The City: Court’s Halt on Filings Gives Partial Reprieve on New York Debt Collection

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By Rachel Holliday Smith

New Yorkers facing down private debts in court will see some relief after advocates pushed Gov. Andrew Cuomo to put all collections on pause amid the coronavirus crisis.

On Monday, the state’s Office of Court Administration released a March 22 directive halting all new nonessential electronic or paper filings in state courts, which includes debt-related cases. The new rule went into effect immediately.

The move does not put a stop to all debt collection — including enforcement of existing judgments that would, for example, freeze a bank account or garnish wages. But it will end, for now, the legal machinations that allow debt cases to start or move forward.

In addition, the largest trade group for debt purchasers that pursue borrowers for collection, Receivables Management Association International, or RMAI, said it will institute new “hardship provisions.” The measures temporarily suspend collection activities in cases of “significant financial hardship due to job loss or medical issues related to COVID-19,” according to the new policy.

RMAI represents more than 550 debt purchasing and collecting agencies, including Encore Capital, the parent company of Midland Funding. Midland was responsible for calling in an alleged 2007 debt now worth just over $2,000 that resulted in 10% of wages being garnished from Migdalia Figueroa, a formerly homeless home health attendant.

“Thank god!”

After THE CITY reported on her case, Figueroa got a call Monday from Pressler and Pressler, a debt collection law firm representing Midland. A representative said they would erase her debt — and repay all garnished wages.

“They’re going to reimburse me the money,” she said shortly after getting the call.

It’s good news for her, but Susan Shin, legal director at The New Economy Project, worries about all of the other cases her group is hearing about via its legal hotline.

The economic justice nonprofit is one of more than 60 groups and 17 state senators that signed letters to the governor calling for a full moratorium on debt collection while the coronavirus pandemic remains a threat.

They want Cuomo and the OCA to suspend all enforcement of debt collection, which is carried out by attorneys, sheriff and marshals empowered by court actions to freeze bank accounts, get a bank levy or garnish wages.

“That, in one fell swoop, would help all of these New Yorkers who are struggling so much right now,” she said.

Who, precisely, has the power to make that call, however, is not so clear-cut. In New York City, marshals are overseen by the Department of Investigation, but are not employees of the city or DOI, said Diane Struzzi, spokesperson for the agency.

“This is a complex area that affects both civil and supreme courts,” she said in a statement, noting that pausing debt collection entirely “would be a mammoth effort to stop a process that in many instances is underway.”

She added that DOI is currently in discussions with the court “regarding the collection of money judgments,” but did not elaborate.

Unintended Consequences Feared

Jan Stieger, executive director of RMAI, warned against a blanket rule forbidding debt collection in New York, pointing to those who want to make payments to clear their credit history or get a loan.

“If you have the outright ban and you don’t allow them to clean it up, you might be having some unintended consequences,” she said.

The court changes made by OCA Monday came in addition to an executive order signed by Cuomo Friday “effectively pressing pause on court-related deadlines,” Jack Sterne, a spokesperson for the governor, said in a statement.

The directive suspended, or “tolled,” any specific time limit for the “commencement, filing, or service of any legal action, notice, motion, or other process or proceeding,” the order read.

In the March 22 directive from the state’s court administrators, filings for several large categories of essential court proceedings were allowed to continue. Those include:

• Criminal matters, including arraignments, temporary orders of protection, resentencings and sex offender registrations

• Family Court issues, including child protection intake cases and emergency family offense petitions

• Emergency guardianship applications, emergency Election Law applications and matters related to retaining or releasing patients who fall under the Mental Hygiene Law

• Applications addressing landlord lockouts, serious code violations, serious repair orders or post-eviction relief in Housing Court.