Governor Paterson Signs Landmark Legislation that Protects Elderly, Disabled, Veteran, and Lower Income New Yorkers From Abusive Debt Collection
ALBANY, N.Y., Sept 29, 2008 /PRNewswire-USNewswire via COMTEX/ -- The Exempt Income Protection Act, sponsored by Senator Dale M. Volker (Depew) and Assembly woman Helene E. Weinstein (Brooklyn), was signed into law by Governor Paterson on Friday, September 26, 2008. The law will shield elderly, disabled, veteran, and lower income New Yorkers from unlawful practices by debt collectors and goes into effect January 1, 2009.
New Yorkers for Responsible Lending (NYRL), a coalition of 141 non-profit organizations from across the state, lauded Governor Paterson for signing the bill. "NYRL applauds the Governor and the State Legislature for providing vital protections to New Yorkers who rely on subsistence income," said Claudia Wilner, Senior Staff Attorney at the Neighborhood Economic Development Advocacy Project (NEDAP).
The new law closes a loophole that has allowed debt collectors and credit card companies to use "restraining notices" to freeze the bank accounts of New Yorkers who receive income that is exempt from debt collection under federal and state law, such as Social Security, veterans benefits, disability, and pension. The law ensures the first $2,500 in an account which contains directly deposited exempt income cannot be restrained.
"This law is a victory for older New Yorkers, veterans, and all low-income consumers who are experiencing difficult times in our sagging economy," said Lois Aronstein, AARP New York State Director. "Governor Paterson, Senator Volker, and Assemblywoman Weinstein are to be commended for their work to help those New Yorkers most in need."
"Advocates throughout the state have been overwhelmed by cases of lower income New Yorkers facing severe problems because their bank accounts have been frozen. We praise the State for passing this critical new law, one of the strongest in the nation," said Kirsten Keefe, Staff Attorney at the Empire Justice Center.
Lawyers who represent individuals when their accounts are frozen -- from agencies such as the Legal Aid Society in Queens, MFY Legal Services, South Brooklyn Legal Services, the Elder Law Clinic at St. John's University School of Law, District Council 37, and Urban Justice Center -- were thrilled with the news. "The law creates a process that strikes a fair balance between the rights of creditors and debtors," said Gina Calabrese, a Professor of Clinical Education and Associate Director of St. John's Elder Law Clinic.
Said Carolyn E. Coffey, a Staff Attorney with MFY Legal Services, "In these tough economic times, it is heartening that New York lawmakers have come together to enact a law that will protect the most vulnerable New Yorkers from unscrupulous debt collectors."
more behind the scene news from carolyn, a SG friend, who helped make this law happen ... congrats carolyn!
I have been working on legislation for the past year and a half to close a loophole in New York law that enables debt collectors to seize elderly and disabled people's exempt income (i.e., social security, unemployment insurance, disability insurance, veterans' benefits) in their bank accounts. The practice is to freeze a person's bank account and then demand payment, even after the collector is informed that the account contains money that is not subject to collection. If they refuse to release it (which is illegal), the person is forced to go to court and navigate the judicial system on their own, which many people simply cannot do. Because so many people who receive benefits do so electronically through direct deposit, it is very simple for the banks to look into someone account before freezing it and see that the contents are clearly exempt, but they take the position that they have to freeze the account otherwise they will be violating a court order. Of course the banks also get to charge the consumer $125 restraining fee, which they take right out of the account. This is the number one problem we get calls about on our consumer rights project hotline at MFY Legal Services.
So I, along with some other consumer advocates from other organizations, drafted legislation to change New York's law regarding this practice. The new law automatically protects $2500 in a person's account that contains clearly exempt direct deposit (which is more than most of our clients ever have) and protects $1716 in other accounts. It also simplifies the procedure for claiming that all the money in an account above those amounts is exempt from collection and prohibits the banks from charging fees when the restraint is deemed void. It was passed in the assembly last year but died in the senate. So this year we lobbied extensively--among other things, I went out to Long Island and to Albany to meet with legislative aides and explain the bill, and we were able after much negotiating to get the banks on board with the proposal. It passed unanimously in the senate and assembly in June, and we had been waiting for Governor Paterson to sign it into law, which we thought would be a no-brainer. When it finally came to his desk, however, a bunch of state agencies who collect debts (like child support and unpaid tickets) came forward screaming that they would be hindered in their collection practices by the bill (which they wouldn't be) and the governor started making noises that he planned to veto the bill. So I went to Albany last week and met with his staffers in an attempt to work out a solution, and the members of our mini-coalition reached out to all those involved, and in the end, we were able to resolve the problem by exempting the state agencies. So the governor signed the bill, and it will go into effect January 1, 2009.