Court by State National Bank of Big Spring which, together with two D.C. area non-profit organizations that also joined in the petition, had brought one of the first lawsuits challenging the CFPB’s constitutionality.



The CFPB’s proposed revisions to its “Policy to Encourage Trial Disclosure Programs” (TDP Policy) have been strongly criticized by consumer and public interest groups who, in addition to other objections, assert that the proposal exceeds the Bureau’s authority under Section 1032(e) of the Dodd-Frank Act.

Section 1032(e)(1) provides:

The Bureau may permit a covered person to conduct a trial program that is limited in time and scope, subject to specified standards and procedures, for the purpose of providing trial disclosures to consumers that are designed to improve upon any model form issued [by the CFPB pursuant to its authority to prescribe disclosure rules under Section 1032 and issue related model forms], or any other model form issued to implement an enumerated statute, as applicable.

A comment letter submitted by the National Consumer Law Center joined by 10 other consumer and public interest groups raises the following principal objections to the CFPB’s proposal:

  • The Bureau’s trial disclosure program authority is limited by Section 1032(e)(1) to the improvement of model forms. The commenters reject the CFPB’s claim that under Section 1032(e)(2), it has the authority to waive a requirement of a rule or enumerated consumer law. (Section 1032(e)(2) provides that “a covered person conducting a trial disclosure program shall be deemed to be in compliance with, or may be exempted from, a requirement of a rule or an enumerated consumer law.”)  According to the commenters, Section 1032 “does not authorize the Bureau to allow trial disclosure programs that change or eliminate the substantive information required to be disclosed, or to deviate from any other substantive requirements of the statute.”  They contend that the CFPB only has authority to revise substantive disclosure requirements to the extent provided in the enumerated consumer laws themselves and that such authority would require the CFPB to use APA notice and comment procedures. According to the commenters, “if the Bureau wishes to experiment with more substantive changes to disclosure requirements before proposing a rule amendment, it may do so through consumer testing or focus groups that do not involve real consumers risking real money.” Notably, the commenters challenge the Bureau’s “mistaken and illegal characterization of a trial disclosure program as one that is used to allow a ‘participant’ to obtain access to market in exchange for ‘reduced regulatory barriers.’”  They state: “It is not the purpose of [the trial disclosure program] to ease access by new players in the consumer financial product marketplace. The purpose of the statute is to protect consumers and improve existing model forms to promote consumer understanding.” (emphasis included).
  • The CFPB’s authority to allow a “covered person” to conduct a trial disclosure program does not allow it to grant waivers sought by trade associations pursuant to a blanket application for its members.
  • The proposal does not comply with the requirement in Section 1032(e)(1) that a trial program be “limited in time” because it would allow an unlimited number of two-year extensions beyond the initial two-year period of a waiver and, if the Bureau was engaged in rulemaking, could allow longer extensions of unlimited duration. The commenters also criticize the Bureau for relying on companies to notify it of material changes that should be investigated and not including any requirements for Bureau monitoring.
  • The proposal does not comply with the requirement in Section 1032(e)(1) that a trial program also be “limited in…scope” because it “imposes no limits in the number of consumers who may be exposed to the trial or the range of products and services.”

The public interest groups submitting the comment letter were also among a much larger group of signatories to a letter sent to the CFPB by “consumer, civil rights, legal services, labor and community groups writ[ing] in strong opposition to [the CFPB’s] policy to encourage trial disclosure programs.”  The groups’ objections set forth in the letter track those set forth in the comment letter.

For a discussion of the CFPB’s amendments to its trial disclosure program policy, click here to listen to our recent podcast.




Addressing the Mortgage Bankers Association (MBA) 2018 Annual Convention in Washington, DC on October 15, 2018, BCFP Acting Director Mick Mulvaney advised that regulation by enforcement is dead, and that he does not care much for regulation by guidance either. He noted to the members that they have a right to know what the law is.

Acting Director Mulvaney advised that if a party is doing something that is against the law, the BCFP will take action against them. However, he advised the difference between the BCFP now from its approach under the prior Director is that if someone is doing something that complies with the law and the BCFP doesn’t like it, the BCFP will not take action.

With regard to UDAAP, Acting Director Mulvaney stated that he believes the concepts of “unfair” and “deceptive” are well established in the law, but that is not so with regard to the concept of “abusive”. He noted he asked his staff to provide examples of what is abusive that is not also either unfair or deceptive. And he signaled that the BCFP will look to engage in rulemaking on abusive.

As we have reported the MBA and other trade groups recently sent a letter to the BCFB seeking reforms in connection with the BCFP’s loan originator compensation rule. When asked by MBA President and CEO Robert Broeksmit about the letter, Acting Director Mulvaney advised that he knew the letter was received and that it is being reviewed by staff, but that he had not actually seen the letter. Mr. Broeksmit then handed Mr. Mulvaney a copy of the letter, drawing laughs from the audience.

With regard to payday lending, Acting Director Mulvaney advised that it can be really dangerous for people given the high interest rates, but that people want it so it exists. He noted he has told payday lenders they exist because bank regulators forced banks out of the business. But he stated that the OCC has signaled it will allow banks back in, and that the way to fix payday lending is through competition.


New York has enacted legislation that requires creditors to provide new disclosures when using devices to remotely disable vehicles, commonly referred to as “kill switches.”  The new law took effect immediately upon its signing by Governor Cuomo on October 2, 2018.

First, the law amended New York’s Uniform Commercial Code to add a definition for a “payment assurance device.”  The term is defined as “any device installed in a vehicle that can be used to remotely disable the vehicle.”

Second, the law amended the provisions of New York’s General Business Law dealing with debt collection procedures.  The law amends the list of prohibited practices to add that “no principal creditor” or its agent shall remotely disable a vehicle using a “payment assurance device” to repossess a vehicle “without first having given written notice of the possible remote disabling of a vehicle in the method and timetable agreed upon by the consumer and the creditor in the initial contract for services.”  A “principal creditor” is defined as “any person, firm, corporation or organization to whom a consumer claim is owed, due or asserted to be due or owed, or any assignee for value of said person, firm, corporation or organization.”

The written notice required to be sent before using a “payment assurance device” must:

  • Be mailed by registered or certified mail “to the address at which the debtor will be residing on the expected date of the remote disabling of the vehicle”
  • Be postmarked no later than 10 days “prior to the date on which the principal creditor or his agent obtains the right to remotely disable the vehicle”

Violations of the debt collection prohibitions in New York’s General Business Law are deemed a misdemeanor and the NY Attorney General or the district attorney  of  any county can bring an action to enjoin violations.