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Debt relief resources in New York
Thin regulations mean you need to do the heavy lifting.
New York only regulates student loan debt relief companies — and it doesn't require companies to be licensed in New York. But if you're a New York City resident, you take advantage of free credit counseling from the city. If you live in another area or are interested in another service, make sure your debt relief company is legit before signing up.
Debt relief regulations in New York
New York State has few debt relief regulations to protect consumers. The state financial code mainly prohibits companies from predatory student debt relief practices, especially when it comes to federal student loans.
But most debt relief companies don't offer this service anywhere in the country, thanks to a federal crackdown on student debt relief in 2010. For the most part, New Yorkers have to rely on the Fair Debt Collections Practices Act (FDCPA) for protection.
Student loan debt relief regulations
New York prohibits companies that offer student loan consultation, or assistance with handling student loan repayments, from the following activities:
- Charging money for services it hasn't yet completed
- Taking power of attorney from you — which allows it to act on your behalf in legal proceedings
- Asking for or accepting your Federal Student Aid (FSA) ID
- Stating or implying that you can't get debt relief on your own
- Performing debt relief without a written contract outlining state regulations
- Claiming the consultant is affiliated with or sponsored by your servicer, the Department of Education or another government program
- Misrepresenting that your payments to the company will go toward your student loans
It also prohibits student loan debt relief companies from "engaging in unfair, deceptive or abusive acts or practices" — but doesn't define these terms.
As a New York resident, you have access to the following options when you're struggling with debt.
- New York City credit counseling. NYC offers its residents free one-on-one credit counseling sessions to manage your money, set up a spending plan and even draft letters to your creditors asking for hardship relief.
- Nonprofit credit counseling. Nonprofit organizations also offer free or low-cost credit counseling services across the state — not just in NYC.
- Debt management. In some cases, your credit counselor might recommend enrolling in a debt management program where it renegotiates your rates and terms with your creditors to make it easier to get out of debt.
- Debt settlement. In more extreme cases, you can have a for-profit company negotiate your balances down in exchange for a one-time payment to your creditors, usually for a fee of 15% to 25% of the debt you enroll in the program.
- DIY negotiations. You don't need to hire a professional for debt management or settlement. Avoid fees by calling your creditors, explain your situation and see if they're willing to offer new terms.
How to find a legit debt relief company
Since New York doesn't require debt relief companies to be licensed, it's on you to make sure a company is legitimate before signing up. Here's what to look out for:
- Banned companies and individuals. Search for the company, its owners and any other names affiliated with it on the Federal Trade Commission (FTC)'s list of companies and individuals who are banned from debt relief.
- Accreditation. Most legitimate debt relief companies are accredited and receive training through at least one trade organization. Look for American Fair Credit Council (AFCC) and International Association of Professional Debt Arbitrators (IAPDA) accreditation.
- Fees. Legitimate debt relief companies don't charge fees before they've performed a service. If it's unclear, look for another provider.
- Disclosures. Many debt relief services are costly and come with the risk of further damaging your finances. A legitimate company should disclose these risks upfront.
- Customer reviews. Read reviews customers have left on sites like the Better Business Bureau (BBB) and Trustpilot to see what customers actually think about the company.
- Lawsuits and government actions. Search for past news articles, press releases and the BBB website for any lawsuits and other government actions against the company for violating state or federal regulations.
- Customer service. Call up customer service and speak with a live representative. If they're pushy or refuse to give you meaningful information about the cost or risks of the program — or you otherwise feel uncomfortable — consider working with a different provider.
See debt relief companies
Compare providers using this table to narrow down your search.
New York debt statistics
New Yorkers have a better hold on their debt than almost any other state. The median debt-to-income ratio was 0.93 at the end of 2019, according to the Federal Reserve. A DTI lower than 1 means you owe less than you make each month.
Residents of the Empire State had an average debt load of 51280 by the end of 2019, according to another Federal Reserve study. Here's how that breaks down:
- Car loans: New Yorkers have an average of $3,780 in car loan debt per capita — one of the lowest in the country. And about 4.09% of those accounts are 90 or more days late.
- Credit card debt: The average credit card balance per capita is $4,010, and 8.96% of those accounts are 90 days delinquent or more.
- Mortgages: Home loans average out at $34,030 per capita. Only 1.9% of those accounts are delinquent.
- Student loans: New York residents have an average student debt of $6,180 per capita. And 8.47% of those accounts are delinquent.
New York doesn't have as many protections against debt relief companies as other states like California. So you have to do a little research yourself before signing up for a company.
Get started on your debt relief search by reading about our list of the best debt relief providers.
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