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Recovering unpaid commercial debts in New York can be daunting, but the state offers creditor-friendly tools and legal frameworks to make the process efficient. Here's what you need to know:
New Regulations in 2026: Starting March 19, 2026, stricter rules under General Business Law Article 29-HHH will regulate "coerced debt", though this mainly impacts consumer debt collection.
Key Steps for Success:
With proper preparation and adherence to New York's legal framework, businesses can recover debts effectively while minimizing risks and disputes.
New York Commercial vs Consumer Debt Collection: Key Differences and Legal Framework
In New York, commercial debt collection operates under contract law and the Uniform Commercial Code (UCC) since the Fair Debt Collection Practices Act (FDCPA) only applies to personal, family, or household-related debts.
"There are no U.S. federal laws, similar to the FDCPA, that regulate third-party commercial (business-to-business) debt collection." – Burt and Associates
This means commercial debt collectors must rely entirely on the terms outlined in contracts and the provisions of the UCC when pursuing collections.
Compliance with federal and state laws is just the first step. Debt collectors must also navigate local licensing requirements. In New York, there’s no state-level licensing mandate for debt collectors; instead, licensing is handled at the municipal level in cities like New York City, Buffalo, and Yonkers. For agencies focusing solely on commercial debt, licensing requirements are generally waived.
In New York City, the Department of Consumer and Worker Protection (DCWP) requires a license only for collecting "personal or household debts" from residents. The licensing fees range between $38 and $150, with a $150 renewal fee every two years. Additionally, agencies collecting child support payments must post a $5,000 surety bond.
It’s critical to classify each debt correctly to ensure compliance with local licensing rules. Many commercial collectors also follow ethical guidelines set by organizations like the Commercial Collection Agency Association (CCAA) and the Commercial Law League of America (CLLA).
Staying compliant with these localized licensing regulations ensures that collection practices align with New York’s legal framework.
New York is introducing stricter measures to regulate debt collection practices. Starting March 19, 2026, General Business Law Article 29-HHH will go into effect, targeting "coerced debt" - debt incurred through fraud, duress, or misuse of personal information. This law specifically applies to debts from personal, family, or household transactions and broadens the definition of a creditor to include entities like "assignees for value" and "debt collection agencies." As a result, debt buyers will need to establish formal procedures for handling coerced debt claims.
Under the new law, when a debtor submits a sworn statement along with supporting documentation (such as a police report, court order, or FTC identity theft report), all collection activities must stop immediately. Creditors then have 30 business days to conduct an internal review and are required to notify the debtor of their findings within five business days after completing the review. If the debt is determined to be coerced, creditors must instruct consumer reporting agencies to delete any negative information tied to it.
Violations of these procedures can result in statutory damages of $1,000 for the debtor, as well as actual damages and attorney’s fees. Additionally, the Attorney General can impose civil penalties of up to $5,000 per violation. For agencies handling consumer-purpose debts, updating compliance protocols before 2026 is crucial to avoid penalties under these new rules.
The best way to manage debt collection is to address potential issues before they arise. In New York's commercial landscape, drafting robust contracts is essential. For example, including a Confession of Judgment clause (CPLR §3218) can simplify the judgment process if disputes occur. Additionally, specifying New York's 9% statutory interest rate (CPLR §5004) in agreements can encourage timely payments while ensuring a fair return on overdue amounts. Opting for New York law as the governing jurisdiction provides access to the state's Commercial Division, which handles high-value claims (over $500,000) in Manhattan.
Another critical step? Keep thorough records. Document every transaction, invoice, and communication. This habit not only minimizes disputes but also strengthens your position if formal collection measures become necessary. Once credit terms are clearly defined, you’ll be better prepared to act promptly when payments are overdue.
When a payment is overdue, the first step is to send a formal demand letter. Reference the 9% annual interest rate and clearly outline your intent to escalate the matter to the Supreme Court if needed. Interestingly, commercial debts in New York that are less than a year old tend to have amicable resolution rates between 55% and 65%.
If negotiations fail, legal tools can help. For instance, restraining notices (CPLR §5222) can freeze a debtor's accounts immediately. For debts that are undisputed, you can pursue summary judgment under CPLR §3212, which typically takes 6 to 12 months to resolve. After securing a judgment, tools like information subpoenas (CPLR §5224) can compel debtors to disclose their assets. Alternatively, you can execute property attachment and sale using property execution (CPLR §5230).
It's also worth noting the statute of limitations: New York allows six years to collect commercial debts (CPLR §213), which is longer than the three-year limit for consumer debts under the Consumer Credit Fairness Act. Properly classifying the debt is crucial since debts tied to personal or household purposes may be subject to consumer protection laws, like the FDCPA. For situations where traditional methods fall short, modern technology platforms can provide innovative solutions.
In New York's regulated debt market, technology platforms are transforming how debt is managed and recovered. Platforms like Debexpert offer tools to simplify compliance while improving efficiency. Key features include portfolio analytics, secure file sharing with end-to-end encryption, and real-time communication between buyers and sellers. A centralized document repository ensures adherence to New York's 60-day debt substantiation requirement, making compliance easier.
Automation also plays a big role. These platforms can enforce contact limits - such as the 7 attempts in 7 days rule - and generate detailed quarterly accountings that break down principal and interest allocations. When it’s time to sell debt portfolios, Debexpert’s auction capabilities (available in formats like English, Dutch, Sealed-bid, and Hybrid) connect sellers with institutional buyers, ensuring secure and compliant transactions. By leveraging these tools, you can streamline debt recovery while staying focused on your core business operations.
