senate Bill S2493

2013-2014 Legislative Session

Defines certain terms related to budget planners and regulates the activities of budget planners

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Archive: Last Bill Status - STRICKEN


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

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Actions

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Assembly Actions - Lowercase
Senate Actions - UPPERCASE
Feb 03, 2014 recommit, enacting clause stricken
Jan 08, 2014 referred to consumer protection
Jun 21, 2013 committed to rules
Mar 04, 2013 advanced to third reading
Feb 28, 2013 2nd report cal.
Feb 27, 2013 1st report cal.108
Jan 17, 2013 referred to consumer protection

Votes

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Feb 27, 2013 - Consumer Protection committee Vote

S2493
10
0
committee
10
Aye
0
Nay
1
Aye with Reservations
0
Absent
0
Excused
0
Abstained
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Consumer Protection Committee Vote: Feb 27, 2013

aye wr (1)

Co-Sponsors

S2493 - Bill Details

Current Committee:
Law Section:
General Business Law
Laws Affected:
Amd §§455 & 457, Gen Bus L; amd §§579, 584-a, 584-b & 585, Bank L
Versions Introduced in 2011-2012 Legislative Session:
S5215C

S2493 - Bill Texts

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Defines certain terms related to budget planners and regulates the activities of budget planners.

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BILL NUMBER:S2493

TITLE OF BILL: An act to amend the general business law and the
banking law, in relation to defining terms related to budget planning
and regulating the activities of budget planners

PURPOSE: The purpose of the bill is to provide clarity with regard to
fees paid by debtors to budget planners; brings the New York budget
planning statute in line with the majority of other state with respect
to non-profit and for-profit providers; and gives the attorney general
enforcement powers with respect to violations of the statute.

SUMMARY OF PROVISIONS:

Section one of the bill amends the general business law to make a
clarification with regard to payments made by debtors and repeals the
statutory language that allows only not-for-profit corporations to
provide budget planning services.

Section two of the bill amends the general business law to make
violations of the article punishable by a class A misdemeanor as
provided in the penal law and gives the attorney general the authority
to make an application to a court or justice to issue an injunction to
enjoin and restrain any violations of the article. The section also
allows the court or justice to impose a civil penalty of not more than
$500 per contract for a violation of the section.

Section three of the bill amends the banking law to repeal the
statutory language that allows only not-for-profit corporations to
provide budget planning services.

Section four and five of the bill amend the banking law to require
that fees or charges imposed must be fair, reasonable and easily
understood by the consumer and that no budget planner shall charge any
consumer for any other service not directly related to budget planning
unless pre-approved by the superintendent.

Section six of the bill clarifies the superintendent's role when
determining fees or charges so to ensure they are not unfair or
unclear.

Section seven of the bill provides for an effective date.

JUSTIFICATION: Budget planning offers programs and services to help
consumers regain their financial footing. Across the country budget
planners consist of nonprofit and for-profit providers that offer
financial counseling, education, budgeting and debt management
products designed to assist consumer in repaying unsecured debt
through methods other than bankruptcy. Each year this industry serves
an estimated ten million consumers and moves approximately S20 billion
between debtors and their creditors on structured repayment plans.

The industry is regulated primarily on the state level. Forty nine
states and the District of Columbia have laws that range from a full
licensing and regulatory structure, such as New York, to misdemeanor
penalties for violating statutory requirements. Most states have
updated their laws in the past five years to reflect the changing


industry and the Federal Trade Commission has utilized its authority
to police unfair and deceptive trade practices by unscrupulous
providers.

New York's budget planning statute was enacted nearly sixty years ago.
The current law provides for significant consumer protections and
establishes a high bar for licensure. The law however does not reflect
recent changes in the industry. For instance, the law does not allow
licensure of taxable entities that provide budget planning services. A
common misconception about budget planners is that only nonprofit
entities can provide appropriate budget planning services. Forty
states make no distinction between providers based on their tax
status. Instead, they regulate and oversee the products and services
of all providers. Regulating based on the products and services,
rather than the service provider, is consistent with other financial
services regulation. This legislation moves New York toward a more
modern approach to regulating budget planners by regulating based on
the services they provide and not based on the tax status of the
provider.

The bill also provides clarity in the statute by requiring regulators
to ensure that fees are fair, reasonable and clearly understood. The
bill also enhances the oversight of the budget planning industry by
giving the attorney general greater authority to police bad actors as
well as imposes enhanced penalties to deter bad behavior.

LEGISLATIVE HISTORY: 2012 - S. 5215c Passed Senate/A. 8212b - Codes
Committee.

FISCAL IMPLICATIONS: Additional revenue to the Department of
Financial Services from licensing fees.

EFFECTIVE DATE: 180 days after enactment.

