Today’s blog is an article written by Scott Wortman, a partner at Warshaw Burstein, LLP, who also writes for our CRLF blog.
If you recall, the United States District Court for the Eastern District of New York in Eric M. Berman, P.C. v. City of New York ruled that law firms whose activities are supervised by an attorney currently registered with the New York State Unified Court System to practice law in New York State are not currently required to be licensed as a Debt Collection Agency by the Department of Consumer Affairs (“DCA”).
However, on Appeal by the City of New York, the Second Circuit (the federal appellate court) certified 2 questions to the New York Court of Appeals (the highest state court in NY):
- Does Local Law 15, insofar as it regulates attorney conduct, constitute an unlawful encroachment on the State’s authority to regulate attorneys, and is there a conflict between Local Law 15 and Sections 53 and 90 of the New York Judiciary Law?
- If Local Law 15’s regulation of attorney conduct is not preempted, does Local Law 15, as applied to attorneys, violate Section 2203(c) of the New York City Charter?
Just this morning, the New York Court of Appeals concluded that there is no conflict between Local Law 15 and the State’s authority to regulate attorneys and, in the absence of such conflict, the City should not be prevented from taking permissible steps to curb abusive debt collection practices. While this is not absolutely dispositive of the 2nd Circuit’s determination, this decision will undoubtedly be the impetus for the 2nd Circuit to overrule the District Court’s determination, once again providing DCA with autonomous and unfettered powers to reign over the entirety of the collection industry as it relates to the City of New York.
Considering the state of New York has 62 municipalities incorporated as Cities and 932 separate towns, it is unquestionably time for some level of cohesion and uniformity to the NY licensing rules regulating this industry. The discussed Local Law has been a financial boon for the City of New York and this determination provides further incentives for other New York municipalities to come up with their own licensing and monetary penalty scheme (by way of example see Yonkers and Buffalo). As stated by Judge Fahey in the dissenting opinion, “Taken to its logical extreme, if this field were open for local government regulation, New York City could require its own bar exam for attorneys seeking to practice within its borders, or Buffalo could develop its own rules of professional conduct for attorneys practicing in that city.”
Of course this applies to all third party debt collectors, as the various New York municipal licensing schemes lack any cohesion or uniformity besides their penchant for gratuitous regulations and arbitrary fines and penalties.
I’ve had the pleasure of successfully representing many hard working and highly ethical members of this important industry that were pursued and stigmatized by regulators; but in my experience, DCA takes the cake for their hostility and antagonistic treatment towards the industry at large. This decision will undeniably embolden DCA’s unreasonable stance.
Scott E. Wortman, Partner
Warshaw Burstein, LLP
555 Fifth Avenue, New York, NY 10017