One of the biggest hurdles in New York debt collection is correctly classifying the type of debt. This is no small task, as the statute of limitations differs: six years for commercial debt and three years for consumer debt. Misclassifying debt can lead to time-barred claims, effectively shutting down recovery efforts. Courts in New York are increasingly rigid about adhering to these limitation periods, making accurate classification a must for timely legal action.
Another challenge comes from navigating municipal licensing rules, which can vary significantly. For instance, New York City’s revamped regulations - slated to take effect on April 1, 2025 - will introduce stricter recordkeeping requirements. Violators could face fines of up to $3,500 per infraction, particularly for repeated offenses. Collecting across multiple jurisdictions demands close attention to these varying requirements to stay compliant.
Additionally, courts in New York demand thorough substantiation before any collection activity can proceed. This means providing a signed contract, a complete chain of title, and detailed accounting records within 60 days. If substantiation isn’t provided, collection efforts must halt entirely. The New York State Department of Financial Services emphasizes this point:
"A debt collector cannot collect a debt until substantiation is provided. Once substantiation is furnished, a debt collector may begin collecting, even if substantiation is provided after the required 60-day period."
These legal complexities make it essential to understand and navigate New York’s debt collection laws with care, ensuring compliance and effective recovery.
Despite these challenges, there are cases where strategic legal approaches have led to successful outcomes.
One such case, Worthy Lending LLC v. New Style Contrs., Inc. (Dec 2022), demonstrates how a secured lender leveraged legal provisions to bypass the debtor entirely. By invoking UCC §§ 9-406 and 9-607, the lender directly collected accounts receivable from the debtor’s customer. The New York Court of Appeals supported this move, ruling that once the lender gave notice of its security interest, the contractor was legally required to pay the lender instead of the debtor. The court clarified:
"After receipt of the notification, the account debtor may discharge its obligation by paying the assignee and may not discharge the obligation by paying the assignor."
Another notable case, Ginocchio v. Resurgent Receivables, LLC (August 2025), highlights the importance of maintaining clear documentation. Resurgent Receivables successfully proved its right to collect by presenting a robust chain of title. The company submitted affidavits from key figures, including Patricia Sexton (records custodian) and Michael Wiese (VP at Credit One Bank), to validate the debt assignment. The court ruled in their favor, affirming that electronic signatures on bills of sale are valid under State Technology Law §304 and that properly maintained business records are admissible as evidence. This case underscores the importance of detailed and organized documentation, especially when debt portfolios change hands multiple times.
These examples show how strict adherence to New York’s legal requirements can lead to effective commercial debt recovery, even in a complex legal environment.
Recovering commercial debt in New York involves a mix of assertive action and strict adherence to regulations. The state provides creditor-friendly mechanisms, like restraining notices under CPLR §5222, which can immediately freeze bank accounts, and a 9% statutory interest rate. For example, a $500,000 claim could accrue an additional $90,000 in interest over two years.
However, these tools are only effective if you comply with all legal and procedural requirements. New York’s six-year statute of limitations for commercial debt - compared to three years for consumer debt - emphasizes the importance of correctly classifying debts. Additionally, New York City enforces strict recordkeeping regulations with hefty fines for repeat violations. Keeping detailed documentation, such as signed agreements, a clear chain of title, and itemized account records, can help minimize disputes and expedite summary judgments. This makes adopting technology an essential part of the process.
Modern technology platforms can simplify compliance tasks by tracking deadlines, calculating interest, and maintaining communication records. They also provide quick access to enforcement tools, like asset disclosure subpoenas and restraining notices.
To improve recovery rates, combine proactive measures - such as including confessions of judgment under CPLR §3218 in contracts - with prompt enforcement and the support of technology. Together, these strategies can help achieve resolution rates of 55%–65% for commercial debts that are less than a year old.
If informal attempts to collect the debt haven’t worked, the amount owed is substantial, and repeated follow-ups have gone unanswered, it might be time to consider legal action. These signs often suggest that further negotiations aren’t likely to lead to a resolution. Before proceeding, ensure you have thorough documentation of all prior efforts to settle the issue. This can be crucial if the matter goes to court.
To pursue a debt collection in New York, you need to present clear evidence of the debt. This typically involves providing documentation such as the original bill or account statements. Having proper records is essential to meet legal requirements and confirm the legitimacy of the claim.
When enforcing a New York judgment against a debtor who hides assets, the first step is tracking down their property. Tools like an Information Subpoena can help uncover what they own. Once you’ve identified assets, enforcement officers - such as sheriffs - can step in to levy property or garnish funds.
If the debtor goes a step further and conceals assets or moves them out of state, things get trickier. In such cases, you might need to domesticate the judgment in another state. From there, you can rely on legal measures like garnishments, liens, or levies, all while adhering to New York law.
More than a decade of Ivan's career has been dedicated to Finance, Banking and Digital Solutions. From these three areas, the idea of a fintech solution called Debepxert was born. He started his career in Big Four consulting and continued in the industry, working as a CFO for publicly traded and digital companies. Ivan came into the debt industry in 2019, when company Debexpert started its first operations. Over the past few years the company, following his lead, has become a technological leader in the US, opened its offices in 10 countries and achieved a record level of sales - 700 debt portfolios per year.
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