STATE OF NEW YORK ________________________________________________________________________ 1427 2025-2026 Regular Sessions IN ASSEMBLY January 9, 2025 ___________ 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. LBD03186-01-5
A. 1427 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. 1427 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] they may determine, either personally or by 20 a person duly designated by [him or her] such superintendent, investi- 21 gate the business and examine the books, accounts, records, and files 22 used therein of every licensee hereunder. For that purpose the super- 23 intendent and [his or her] their duly designated representative shall 24 have free access to the offices and place of business, books, accounts, 25 papers, records, files, safes and vaults of all such licensees. The 26 superintendent and any person duly designated by [him or her] the super- 27 intendent shall have authority to require the attendance of and to exam- 28 ine under oath all persons whose testimony [he or she] may [require] be 29 required relative to such business. The expenses incurred in making any 30 examination pursuant to this section shall be assessed against and paid 31 by the licensee so examined, except that traveling and subsistence 32 expenses so incurred shall be charged against and paid by licensees in 33 such proportions as the superintendent shall deem just and reasonable, 34 and such proportionate charges shall be added to the assessment of the 35 other expenses incurred upon each examination. Upon written notice by 36 the superintendent of the total amount of such assessment, the licensee 37 shall become liable for and shall pay such assessment to the superinten- 38 dent. If, upon review, the superintendent shall determine that the fees 39 or service charges set by the licensee are unfair, unreasonable or 40 unclear, [he or she] the superintendent shall direct the licensee to 41 make adjustments in said fees and service charges in accordance with 42 [his or her] their findings, which shall set forth a detailed factual 43 basis and reasoning supporting such finding. 44 § 7. Subdivision 10 of section 36 of the banking law, as amended by 45 section 2 of part L of chapter 58 of the laws of 2019, is amended to 46 read as follows: 47 10. All reports of examinations and investigations, correspondence and 48 memoranda concerning or arising out of such examination and investi- 49 gations, including any duly authenticated copy or copies thereof in the 50 possession of any banking organization, bank holding company or any 51 subsidiary thereof (as such terms "bank holding company" and "subsid- 52 iary" are defined in article three-A of this chapter), any corporation 53 or any other entity affiliated with a banking organization within the 54 meaning of subdivision six of this section and any non-banking subsid- 55 iary of a corporation or any other entity which is an affiliate of a 56 banking organization within the meaning of subdivision six-a of this
A. 1427 4 1 section, foreign banking corporation, licensed lender, licensed casher 2 of checks, licensed mortgage banker, registered mortgage broker, 3 licensed mortgage loan originator, licensed sales finance company, 4 registered mortgage loan servicer, licensed student loan servicer, 5 licensed insurance premium finance agency, licensed transmitter of 6 money, licensed budget planner, licensed debt settlement company, any 7 other person or entity subject to supervision under this chapter, or the 8 department, shall be confidential communications, shall not be subject 9 to subpoena and shall not be made public unless, in the judgment of the 10 superintendent, the ends of justice and the public advantage will be 11 subserved by the publication thereof, in which event the superintendent 12 may publish or authorize the publication of a copy of any such report or 13 any part thereof in such manner as may be deemed proper or unless such 14 laws specifically authorize such disclosure. For the purposes of this 15 subdivision, "reports of examinations and investigations, and any corre- 16 spondence and memoranda concerning or arising out of such examinations 17 and investigations", includes any such materials of a bank, insurance or 18 securities regulatory agency or any unit of the federal government or 19 that of this state, any other state or that of any foreign government 20 which are considered confidential by such agency or unit and which are 21 in the possession of the department or which are otherwise confidential 22 materials that have been shared by the department with any such agency 23 or unit and