STATE OF NEW YORK ________________________________________________________________________ 1730 2023-2024 Regular Sessions IN ASSEMBLY January 20, 2023 ___________ Introduced by M. of A. DINOWITZ, BENEDETTO -- read once and referred to the Committee on Consumer Affairs and Protection AN ACT to amend the general business law and the banking law, in relation to providing for budget planning and debt settlement services The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. Section 455 of the general business law, as amended by 2 chapter 629 of the laws of 2002, subdivision 1 as amended by chapter 456 3 of the laws of 2006, and subdivision 4 as amended by chapter 549 of the 4 laws of 2013, is amended to read as follows: 5 § 455. Definitions. 1. Budget planning, as used in this article, means 6 the making of a contract between a person or entity engaged in the busi- 7 ness of budget planning with a particular debtor whereby: 8 (i) the debtor agrees to pay a sum or sums of money in any manner or 9 form and the person or entity engaged in the business of budget planning 10 distributes, or supervises, coordinates or controls the distribution of, 11 or has a contractual relationship with another person or entity that 12 distributes, or supervises, coordinates or controls such distribution 13 of, the same among certain specified creditors in accordance with a 14 periodic payment plan agreed upon; and 15 (ii) the debtor agrees to pay to such person or entity, or such other 16 person or entity that distributes, or supervises, coordinates or 17 controls such distribution of, a sum or sums of money, any valuable 18 consideration for such services or for any other services rendered in 19 connection therewith; provided, however, that "budget planning" does not 20 include "debt settlement services" as defined in section five hundred 21 eighty-eight-a of the banking law. For the purposes of this article, a 22 person or entity shall be considered as engaged in the business of budg- 23 et planning in New York, and subject to this article and the licensing 24 and other requirements of article twelve-C of the banking law, if such 25 person or entity solicits budget planning business within this state EXPLANATION--Matter in italics (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD01016-01-3
A. 1730 2 1 and, in connection with such solicitation, enters into a contract for 2 budget planning with an individual then resident in this state. 3 2. Person, as used in this article, shall not include a person admit- 4 ted to practice law in this state. 5 3. Entity, as used in this article, shall not include a firm, partner- 6 ship, professional corporation, or other organization, all of the 7 members or principals of which are admitted to practice law in this 8 state. 9 4. [Person or entity as used in this article shall not include a char- 10 itable corporation as defined in paragraph (a) of section one hundred 11 two (Definitions) of the not-for-profit corporation law of this state, 12 or an entity incorporated in another state and having a similar not-for- 13 profit status, licensed by the superintendent, to engage in the business 14 of budget planning as defined in this section. 15 5.] Any attorney licensed to practice law in this state who is engaged 16 in budget planning shall: 17 (a) negotiate directly with creditors on behalf of the client; 18 (b) ensure that all moneys received from the client are deposited in 19 the attorney's account maintained for client funds; 20 (c) pay creditors from such account; and 21 (d) offer budget planning services through the same legal entity that 22 the attorney uses to practice law. 23 § 2. Section 457 of the general business law, as amended by chapter 24 629 of the laws of 2002, is amended to read as follows: 25 § 457. [Penalty] Penalties for violation of this article; criminal and 26 civil. (a) Whoever either individually or as officer, director or 27 employee of any person, firm, association or corporation, violates any 28 of the provisions of the preceding section shall be guilty of a class A 29 misdemeanor [for each such violation] punishable as provided in articles 30 seventy and eighty of the penal law. 31 (b) Whenever there shall be a violation of this article, application 32 may be made by the attorney general in the name of the people of the 33 state of New York to a court or justice having jurisdiction by a special 34 proceeding to issue an injunction, and upon notice to the defendant of 35 not less than five days, to enjoin and restrain the continuance of such 36 violations; and if it shall appear to the satisfaction of the court or 37 justice that the defendant has, in fact, violated this article, an 38 injunction may be issued by such court or justice, enjoining and 39 restraining any further violation, without requiring proof that any 40 person has, in fact, been injured or damaged thereby. In connection with 41 any such proposed application, the attorney general is authorized to 42 take proof and make a determination of the relevant facts and to issue 43 subpoenas in accordance with the civil practice law and rules. Whenever 44 the court shall determine that a violation of section four hundred 45 fifty-six of this article has occurred, the court may impose a civil 46 penalty of not more than five hundred dollars per contract made in 47 violation of such section, not to exceed one hundred thousand dollars. 48 § 3. Section 579 of the banking law, as amended by chapter 549 of the 49 laws of 2013, is amended to read as follows: 50 § 579. Doing business without license prohibited. [Only a charitable 51 corporation as defined in paragraph (a) of section one hundred two 52 (Definitions) of the not-for-profit corporation law of this state, or an 53 entity incorporated in another state and having a similar not-for-profit 54 status,] No person or entity shall engage in the business of budget 55 planning as defined in subdivision one of section four hundred fifty- 56 five of the general business law [of this state] except as authorized by
A. 1730 3 1 this article and without first obtaining a license from the superinten- 2 dent. 3 § 4. Subdivision 2 of section 584-a of the banking law, as added by 4 chapter 629 of the laws of 2002, is amended to read as follows: 5 2. the total fees agreed to for such services, including any adjust- 6 ments for estimated available rebates from creditors, provided that 7 nothing in this subdivision shall require a licensee to share rebates 8 with its clients and provided that any fees or charges imposed must be 9 fair, reasonable and easily understood; 10 § 5. Section 584-b of the banking law is amended by adding a new 11 subdivision 4-a to read as follows: 12 4-a. No licensee shall impose any fee or charge whatsoever that is 13 not fair, reasonable and able to be easily understood. 14 § 6. Section 585 of the banking law, as amended by chapter 629 of the 15 laws of 2002, is amended to read as follows: 16 § 585. Superintendent authorized to examine. For the purpose of 17 discovering violations of this article or securing information lawfully 18 required by him or her hereunder, the superintendent may at any time, 19 and as often as he or she may determine, either personally or by a 20 person duly designated by him or her, investigate the business and exam- 21 ine the books, accounts, records, and files used therein of every licen- 22 see hereunder. For that purpose the superintendent and his or her duly 23 designated representative shall have free access to the offices and 24 place of business, books, accounts, papers, records, files, safes and 25 vaults of all such licensees. The superintendent and any person duly 26 designated by him or her shall have authority to require the attendance 27 of and to examine under oath all persons whose testimony he or she may 28 require relative to such business. The expenses incurred in making any 29 examination pursuant to this section shall be assessed against and paid 30 by the licensee so examined, except that traveling and subsistence 31 expenses so incurred shall be charged against and paid by licensees in 32 such proportions as the superintendent shall deem just and reasonable, 33 and such proportionate charges shall be added to the assessment of the 34 other expenses incurred upon each examination. Upon written notice by 35 the superintendent of the total amount of such assessment, the licensee 36 shall become liable for and shall pay such assessment to the superinten- 37 dent. If, upon review, the superintendent shall determine that the fees 38 or service charges set by the licensee are unfair, unreasonable or 39 unclear, he or she shall direct the licensee to make adjustments in said 40 fees and service charges in accordance with his or her findings, which 41 shall set forth a detailed factual basis and reasoning supporting such 42 finding. 43 § 7. Subdivision 10 of section 36 of the banking law, as amended by 44 section 2 of part L of chapter 58 of the laws of 2019, is amended to 45 read as follows: 46 10. All reports of examinations and investigations, correspondence and 47 memoranda concerning or arising out of such examination and investi- 48 gations, including any duly authenticated copy or copies thereof in the 49 possession of any banking organization, bank holding company or any 50 subsidiary thereof (as such terms "bank holding company" and "subsid- 51 iary" are defined in article three-A of this chapter), any corporation 52 or any other entity affiliated with a banking organization within the 53 meaning of subdivision six of this section and any non-banking subsid- 54 iary of a corporation or any other entity which is an affiliate of a 55 banking organization within the meaning of subdivision six-a of this 56 section, foreign banking corporation, licensed lender, licensed casher
