Regulatory Alert: New York Adopts Law to Regulate Telemarketing Sales

In New York, the Nuisance Call Act is set to go into effect on March 1, 2020. Signed by Governor Cuomo on December 2, 2019, this new legislation aims to close loopholes in the do-not-call registry that may have prevented its application to live telemarketers, and to otherwise curb robocalls to state residents. This act will require live telemarketers to give consumers the option to be added to the seller’s do-not-call list. It will also require telemarketers to have a consumer’s written consent prior to sharing or selling their contact information. Telephone service providers will now also be required to offer consumers free call mitigation technology.

Debt Relief Industry – Year in Review

Federal Level

At the Federal level, the Federal Trade Commission has used 2019 to renew efforts to dismantle the student loan debt relief industry. The FTC, usually under the Telemarketing Sales Rule and FTC Act, has obtained numerous restraining orders and judgments against different companies alleging to help consumers obtain student loan forgiveness, consolidation, and repayment programs to eliminate or reduce their monthly payments and principal balances.

The FTC has alleged that student debt relief companies utilize deceptive and abusive practices, including making unsubstantiated claims and material misrepresentations about services, to bilk millions of dollars from consumers without providing any of their marketed services. The FTC’s actions have even extended to financing companies and other companies found to have assisted and facilitated in the violation of the TSR and FTC Act. This has ultimately resulted in multiple companies being banned from offering debt relief services and the return of millions of dollars in fees to consumers.

State Level

On the state level, a bill allowing for-profit debt adjustment in New Jersey continues to slowly make its way through the New Jersey state legislature. The bill, introduced to the New Jersey state Senate on February 21, 2019 by Democratic state senator Nellie Pou, would amend the current “debt adjusters law” to allow for-profit debt adjustment companies to conduct business in the state as long as “the company: (1) does not receive or hold, actually or constructively, consumer funds; and (2) is regulated by the Federal Trade Commission pursuant to the commission’s “Telemarketing Sales Rule.”

If adopted in its current form, this bill would remove New Jersey’s blanket ban on for-profit debt settlement and would bring the state’s statute more in line with other states which allow such services pursuant to a state-provided license. While certain requirements, such as surety bond values and licensing information requirements have been set forth already in the bill, other important details, such as fee restrictions, have still not been confirmed.

Another looming change on the state level is the California Consumer Privacy Act, set to take effect January 1, 2020 as to consumer data and January 2021 as to business-to-business data. The CCPA is a comprehensive new consumer protection law intended to give consumers the right to know what personal information of theirs is collected, and how it is used, shared, or sold. It will also provide consumers with the right to delete personal information held by businesses, including by businesses’ service providers. Consumers will also have the right to opt-out of the sale of their personal information.

Affected companies that do business in California and meet the CCPA’s thresholds will need to consider updating their disclosures in their privacy policies and implement newly documented processes for responding to consumer requests. Companies will also need to review their vendor services agreements to ensure that all consumer information is handled in a compliant manner on their behalf. While the law will likely cause tremendous shifts in the way debt relief companies do business, they will have a six-month window to comply starting on the January 1, 2020 effective date. Companies will want to make sure they prioritize such compliance, as violations can result in civil penalties of up to $2,500 for each violation or $7,200 for each intentional violation after notice and a 30-day opportunity to cure have lapsed.

Google Advertising Policy Changes

In November 2019, Google has updated its financial products and services policy to restrict the advertisement of debt settlement, debt management, and credit repair services. Google will now only allow “ads promoting debt services if the advertiser and provider of these services is an approved non-profit budget and credit counseling agency, as defined by 11 U.S. Code § 111.” While certification requirements have yet to be published, this policy is already expected to cause upheaval with one of the industries’ dominant forms of marketing. Not only will it greatly impact debt settlement companies, but it will also apply to companies who advertise these services directly, to lead generators, and to companies that connect consumers with related third-party services.
Shipkevich PLLC Regulatory Workshop

On November 4, 2019, Shipkevich PLLC held its inaugural regulatory workshop for the debt relief industry in Irvine, California. Hosted by Felix Shipkevich, Stefan Savic, Brian Grossman, and Brian Lazarus, the workshop was attended by over 35 debt relief companies. This full-day workshop covered legal and regulatory issues concerning the debt settlement industry, civil litigation and enforcement actions involving debt settlement companies, the debt settlement attorney model, privacy and data security issues, and debt settlement funding agreements.