New York Passes Bill to Close Debt Collection ?Loophole?

New York Governor David Paterson announced Friday that he had signed into a law a bill that blocks exempt funds in a consumer’s bank account from being frozen by legal action taken by debt collection agencies and credit card companies.

According to advocates of the bill, it closes a loophole that previously allowed debt collectors to freeze bank accounts with restraining notices, even if the bank accounts contained funds that were exempt from such action under federal law. Exempt funds include those from Social Security, veterans benefits, disability, and pensions.

The new bill would specifically protect the first $2,500 of exempt funds from a bank account freeze.

"This law is a victory for older New Yorkers, veterans, and all low-income consumers who are experiencing difficult times in our sagging economy," said Lois Aronstein, AARP New York State Director. "Governor Paterson, Senator Volker, and Assemblywoman Weinstein are to be commended for their work to help those New Yorkers most in need."