A. 1730 4 1 of checks, licensed mortgage banker, registered mortgage broker, 2 licensed mortgage loan originator, licensed sales finance company, 3 registered mortgage loan servicer, licensed student loan servicer, 4 licensed insurance premium finance agency, licensed transmitter of 5 money, licensed budget planner, licensed debt settlement company, any 6 other person or entity subject to supervision under this chapter, or the 7 department, shall be confidential communications, shall not be subject 8 to subpoena and shall not be made public unless, in the judgment of the 9 superintendent, the ends of justice and the public advantage will be 10 subserved by the publication thereof, in which event the superintendent 11 may publish or authorize the publication of a copy of any such report or 12 any part thereof in such manner as may be deemed proper or unless such 13 laws specifically authorize such disclosure. For the purposes of this 14 subdivision, "reports of examinations and investigations, and any corre- 15 spondence and memoranda concerning or arising out of such examinations 16 and investigations", includes any such materials of a bank, insurance or 17 securities regulatory agency or any unit of the federal government or 18 that of this state, any other state or that of any foreign government 19 which are considered confidential by such agency or unit and which are 20 in the possession of the department or which are otherwise confidential 21 materials that have been shared by the department with any such agency 22 or unit and are in the possession of such agency or unit. 23 § 8. Subdivisions 1, 2, 3 and 5 of section 39 of the banking law, as 24 amended by section 3 of part L of chapter 58 of the laws of 2019, are 25 amended to read as follows: 26 1. To appear and explain an apparent violation. Whenever it shall 27 appear to the superintendent that any banking organization, bank holding 28 company, registered mortgage broker, licensed mortgage banker, licensed 29 student loan servicer, registered mortgage loan servicer, licensed mort- 30 gage loan originator, licensed lender, licensed casher of checks, 31 licensed sales finance company, licensed insurance premium finance agen- 32 cy, licensed transmitter of money, licensed budget planner, licensed 33 debt settlement company, out-of-state state bank that maintains a branch 34 or branches or representative or other offices in this state, or foreign 35 banking corporation licensed by the superintendent to do business or 36 maintain a representative office in this state has violated any law or 37 regulation, he or she may, in his or her discretion, issue an order 38 describing such apparent violation and requiring such banking organiza- 39 tion, bank holding company, registered mortgage broker, licensed mort- 40 gage banker, licensed student loan servicer, licensed mortgage loan 41 originator, licensed lender, licensed casher of checks, licensed sales 42 finance company, licensed insurance premium finance agency, licensed 43 transmitter of money, licensed budget planner, licensed debt settlement 44 company, out-of-state state bank that maintains a branch or branches or 45 representative or other offices in this state, or foreign banking corpo- 46 ration to appear before him or her, at a time and place fixed in said 47 order, to present an explanation of such apparent violation. 48 2. To discontinue unauthorized or unsafe and unsound practices. When- 49 ever it shall appear to the superintendent that any banking organiza- 50 tion, bank holding company, registered mortgage broker, licensed mort- 51 gage banker, licensed student loan servicer, registered mortgage loan 52 servicer, licensed mortgage loan originator, licensed lender, licensed 53 casher of checks, licensed sales finance company, licensed insurance 54 premium finance agency, licensed transmitter of money, licensed budget 55 planner, licensed debt settlement company, out-of-state state bank that 56 maintains a branch or branches or representative or other offices in
A. 1730 5 1 this state, or foreign banking corporation licensed by the superinten- 2 dent to do business in this state is conducting business in an unauthor- 3 ized or unsafe and unsound manner, he or she may, in his or her 4 discretion, issue an order directing the discontinuance of such unau- 5 thorized or unsafe and unsound practices, and fixing a time and place at 6 which such banking organization, bank holding company, registered mort- 7 gage broker, licensed mortgage banker, licensed student loan servicer, 8 registered mortgage loan servicer, licensed mortgage loan originator, 9 licensed lender, licensed casher of checks, licensed sales finance 10 company, licensed insurance premium finance agency, licensed transmitter 11 of money, licensed budget planner, licensed debt settlement company, 12 out-of-state state bank that maintains a branch or branches or represen- 13 tative or other offices in this state, or foreign banking corporation 14 may voluntarily appear before him or her to present any explanation in 15 defense of the practices directed in said order to be discontinued. 16 3. To make good impairment of capital or to ensure compliance with 17 financial requirements. Whenever it shall appear to the superintendent 18 that the capital or capital stock of any banking organization, bank 19 holding company or any subsidiary thereof which is organized, licensed 20 or registered pursuant to this chapter, is impaired, or the financial 21 requirements imposed by subdivision one of section two hundred two-b of 22 this chapter or any regulation of the superintendent on any branch or 23 agency of a foreign banking corporation or the financial requirements 24 imposed by this chapter or any regulation of the superintendent on any 25 licensed lender, registered mortgage broker, licensed mortgage banker, 26 licensed student loan servicer, licensed casher of checks, licensed 27 sales finance company, licensed insurance premium finance agency, 28 licensed transmitter of money, licensed budget planner, licensed debt 29 settlement company, or private banker are not satisfied, the superinten- 30 dent may, in the superintendent's discretion, issue an order directing 31 that such banking organization, bank holding company, branch or agency 32 of a foreign banking corporation, registered mortgage broker, licensed 33 mortgage banker, licensed student loan servicer, licensed lender, 34 licensed casher of checks, licensed sales finance company, licensed 35 insurance premium finance agency, licensed transmitter of money, 36 licensed budget planner, licensed debt settlement company, or private 37 banker make good such deficiency forthwith or within a time specified in 38 such order. 39 5. To keep books and accounts as prescribed. Whenever it shall appear 40 to the superintendent that any banking organization, bank holding compa- 41 ny, registered mortgage broker, licensed mortgage banker, licensed 42 student loan servicer, registered mortgage loan servicer, licensed mort- 43 gage loan originator, licensed lender, licensed casher of checks, 44 licensed sales finance company, licensed insurance premium finance agen- 45 cy, licensed transmitter of money, licensed budget planner, licensed 46 debt settlement company, agency or branch of a foreign banking corpo- 47 ration licensed by the superintendent to do business in this state, does 48 not keep its books and accounts in such manner as to enable him or her 49 to readily ascertain its true condition, he or she may, in his or her 50 discretion, issue an order requiring such banking organization, bank 51 holding company, registered mortgage broker, licensed mortgage banker, 52 licensed student loan servicer, registered mortgage loan servicer, 53 licensed mortgage loan originator, licensed lender, licensed casher of 54 checks, licensed sales finance company, licensed insurance premium 55 finance agency, licensed transmitter of money, licensed budget planner, 56 licensed debt settlement company, or foreign banking corporation, or the
