senate Bill S1786

Prohibits the mailing of credit card applications

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Bill Status


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor
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actions

  • 09 / Jan / 2013
    • REFERRED TO CONSUMER PROTECTION
  • 08 / Jan / 2014
    • REFERRED TO CONSUMER PROTECTION

Summary

Prohibits the mailing of credit card applications; provides for a penalty of no more than one thousand dollars per occurrence; makes exemptions.

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Bill Details

Versions:
S1786
Legislative Cycle:
2013-2014
Current Committee:
Senate Consumer Protection
Law Section:
General Business Law
Laws Affected:
Amd §520, Gen Bus L; amd §108, Bank L; amd §413, Pers Prop L
Versions Introduced in Previous Legislative Cycles:
2011-2012: S4299
2009-2010: S1915

Sponsor Memo

BILL NUMBER:S1786

TITLE OF BILL: An act to amend the general business law, the banking
law and the personal property law, in relation to prohibiting
unsolicited mailing of credit card applications

PURPOSE: To prohibit the mailing of unsolicited credit card
applications.

SUMMARY OF PROVISIONS: The opening paragraph and subdivision 9 of
section 520 of the general business law, the opening paragraph as
added by chapter 200 of the laws of 1987 and subdivision 9 as added by
chapter 485 of the laws of 1996, are amended and three new
subdivisions 10, 11, and 12 are added.

Subdivision 10 states that, except as provided in subdivision 12 of
this section, it shall be unlawful for any financial institution,
retail merchant or other person to mail or otherwise deliver any
credit card application or credit card in this state.

Subdivision 11 states that upon conviction of this section, a fine of
no more than one thousand dollars per occurrence shall be imposed.

Subdivision 12 states that this section shall not apply to any credit
card application or credit card when mailed or otherwise delivered
either: (a) in response to a request or application for a credit card;
or (b) as a replacement for a credit card previously issued to the
person to whom the credit card is shipped or mailed.

JUSTIFICATION: Gary Blesky of "My Generation" writes, "for a
generation hooked on plastic, getting into trouble with credit cards
has never been easier." This problem stems from more than 3 billion
offers that the industry mails out each year. They pull the consumer
in with low introductory rates and then the rates skyrocket up to 19.9
percent permanently.

In 1991, the last year that America went through a recession, the
country was spending 12.6 percent of its disposable income on
household debt. That ratio has now been raised to 14.1 percent which
is dangerously close to the 15 percent level that financial pros flag
as the line between having debt and having a debt problem. This
reliance on credit cards is not likely to diminish now, as the economy
slows and cash gets tighter.

According to Cardweb.com, Inc., an independent research firm that
focuses on the payment card industry, there are currently 281 million
people in the US. Approximately 185 million Americans use credit
cards.

These credit card companies prey on people who can least afford to use
and manage credit cards; students and low-income families. The average
credit card debt that a college student owes by the time they graduate
is approximately $3000. According to an article published on
Nellie-Mae.com by Alan Blair, today undergraduate students are leaving
school with average indebtedness of over $12,000 in federal student
loans.


Daniel McGinn of Newsweek referenced a study published by the
University of Michigan to illustrate the rise in consumer debt (credit
card debt) among low-income families in his article titled, "Are You
Maxed Out?". The study found that more than half of low-income
families with high consumer debts and low net worth in 1994 were still
broke in 1999. It shows that their average indebtedness grew from
$2,900 to $18,800.

These statistics are a clear indication of how unsolicited credit
cards applications can lead to problems. These offers are aimed to get
the consumer in debt not only with one credit card, but with numerous
cards carrying high annual percentage rates. This aim of this
legislation is to protect the consumers who are drowning in debt.

LEGISLATIVE HISTORY: 2011-2012 - S.4229 - Referred to Consumer
Protection 2009-10- S.1915- Referred to Consumer Protection 2008-07-
S.5177- Referred to Consumer Protection 2005-06- S.1673- Referred to
Consumer Protection 2004-03- S.4055- Referred to Consumer Protection
2002 - S.6060 - Referred to Consumer Protection

FISCAL IMPLICATIONS: None to the State

EFFECTIVE DATE: This act shall take effect one hundred eighty days
after it shall have become a law.

view bill text
                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  1786

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                               (PREFILED)

                             January 9, 2013
                               ___________

Introduced  by Sen. CARLUCCI -- read twice and ordered printed, and when
  printed to be committed to the Committee on Consumer Protection