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

                                  2493

                       2013-2014 Regular Sessions

                            I N  S E N A T E

                            January 17, 2013
                               ___________

Introduced  by  Sens.  GRIFFO, ZELDIN -- 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  and the banking law, in
  relation to defining terms related to budget planning  and  regulating
  the activities of budget planners

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

  Section 1. Section 455 of the general  business  law,  as  amended  by
chapter  629  of  the  laws  of 2002, subdivisions 1 and 4 as amended by
chapter 456 of the laws of 2006, is amended to read as follows:
  S 455. Definitions. 1. Budget planning, as used in this article, means
the making of a contract between a person or entity engaged in the busi-
ness of budget planning with a particular debtor whereby:
  (i) the debtor agrees to pay a sum or sums of money in any  manner  or
form and the person or entity engaged in the business of budget planning
distributes, or supervises, coordinates or controls the distribution of,
or  has  a  contractual  relationship with another person or entity that
distributes, or supervises, coordinates or  controls  such  distribution
of,  the  same  among  certain  specified creditors in accordance with a
PERIODIC PAYMENT plan agreed upon BY THE DEBTOR'S CREDITORS AT  OR  NEAR
THE TIME THE CONTRACT IS ENTERED; and
  (ii)  the debtor agrees to pay to such person or entity, or such other
person  or  entity  that  distributes,  or  supervises,  coordinates  or
controls  such  distribution  of,  a  sum or sums of money, any valuable
consideration for such services or for any other  services  rendered  in
connection  therewith.    For  the purposes of this article, a person or
entity shall be considered as engaged in the business of budget planning
in New York, and subject to this article and  the  licensing  and  other
requirements  of  article twelve-C of the banking law, if such person or
entity solicits budget planning  business  within  this  state  and,  in

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD06471-01-3

S. 2493                             2

connection  with  such  solicitation,  enters into a contract for budget
planning with an individual then resident in this state.
  2.  Person, as used in this article, shall not include a person admit-
ted to practice law in this state.
  3. Entity, as used in this article, shall not include a firm, partner-
ship, professional  corporation,  or  other  organization,  all  of  the
members  or  principals  of  which  are admitted to practice law in this
state.
  4. [Person or entity as used in this article shall not include a  type
B  not-for-profit  corporation  as defined in section two hundred one of
the not-for-profit corporation law of this state, or an entity  incorpo-
rated  in  another  state  and  having  a similar not-for-profit status,
licensed by the superintendent, to engage  in  the  business  of  budget
planning as defined in this section.
  5.] Any attorney licensed to practice law in this state who is engaged
in budget planning shall:
  (a) negotiate directly with creditors on behalf of the client;
  (b)  ensure  that all moneys received from the client are deposited in
the attorney's account maintained for client funds;
  (c) pay creditors from such account; and
  (d) offer budget planning services through the same legal entity  that
the attorney uses to practice law.
  S  2.  Section  457 of the general business law, as amended by chapter
629 of the laws of 2002, is amended to read as follows:
  S 457. [Penalty] PENALTIES FOR VIOLATION OF THIS ARTICLE; CRIMINAL AND
CIVIL.   (A) Whoever either individually  or  as  officer,  director  or
employee  of  any person, firm, association or corporation, violates any
of the provisions of the preceding section shall be guilty of a CLASS  A
misdemeanor [for each such violation] PUNISHABLE AS PROVIDED IN ARTICLES
SEVENTY AND EIGHTY OF THE PENAL LAW.
  (B)  WHENEVER THERE SHALL BE A VIOLATION OF THIS  ARTICLE, APPLICATION
MAY BE MADE BY THE ATTORNEY GENERAL IN THE NAME OF  THE  PEOPLE  OF  THE
STATE OF NEW YORK TO A COURT OR JUSTICE HAVING JURISDICTION BY A SPECIAL
PROCEEDING  TO  ISSUE AN INJUNCTION, AND UPON NOTICE TO THE DEFENDANT OF
NOT LESS THAN FIVE DAYS, TO ENJOIN AND RESTRAIN THE CONTINUANCE OF  SUCH
VIOLATIONS;  AND  IF IT SHALL APPEAR TO THE SATISFACTION OF THE COURT OR
JUSTICE THAT THE DEFENDANT HAS,  IN  FACT,  VIOLATED  THIS  ARTICLE,  AN
INJUNCTION  MAY  BE  ISSUED  BY  SUCH  COURT  OR  JUSTICE, ENJOINING AND
RESTRAINING ANY FURTHER VIOLATION,  WITHOUT  REQUIRING  PROOF  THAT  ANY
PERSON HAS, IN FACT, BEEN INJURED OR DAMAGED THEREBY. IN CONNECTION WITH
ANY  SUCH  PROPOSED  APPLICATION,  THE ATTORNEY GENERAL IS AUTHORIZED TO
TAKE PROOF AND MAKE A DETERMINATION OF THE RELEVANT FACTS AND  TO  ISSUE
SUBPOENAS  IN ACCORDANCE WITH THE CIVIL PRACTICE LAW AND RULES. WHENEVER
THE COURT SHALL DETERMINE THAT  A  VIOLATION  OF  SECTION  FOUR  HUNDRED
FIFTY-SIX  OF  THIS  ARTICLE  HAS OCCURRED, THE COURT MAY IMPOSE A CIVIL
PENALTY OF NOT MORE THAN FIVE  HUNDRED  DOLLARS  PER  CONTRACT  MADE  IN
VIOLATION OF SUCH SECTION, NOT TO EXCEED ONE HUNDRED THOUSAND DOLLARS.
  S  3. Section 579 of the banking law, as amended by chapter 629 of the
laws of 2002, is amended to read as follows:
  S 579. Doing business without license prohibited. [Only a type B  not-
for-profit  corporation  as  defined  in  section two hundred one of the
not-for-profit corporation law of this state, or an entity  incorporated
in  another state and having a similar not-for-profit status,] NO PERSON
OR ENTITY shall engage in the business of budget planning as defined  in
subdivision  one of section four hundred fifty-five of the general busi-