A. 1730 6 1 officers or agents thereof, or any of them, to open and keep such books 2 or accounts as he or she may, in his or her discretion, determine and 3 prescribe for the purpose of keeping accurate and convenient records of 4 its transactions and accounts. 5 § 9. Paragraph (a) of subdivision 1 of section 44 of the banking law, 6 as amended by section 4 of part L of chapter 58 of the laws of 2019, is 7 amended to read as follows: 8 (a) Without limiting any power granted to the superintendent under any 9 other provision of this chapter, the superintendent may, in a proceeding 10 after notice and a hearing, require any safe deposit company, licensed 11 lender, licensed casher of checks, licensed sales finance company, 12 licensed insurance premium finance agency, licensed transmitter of 13 money, licensed mortgage banker, licensed student loan servicer, regis- 14 tered mortgage broker, licensed mortgage loan originator, registered 15 mortgage loan servicer[or], licensed budget planner or licensed debt 16 settlement company to pay to the people of this state a penalty for any 17 violation of this chapter, any regulation promulgated thereunder, any 18 final or temporary order issued pursuant to section thirty-nine of this 19 article, any condition imposed in writing by the superintendent in 20 connection with the grant of any application or request, or any written 21 agreement entered into with the superintendent. 22 § 10. The banking law is amended by adding a new article 12-CC to read 23 as follows: 24 ARTICLE XII-CC 25 DEBT SETTLEMENT COMPANIES 26 Section 588-a. Definitions. 27 588-b. Doing business without license prohibited. 28 588-c. Application for license. 29 588-d. Conditions for issuance of a license; procedure where 30 application denied. 31 588-e. License provisions. 32 588-f. Changes in officers or directors of licensee. 33 588-g. Changes in control. 34 588-h. Grounds for suspension, revocation, or termination of 35 license; procedure. 36 588-i. Advertising and marketing practices. 37 588-j. Individualized financial analysis; statement. 38 588-k. Required pre-agreement disclosures and warnings. 39 588-l. Debt settlement services agreements. 40 588-m. Fees. 41 588-n. Debtor settlement accounts; monthly accounting. 42 588-o. Cancellation of debt settlement services agreement; right 43 to refunds. 44 588-p. Obligation of good faith. 45 588-q. Prohibited activities. 46 588-r. Superintendent authorized to examine. 47 588-s. Licensee's books and records; reports. 48 588-t. Penalties; noncompliance. 49 588-u. Authority of superintendent. 50 588-v. Severability. 51 § 588-a. Definitions. As used in this article: 1. "Affiliate" means 52 any person that directly or indirectly controls, is controlled by, or is 53 under common control with another person. 54 2. "Clearly and conspicuously" means that a statement, representation, 55 term, or disclosure is so presented as to be readily apparent and under- 56 stood by the person to whom it is being addressed. Factors to be consid-
A. 1730 7 1 ered for this purpose include but are not limited to size, placement, 2 color contrast, length, crawl time, and audibility. 3 3. "Debtor" means any individual who has incurred indebtedness or owes 4 a debt. 5 4. "Debtor settlement account" means any account or other means or 6 device in which payments, deposits, or other transfers from a debtor are 7 arranged, held, or transferred by or to a debt settlement company for 8 the accumulation of the debtor's funds in anticipation of proffering an 9 adjustment or settlement of a debt or obligation of the debtor. 10 5. "Debt settlement company" means any person: 11 (a) engaging in, or holding himself, herself, or itself out as engag- 12 ing in, the business of providing debt settlement services in exchange 13 for or in expectation of any compensation or gain; or 14 (b) soliciting for or acting on behalf of any person engaging in, or 15 holding himself, herself, or itself out as engaging in, the business of 16 providing debt settlement services in exchange for or in expectation of 17 any compensation or gain; provided, however, that "debt settlement 18 company" shall not include: 19 (i) the following exempt persons: 20 (A) any attorney licensed to practice law in this state when acting in 21 the ordinary practice of law and through the entity used by the attorney 22 in the ordinary practice of law, and not holding himself or herself out 23 as a debt settlement company, and not providing debt settlement 24 services, except as incidental to legal representation; 25 (B) any public officer while acting in an official capacity and any 26 person acting under court order; or 27 (C) any person while performing services incidental to the dissol- 28 ution, winding up, or liquidation of a partnership, corporation, or 29 other business enterprise; or 30 (D) any bank, trust company, savings bank, savings and loan associ- 31 ation, or credit union, whether incorporated, chartered, or organized 32 under the laws of this state or any other state or the United States, or 33 any operating subsidiary of any such bank, trust company, savings bank, 34 savings and loan association, or credit union. 35 (ii) such other persons as may be specifically exempted by the super- 36 intendent in his or her sole discretion and consistent with the purposes 37 of this article and the rules and regulations promulgated hereunder. 38 6. "Debt settlement services" means: 39 (a) offering to provide or providing advice or services, or offering 40 to act or acting as an intermediary between or on behalf of a debtor and 41 one or more of the debtor's creditors, where the primary purpose of the 42 advice, service, or action is to obtain a settlement, adjustment, or 43 satisfaction of the debtor's unsecured debt to a creditor in an amount 44 less than the principal amount of the debt or in an amount less than the 45 current outstanding balance of the debt; or 46 (b) offering to provide services related to or providing services 47 advising, encouraging, assisting, or counseling a debtor to accumulate 48 funds for the primary purpose of proposing, obtaining, or seeking to 49 obtain a settlement, adjustment, or satisfaction of the debtor's unse- 50 cured debt to a creditor in an amount less than the principal amount of 51 the debt or in an amount less than the current outstanding balance of 52 the debt; provided, however, that debt settlement services shall not 53 include: 54 (i) "budget planning" as defined in section four hundred fifty-five of 55 the general business law; or
A. 1730 8 1 (ii) the services of an attorney in providing information, advice, or 2 legal representation with respect to filing a case or proceeding under 3 Title 11 of the United States Code. 4 7. "Debt settlement services agreement" means a contract or other 5 agreement with a debtor related to the provision of debt settlement 6 services. 7 8. "Enrollment fee" means any fee, obligation, or compensation paid or 8 to be paid by the debtor to a debt settlement company in consideration 9 of or in connection with establishing a debt settlement services agree- 10 ment. 11 9. "Maintenance fee" means any fee, obligation, or compensation paid 12 or to be paid by a debtor to a debt settlement company in consideration 13 of or in connection with maintaining the relationship and services 14 provided by a debt settlement company in accordance with a debt settle- 15 ment services agreement. 16 10. "Person" means an individual, partnership, limited liability 17 company, corporation, association, or any other legal entity. 18 11. "Principal amount of the debt" means the total amount owed by a 19 debtor to one or more creditors for a debt that is included in a debt 20 settlement services agreement at the time when the debtor enters into 21 such agreement. 22 12. "Settlement fee" means any fee, obligation, or compensation paid 23 or to be paid by a debtor to a debt settlement company in consideration 24 of or in connection with an agreement or other arrangement on the part 25 of a creditor to accept less than the principal amount of the debt as 26 satisfaction of the creditor's claim against the debtor. 27 § 588-b. Doing business without license prohibited. 1. Except as 28 provided in subdivision three of this section, no person shall engage in 29 the business of a debt settlement company in this state without first 30 obtaining a license from the superintendent in accordance with the 31 licensing procedure provided in this article and such rules and regu- 32 lations as may be promulgated hereunder. 33 2. The business of a debt settlement company is conducted in this 34 state if the debt settlement company, its employees, or its agents are 35 located in this state or if the debt settlement company advertises, 36 solicits, offers, or contracts to provide debt settlement services to 37 debtors then resident in this state. 38 3. If a debt settlement company is licensed under this article, subdi- 39 vision one of this section does not apply to any employee of such licen- 40 see. 41 § 588-c. Application for license. 1. Application for a license 42 required under this article shall be in writing, under oath, and in the 43 form prescribed by the superintendent, and shall contain the following: 44 (a) the exact name and complete street address of the applicant and, 45 if applicable, its date of incorporation or organization; 46 (b) the name and complete business and residential address and occupa- 47 tion of each officer and director of the applicant and each person that 48 owns at least ten percent of the shares or other ownership interests of 49 the applicant; 50 (c) the complete street address of the principal office from which the 51 business is to be conducted; 52 (d) if the applicant has one or more branches, subsidiaries, or affil- 53 iates located in this state, soliciting business in this state, or doing 54 business with residents of this state, the complete address of each such 55 place of business; and