are in the possession of such agency or unit. 24 § 8. Subdivisions 1, 2, 3 and 5 of section 39 of the banking law, as 25 amended by section 3 of part L of chapter 58 of the laws of 2019, are 26 amended to read as follows: 27 1. To appear and explain an apparent violation. Whenever it shall 28 appear to the superintendent that any banking organization, bank holding 29 company, registered mortgage broker, licensed mortgage banker, licensed 30 student loan servicer, registered mortgage loan servicer, licensed mort- 31 gage loan originator, licensed lender, licensed casher of checks, 32 licensed sales finance company, licensed insurance premium finance agen- 33 cy, licensed transmitter of money, licensed budget planner, licensed 34 debt settlement company, out-of-state state bank that maintains a branch 35 or branches or representative or other offices in this state, or foreign 36 banking corporation licensed by the superintendent to do business or 37 maintain a representative office in this state has violated any law or 38 regulation, [he or she] the superintendent may, in [his or her] their 39 discretion, issue an order describing such apparent violation and 40 requiring such banking organization, bank holding company, registered 41 mortgage broker, licensed mortgage banker, licensed student loan servi- 42 cer, licensed mortgage loan originator, licensed lender, licensed casher 43 of checks, licensed sales finance company, licensed insurance premium 44 finance agency, licensed transmitter of money, licensed budget planner, 45 licensed debt settlement company, out-of-state state bank that maintains 46 a branch or branches or representative or other offices in this state, 47 or foreign banking corporation to appear before [him or her] the super- 48 intendent, at a time and place fixed in said order, to present an expla- 49 nation of such apparent violation. 50 2. To discontinue unauthorized or unsafe and unsound practices. When- 51 ever it shall appear to the superintendent that any banking organiza- 52 tion, bank holding company, registered mortgage broker, licensed mort- 53 gage banker, licensed student loan servicer, registered mortgage loan 54 servicer, licensed mortgage loan originator, licensed lender, licensed 55 casher of checks, licensed sales finance company, licensed insurance 56 premium finance agency, licensed transmitter of money, licensed budget
A. 1427 5 1 planner, licensed debt settlement company, out-of-state state bank that 2 maintains a branch or branches or representative or other offices in 3 this state, or foreign banking corporation licensed by the superinten- 4 dent to do business in this state is conducting business in an unauthor- 5 ized or unsafe and unsound manner, [he or she] the superintendent may, 6 in [his or her] their discretion, issue an order directing the discon- 7 tinuance of such unauthorized or unsafe and unsound practices, and 8 fixing a time and place at which such banking organization, bank holding 9 company, registered mortgage broker, licensed mortgage banker, licensed 10 student loan servicer, registered mortgage loan servicer, licensed mort- 11 gage loan originator, licensed lender, licensed casher of checks, 12 licensed sales finance company, licensed insurance premium finance agen- 13 cy, licensed transmitter of money, licensed budget planner, licensed 14 debt settlement company, out-of-state state bank that maintains a branch 15 or branches or representative or other offices in this state, or foreign 16 banking corporation may voluntarily appear before [him or her] the 17 superintendent to present any explanation in defense of the practices 18 directed in said order to be discontinued. 19 3. To make good impairment of capital or to ensure compliance with 20 financial requirements. Whenever it shall appear to the superintendent 21 that the capital or capital stock of any banking organization, bank 22 holding company or any subsidiary thereof which is organized, licensed 23 or registered pursuant to this chapter, is impaired, or the financial 24 requirements imposed by subdivision one of section two hundred two-b of 25 this chapter or any regulation of the superintendent on any branch or 26 agency of a foreign banking corporation or the financial requirements 27 imposed by this chapter or any regulation of the superintendent on any 28 licensed lender, registered mortgage broker, licensed mortgage banker, 29 licensed student loan servicer, licensed casher of checks, licensed 30 sales finance company, licensed insurance premium finance agency, 31 licensed transmitter of money, licensed budget planner, licensed debt 32 settlement company, or private banker are not satisfied, the superinten- 33 dent may, in the superintendent's discretion, issue an order directing 34 that such banking organization, bank holding company, branch or agency 35 of a foreign banking corporation, registered mortgage broker, licensed 36 mortgage banker, licensed student loan servicer, licensed lender, 37 licensed casher of checks, licensed sales finance company, licensed 38 insurance premium finance agency, licensed transmitter of money, 39 licensed budget planner, licensed debt settlement company, or private 40 banker make good such deficiency forthwith or within a time specified in 41 such order. 