The New York FAIR Act Takes Effect February 17 And How It Will Effect Collection Agencies

New York’s FAIR (Fostering Affordability and Integrity through Reasonable Business Practices) Act takes effect on February 17, 2026, and it materially increases legal risk for collection agencies by treating “unfair” and “abusive” debt collection practices as violations of the state’s main consumer‑protection law enforceable by the Attorney General (AG).

What the FAIR Act Does

• Expands General Business Law § 349 to cover unfair and abusive practices in addition to deceptive ones, aligning New York more closely with federal UDAAP concepts.

• Allows the New York AG to bring civil enforcement actions for any unfair, deceptive, or abusive act or practice (UDAAP) by businesses “conducting any business” in the state, not just consumer‑facing conduct.

• Keeps private lawsuits limited: private plaintiffs can still sue only for “deceptive” acts, not for unfair or abusive ones, so the new exposure for unfair/abusive conduct is primarily AG‑driven.

• Broadens who is protected so that individuals, small businesses, and nonprofits can be considered harmed “consumers” for purposes of AG enforcement.

Why It Matters for Collection Agencies

For collection agencies, the key change is that conduct which previously might have been lawful under New York’s deceptive‑only standard can now be attacked as “unfair” or “abusive,” even if it is not misleading on its face.

Examples of practices New York has specifically flagged as targets include:

• “Abusive debt collectors,” including those that exploit vulnerable or limited‑English‑proficient consumers.

• Collectors who take or refuse to return funds or assets that are exempt from collection (such as Social Security benefits).

• Companies filing lawsuits with little or no basis, or relying on inadequate documentation to prove the debt.

The AG can seek injunctive relief, restitution, and civil penalties, and has signaled an intent to use the statute aggressively against predatory lending and collection conduct.

Effective Date and Scope

• Effective date: February 17, 2026 (60 days after enactment in December 2025).

• Applies to “any” business conduct in or directed into New York, which means out‑of‑state collection agencies collecting from New York residents can be covered.

• Supplements, but does not replace, other federal and state rules such as the FDCPA and New York’s detailed debt‑collection regulations and Consumer Credit Fairness Act (e.g., documentation, validation, and statute‑of‑limitations rules remain in place).

Practical Compliance Steps for Collection Agencies

Collection agencies collecting from New York consumers (or New York small businesses) should, before or by February 17, 2026:

• Review policies and scripts for any conduct that could be viewed as “unfair” (causes substantial injury not reasonably avoidable and not outweighed by benefits) or “abusive” (takes unreasonable advantage of confusion, vulnerability, or lack of understanding).

• Confirm robust procedures to identify and protect exempt income and assets, and to promptly refund any exempt funds collected in error.

• Strengthen verification and documentation standards before initiating lawsuits, garnishments, or bank restraints to avoid claims of baseless litigation.

• Address language‑access issues (translations, interpretation, clear disclosures) when dealing with limited‑English‑proficient consumers.

• Train staff that compliance is now measured not just against deception but also fairness and abusiveness, with AG enforcement risk and potential civil penalties attached.

Before February 17, 2026, collection agencies that collect from New Yorkers should tighten their program around “unfair” and “abusive” practices, not just deception, because the New York Attorney General will be able to sue for any unfair, deceptive, or abusive act or practice (UDAAP) under the FAIR Act.

1. Governance and Risk Assessment

• Map where you touch New York consumers, small businesses, or nonprofits (including from out of state) and treat all such activity as in scope for New York UDAAP risk.

• Update your UDAAP risk assessment to add New York’s definitions of unfair (FTC‑style balancing test) and abusive (taking unreasonable advantage of confusion, vulnerability, or lack of understanding).

• Make sure your board or senior management has been briefed that New York AG enforcement and civil penalties now attach to unfair and abusive collection conduct, not just deceptive conduct.

2. Policies, Scripts, and Training

• Rewrite written policies and collection scripts so they prohibit unfair and abusive practices, including harassment, excessive contacts, and exploiting limited‑English‑proficient or otherwise vulnerable consumers.

• Embed examples in training: forbidden tactics should include misusing legal threats, pressuring payments from clearly exempt income, or confusing consumers about settlement consequences.

• Train agents that “technically accurate but highly misleading” statements may still be unfair or abusive even if not strictly deceptive.

3. Exempt Funds and “Abusive” Practices

• Implement or tighten procedures to identify exempt income (e.g., Social Security, certain government benefits) before and after restraints, garnishments, or levies.

• Create a fast process to release and return exempt funds if they are restrained or collected by mistake; New York has specifically flagged refusal to return exempt funds as an unfair or abusive practice.

• Add quality‑assurance checks for judgments and bank restraints to ensure you are not freezing obviously exempt accounts (e.g., direct‑deposit benefits accounts) without review.

4. Documentation, Lawsuits, and Time‑Barred Debt

• Confirm you have documentation sufficient to prove ownership, amount, and chain of title before you threaten or file suit, consistent with New York’s Consumer Credit Fairness Act and related rules.

• Refresh your statute‑of‑limitations controls; for most consumer debts in New York, the limitations period is three years, and collection efforts or litigation on time‑barred debts can present significant UDAAP risk.

• Align litigation vendor and law‑firm agreements so they must meet your documentation and fairness standards and promptly correct any improper filings.

5. Disclosures, Validation, and Contact Practices

• Verify your initial and follow‑up notices satisfy FDCPA/Regulation F and New York‑specific requirements (itemization, original creditor, dispute rights), and that collection pauses as required upon dispute.

• Review call‑frequency and time‑of‑day rules, including federal “7‑in‑7” type limits and New York expectations against harassment, and adjust dialer settings accordingly.

• For NYC accounts, monitor the pending DCWP rules so your templates can be quickly updated once a new effective date is set (enhanced validation, language‑access, and time‑barred‑debt notices).

6. Language Access and Vulnerable Consumers

• Put in place a language‑access plan for significant non‑English‑speaking populations you serve in New York (e.g., Spanish), covering scripts, letters, and interpretation options.

• Flag and treat as higher‑risk accounts involving elderly, disabled, or limited‑English‑proficient consumers, with escalation rules to prevent practices that could be characterized as taking unreasonable advantage.

7. Monitoring, QA, and Complaints

• Update QA scorecards and call monitoring to include explicit “unfair/abusive” review questions, not just FDCPA violations.

• Enhance complaint‑tracking and root‑cause analysis for New York consumers; repeat themes involving pressure tactics, confusion, or exempt funds should trigger policy and training fixes.

• Document all changes taken before February 17, 2026, so you can demonstrate proactive compliance if the AG or regulator inquires.