BILL NUMBER:S5826

TITLE  OF  BILL:    An  act  to  amend the vehicle and traffic law, in
relation to sanctions for credit card charge backs  on  motor  vehicle
fees

PURPOSE:  To  authorize  the  Department  of  Motor Vehicles to impose
sanctions against persons who pay for fees  with  a  credit  card  and
thereafter use the card "charge back" system to avoid payment.

SUMMARY  OF  PROVISIONS:   Bill section 1 would amend section 202-b of
the Vehicle and Traffic Law by prohibiting to provide  that  when  the
fee  for  one's  business  or driver's license and/or registration was
paid by credit card, the person subsequently contests the credit  card
charge  and  causes  the fee to be charged back to the Department, any
further transactions with DMV in  the  name  of  such  person  may  be
prohibited until payment is made in full.

The  bill  would  take  effect  120  days  after  receiving  Executive
approval.

EXISTING LAW: Currently, the Vehicle and Traffic Law only authorizes a
civil penalty and sanctions for dishonored checks.

JUSTIFICATION: DMV has experienced an increase  in  a  relatively  new
type  of fraudulent activity associated with credit card transactions.
              

A customer will pay a license or registration fee with a  credit  card
and  then illegitimately contest the charge with the customer's credit
card company to obtain a "charge back." By requesting  a  charge  back
for  a  valid  DMV  charge, these customers are able to obtain a valid
license or registration that they have not paid for.

While VTL § 202-b currently allows  DMV  to  suspend  the  license  or
registration  of  a  customer  whose  check is dishonored, there is no
similar  mechanism  for  those  who  defraud  DMV  by   illegitimately
requesting  a  charge  back on their credit card transaction. The same
safeguards applicable to  dishonored  checks  would  apply  to  charge
backs.  This  proposal includes the ability to sanction a customer who
pays a DMV fee via a credit card  and  then  subsequently  requests  a
'charge back' with their credit card company by prohibiting any future
transactions with DMV until full payment has been made.

Both the volume of charge backs and the dollar amount per charged back
transaction have been increasing. DMV anticipates that this trend will
continue  as the range of transactions payable by credit card expands,
and especially as additional internet  transactions  are  offered.  In
fiscal.  year  2010-11,  DMV  received  an  average  of 100 chargeback
requests per month from credit card issuers. DMV was able  to  recover
only  50%  of the unpaid fees associated with credit card charge backs
($158,457 out of $306,898). In addition to this lost revenue, DMV  has
incurred  additional expenses because credit card companies may charge
510.00 per charge back.

LEGISLATIVE HISTORY: Similar legislation was introduced as S. 4918 and
passed the Senate in 2003 and 2004.


FISCAL IMPLICATIONS: By imposing sanctions, this  bill  will  increase
revenue to the State by reducing the number of unpaid transaction fees
for driver's licenses and registrations.

EFFECTIVE  DATE:  On-hundred  twentieth day after it shall have become
law