A. 1730 9 1 (e) such other pertinent information as the superintendent may 2 require, including but not limited to evidence indicating that the 3 applicant, or an officer, director, or manager of such applicant has at 4 least one year of experience in financial services or related fields 5 applicable to debt settlement services. 6 2. An applicant shall file a master application for its principal 7 office and supplemental applications for each branch office that will 8 conduct the business of a debt settlement company in this state. 9 3. Upon original application for a license or licenses, the applicant 10 shall pay an investigation fee in an aggregate amount as prescribed 11 pursuant to section eighteen-a of this chapter. No additional investi- 12 gation fee shall be required for any subsequent application for a 13 license unless such application is subsequent to a denial of a license 14 or to a revocation, suspension, surrender, or termination of a license; 15 provided, however, that an application to establish a branch office of 16 the licensee shall be accompanied by the fee prescribed in section eigh- 17 teen-a of this chapter. 18 4. As a condition for the issuance and retention of a license, and 19 subject to such regulations as the superintendent shall prescribe, 20 applicants for a license shall file with the superintendent a surety 21 bond in favor or the superintendent, issued by a bonding company or 22 insurance company authorized to do business in this state, and in a form 23 satisfactory to the superintendent. 24 (a) In lieu of the surety bond required by this subdivision, an appli- 25 cant may pledge to the superintendent and maintain in a pledge account 26 with such banks, savings banks, savings and loan associations, trust 27 companies, national banks, federal savings banks, or federal savings and 28 loan associations in the state as such licensee may designate and the 29 superintendent may approve: 30 (i) interest-bearing bills, notes, bonds, debentures, or other obli- 31 gations issued or guaranteed by the United States or any state or other 32 local governmental entity or any instrumentality thereof, bearing a 33 rating of one of the three highest grades by a nationally recognized 34 statistical rating organization that has been engaged in rating state 35 and municipal issues for a period of not less than five years; 36 (ii) dollar deposits; or 37 (iii) such other assets or letters of credit as the superintendent 38 shall by rule or regulation permit. 39 (b) Except as provided hereunder, the principal amount of such surety 40 bond or deposit shall be two hundred fifty thousand dollars. The super- 41 intendent may: 42 (i) require a larger bond or deposit if he or she determines, in his 43 or her sole discretion, that a licensee has engaged in a pattern of 44 conduct resulting in bona fide debtor complaints of misconduct and that 45 such increased bond or deposit is necessary for the protection of 46 debtors; or 47 (ii) increase or decrease the amount of such bond or deposit based 48 upon the applicant's or licensee's financial condition, business plan, 49 business experience, or any other factor the superintendent considers 50 appropriate. 51 (c) The proceeds of such surety bond or deposit shall constitute a 52 trust fund to be used exclusively: 53 (i) to reimburse fees that have been improperly charged to or 54 collected from debtors with respect to the business of a debt settlement 55 company in this state, as such business is described in section five 56 hundred eighty-eight-b of this article;
A. 1730 10 1 (ii) to reimburse amounts that have not been properly distributed to 2 creditors or properly returned to debtors with respect to the business 3 of a debt settlement company in this state, as such business is 4 described in section five hundred eighty-eight-b of this article; and 5 (iii) to pay outstanding banking department examination costs and 6 assessments. 7 § 588-d. Conditions for issuance of a license; procedure where appli- 8 cation denied. Upon the filing of an application for a license, if the 9 superintendent shall find that the financial responsibility, experience, 10 character, and general fitness of the applicant, and of the control 11 persons, officers, and directors thereof are such as to command the 12 confidence of the community and to warrant belief that the business will 13 be operated honestly, fairly, and efficiently within the purposes of 14 this article, he or she shall thereupon issue a license in duplicate to 15 engage in debt settlement services in accordance with the provisions of 16 this article. The superintendent shall transmit one copy of such 17 license to the applicant and file the other in the office of the depart- 18 ment. Such license shall remain in full force and effect until it is 19 surrendered by the licensee or revoked, suspended, or terminated as 20 hereinafter provided. If the superintendent shall not so find, he or 21 she shall not issue such license and he or she shall notify the appli- 22 cant of the denial. 23 § 588-e. License provisions. Each license issued under this article 24 shall state the principal office address and, if applicable, the address 25 of the branch office for which it was issued. Such license shall state 26 fully the name of the licensee and, if applicable, the date and place of 27 its incorporation or organization. A copy of such license shall be prom- 28 inently posted in the principal office and, if applicable, such branch 29 office. Such license shall not be transferable or assignable. In the 30 event the location at which the business is to be conducted shall be 31 changed, the licensee shall forthwith notify the superintendent who 32 shall thereupon without charge attach to the license a rider setting 33 forth such changed location. 34 § 588-f. Changes in officers or directors of licensee. In the event 35 that there shall be any change among the officers or directors of any 36 licensee, the licensee shall promptly notify the superintendent of the 37 name, address, and occupation of each new officer or director and 38 provide such other information as the superintendent may require. 39 § 588-g. Changes in control. 1. It shall be unlawful except with the 40 prior approval of the superintendent for any action to be taken which 41 results in a change of control of the business of a licensee. Prior to 42 any change of control, the person desirous of acquiring control of the 43 business of a licensee shall make written application to the superinten- 44 dent and pay an investigation fee as prescribed pursuant to section 45 eighteen-a of this chapter to the superintendent. The application shall 46 contain such information as the superintendent may prescribe as neces- 47 sary or appropriate for the purpose of making the determination required 48 by subdivision two of this section. 49 2. The superintendent shall approve or disapprove the proposed change 50 of control of a licensee in accordance with the provisions of section 51 five hundred eighty-eight-d of this article. 52 3. As used in this section, the term "control" means the possession, 53 directly or indirectly, of the power to direct or cause the direction of 54 the management and policies of a licensee, whether through the ownership 55 of voting stock of such licensee, the ownership of voting stock of any 56 person which possesses such power or otherwise. Control shall be
A. 1730 11 1 presumed to exist if any person, directly or indirectly, owns, controls 2 or holds with power to vote ten percent or more of the voting stock of 3 any licensee or of any person which owns, controls or holds with power 4 to vote ten percent or more of the voting stock of any licensee, but no 5 person shall be deemed to control a licensee solely by reason of being 6 an officer or director of such licensee or person. The superintendent 7 may in his or her discretion, upon the application of a licensee or any 8 person who, directly or indirectly, owns, controls or holds with power 9 to vote or seeks to own, control or hold with power to vote any voting 10 stock of such licensee, determine whether or not the ownership, control 11 or holding of such voting stock constitutes or would constitute control 12 of such licensee for purposes of this section. 13 § 588-h. Grounds for suspension, revocation, or termination of 14 license; procedure. 1. In addition to the authority set forth in subdi- 15 vision two of this section, the superintendent may suspend or revoke any 16 license issued under this article if, after notice and a hearing, he or 17 she shall find that: 18 (a) the licensee has violated any provisions of this article, or of 19 any rule or regulation made by the superintendent under and within the 20 authority of this article; 21 (b) any fact or condition exists which, if it had existed at the time 22 of the original application for such license, would have warranted the 23 superintendent in refusing originally to issue such license; or 24 (c) the licensee or an officer, director, or control person of the 25 licensee has been convicted of a crime against the laws of this state or 26 any other state or of the United States involving moral turpitude or 27 fraudulent or dishonest actions, or a final judgment in a court of 28 competent jurisdiction has been entered against the licensee or an offi- 29 cer, director, or control person of the licensee in a civil action aris- 30 ing from fraud, misrepresentation, or deceit. 