STATE OF NEW YORK ________________________________________________________________________ 7583 2023-2024 Regular Sessions IN SENATE June 21, 2023 ___________ Introduced by Sen. LIU -- read twice and ordered printed, and when printed to be committed to the Committee on Rules AN ACT to amend the executive law and the banking law, in relation to establishing the banking bill of rights The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. Legislative intent. Across New York, financial institutions 2 terminate individuals' bank accounts or deny their applications with no 3 reason provided or recourse allowed. These banking practices dispropor- 4 tionately impact immigrant communities, resulting in unbanked or under- 5 banked New Yorkers. Such practices harm consumers' credit scores and 6 histories, creating barriers to housing, education and access to the 7 financial industry altogether; they also block millions of dollars of 8 donations to charitable organizations. Furthermore, these unfair and 9 discriminatory practices create a chilling effect on local economies 10 statewide. Personal finance deserves due process, and it is the intent 11 of the legislature to ensure fundamental banking rights for all New 12 Yorkers. Requiring financial institutions to disclose the reasons for 13 adverse actions with respect to credit and deposit accounts will prevent 14 discrimination ex ante, in addition to giving consumers an opportunity 15 to improve their credit or financial status and rectify mistakes that 16 may occur from misinformation or inadequate information; it will also 17 create a beneficial competitive effect on the financial industry. 18 § 2. The executive law is amended by adding a new section 296-b to 19 read as follows: 20 § 296-b. Banking bill of rights. 1. Definitions. For the purposes of 21 this section, the following terms shall have the following meanings: 22 a. "Financial institution" shall mean any corporation organized under 23 and subject to the provisions of the banking law, including any bank, 24 trust company, savings bank, savings and loan association, credit union, 25 mortgage broker, mortgage banker, or other investment entity, whether EXPLANATION--Matter in italics (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD10967-04-3
S. 7583 2 1 headquartered within or outside the state, which provides credit or a 2 deposit account to a customer in the state. 3 b. "Deposit account" shall mean any demand deposit account, including 4 but not limited to, a checking account, time deposit account, certif- 5 icate of deposit (CD), savings account, passbook account, share account, 6 money market account, or other similar account maintained by a financial 7 institution. 8 c. "Adverse action" shall mean a termination or closure of an account 9 or an unfavorable change in the terms of an account that does not affect 10 all or substantially all of a class of the financial institution's cred- 11 it or deposit accounts, including but not limited to, loss of privi- 12 leges. The term "adverse action" shall not include a change in the terms 13 of an account expressly agreed to by an account holder, or any action or 14 forbearance relating to an account taken in connection with inactivity, 15 default, or delinquency of such account. 16 2. Due process requirements. Notwithstanding any other provision of 17 law or rule or regulation to the contrary, a financial institution 18 shall: 19 a. provide written notice of: 20 (1) all the specific reasons for denial of an application for credit 21 or a deposit account to an applicant within ten days of such denial; and 22 (2) any adverse action of an existing customer's credit or deposit 23 account and all the specific reasons for such adverse action at least 24 thirty days prior to taking such adverse action; provided, however, that 25 where such adverse action is a refusal or failure to authorize an 26 account transaction at a point of sale, or whereby fraud or potentially 27 unlawful activity is detected, written notice shall be provided as soon 28 as reasonably possible but no later than five days after such adverse 29 action is taken. 30 b. provide a reasonable opportunity for an applicant for credit or a 31 deposit account or a customer with existing credit or a deposit account 32 to contest or correct any information that the financial institution may 33 have relating to denial of an application for credit or a deposit 34 account or any pending adverse action relating to a customer's existing 35 credit or deposit account; and 36 c. consider any information provided by an applicant for credit or a 37 deposit account or a customer with existing credit or a deposit account 38 pursuant to paragraph b of this subdivision in making a final decision 39 regarding denial of an application for credit or a deposit account or 40 any pending adverse action related to existing credit or a deposit 41 account. 42 3. Enforcement. a. Any financial institution that violates subpara- 43 graph one or two of paragraph a of subdivision two of this section shall 44 be liable to such applicant or customer for the following: 45 (1) ten thousand dollars for each such violation; 46 (2) actual damages resulting from such violation, including consequen- 47 tial and incidental damages; 48 (3) reasonable attorneys' fees; and 49 (4) in the case of repeat violations or violators, punitive damages. 50 b. A violation pursuant to paragraph a of this subdivision shall 51 create a presumption of unlawful discriminatory practice pursuant to 52 sections two hundred ninety-six and two hundred ninety-six-a of this 53 article in favor of the applicant or customer. 54 c. Any applicant or customer seeking to enforce the provisions of this 55 section, in lieu of the procedure set forth in section two hundred nine- 56 ty-seven of this article, may file a verified complaint with the super-
S. 7583 3 1 intendent of financial services; provided, however, that the filing of 2 such complaint with either the superintendent of financial services or 3 the division shall bar subsequent recourse to the other agency, as well 4 as to any local commission on human rights, with respect to the griev- 5 ance complained of. In the case of a verified complaint filed with the 6 superintendent of financial services, the procedure set forth in para- 7 graphs a and b of subdivision seven of section two hundred ninety-six-a 8 of this article shall apply. If the superintendent of financial services 9 finds that a violation of this section has occurred, such superintendent 10 shall issue an order determining liability pursuant to paragraph a of 11 this subdivision. 12 4. Preemption. Nothing in this section shall be construed to preempt 13 any other state or federal law prohibiting the disclosure of certain 14 protected consumer information or limit the ability of financial insti- 15 tutions to make reasonable business judgments. 16 5. Rules and regulations. The superintendent of financial services is 17 authorized to promulgate rules and regulations to effectuate the 18 provisions of this section. 19 § 3. Paragraph a of subdivision 4 of section 296-a of the executive 20 law, as amended by chapter 632 of the laws of 1976, is amended to read 21 as follows: 22 a. [If so requested by] A creditor shall furnish an applicant for 23 credit[, a creditor shall furnish such applicant] with a statement of 24 the specific reasons for rejection of the applicant's application for 25 credit pursuant to section two hundred ninety-six-b of this article. 26 § 4. Section 9-d of the banking law, as added by chapter 173 of the 27 laws of 1974 and as further amended by section 104 of part A of chapter 28 62 of the laws of 2011, is amended to read as follows: 29 § 9-d. Enforcement of [section] sections two hundred ninety-six-a and 30 two hundred ninety-six-b of the executive law. In addition to the powers 31 conferred upon the superintendent of financial services by this chapter, 32 he or she shall enforce [section] sections two hundred ninety-six-a and 33 two hundred ninety-six-b of the executive law by taking such action as 34 is therein authorized. 35 § 5. This act shall take effect immediately.