AN ACT to amend the general  business  law,  the  banking  law  and  the
  personal  property law, in relation to prohibiting unsolicited mailing
  of credit card applications

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1.  The opening paragraph and subdivision 9 of section 520 of
the general business law, the opening paragraph as added by chapter  200
of  the  laws  of  1987 and subdivision 9 as added by chapter 485 of the
laws of 1996, are amended and three new subdivisions 10, 11 and  12  are
added to read as follows:
  Any  application  form  [or preapproved written solicitation] to enter
into a credit card agreement for personal, family, or household purposes
which is mailed to an individual residing in  this  state  on  or  after
January  first, nineteen hundred eighty-eight, by or on behalf of [a] AN
issuer, whether or not the issuer is located in this state,  other  than
an  application  form or solicitation included in a magazine, newspaper,
or other publication distributed by someone other than the issuer,  and,
any  application  primarily  for  a credit card to be used for personal,
family or household purposes which is distributed or made  available  in
this  state to a resident of this state on or after January first, nine-
teen hundred eighty-eight in an office or other place of business  owned
or  operated  by  the issuer, shall contain the following disclosures in
chart form and shall put chart headings in bold face type  of  at  least
ten  point in size and material inside the chart of at least eight point
type in size. Such chart shall use substantially  the  same  format  and
terminology  shown below.   In completing the chart with the information
required for each category, the guidelines hereinafter contained in  the
corresponding subdivisions numbered one through four shall be utilized:

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD05311-01-3

S. 1786                             2

_________________________________________________________________________
|             |              |              |             |Cash Advance |
|             |  Variable    |              |             |Fee, Trans-  |
|  Annual     | Rate Index   |  Annualized  |   Grace     | action Fee, |
| Percentage  |    and       |  Membership  | Period for  |Late Fee, and|
|  Rate (1)   | Spread (1a)  |    Fee (2)   |Purchases (3)| Over-the-   |
|             |              |              |             |Limit Fees(4)|
|             |              |              |             |             |
_________________________________________________________________________
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_________________________________________________________________________

  (9)  Any  application  form  [or  preapproved written solicitation] to
enter into a retail installment credit agreement  in  which  the  retail
seller  or financing agency may take or retain a purchase money security
interest, as set forth in paragraph (c) of subdivision twelve of section
four hundred thirteen of the personal property law, which is  mailed  or
otherwise  made  available to an individual residing in this state on or
after the effective date of this subdivision, by  or  on  behalf  of  an
issuer,  whether  or not the issuer is located in this state, other than
an application form or solicitation included in a  magazine,  newspaper,
or other publication distributed by someone other than the issuer, shall
contain  a  clear  and  conspicuous  written notice or disclosure to the
buyer that the retail seller or financing agency has  or  may  retain  a
security interest in merchandise covered under paragraph (c) of subdivi-
sion  twelve  of  section four hundred thirteen of the personal property
law until the full payment price of said merchandise  is  paid.  Further
provided,  however,  in  all  instances,  said  written  notice  must be
provided to any buyer prior to the first transaction made under any such
retail installment credit agreement in which  a  security  interest  has
been or may be taken or retained.
  (10)  EXCEPT  AS  PROVIDED  IN  SUBDIVISION TWELVE OF THIS SECTION, IT
SHALL BE UNLAWFUL FOR ANY  FINANCIAL  INSTITUTION,  RETAIL  MERCHANT  OR
OTHER PERSON TO MAIL OR OTHERWISE DELIVER ANY CREDIT CARD APPLICATION OR
CREDIT CARD IN THIS STATE.
  (11) UPON CONVICTION OF A VIOLATION OF THIS SECTION, A FINE OF NO MORE
THAN ONE THOUSAND DOLLARS PER OCCURRENCE SHALL BE IMPOSED.
  (12)  THIS  SECTION  SHALL NOT APPLY TO ANY CREDIT CARD APPLICATION OR
CREDIT CARD WHEN MAILED OR OTHERWISE DELIVERED EITHER:
  (A) IN RESPONSE TO A REQUEST OR APPLICATION FOR A CREDIT CARD; OR
  (B) AS A REPLACEMENT FOR A CREDIT CARD PREVIOUSLY ISSUED TO THE PERSON
TO WHOM THE CREDIT CARD IS SHIPPED OR MAILED.
  S 2. The third undesignated paragraph of paragraph (b) of  subdivision
5  of  section 108 of the banking law, as added by chapter 1 of the laws
of 1994, is amended to read as follows:
  A written agreement, whether it  provides  for  a  fixed  or  variable
interest  rate,  may  provide  for  an  introductory rate of interest at
either a fixed or a variable rate,  provided  that  the  terms  of  such
introductory  rate,  including,  if  applicable,  the  date on which the
introductory rate shall terminate, are disclosed to the  borrower.  Such

