AG releases tips to stay protected from debt collectors

New York Attorney General Letitia James released a guide to help New Yorkers use the state's Exempt Income Protection Act (EIPA) to protect their money from debt collectors.

The EIPA is a state law that prevents debt collectors from draining consumers' bank accounts, leaving them unable to cover the costs of basic needs. The law automatically protects a certain amount of money in people's bank accounts from being frozen or seized, and also protects vital government benefits like Social Security, disability benefits, and veteran's benefits.

The Office of the Attorney General's (OAG) guide comes after James recently secured $1 million from Netspend, a financial services company that illegally turned over its customers' funds to debt collectors when those funds should have been protected under EIPA. This guide will help New Yorkers use their rights under EIPA to protect their money and report debt collectors who are breaking the law to OAG.

"When banks allow debt collectors to wipe out New Yorkers' bank accounts, they're not only throwing vulnerable people into financial chaos, they're breaking the law," James said. "New Yorkers should know how to protect their money from debt collectors so they can continue to pay their bills while they manage their debt. My office's helpful guide provides valuable tips for New Yorkers to protect their funds and hold banks and debt collectors accountable when they break the law. I encourage anyone who has had their hard-earned money illegally seized or frozen to report it to my office."

The EIPA automatically exempts a certain amount of money in people's bank accounts from being frozen or seized. This protected amount is based on the minimum wage and is $3,960 for those in New York City, Long Island, or Westchester, and $3,720 for those anywhere else in New York as of January 2025. The EIPA also protects 90% of wages or salary earned in the 60 days before a debt collector attempts to seize funds.

Crucially, EIPA also protects government benefits and retirement funds from being frozen or seized, ensuring New Yorkers have enough money to pay their bills. These funds include:

Social Security;

Supplemental security income;

Disability benefits;

Unemployment insurance;

Workers compensation;

Veterans benefits;

Spousal support, alimony, or child support; and

Payments from public or private pensions and retirement accounts, such as 401(k) s or individual retirement accounts (IRAs).

James has successfully secured restitution for New Yorkers whose funds were illegally seized by debt collectors according to a press release sent by the OAG. In April 2024, James secured more than $700,000 from Pathward Bank for unlawfully freezing customer accounts and illegally transferring money to debt collectors in violation of EIPA.

In February 2024, James secured more than $650,000 from a debt collection law firm for filing frivolous lawsuits against vulnerable New York City tenants. In May 2022, Attorney General James and the Consumer Financial Protection Bureau shut down a predatory debt collection operation that used deceptive and abusive tactics to illegally collect millions of dollars from hundreds of thousands of consumers.

The OAG's guide includes the steps New Yorkers must take to use EIPA to protect their funds from being seized, as well as instructions on how to report violations to OAG.

Any consumer who has had their money frozen or seized in violation of the law should report the violation to OAG's Consumer Frauds Bureau online or by calling 1-800-771- 7755.