42 5. To keep books and accounts as prescribed. Whenever it shall appear 43 to the superintendent that any banking organization, bank holding compa- 44 ny, registered mortgage broker, licensed mortgage banker, licensed 45 student loan servicer, registered mortgage loan servicer, licensed mort- 46 gage loan originator, licensed lender, licensed casher of checks, 47 licensed sales finance company, licensed insurance premium finance agen- 48 cy, licensed transmitter of money, licensed budget planner, licensed 49 debt settlement company, agency or branch of a foreign banking corpo- 50 ration licensed by the superintendent to do business in this state, does 51 not keep its books and accounts in such manner as to enable [him or her] 52 the superintendent to readily ascertain its true condition, [he or she] 53 the superintendent may, in [his or her] their discretion, issue an order 54 requiring such banking organization, bank holding company, registered 55 mortgage broker, licensed mortgage banker, licensed student loan servi- 56 cer, registered mortgage loan servicer, licensed mortgage loan origina-
A. 1427 6 1 tor, licensed lender, licensed casher of checks, licensed sales finance 2 company, licensed insurance premium finance agency, licensed transmitter 3 of money, licensed budget planner, licensed debt settlement company, or 4 foreign banking corporation, or the officers or agents thereof, or any 5 of them, to open and keep such books or accounts as [he or she] the 6 superintendent may, in [his or her] their discretion, determine and 7 prescribe for the purpose of keeping accurate and convenient records of 8 its transactions and accounts. 9 § 9. Paragraph (a) of subdivision 1 of section 44 of the banking law, 10 as amended by section 4 of part L of chapter 58 of the laws of 2019, is 11 amended to read as follows: 12 (a) Without limiting any power granted to the superintendent under any 13 other provision of this chapter, the superintendent may, in a proceeding 14 after notice and a hearing, require any safe deposit company, licensed 15 lender, licensed casher of checks, licensed sales finance company, 16 licensed insurance premium finance agency, licensed transmitter of 17 money, licensed mortgage banker, licensed student loan servicer, regis- 18 tered mortgage broker, licensed mortgage loan originator, registered 19 mortgage loan servicer[or], licensed budget planner or licensed debt 20 settlement company to pay to the people of this state a penalty for any 21 violation of this chapter, any regulation promulgated thereunder, any 22 final or temporary order issued pursuant to section thirty-nine of this 23 article, any condition imposed in writing by the superintendent in 24 connection with the grant of any application or request, or any written 25 agreement entered into with the superintendent. 26 § 10. The banking law is amended by adding a new article 12-CC to read 27 as follows: 28 ARTICLE XII-CC 29 DEBT SETTLEMENT COMPANIES 30 Section 588-a. Definitions. 31 588-b. Doing business without license prohibited. 32 588-c. Application for license. 33 588-d. Conditions for issuance of a license; procedure where 34 application denied. 35 588-e. License provisions. 36 588-f. Changes in officers or directors of licensee. 37 588-g. Changes in control. 38 588-h. Grounds for suspension, revocation, or termination of 39 license; procedure. 40 588-i. Advertising and marketing practices. 41 588-j. Individualized financial analysis; statement. 42 588-k. Required pre-agreement disclosures and warnings. 43 588-l. Debt settlement services agreements. 44 588-m. Fees. 45 588-n. Debtor settlement accounts; monthly accounting. 46 588-o. Cancellation of debt settlement services agreement; right 47 to refunds. 48 588-p. Obligation of good faith. 49 588-q. Prohibited activities. 50 588-r. Superintendent authorized to examine. 51 588-s. Licensee's books and records; reports. 52 588-t. Penalties; noncompliance. 53 588-u. Authority of superintendent. 54 588-v. Severability.
