New York debt collection laws: commercial debt collection rules and the statute of limitations on a business invoice

Four bodies of law can touch a New York collection, and for an ordinary B2B invoice only two of them do much work.

General Business Law article 29-H (sections 600 to 603) is New York's debt collection statute. It prohibits things like simulating a law enforcement officer, communicating at unusual hours or with abusive frequency, and collecting fees or costs that are not justly due and legally chargeable. Its reach is set by the definitions in GBL 600: debt means an obligation of a consumer arising from a transaction primarily for personal, family or household purposes, and a consumer claim means an obligation of a natural person from a credit transaction for those same purposes. A commercial invoice to a business is neither.

The CPLR is where the rules that actually govern your claim live: the limitations period, the interest rate, and the enforcement machinery in article 52. This is the part of New York law worth reading if you are owed money.

New York City's Administrative Code and DCWP rules add a licensing regime and detailed conduct rules inside the five boroughs, again aimed at consumer collection by agencies and debt buyers.

Federal law contributes the FDCPA, which is consumer only, plus the TCPA on calls and texts regardless of debt type, and the bankruptcy automatic stay.

Mostly no, with one exception worth understanding properly.

Article 29-H does not apply to a business to business invoice, because GBL 600 ties the whole article to consumer transactions. So the prohibited practices in GBL 601 and the disclosure duties in GBL 601-a are not your compliance problem when you chase a distributor that owes you for goods.

The exception is the mirror image, and it catches New York businesses out regularly. Article 29-H does not limit itself to third party collectors the way the FDCPA does. GBL 601 prohibits conduct by a principal creditor, defined in GBL 600 as any person, firm, corporation or organization to whom a consumer claim is owed. That means if you sell to individuals as well as to businesses, New York law regulates how you collect from those individual customers even though the FDCPA generally leaves an original creditor alone. Texas does something similar under its own statute, which is why a national collection policy written to FDCPA scope tends to be wrong in both states.

Practically: sort your aging by whether the customer is a business or a natural person buying for personal use, and run the second group under consumer rules.

Six years for a commercial invoice, under CPLR 213(2), running from the breach rather than from the invoice date. CPLR 213(2) covers an action upon a contractual obligation or liability, express or implied.

The three year figure that dominates search results is CPLR 214-i, added by the Consumer Credit Fairness Act and effective April 7, 2022. It applies to an action arising out of a consumer credit transaction where the purchaser, borrower or debtor is the defendant. Credit extended for business purposes is not a consumer credit transaction. A table that prints a flat 3 for New York is describing consumer credit and mislabeling it.

The second trap runs the other way and costs creditors two years. If what you sold was goods, UCC 2-725 sets four years for breach of a contract for sale, and New York has adopted it. A supplier of physical product generally has four years, not six. A services firm, a contractor billing labor, or a business on a written agreement that is not a sale of goods generally has the full six.

Two events can move the clock. Under General Obligations Law 17-101 a signed written acknowledgment of the debt can restart it, and a partial payment made in circumstances showing an intent to pay the rest can do the same. Get either one in writing.

Our general guide to the statute of limitations on unpaid invoices covers how this works in the other states.

Yes, and New York gives you more room than most states, provided the contract sets the term.

If your contract states a rate, that rate governs. New York's usury ceilings, 16 percent civil under General Obligations Law 5-501 and 25 percent criminal under Penal Law 190.40, apply to a loan or a forbearance of money. New York courts have repeatedly held that a late charge on an overdue trade invoice is neither: the debtor is treated as in default, and the charge is understood as compensation for the cost of the delay rather than interest on a loan. Separately, GOL 5-521 prevents a corporate obligor from raising the civil usury defense at all, leaving only the 25 percent criminal ceiling.

If your contract is silent, you are not left with nothing. CPLR 5001 makes prejudgment interest recoverable as of right on a sum awarded for breach of a contract, and CPLR 5004 supplies the rate where the contract does not: 9 percent a year. That is a good statutory default, but it only starts helping once you sue, whereas a contractual late charge starts working on day 31.

One federal rule overrides all of this in one situation. Under 15 USC 1692f(1) you cannot collect any amount, including interest or fees, unless the agreement creating the debt expressly authorizes it or law permits it. That is an FDCPA provision and so consumer facing, but it is the right instinct everywhere: if the fee is not in the contract, do not put it on the statement. See our guide to late fees on invoices for the wording.

Not to collect your own. New York has no statewide collection agency license. The significant licensing regime is New York City's, and it does not reach an original creditor.