S. 1786                             3

disclosure  shall  be  contained on an application form [or pre-approved
written solicitation] as specified  pursuant  to  subdivisions  one  and
one-a  of  section  five  hundred  twenty of the general business law. A
change  in  the  interest  rate  upon expiration of an introductory rate
shall not be considered a variable rate or a change in terms. The inter-
est rate in effect after expiration of an introductory rate may apply to
all amounts due under the agreement  regardless  of  when  incurred  and
disclosure  of the same shall be provided to the borrower in the written
agreement.
  S 3. Paragraph (a) of subdivision 3 of section  413  of  the  personal
property law, as amended by chapter 1 of the laws of 1994 and as further
amended  by  section 104 of part A of chapter 62 of the laws of 2011, is
amended to read as follows:
  (a) A seller may, in a retail [instalment] INSTALLMENT  credit  agree-
ment, contract for and, if so contracted for, the seller or holder ther-
eof  may  charge,  receive  and collect the service charge authorized by
this article, which service charge shall not exceed the  rate  or  rates
agreed  upon  by the seller and the buyer, including, in accordance with
the provisions of the credit agreement, rates that may vary,  from  time
to  time  computed, for the purposes of this section, on the outstanding
indebtedness from month to month, or if the service charge  so  computed
is  less  than seventy cents for any month, seventy cents. If the credit
agreement provides for a variable rate  of  service  charge,  such  rate
shall  be  determined  at  regular  intervals as set forth in the credit
agreement and in accordance with such regulations as the  superintendent
of  financial services shall prescribe but said rate shall not vary more
often than once in any three month  period  and  shall  be  based  on  a
published index that is (a) readily available, (b) independently verifi-
able,  (c)  beyond  the  control  of  the seller and (d) approved by the
superintendent, (e) such charges in credit agreements shall be based  on
the index values, or the index numbers plus or minus additional percent-
age  points provided, however, that variations in the charge must corre-
spond directly to the movements of the index values plus or minus  addi-
tional  percentage  points  only.  Once  such  charge  is established no
lending institution may add any factors to  increase  the  charge  other
than  variations  in the established index without the prior approval of
the superintendent of financial services.
  The superintendent of financial services shall adopt regulations  with
respect to credit agreements that provide for a variable rate of service
charge,  including  but  not limited to: (a) providing for disclosure to
the buyer by the seller of the circumstances under which  the  rate  may
increase, any limitations on the increase, the effect of an increase and
an  example of the payment terms that would result from an increase; (b)
providing for disclosure to the buyer by the seller of a history of  the
fluctuations  of  the  index  over  a reasonable period of time; and (c)
providing for notice to the buyer  by  the  seller  prior  to  any  rate
increase  or change in the terms of payment. The regulations shall allow
a seller, holder or financing agency after choosing an approved index to
choose a spread and a minimum and maximum rate of service charge at  its
discretion.  A retail [instalment] INSTALLMENT credit agreement, whether
it provides for a fixed or variable service charge, may provide  for  an
introductory  rate of service charge at either a fixed or variable rate,
provided that the terms of such introductory rate, including, if  appli-
cable,  the  date  on  which  the introductory rate shall terminate, are
disclosed to the buyer. Such disclosure shall be contained on an  appli-
cation form [or pre-approved written solicitation] as specified pursuant

S. 1786                             4

to  subdivisions  one  and  one-a  of section five hundred twenty of the
general business law. A change in the service charge rate  upon  expira-
tion  of an introductory rate shall not be considered a variable rate or
a change in terms. The service charge rate in effect after expiration of
an  introductory  rate  may  apply  to  all amounts due under the credit
agreement regardless of when incurred, and disclosure of the same  shall
be provided to the buyer in the written agreement.
  S 4. This act shall take effect on the one hundred eightieth day after
it shall have become a law.

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