A. 1427 7 1 § 588-a. Definitions. As used in this article: 1. "Affiliate" means 2 any person that directly or indirectly controls, is controlled by, or is 3 under common control with another person. 4 2. "Clearly and conspicuously" means that a statement, representation, 5 term, or disclosure is so presented as to be readily apparent and under- 6 stood by the person to whom it is being addressed. Factors to be consid- 7 ered for this purpose include but are not limited to size, placement, 8 color contrast, length, crawl time, and audibility. 9 3. "Debtor" means any individual who has incurred indebtedness or owes 10 a debt. 11 4. "Debtor settlement account" means any account or other means or 12 device in which payments, deposits, or other transfers from a debtor are 13 arranged, held, or transferred by or to a debt settlement company for 14 the accumulation of the debtor's funds in anticipation of proffering an 15 adjustment or settlement of a debt or obligation of the debtor. 16 5. "Debt settlement company" means any person: 17 (a) engaging in, or holding themself or itself out as engaging in, the 18 business of providing debt settlement services in exchange for or in 19 expectation of any compensation or gain; or 20 (b) soliciting for or acting on behalf of any person engaging in, or 21 holding themself or itself out as engaging in, the business of providing 22 debt settlement services in exchange for or in expectation of any 23 compensation or gain; provided, however, that "debt settlement company" 24 shall not include: 25 (i) the following exempt persons: 26 (A) any attorney licensed to practice law in this state when acting in 27 the ordinary practice of law and through the entity used by the attorney 28 in the ordinary practice of law, and not holding themself out as a debt 29 settlement company, and not providing debt settlement services, except 30 as incidental to legal representation; or 31 (B) any public officer while acting in an official capacity and any 32 person acting under court order; or 33 (C) any person while performing services incidental to the dissol- 34 ution, winding up, or liquidation of a partnership, corporation, or 35 other business enterprise; or 36 (D) any bank, trust company, savings bank, savings and loan associ- 37 ation, or credit union, whether incorporated, chartered, or organized 38 under the laws of this state or any other state or the United States, or 39 any operating subsidiary of any such bank, trust company, savings bank, 40 savings and loan association, or credit union. 41 (ii) such other persons as may be specifically exempted by the super- 42 intendent in their sole discretion and consistent with the purposes of 43 this article and the rules and regulations promulgated hereunder. 44 6. "Debt settlement services" means: 45 (a) offering to provide or providing advice or services, or offering 46 to act or acting as an intermediary between or on behalf of a debtor and 47 one or more of the debtor's creditors, where the primary purpose of the 48 advice, service, or action is to obtain a settlement, adjustment, or 49 satisfaction of the debtor's unsecured debt to a creditor in an amount 50 less than the principal amount of the debt or in an amount less than the 51 current outstanding balance of the debt; or 52 (b) offering to provide services related to or providing services 53 advising, encouraging, assisting, or counseling a debtor to accumulate 54 funds for the primary purpose of proposing, obtaining, or seeking to 55 obtain a settlement, adjustment, or satisfaction of the debtor's unse- 56 cured debt to a creditor in an amount less than the principal amount of
A. 1427 8 1 the debt or in an amount less than the current outstanding balance of 2 the debt; provided, however, that debt settlement services shall not 3 include: 4 (i) "budget planning" as defined in section four hundred fifty-five of 5 the general business law; or 6 (ii) the services of an attorney in providing information, advice, or 7 legal representation with respect to filing a case or proceeding under 8 Title 11 of the United States Code. 9 7. "Debt settlement services agreement" means a contract or other 10 agreement with a debtor related to the provision of debt settlement 11 services. 12 8. "Enrollment fee" means any fee, obligation, or compensation paid or 13 to be paid by the debtor to a debt settlement company in consideration 14 of or in connection with establishing a debt settlement services agree- 15 ment. 16 9. "Maintenance fee" means any fee, obligation, or compensation paid 17 or to be paid by a debtor to a debt settlement company in consideration 18 of or in connection with maintaining the relationship and services 19 provided by a debt settlement company in accordance with a debt settle- 20 ment services agreement. 21 10. "Person" means an individual, partnership, limited liability 22 company, corporation, association, or any other legal entity. 23 11. "Principal amount of the debt" means the total amount owed by a 24 debtor to one or more creditors for a debt that is included in a debt 25 settlement services agreement at the time when the debtor enters into 26 such agreement. 27 12. "Settlement fee" means any fee, obligation, or compensation paid 28 or to be paid by a debtor to a debt settlement company in consideration 29 of or in connection with an agreement or other arrangement on the part 30 of a creditor to accept less than the principal amount of the debt as 31 satisfaction of the creditor's claim against the debtor. 