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

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S5215C-2011 Actions

• Jun 13, 2012: referred to codes
• Jun 13, 2012: DELIVERED TO ASSEMBLY
• Jun 13, 2012: PASSED SENATE
• Jun 13, 2012: ORDERED TO THIRD READING CAL.1235
• Jun 13, 2012: COMMITTEE DISCHARGED AND COMMITTED TO RULES
• Jun 1, 2012: PRINT NUMBER 5215C
• Jun 1, 2012: AMEND AND RECOMMIT TO FINANCE
• Jan 18, 2012: REPORTED AND COMMITTED TO FINANCE
• Jan 4, 2012: REFERRED TO CONSUMER PROTECTION
• Jun 24, 2011: COMMITTED TO RULES
• Jun 14, 2011: AMENDED ON THIRD READING 5215B
• Jun 14, 2011: ADVANCED TO THIRD READING
• Jun 13, 2011: 2ND REPORT CAL.
• Jun 7, 2011: 1ST REPORT CAL.1060
• Jun 2, 2011: PRINT NUMBER 5215A
• Jun 2, 2011: AMEND AND RECOMMIT TO BANKS
• May 17, 2011: REPORTED AND COMMITTED TO BANKS
• May 3, 2011: REFERRED TO CONSUMER PROTECTION

S5215C-2011 Meetings

Rules: Jun 18, 2012

S5215C-2011 Calendars

Floor Calendar: Jun 13, 2012

S5215C-2011 Votes

S5215C-2011 Memo

BILL NUMBER:S5215C

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 $20 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:

This is a new bill.

FISCAL IMPLICATIONS:

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

EFFECTIVE DATE:

This act shall take effect in 180 days from enactment.

S5215C-2011 Text

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

                                   5215--C

                         2011-2012 Regular Sessions

                              I N  SENATE

                                 May 3, 2011
                                 ___________

  Introduced  by  Sens.  GRIFFO, ZELDIN -- read twice and ordered printed,
    and when  printed  to  be  committed  to  the  Committee  on  Consumer
    Protection  -- reported favorably from said committee and committed to
    the Committee on Banks -- committee discharged, bill amended,  ordered
    reprinted  as  amended  and  recommitted to said committee -- reported
    favorably from said committee, ordered to  first  and  second  report,
    ordered  to  a third reading, amended and ordered reprinted, retaining
    its place in the order of third reading -- recommitted to the  Commit-
    tee on Consumer Protection in accordance with Senate Rule 6, sec. 8 --
    reported  favorably from said committee and committed to the Committee
    on Finance -- committee discharged, bill amended, ordered reprinted as
    amended and recommitted to said committee

  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

   EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                        [ ] is old law to be omitted.
                                                             LBD11381-06-2

 S. 5215--C                          2

    (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
  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. 5215--C                          3

    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-
  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

 S. 5215--C                          4

  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.