31 2. (a) The superintendent may, for good cause, without notice or a 32 hearing, issue an order suspending any license issued pursuant to this 33 article for a period not exceeding ninety days, pending investigation. 34 "Good cause", as used in this subdivision, shall exist only when the 35 licensee has defaulted or is likely to default in performing its finan- 36 cial engagements or engages or has engaged in dishonest or inequitable 37 practices which may cause substantial harm to the persons afforded the 38 protection of this article. 39 (b) The superintendent may, in his or her sole discretion, without 40 notice or a hearing, issue an order suspending any license issued pursu- 41 ant to the authority of this article upon the failure of such licensee 42 to make any payments as required by this chapter. 43 (c) The superintendent may, in his or her sole discretion, without 44 notice or a hearing, issue an order suspending any license issued pursu- 45 ant to the authority of this article: 46 (i) thirty days after the date the licensee fails to file any report 47 required under this article to be filed by it with the superintendent; 48 (ii) immediately upon the licensee filing a petition in bankruptcy; 49 (iii) at least thirty days after the licensee has had filed against it 50 a petition in bankruptcy; or 51 (iv) immediately upon the receipt by the superintendent of notice that 52 the surety bond required pursuant to section five hundred eighty-eight-c 53 of this article is no longer in effect or that the value of assets in 54 the pledge account is less than the required amount. 55 3. If the superintendent has issued an order suspending a license 56 issued pursuant to the authority of this article pursuant to paragraph
A. 1730 12 1 (a) of subdivision two of this section, such license may be reinstated 2 if the superintendent determines, in his or her sole discretion after 3 investigation, that good cause therefor did not exist or no longer 4 exists. If the superintendent has issued an order suspending a license 5 issued pursuant to paragraph (b) or (c) of subdivision two of this 6 section, such license may be reinstated, if the superintendent deter- 7 mines, in his or her sole discretion, that the licensee has cured all 8 deficiencies set forth in such order by the close of business ninety 9 days after the date of such suspension order, including, without limita- 10 tion, making any overdue payment, having any such bankruptcy petition 11 dismissed, or having such bond reinstated or depositing all required 12 additional assets. Otherwise, in the case of a suspension pursuant to 13 paragraph (b) or (c) of subdivision two of this section, unless the 14 superintendent has, in his or her sole discretion, extended such suspen- 15 sion, all licenses of such licensee shall be deemed to be automatically 16 terminated by operation of law at the close of business on such nineti- 17 eth day. 18 4. Except as provided for in subdivision two of this section, no 19 license shall be revoked or suspended except after notice and a hearing 20 thereon. 21 5. With the prior consent of the superintendent, any licensee may 22 surrender any license by delivering to the superintendent written notice 23 that it thereby surrenders such license, but such surrender shall not 24 affect such licensee's civil or criminal liability for acts committed 25 prior to such surrender or its obligations to the superintendent for 26 assessments, fees, or administrative actions with respect to the periods 27 before such surrender. 28 6. No revocation, suspension, termination, or surrender of any license 29 shall impair or affect the obligation of any pre-existing lawful 30 contract between the licensee and any person. 31 7. Every license issued hereunder shall remain in force and effect 32 until the same shall have been surrendered, revoked, suspended, or 33 terminated in accordance with the provisions of this article, but the 34 superintendent shall have authority to reinstate a suspended license or 35 to issue a new license to a licensee whose license shall have been 36 revoked if no fact or condition then exists which would have warranted 37 the superintendent in refusing originally to issue such license under 38 this article. 39 8. Whenever the superintendent shall revoke or suspend a license 40 issued pursuant to this article, he or she shall forthwith execute in 41 duplicate a written order to that effect. The superintendent shall file 42 one copy of such order in the office of the department and shall forth- 43 with serve the other copy upon the licensee. Any such order may be 44 reviewed in the manner provided by article seventy-eight of the civil 45 practice law and rules. Such application for review as authorized by 46 this section must be made within thirty days from the date of such order 47 of suspension or revocation. 48 9. Whenever a license shall have terminated in accordance with this 49 article, the superintendent shall notify the licensee that the license 50 has terminated and that the licensee may not engage in the business of a 51 debt settlement company in this state. 52 § 588-i. Advertising and marketing practices. 1. A debt settlement 53 company shall not, expressly or by implication, make any unfair or 54 deceptive representations, or any omissions of material facts, in any of 55 its advertising or marketing communications concerning debt settlement 56 services.
A. 1730 13 1 2. All advertising and marketing communications concerning debt 2 settlement services shall disclose the following information clearly and 3 conspicuously: "Debt settlement services are not appropriate for every- 4 one. Failure to pay your monthly bills in a timely manner will result in 5 increased balances and will harm your credit rating. Not all creditors 6 will agree to reduce the amount you owe, and they may pursue collection, 7 including lawsuits." 8 3. All advertising and marketing communications of a licensed debt 9 settlement company concerning debt settlement services shall indicate 10 that the debt settlement company is licensed by the department and shall 11 contain the name and office address of such debt settlement company, 12 which shall conform to a name and address on record with the department. 13 § 588-j. Individualized financial analysis; statement. 1. Prior to 14 entering into a debt settlement services agreement, a debt settlement 15 company shall prepare and provide to the debtor in writing and retain a 16 copy of: 17 (a) an individualized financial analysis, including a listing of the 18 debtor's income, expenses, and debts; and 19 (b) a statement containing: 20 (i) a description of the services to be provided under the proposed 21 debt settlement services agreement; 22 (ii) a good faith estimate of the time it will take to complete all 23 steps necessary for a settlement of each debt included under the 24 proposed debt settlement services agreement; 25 (iii) the total amount of debt owed to each creditor included under 26 the proposed debt settlement services agreement; 27 (iv) the total amount of money estimated to be necessary to complete 28 all steps necessary for a settlement of each debt included under the 29 proposed debt settlement services agreement; and 30 (v) the monthly targeted amount of money necessary to complete all 31 steps necessary for a settlement of each debt included under the 32 proposed debt settlement services agreement. 33 2. A debt settlement company shall not enter into a debt settlement 34 services agreement unless it makes written determinations, supported by 35 the financial analysis, that: 36 (a) the debtor can reasonably meet the requirements of such proposed 37 debt settlement services agreement, including the fees and the savings 38 goals; and 39 (b) such proposed debt settlement services agreement will be suitable 40 for the debtor at the time it is to be signed. 41 § 588-k. Required pre-agreement disclosures and warnings. 1. Before 42 the debtor signs a debt settlement services agreement, the debt settle- 43 ment company shall provide an oral and written notice to the debtor that 44 clearly and conspicuously discloses all of the following: 45 (a) debt settlement services may not be suitable for all debtors; 46 (b) using debt settlement services likely will harm the debtor's cred- 47 it history, credit rating, and credit score; 48 (c) using debt settlement services does not stop creditor collection 49 activity, including creditor lawsuits and garnishments; 50 (d) not all creditors will accept a reduction in the balance, interest 51 rate, or fees a debtor owes; 52 (e) the debtor should inquire about other means of dealing with debt, 53 including but not limited to budget planning and bankruptcy; 54 (f) the debtor remains obligated to make periodic or scheduled 55 payments to creditors while participating in a debt settlement program;