32 § 588-b. Doing business without license prohibited. 1. Except as 33 provided in subdivision three of this section, no person shall engage in 34 the business of a debt settlement company in this state without first 35 obtaining a license from the superintendent in accordance with the 36 licensing procedure provided in this article and such rules and regu- 37 lations as may be promulgated hereunder. 38 2. The business of a debt settlement company is conducted in this 39 state if the debt settlement company, its employees, or its agents are 40 located in this state or if the debt settlement company advertises, 41 solicits, offers, or contracts to provide debt settlement services to 42 debtors then resident in this state. 43 3. If a debt settlement company is licensed under this article, subdi- 44 vision one of this section does not apply to any employee of such licen- 45 see. 46 § 588-c. Application for license. 1. Application for a license 47 required under this article shall be in writing, under oath, and in the 48 form prescribed by the superintendent, and shall contain the following: 49 (a) the exact name and complete street address of the applicant and, 50 if applicable, its date of incorporation or organization; 51 (b) the name and complete business and residential address and occupa- 52 tion of each officer and director of the applicant and each person that 53 owns at least ten percent of the shares or other ownership interests of 54 the applicant; 55 (c) the complete street address of the principal office from which the 56 business is to be conducted;
A. 1427 9 1 (d) if the applicant has one or more branches, subsidiaries, or affil- 2 iates located in this state, soliciting business in this state, or doing 3 business with residents of this state, the complete address of each such 4 place of business; and 5 (e) such other pertinent information as the superintendent may 6 require, including but not limited to evidence indicating that the 7 applicant, or an officer, director, or manager of such applicant has at 8 least one year of experience in financial services or related fields 9 applicable to debt settlement services. 10 2. An applicant shall file a master application for its principal 11 office and supplemental applications for each branch office that will 12 conduct the business of a debt settlement company in this state. 13 3. Upon original application for a license or licenses, the applicant 14 shall pay an investigation fee in an aggregate amount as prescribed 15 pursuant to section eighteen-a of this chapter. No additional investi- 16 gation fee shall be required for any subsequent application for a 17 license unless such application is subsequent to a denial of a license 18 or to a revocation, suspension, surrender, or termination of a license; 19 provided, however, that an application to establish a branch office of 20 the licensee shall be accompanied by the fee prescribed in section eigh- 21 teen-a of this chapter. 22 4. As a condition for the issuance and retention of a license, and 23 subject to such regulations as the superintendent shall prescribe, 24 applicants for a license shall file with the superintendent a surety 25 bond in favor or the superintendent, issued by a bonding company or 26 insurance company authorized to do business in this state, and in a form 27 satisfactory to the superintendent. 28 (a) In lieu of the surety bond required by this subdivision, an appli- 29 cant may pledge to the superintendent and maintain in a pledge account 30 with such banks, savings banks, savings and loan associations, trust 31 companies, national banks, federal savings banks, or federal savings and 32 loan associations in the state as such licensee may designate and the 33 superintendent may approve: 34 (i) interest-bearing bills, notes, bonds, debentures, or other obli- 35 gations issued or guaranteed by the United States or any state or other 36 local governmental entity or any instrumentality thereof, bearing a 37 rating of one of the three highest grades by a nationally recognized 38 statistical rating organization that has been engaged in rating state 39 and municipal issues for a period of not less than five years; 40 (ii) dollar deposits; or 41 (iii) such other assets or letters of credit as the superintendent 42 shall by rule or regulation permit. 43 (b) Except as provided hereunder, the principal amount of such surety 44 bond or deposit shall be two hundred fifty thousand dollars. The super- 45 intendent may: 46 (i) require a larger bond or deposit if the superintendent determines, 47 in their sole discretion, that a licensee has engaged in a pattern of 48 conduct resulting in bona fide debtor complaints of misconduct and that 49 such increased bond or deposit is necessary for the protection of 50 debtors; or 51 (ii) increase or decrease the amount of such bond or deposit based 52 upon the applicant's or licensee's financial condition, business plan, 53 business experience, or any other factor the superintendent considers 54 appropriate. 55 (c) The proceeds of such surety bond or deposit shall constitute a 56 trust fund to be used exclusively:
