New York's financial regulatory agency is asking the federal Consumer Financial Protection Bureau to pump the brakes on a proposed rule that would enable debt collectors to contact consumers through email, text message or even social media without restraint.

State Department of Financial Services Superintendent Linda Lacewell wrote in a letter to the federal regulatory agency that the proposed rule doesn't address the problems everyday consumers face from debt collection companies. 

"The current proposal would severely harm the financial futures and social well-being of millions of consumers in New York State and nationwide," Lacewell wrote. 

Her comments were sent to the bureau before the public comment period on the rule ended Wednesday, according to DFS.

Lacewell urged the federal regulatory agency to take a step back and engage states, like New York, to formulate new standards that would adequately address the needs of consumers. Those include abusive debt collection practices, Lacewell said.

She cited the bureau's own data in her letter to make the point. According to Lacewell, it showed that 40%, or 32,600, of the total complaints about debt collection last year referenced attempts by companies to collect on debt that wasn't owned.

That could be addressed through changes to the proposed rule, Lacewell wrote. She suggested that the agency could require debt collectors to obtain verification of the debt or a copy of the judgment and review it before reaching out to consumers. 

While the proposed federal rule is intended to update the methods of communication available for companies to collect on debt, which haven't changed in decades, it doesn't go far enough to protect consumers from risk and harassment, Lacewell wrote.

Part of the proposal, for example, would allow debt collection companies to send required documents to consumers via a hyperlink. She likened that part of the rule to "blessing and normalizing a delivery method frequently used by scammers and hackers."

"While hyperlinks can be a useful technology, NYDFS does not wish to see regulatory enforcement of their use in a context as urgent as debt collection communications," Lacewell wrote.

Another part of the proposal could be used by debt collectors to continue harassing consumers, just in a different way, Lacewell said.

The rule would cap the number of calls from debt collectors to seven calls within a seven-day period per debt. That would leave open the possibility that a consumer could continue receiving multiple calls a day if they have more than one debt, which is probable, Lacewell said.

Debt collectors would also be allowed to contact consumers through email, text or social media without a cap on the number of attempts. That means that, while consumers may receive fewer phone calls, they may still be frequently contacted by debt collectors through other means.

"The notice of proposed rulemaking does not go far enough to protect consumers from harassing and excessive communications, particularly for new methods of communication," Lacewell said.

The Fair Debt Collection Practices Act, the law that the proposed rule is seeking to update, does include a provision barring debt collectors from harassing consumers. If they're found to have done so, they could face liability, either from the agency or through legal action.

Lacewell pointed to a regulation from DFS, promulgated in 2014, to limit how third-party debt collectors interact with consumers as another example of how New York has addressed problems of abuse in the debt collection industry.

That regulation, according to Lacewell, required debt collectors to seek the consent of consumers before initiating contact through digital means. It also required those companies to provide additional disclosures to consumers, and deliver more documentation to individuals who dispute the validity of a charged-off debt.

Federal law allows consumers to request written verification of a debt they're contacted about, but that has to be done through a written inquiry within 30 days of the initial contact.

The public comment period for the proposed rule was recently extended, but closed Wednesday. Some consumer advocates have criticized the rule, which still has to be finalized before it takes effect.

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