A. 1730 14 1 (g) the failure to make periodic or scheduled payments to a creditor 2 is likely to: 3 (i) harm the debtor's credit history, credit rating, and/or credit 4 score; 5 (ii) lead the creditor to increase lawful collection activity, includ- 6 ing litigation, garnishment of the debtor's wages, and judgment liens on 7 the debtor's property; and 8 (iii) lead to the imposition by the creditor of interest charges, late 9 fees, and other penalty fees, increasing the amount owed by the debtor; 10 and 11 (h) the debtor may be required to pay taxes on any amount of debt that 12 is forgiven. 13 2. The written notice required by subdivision one of this section 14 shall be entitled "Debtor Notice and Rights Form". 15 3. Prior to signing a debt settlement services agreement, the debtor 16 shall sign and date an acknowledgment form at the end of the Debtor 17 Notice and Rights Form. The acknowledgment form shall state: "I, the 18 debtor, have received from the debt settlement company a copy of the 19 form entitled Debtor Notice and Rights Form." The debt settlement compa- 20 ny or its representative shall also sign and date the acknowledgment 21 form, which shall include the name and address of the debt settlement 22 company. The acknowledgment form shall be in duplicate and incorporated 23 into the Debtor Notice and Rights Form. The original acknowledgment form 24 shall be retained by the debt settlement company, and the duplicate copy 25 shall be given to the debtor. 26 4. The requirements of this section are satisfied if the debt settle- 27 ment company gives the debtor the following warning verbatim, both oral- 28 ly and in writing, with the caption "DEBTOR NOTICE AND RIGHTS FORM" in 29 at least twenty-eight-point font and the remaining portion in at least 30 fourteen-point font, before the debtor signs a debt settlement services 31 agreement: 32 "DEBTOR NOTICE AND RIGHTS FORM 33 CAUTION 34 Using debt settlement services will LIKELY HARM your credit history, 35 credit rating, and credit score. 36 We CANNOT GUARANTEE that you will successfully reduce or eliminate 37 your debt. 38 YOU REMAIN OBLIGATED TO MAKE PAYMENTS TO YOUR CREDITORS. If you stop 39 paying your creditors, there is a strong likelihood some or all of the 40 following may happen: 41 - CREDITORS MAY STILL CONTACT YOU AND TRY TO COLLECT. 42 - CREDITORS MAY STILL SUE YOU FOR THE MONEY YOU OWE. 43 - YOUR WAGES OR BANK ACCOUNT MAY STILL BE GARNISHED. 44 - LIENS MAY STILL BE PLACED ON YOUR PROPERTY. 45 - YOUR CREDIT HISTORY, CREDIT RATING, AND/OR CREDIT SCORE LIKELY WILL 46 BE HARMED. 47 - THE AMOUNT OF MONEY YOU OWE MAY INCREASE DUE TO CREDITOR IMPOSITION 48 OF INTEREST CHARGES, LATE FEES, AND OTHER PENALTY FEES. 49 - NOT ALL CREDITORS WILL AGREE TO ACCEPT A BALANCE REDUCTION. 50 IF WE DO SETTLE YOUR DEBT, YOU MAY BE REQUIRED TO PAY TAXES ON THE 51 AMOUNT FORGIVEN. 52 DEBT SETTLEMENT SERVICES ARE NOT RIGHT FOR EVERYONE. YOU SHOULD 53 CONSIDER ALL YOUR OPTIONS FOR ADDRESSING YOUR DEBT, SUCH AS BUDGET PLAN- 54 NING OR A BANKRUPTCY FILING. 55 YOUR RIGHT TO CANCEL
A. 1730 15 1 If you sign a debt settlement services agreement, you have the right 2 to cancel at any time and receive a full refund of all unearned fees you 3 have paid to the debt settlement company and all funds placed in your 4 debtor settlement account that have not been paid to any creditors. If 5 you cancel within ninety days of signing the debt settlement services 6 agreement you also have the right to receive a full refund of any 7 enrollment fees you have paid. 8 ACKNOWLEDGMENT BY DEBTOR 9 I, the debtor, have received from the debt settlement company a copy 10 of the form entitled Debtor Notice and Rights Form." 11 § 588-l. Debt settlement services agreements. 1. A debt settlement 12 company shall not provide debt settlement services to a debtor without a 13 written debt settlement services agreement signed and dated by both the 14 debtor and the debt settlement company. 15 2. Any debt settlement services agreement entered into in violation of 16 the provisions of this section is void. 17 3. Each debt settlement company shall submit to the banking department 18 any form of debt settlement services agreement it intends to use. 19 4. A debt settlement services agreement shall disclose all of the 20 following clearly and conspicuously: 21 (a) the name and address of the debtor; 22 (b) the date of execution of the debt settlement services agreement; 23 (c) the legal name of the debt settlement company, including any other 24 business names used in this state by the debt settlement company; 25 (d) the complete street address of the debt settlement company, which 26 shall conform to an address on record with the department; 27 (e) the license number of the principal office and, if applicable, of 28 the branch office under which the debt settlement company is licensed in 29 this state; 30 (f) a toll-free telephone number at which the debtor may speak with a 31 representative of the debt settlement company during normal business 32 hours; 33 (g) a complete list of the debtor's accounts, debts, and obligations 34 covered by the debt settlement services agreement, including the name of 35 each creditor and the principal amount of each debt; 36 (h) a description of the services to be provided by the debt settle- 37 ment company, including the expected time frame for settlement for each 38 account, debt, or obligation included in paragraph (g) of this subdivi- 39 sion; 40 (i) an itemized list of all fees, including any enrollment fee and 41 settlement fees to be paid by the debtor to the debt settlement company, 42 and the date, approximate date, or circumstances under which each fee 43 will become due; 44 (j) a good faith estimate of the total amount of all fees to be 45 collected by the debt settlement company from the debtor for the 46 provision of debt settlement services under the debt settlement services 47 agreement; 48 (k) a statement of the proposed savings goals for the debtor, stating: 49 (i) the amount to be saved per month; 50 (ii) the time period over which the savings goals extend; 51 (iii) the amount of money the debtor must save before a settlement 52 offer will be made to each of the debtor's creditors; and 53 (iv) the total amount of the savings expected to be paid by the debtor 54 pursuant to the terms of the debt settlement services agreement; 55 (l) the written individualized financial analysis required by section 56 five hundred eighty-eight-j of this article;
A. 1730 16 1 (m) a written notice to the debtor stating: 2 (i) that the debtor may cancel the debt settlement services agreement 3 at any time; and 4 (ii) that upon such cancellation: 5 (A) all powers of attorney granted to the debt settlement company by 6 the debtor shall be considered revoked and voided; and 7 (B) the debtor may be entitled to a refund. The terms of such refund 8 shall also be stated and shall be consistent with the requirements of 9 section five hundred eighty-eight-o of this article. 10 (n) a form the debtor may use to cancel the debt settlement services 11 agreement pursuant to the provisions of section five hundred eighty- 12 eight-o of this article. The form shall disclose clearly and conspicu- 13 ously how the debtor can cancel the debt settlement services agreement, 14 including applicable addresses, telephone numbers, facsimile numbers, 15 and electronic mail addresses the debtor can use to cancel the debt 16 settlement services agreement; 17 (o) a clear and conspicuous notice to the debtor that the debtor may 18 contact the department with any questions or complaints regarding the 19 debt settlement company along with the address, telephone number and 20 internet website of the department. 21 5. (a) A debt settlement services agreement may confer on a debt 22 settlement company a power of attorney to settle the debtor's debt for 23 no more than fifty percent of the principal amount of the debt. An 24 agreement may not confer a power of attorney to settle a debt for more 25 than fifty percent of that amount, but may confer a power of attorney to 26 negotiate with creditors of the debtor on behalf of the debtor. A debt 27 settlement services agreement must provide that the debt settlement 28 company will obtain the assent of the debtor after a creditor has 29 assented to a settlement for more than fifty percent of the principal 30 amount of the debt. 31 (b) A debt settlement services agreement may not provide for applica- 32 tion of the law of any jurisdiction other than the United States and 33 this state. 34 6. If a debt settlement company communicates with a debtor primarily 35 in a language other than English, then the debt settlement company shall 36 furnish to the debtor a written translation in that other language of 37 all the disclosures and documents required by this article. 38 § 588-m. Fees. 1. The types of fees that a debt settlement company may 39 charge a debtor are the following: 40 (a) enrollment fees; and 41 (b) settlement fees. 42 2. All fee types not included under subdivision one of this section 43 are prohibited, including maintenance fees. 44 3. The amount of an enrollment fee charged by a debt settlement compa- 45 ny shall not exceed fifty dollars or such other amount as set by the 46 superintendent. 47 4. The amount of the settlement fee charged by a debt settlement 48 company with respect to each debt covered by a debt settlement services 49 agreement shall not exceed the lesser of: 50 (a) the amount that is reasonable and commensurate to the debt settle- 51 ment services provided to the debtor; and 52 (b) the amount that is twenty percent of the difference between: 53 (i) the principal amount of the debt; and 54 (ii) the amount: 55 (A) paid by the debt settlement company to the creditor pursuant to 56 the settlement negotiated by the debt settlement company on behalf of