A. 1427 10 1 (i) to reimburse fees that have been improperly charged to or 2 collected from debtors with respect to the business of a debt settlement 3 company in this state, as such business is described in section five 4 hundred eighty-eight-b of this article; 5 (ii) to reimburse amounts that have not been properly distributed to 6 creditors or properly returned to debtors with respect to the business 7 of a debt settlement company in this state, as such business is 8 described in section five hundred eighty-eight-b of this article; and 9 (iii) to pay outstanding banking department examination costs and 10 assessments. 11 § 588-d. Conditions for issuance of a license; procedure where appli- 12 cation denied. Upon the filing of an application for a license, if the 13 superintendent shall find that the financial responsibility, experience, 14 character, and general fitness of the applicant, and of the control 15 persons, officers, and directors thereof are such as to command the 16 confidence of the community and to warrant belief that the business will 17 be operated honestly, fairly, and efficiently within the purposes of 18 this article, the superintendent shall thereupon issue a license in 19 duplicate to engage in debt settlement services in accordance with the 20 provisions of this article. The superintendent shall transmit one copy 21 of such license to the applicant and file the other in the office of the 22 department. Such license shall remain in full force and effect until it 23 is surrendered by the licensee or revoked, suspended, or terminated as 24 hereinafter provided. If the superintendent shall not so find, they 25 shall not issue such license and shall notify the applicant of the 26 denial. 27 § 588-e. License provisions. Each license issued under this article 28 shall state the principal office address and, if applicable, the address 29 of the branch office for which it was issued. Such license shall state 30 fully the name of the licensee and, if applicable, the date and place of 31 its incorporation or organization. A copy of such license shall be prom- 32 inently posted in the principal office and, if applicable, such branch 33 office. Such license shall not be transferable or assignable. In the 34 event the location at which the business is to be conducted shall be 35 changed, the licensee shall forthwith notify the superintendent who 36 shall thereupon without charge attach to the license a rider setting 37 forth such changed location. 38 § 588-f. Changes in officers or directors of licensee. In the event 39 that there shall be any change among the officers or directors of any 40 licensee, the licensee shall promptly notify the superintendent of the 41 name, address, and occupation of each new officer or director and 42 provide such other information as the superintendent may require. 43 § 588-g. Changes in control. 1. It shall be unlawful except with the 44 prior approval of the superintendent for any action to be taken which 45 results in a change of control of the business of a licensee. Prior to 46 any change of control, the person desirous of acquiring control of the 47 business of a licensee shall make written application to the superinten- 48 dent and pay an investigation fee as prescribed pursuant to section 49 eighteen-a of this chapter to the superintendent. The application shall 50 contain such information as the superintendent may prescribe as neces- 51 sary or appropriate for the purpose of making the determination required 52 by subdivision two of this section. 53 2. The superintendent shall approve or disapprove the proposed change 54 of control of a licensee in accordance with the provisions of section 55 five hundred eighty-eight-d of this article.
A. 1427 11 1 3. As used in this section, the term "control" means the possession, 2 directly or indirectly, of the power to direct or cause the direction of 3 the management and policies of a licensee, whether through the ownership 4 of voting stock of such licensee, the ownership of voting stock of any 5 person which possesses such power or otherwise. Control shall be 6 presumed to exist if any person, directly or indirectly, owns, controls 7 or holds with power to vote ten percent or more of the voting stock of 8 any licensee or of any person which owns, controls or holds with power 9 to vote ten percent or more of the voting stock of any licensee, but no 10 person shall be deemed to control a licensee solely by reason of being 11 an officer or director of such licensee or person. The superintendent 12 may in their discretion, upon the application of a licensee or any 13 person who, directly or indirectly, owns, controls or holds with power 14 to vote or seeks to own, control or hold with power to vote any voting 15 stock of such licensee, determine whether or not the ownership, control 16 or holding of such voting stock constitutes or would constitute control 17 of such licensee for purposes of this section. 18 § 588-h. Grounds for suspension, revocation, or termination of 19 license; procedure. 1. In addition to the authority set forth in subdi- 20 vision two of this section, the superintendent may suspend or revoke any 21 license issued under this article if, after notice and a hearing, the 22 superintendent shall find that: 23 (a) the licensee has violated any provisions of this article, or of 24 any rule or regulation made by the superintendent under and within the 25 authority of this article; 26 (b) any fact or condition exists which, if it had existed at the time 27 of the original application for such license, would have warranted the 28 superintendent in refusing originally to issue such license; or 29 (c) the licensee or an officer, director, or control person of the 30 licensee has been convicted of a crime against the laws of this state or 31 any other state or of the United States involving moral turpitude or 32 fraudulent or dishonest actions, or a final judgment in a court of 33 competent jurisdiction has been entered against the licensee or an offi- 34 cer, director, or control person of the licensee in a civil action aris- 35 ing from fraud, misrepresentation, or deceit. 