S. 2493                             3

ness law [of this state] except as authorized by this article and  with-
out first obtaining a license from the superintendent.
  S  4.  Subdivision  2 of section 584-a of the banking law, as added by
chapter 629 of the laws of 2002, is amended to read as follows:
  2. the total fees agreed to for such services, including  any  adjust-
ments  for  estimated  available  rebates  from creditors, provided that
nothing in this subdivision shall require a licensee  to  share  rebates
with  its  clients AND PROVIDED THAT ANY FEES OR CHARGES IMPOSED MUST BE
FAIR, REASONABLE AND EASILY UNDERSTOOD;
  S 5. Section 584-b of the banking law is amended  by  adding  two  new
subdivisions 4-a and 14 to read as follows:
  4-A.    NO  LICENSEE SHALL IMPOSE ANY FEE OR CHARGE WHATSOEVER THAT IS
NOT FAIR, REASONABLE AND ABLE TO BE EASILY UNDERSTOOD.
  14. NO LICENSEE SHALL CHARGE THE DEBTOR FOR OR PROVIDE CREDIT OR OTHER
INSURANCE, COUPONS FOR GOODS OR SERVICES, MEMBERSHIP IN A  CLUB,  ACCESS
TO  COMPUTERS  OR THE INTERNET, OR ANY OTHER MATTER NOT DIRECTLY RELATED
TO BUDGET PLANNING SERVICES UNLESS PRE-APPROVED BY THE SUPERINTENDENT.
  S 6. Section 585 of the banking law, as amended by chapter 629 of  the
laws of 2002, is amended to read as follows:
  S  585.  Superintendent  authorized  to  examine.  For  the purpose of
discovering violations of this article or securing information  lawfully
required  by  him  or her hereunder, the superintendent may at any time,
and as often as he or she may  determine,  either  personally  or  by  a
person duly designated by him or her, investigate the business and exam-
ine the books, accounts, records, and files used therein of every licen-
see  hereunder.  For that purpose the superintendent and his or her duly
designated representative shall have free  access  to  the  offices  and
place  of  business,  books, accounts, papers, records, files, safes and
vaults of all such licensees. The superintendent  and  any  person  duly
designated  by him or her shall have authority to require the attendance
of and to examine under oath all persons whose testimony he or  she  may
require  relative  to such business. The expenses incurred in making any
examination pursuant to this section shall be assessed against and  paid
by  the  licensee  so  examined,  except  that traveling and subsistence
expenses so incurred shall be charged against and paid by  licensees  in
such  proportions  as the superintendent shall deem just and reasonable,
and such proportionate charges shall be added to the assessment  of  the
other  expenses  incurred  upon each examination. Upon written notice by
the superintendent of the total amount of such assessment, the  licensee
shall become liable for and shall pay such assessment to the superinten-
dent.  If, upon review, the superintendent shall determine that the fees
or service charges set by  the  licensee  are  UNFAIR,  unreasonable  OR
UNCLEAR, he or she shall direct the licensee to make adjustments in said
fees  and  service charges in accordance with his or her findings, which
shall set forth a detailed factual basis and reasoning  supporting  such
finding.
  S 7. This act shall take effect on the one hundred eightieth day after
it  shall  have  become  a  law  and  shall apply to all debt settlement
services agreements entered into or  offered  on  or  after  such  date;
provided,  however,  that  effective  immediately, the superintendent of
financial services shall add, amend, and/or repeal  any  rule  or  regu-
lation he or she deems necessary or desirable for implementation of this
act.

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