NYC Administrative Code 20-489 defines a debt collection agency as a business whose principal purpose is to regularly collect debts owed or due to another, and it expressly includes a buyer of delinquent debt. It expressly excludes an officer or employee of a creditor who, in the name of the creditor, collects debts for that creditor. A New York City company invoicing its own customers and following up on its own accounts, in its own name, is outside the definition.

Two ways a business walks into the licensing regime without meaning to. First, buying receivables: if you purchase delinquent debt from another party and then collect it, you are a debt buyer and the exclusion is gone. Ordinary non recourse factoring where the factor takes the paper is a different arrangement, but if you are the one acquiring defaulted accounts, get advice before you collect them. Second, collecting under a name that implies an outside agency. Sending letters as a recovery bureau that is really your own back office is the classic way an original creditor loses first party status, under federal law and under a licensing analysis alike. Collect as yourself.

New York's forum rules for a business plaintiff are unusual and catch people out.

A corporation, LLC, partnership or association cannot use the regular Small Claims Part. Small claims in New York is for natural persons. A business plaintiff files instead in the Commercial Claims Part under CCA 1801-A, which is the same informal, low cost procedure with different limits.

• Commercial Claims Part cap: $5,000, exclusive of interest and costs, money damages only.
• No more than five commercial claims statewide per calendar month. A creditor with a stack of small delinquencies cannot simply file them all at once.
• Any authorized employee may appear for the corporation, so you do not necessarily need counsel at the hearing.

Compare that to what a natural person gets: $10,000 in New York City Civil Court, $5,000 in city courts outside the city, and $3,000 in town and village justice courts. A New York City business is capped at half what an individual across the aisle can claim.

Above $5,000 you move to Civil Court, whose general jurisdiction runs to $50,000 in New York City, or to Supreme Court above that. Our walkthrough of small claims court for unpaid invoices covers the decision of whether filing is worth it at all.

This is where New York is genuinely strong, and where a New York judgment is worth materially more than the same judgment in a weaker enforcement state.

CPLR 5224, information subpoena. Your attorney serves written questions, by certified or registered mail, on the debtor or on a third party such as a bank, with a certification that there is a reasonable belief the recipient has information that will help collect. Answers come back within seven days of receipt, in writing and under oath. No court order is needed.

CPLR 5222, restraining notice. Issued by the clerk or by the judgment creditor's attorney as an officer of the court. It forbids the debtor, or a bank holding the debtor's money, from transferring the property. It carries the force of an injunction and violation is punishable as contempt. Served on a garnishee it lasts one year; served on the judgment debtor it runs until the judgment is satisfied.

CPLR 5222-a does not help a business debtor. The exempt income procedure, with its protected balances and exemption claim forms, applies to a natural person's account. A restrained corporate account has no equivalent automatic protection.

CPLR 5230, execution. Where the money will not come loose voluntarily, an execution goes to the sheriff or a New York City marshal to levy.

You have a long time. Under CPLR 211(b) a money judgment is presumed paid and satisfied only after twenty years from when you were first entitled to enforce it, and a docketed judgment is a lien on the debtor's real property in the county for ten years. At 9 percent statutory interest, a New York commercial judgment that sits unpaid grows substantially. Our guide to collecting a judgment against a business covers the national picture.

New York City layers its own regime on top of state law, administered by the Department of Consumer and Worker Protection. For a business collecting its own commercial invoices, the practical answer is that almost none of it applies, but it is worth knowing where the line sits.

The city licenses debt collection agencies under Administrative Code subchapter 30, and its rules impose detailed requirements on licensed collectors: call frequency limits, disclosure of the original creditor and the debt's itemization, language access obligations, and record retention. These attach to licensees. Because 20-489 excludes a creditor collecting its own debts in its own name, a Manhattan supplier chasing its own receivables is not a licensee and the agency rules do not bind it.

Where a New York City business does need to pay attention is the consumer side of its own book. If some of your customers are individuals buying for household purposes, GBL article 29-H binds you as principal creditor, and the city's consumer protection rules on deceptive practices apply to your conduct as a business operating in the city regardless of licensing. A separate policy for consumer accounts is the clean answer.

Most of what determines whether a New York receivable is collectible was decided before the goods shipped.

Our page on net 30 payment terms covers how to define the due date so it is not arguable.

Ranked on the things that decide whether an old invoice is worth pursuing, New York does well.

The short version: Texas is the best state to be a creditor suing on a contract, because fees come with the claim. New York is the best state to hold a judgment, because of the six year window to sue, 9 percent accruing for up to twenty years, and enforcement tools your own lawyer can fire without a judge. Read the commercial debt collection laws pillar for the federal picture, or the California and Texas deep dives.