36 2. (a) The superintendent may, for good cause, without notice or a 37 hearing, issue an order suspending any license issued pursuant to this 38 article for a period not exceeding ninety days, pending investigation. 39 "Good cause", as used in this subdivision, shall exist only when the 40 licensee has defaulted or is likely to default in performing its finan- 41 cial engagements or engages or has engaged in dishonest or inequitable 42 practices which may cause substantial harm to the persons afforded the 43 protection of this article. 44 (b) The superintendent may, in their sole discretion, without notice 45 or a hearing, issue an order suspending any license issued pursuant to 46 the authority of this article upon the failure of such licensee to make 47 any payments as required by this chapter. 48 (c) The superintendent may, in their sole discretion, without notice 49 or a hearing, issue an order suspending any license issued pursuant to 50 the authority of this article: 51 (i) thirty days after the date the licensee fails to file any report 52 required under this article to be filed by it with the superintendent; 53 (ii) immediately upon the licensee filing a petition in bankruptcy; 54 (iii) at least thirty days after the licensee has had filed against it 55 a petition in bankruptcy; or
A. 1427 12 1 (iv) immediately upon the receipt by the superintendent of notice that 2 the surety bond required pursuant to section five hundred eighty-eight-c 3 of this article is no longer in effect or that the value of assets in 4 the pledge account is less than the required amount. 5 3. If the superintendent has issued an order suspending a license 6 issued pursuant to the authority of this article pursuant to paragraph 7 (a) of subdivision two of this section, such license may be reinstated 8 if the superintendent determines, in their sole discretion after inves- 9 tigation, that good cause therefor did not exist or no longer exists. If 10 the superintendent has issued an order suspending a license issued 11 pursuant to paragraph (b) or (c) of subdivision two of this section, 12 such license may be reinstated, if the superintendent determines, in 13 their sole discretion, that the licensee has cured all deficiencies set 14 forth in such order by the close of business ninety days after the date 15 of such suspension order, including, without limitation, making any 16 overdue payment, having any such bankruptcy petition dismissed, or 17 having such bond reinstated or depositing all required additional 18 assets. Otherwise, in the case of a suspension pursuant to paragraph (b) 19 or (c) of subdivision two of this section, unless the superintendent 20 has, in their sole discretion, extended such suspension, all licenses of 21 such licensee shall be deemed to be automatically terminated by opera- 22 tion of law at the close of business on such ninetieth day. 23 4. Except as provided for in subdivision two of this section, no 24 license shall be revoked or suspended except after notice and a hearing 25 thereon. 26 5. With the prior consent of the superintendent, any licensee may 27 surrender any license by delivering to the superintendent written notice 28 that it thereby surrenders such license, but such surrender shall not 29 affect such licensee's civil or criminal liability for acts committed 30 prior to such surrender or its obligations to the superintendent for 31 assessments, fees, or administrative actions with respect to the periods 32 before such surrender. 33 6. No revocation, suspension, termination, or surrender of any license 34 shall impair or affect the obligation of any pre-existing lawful 35 contract between the licensee and any person. 36 7. Every license issued hereunder shall remain in force and effect 37 until the same shall have been surrendered, revoked, suspended, or 38 terminated in accordance with the provisions of this article, but the 39 superintendent shall have authority to reinstate a suspended license or 40 to issue a new license to a licensee whose license shall have been 41 revoked if no fact or condition then exists which would have warranted 42 the superintendent in refusing originally to issue such license under 43 this article. 44 8. Whenever the superintendent shall revoke or suspend a license 45 issued pursuant to this article, they shall forthwith execute in dupli- 46 cate a written order to that effect. The superintendent shall file one 47 copy of such order in the office of the department and shall forthwith 48 serve the other copy upon the licensee. Any such order may be reviewed 49 in the manner provided by article seventy-eight of the civil practice 50 law and rules. Such application for review as authorized by this section 51 must be made within thirty days from the date of such order of suspen- 52 sion or revocation. 53 9. Whenever a license shall have terminated in accordance with this 54 article, the superintendent shall notify the licensee that the license 55 has terminated and that the licensee may not engage in the business of a 56 debt settlement company in this state.