A. 1730 17 1 the debtor as full and complete satisfaction of the creditor's claim 2 with regard to that debt; or 3 (B) negotiated by the debt settlement company and paid by the debtor 4 to the creditor pursuant to a settlement negotiated by the debt settle- 5 ment company on behalf of the debtor as full and complete satisfaction 6 of the creditor's claim with regard to that debt. 7 5. A debt settlement company shall not collect any settlement fee from 8 a debtor until: 9 (a) the creditor enters into a legally enforceable agreement with the 10 debtor to accept funds in a specific dollar amount as full and complete 11 satisfaction of the creditor's claim with regard to that debt; and 12 (b) those funds are provided to the creditor: 13 (i) by the debt settlement company on behalf of the debtor; or 14 (ii) directly by the debtor pursuant to a settlement negotiated by the 15 debt settlement company. 16 6. It shall be unlawful to split or divide the provision of debt 17 settlement services to a debtor into separate debt settlement services 18 agreements for the purpose of collecting additional fees from such 19 debtor. 20 § 588-n. Debtor settlement accounts; monthly accounting. 1. A debt 21 settlement company that receives funds from a debtor shall hold all 22 funds received for a debtor settlement account in a properly designated 23 bank account in a federally insured depository institution. 24 (a) Such funds shall: 25 (i) constitute trust funds owned by the debtor from whom they were 26 received; 27 (ii) remain the property of such debtor until the debt settlement 28 company disburses the funds to a creditor on behalf of such debtor; 29 (iii) be kept separate and apart at all times from funds belonging to 30 the debt settlement company or any of its officers, employees, or 31 agents; and 32 (iv) be deposited in such bank account not later than the end of the 33 business day following receipt by the debt settlement company or its 34 agent. 35 (b) A debt settlement company or its agent that maintains one or more 36 debtor settlement accounts shall obtain and preserve a written agreement 37 from each bank in which any such account is maintained. Such written 38 agreement shall expressly provide that the funds in such debtor settle- 39 ment account shall be subject to no right, charge, security interest, 40 lien, or claim of any kind in favor of such bank or any person claiming 41 through such bank. 42 (c) Any interest earned on a debtor settlement account shall be cred- 43 ited to the debtor. If the funds of multiple debtors are kept in a 44 single interest earning bank account, then the interest earned shall be 45 deposited pro rata among the debtors whose funds are in the account. 46 (d) A debt settlement company may not hold funds received for a debtor 47 settlement account in an account administered by a person that gives or 48 accepts any money or other compensation in exchange for referrals of 49 business involving the debt settlement company. 50 2. A debt settlement company shall, no less than monthly, provide each 51 debtor with which it has a debt settlement services agreement a state- 52 ment of fees paid, settlements completed, remaining debts and, if funds 53 are held in a bank account pursuant to subdivision one of this section, 54 account balances. 55 3. Nothing in this article requires the establishment of a debtor 56 settlement account if no debtor funds other than enrollment fees or
A. 1730 18 1 earned settlement fees are held or controlled by a debt settlement 2 company. 3 § 588-o. Cancellation of debt settlement services agreement; right to 4 refunds. 1. A debtor may cancel a debt settlement services agreement at 5 any time until after the debt settlement company has fully performed 6 each service the debt settlement company contracted to perform or 7 represented that it would perform. 8 2. If a debtor cancels a debt settlement services agreement not later 9 than ninety days after the date of the execution of the debt settlement 10 services agreement or at any time upon a violation of a provision of 11 this article by the debt settlement company, the debt settlement company 12 shall refund to the debtor: 13 (a) all fees paid to the debt settlement company by the debtor, with 14 the exception of any earned settlement fee; and 15 (b) all funds provided by the debtor to the debt settlement company 16 that: 17 (i) have accumulated in a debtor settlement account; and 18 (ii) the debt settlement company has not disbursed to creditors. 19 3. If a debtor cancels a debt settlement services agreement later than 20 ninety days after the date of the execution of the debt settlement 21 services agreement and for any reason other than for a violation of a 22 provision of this article by the debt settlement company, the debt 23 settlement company shall refund to the debtor: 24 (a) all fees paid to the debt settlement company by the debtor, with 25 the exception of any earned settlement fee and any enrollment fee; and 26 (b) all funds provided by the debtor to the debt settlement company 27 that: 28 (i) have accumulated in a debtor settlement account; and 29 (ii) the debt settlement company has not disbursed to creditors. 30 4. A debt settlement company shall make any refund required under this 31 section within five business days after receipt of written notice of 32 cancellation, and shall include with such refund a full statement of 33 account showing: 34 (a) the fees received by the debt settlement company from the debtor; 35 (b) the fees refunded to the debtor by the debt settlement company; 36 (c) the payments made by the debt settlement company to creditors on 37 behalf of the debtor; 38 (d) the settlement fees earned, if any, by the debt settlement company 39 by settling debt on behalf of the debtor; 40 (e) the savings of the debtor held by the debt settlement company 41 immediately prior to such refund; and 42 (f) the savings of the debtor refunded to the debtor by the debt 43 settlement company. 44 5. Upon cancellation of a debt settlement services agreement by the 45 debtor: 46 (a) all powers of attorney and direct debit authorizations granted to 47 the debt settlement company by the debtor shall be considered revoked 48 and voided; and 49 (b) the debt settlement company shall immediately take any action 50 necessary to reflect cancellation of the debt settlement services agree- 51 ment, including but not limited to notifying the recipient of any direct 52 debit authorization. 53 6. Upon the cancellation of a debt settlement services agreement, the 54 debt settlement company shall provide timely written notice of the 55 cancellation of such agreement to each of the creditors with whom the
A. 1730 19 1 debt settlement company has had any prior communication on behalf of the 2 debtor in connection with the provision of any debt settlement services. 3 § 588-p. Obligation of good faith. A debt settlement company shall act 4 in good faith in all matters under this article. 5 § 588-q. Prohibited activities. 1. No person, except a licensee, may 6 make any representation, directly or indirectly, orally or in writing 7 that he, she, or it is licensed under this article. 8 2. No person, other than a licensee or a person exempt from the 9 licensing requirements of this article, shall use the title "debt 10 settlement company" or the terms "debt settlement" or "debt settlement 11 services" in any advertising, marketing communication, business card, or 12 letterhead. 13 3. A debt settlement company shall not do any of the following: 14 (a) charge or collect from a debtor any fee not permitted by, in an 15 amount in excess of the maximum amount permitted by, or at a time earli- 16 er than permitted by section five hundred eighty-eight-m of this arti- 17 cle; 18 (b) include in a debt settlement services agreement any secured debt; 19 (c) advise or represent, expressly or by implication, that debtors 20 should stop making payments to their creditors; 21 (d) advise or represent, expressly or by implication, that debtors 22 should stop communicating with their creditors; 23 (e) engage in any practice that prohibits or limits the debtor or any 24 creditor from communication directly with one another; 25 (f) change the mailing address on any of a debtor's statements from a 26 creditor; 27 (g) make loans or offer credit or solicit or accept any note, mort- 28 gage, or negotiable instrument other than a check signed by the debtor 29 and dated no later than the date of signature; 30 (h) take any confession of judgment or power of attorney to confess 31 judgment against the debtor or appear as the debtor or on behalf of the 32 debtor in any judicial, administrative, or other action or proceeding; 33 (i) take any release or waiver of any obligation to be performed on 34 the part of the debt settlement company or any right of the debtor; 35 (j) advertise, display, distribute, broadcast, or televise services or 36 permit services to be advertised, displayed, distributed, broadcasted, 37 or televised, in any manner whatsoever, that contains any false, 38 misleading, or deceptive statements or representations with regard to 39 any matter involving the business of debt settlement services, including 40 but not limited to the fees to be charged, the services to be performed, 41 the results or outcomes of those services, or the effect those services 42 will have on a debtor's credit rating or on creditor collection efforts; 43 (k) receive any cash, fee, gift, bonus, premium, reward, or other 44 compensation from any person other than the debtor explicitly for the 45 provision of debt settlement services to that debtor; 46 (l) offer or provide gifts or bonuses to debtors for signing a debt 47 settlement services agreement or for referring another potential custom- 48 er or customers; 49 (m) except with the prior consent of the debtor, disclose to anyone 50 the name or any personal information of a debtor for whom the debt 51 settlement company has provided or is providing debt settlement services 52 other than to a debtor's own creditors or the debt settlement company's 53 agents or affiliates for the purpose of providing debt settlement 54 services. "Personal information of a debtor" as used herein shall 55 include but not be limited to a debtor's name, photograph, address, 56 telephone number, social security number, date of birth, driver's iden-
A. 1730 20 1 tification number, credit card number, bank account number, mother's 2 maiden name, medical or disability information, if any, as well as any 3 other identification number which a licensee may possess; 4 (n) enter into a debt settlement services agreement with a debtor 5 without first providing the disclosures and financial analysis and 6 making the determinations required by this article; 7 (o) misrepresent any material fact, make a material omission, or make 8 a false promise directed to one or more debtors in connection with the 9 solicitation, offering, contracting, or provision of debt settlement 10 services; 11 (p) violate the provisions of applicable do-not-call statutes; 12 (q) purchase debts or engage in the practice or business of debt 13 collection; 14 (r) represent or imply to a person participating in or considering 15 debt settlement services that the purchase of any ancillary goods or 16 services is required; 17 (s) use a communication which simulates in any manner a legal or judi- 18 cial process, or which gives the false appearance of being authorized, 19 issued, or approved by a government, governmental agency, or attorney- 20 at-law; or 21 (t) make a representation that the debt settlement company will 22 furnish money to pay bills or prevent attachment. 23 § 588-r. Superintendent authorized to examine. For the purpose of 24 discovering violations of this article or securing information lawfully 25 required by him or her hereunder, the superintendent may at any time, 26 and as often as he or she may determine, either personally or by a 27 person duly designated by him or her, investigate the business and exam- 28 ine the books, accounts, records, and files used therein of every licen- 29 see hereunder. For that purpose the superintendent and his or her duly 30 designated representative shall have free access to the offices and 31 place of business, books, accounts, papers, records, files, safes and 32 vaults of all such licensees. The superintendent and any person duly 33 designated by him or her shall have authority to require the attendance 34 of and to examine under oath all persons whose testimony he or she may 35 require relative to such business. The expenses incurred in making any 36 examination pursuant to this section shall be assessed against and paid 37 by the licensee so examined, except that traveling and subsistence 38 expenses so incurred shall be charged against and paid by licensees in 39 such proportions as the superintendent shall deem just and reasonable, 40 and such proportionate charges shall be added to the assessment of the 41 other expenses incurred upon each examination. Upon written notice by 42 the superintendent of the total amount of such assessment, the licensee 43 shall become liable for and shall pay such assessment to the superinten- 44 dent. 45 § 588-s. Licensee's books and records; reports. 1. The licensee shall 46 create and use in its business such books, accounts, and records as will 47 enable the superintendent to determine whether such licensee is comply- 48 ing with the provisions of this article and with the rules and regu- 49 lations lawfully made by the superintendent hereunder. Every licensee 50 shall preserve such books, accounts, and records for at least six years 51 by any manner permitted by this chapter. 52 2. Each licensee shall annually, on or before the first day of Febru- 53 ary, file a report with the superintendent giving such information as 54 the superintendent may require concerning the business and operations 55 during the preceding calendar year of such licensee under authority of 56 this article. Such report shall be subscribed and affirmed as true by
A. 1730 21 1 the licensee under the penalties of perjury and shall be in the form 2 prescribed by the superintendent. In addition to annual reports, the 3 superintendent may require such additional regular or special reports as 4 he or she may deem necessary to the proper supervision of licensees 5 under this article. Such additional reports shall be in the form 6 prescribed by the superintendent and shall be subscribed and affirmed as 7 true under the penalties of perjury. 8 3. Each licensee, within one hundred twenty days of the close of the 9 licensee's fiscal year, shall submit an independently audited financial 10 statement to the superintendent. 11 § 588-t. Penalties; noncompliance. 1. Any person who violates any 12 provision of the licensing requirements of section five hundred eighty- 13 eight-b of this article shall be guilty of a class A misdemeanor, 14 punishable as provided in articles seventy and eighty of the penal law. 15 2. Any debt settlement services agreement that does not comply with 16 the provisions of this article is void. 17 3. Any waiver by a debtor of any protection provided by or any right 18 of the debtor under this article is void. 19 4. Any attempt by any person to obtain a waiver from any debtor of any 20 protection provided by or any right or protection of the debtor or any 21 obligation or requirement of the debt settlement company under this 22 article shall be a violation of this article. 23 5. Upon proper notice of a void debt settlement services agreement, 24 the debt settlement company shall make a refund to the debtor as if the 25 debt settlement services agreement had been cancelled as provided in 26 subdivision two of section five hundred eighty-eight-o of this article. 27 6. In addition to such penalties as may otherwise be applicable by 28 law, the superintendent may, after notice and hearing as provided else- 29 where in this article, require any person found violating the provisions 30 of this article or the rules or regulations promulgated hereunder to pay 31 to the people of this state an additional penalty for each violation of 32 the article or any regulation or policy promulgated hereunder a sum not 33 to exceed an amount as determined pursuant to section forty-four of this 34 chapter for each such violation. 35 7. Nothing in this article shall create a private right of action on 36 behalf of a debtor against a debt settlement company for violations of 37 this article. 38 8. Nothing in this article shall limit any statutory or common-law 39 right of any person to bring any action in any court for any act, or the 40 right of the state to punish any person for any violation of any law. 41 § 588-u. Authority of superintendent. The superintendent is hereby 42 authorized and empowered to make, in addition hereto and not inconsist- 43 ent herewith, such general rules and regulations, and such specific 44 rulings, demands, and findings as he or she may deem necessary for the 45 proper conduct of the business authorized and licensed hereunder and for 46 the enforcement of this article. 47 § 588-v. Severability. If any word, phrase, clause, sentence, para- 48 graph, subdivision, section, or part of this article shall be adjudged 49 by any court of competent jurisdiction to be invalid, such judgment 50 shall not affect, impair, or invalidate the remainder thereof which can 51 be given effect without the invalid provision, but shall be confined in 52 its operation to the word, phrase, clause, sentence, paragraph, subdivi- 53 sion, section, or part of this article directly involved in the contro- 54 versy in which the judgment shall have been rendered. 55 § 11. This act shall take effect on the one hundred eightieth day 56 after it shall have become a law and shall apply to all debt settlement
A. 1730 22 1 services agreements entered into or offered on or after such date; 2 provided, however, that effective immediately, the superintendent of 3 financial services shall add, amend, and/or repeal any rule or regu- 4 lation he or she deems necessary or desirable for implementation of this 5 act.