A. 1427 13 1 § 588-i. Advertising and marketing practices. 1. A debt settlement 2 company shall not, expressly or by implication, make any unfair or 3 deceptive representations, or any omissions of material facts, in any of 4 its advertising or marketing communications concerning debt settlement 5 services. 6 2. All advertising and marketing communications concerning debt 7 settlement services shall disclose the following information clearly and 8 conspicuously: "Debt settlement services are not appropriate for every- 9 one. Failure to pay your monthly bills in a timely manner will result in 10 increased balances and will harm your credit rating. Not all creditors 11 will agree to reduce the amount you owe, and they may pursue collection, 12 including lawsuits." 13 3. All advertising and marketing communications of a licensed debt 14 settlement company concerning debt settlement services shall indicate 15 that the debt settlement company is licensed by the department and shall 16 contain the name and office address of such debt settlement company, 17 which shall conform to a name and address on record with the department. 18 § 588-j. Individualized financial analysis; statement. 1. Prior to 19 entering into a debt settlement services agreement, a debt settlement 20 company shall prepare and provide to the debtor in writing and retain a 21 copy of: 22 (a) an individualized financial analysis, including a listing of the 23 debtor's income, expenses, and debts; and 24 (b) a statement containing: 25 (i) a description of the services to be provided under the proposed 26 debt settlement services agreement; 27 (ii) a good faith estimate of the time it will take to complete all 28 steps necessary for a settlement of each debt included under the 29 proposed debt settlement services agreement; 30 (iii) the total amount of debt owed to each creditor included under 31 the proposed debt settlement services agreement; 32 (iv) the total amount of money estimated to be necessary to complete 33 all steps necessary for a settlement of each debt included under the 34 proposed debt settlement services agreement; and 35 (v) the monthly targeted amount of money necessary to complete all 36 steps necessary for a settlement of each debt included under the 37 proposed debt settlement services agreement. 38 2. A debt settlement company shall not enter into a debt settlement 39 services agreement unless it makes written determinations, supported by 40 the financial analysis, that: 41 (a) the debtor can reasonably meet the requirements of such proposed 42 debt settlement services agreement, including the fees and the savings 43 goals; and 44 (b) such proposed debt settlement services agreement will be suitable 45 for the debtor at the time it is to be signed. 46 § 588-k. Required pre-agreement disclosures and warnings. 1. Before 47 the debtor signs a debt settlement services agreement, the debt settle- 48 ment company shall provide an oral and written notice to the debtor that 49 clearly and conspicuously discloses all of the following: 50 (a) debt settlement services may not be suitable for all debtors; 51 (b) using debt settlement services likely will harm the debtor's cred- 52 it history, credit rating, and credit score; 53 (c) using debt settlement services does not stop creditor collection 54 activity, including creditor lawsuits and garnishments; 55 (d) not all creditors will accept a reduction in the balance, interest 56 rate, or fees a debtor owes;
A. 1427 14 1 (e) the debtor should inquire about other means of dealing with debt, 2 including but not limited to budget planning and bankruptcy; 3 (f) the debtor remains obligated to make periodic or scheduled 4 payments to creditors while participating in a debt settlement program; 5 (g) the failure to make periodic or scheduled payments to a creditor 6 is likely to: 7 (i) harm the debtor's credit history, credit rating, and/or credit 8 score; 9 (ii) lead the creditor to increase lawful collection activity, includ- 10 ing litigation, garnishment of the debtor's wages, and judgment liens on 11 the debtor's property; and 12 (iii) lead to the imposition by the creditor of interest charges, late 13 fees, and other penalty fees, increasing the amount owed by the debtor; 14 and 15 (h) the debtor may be required to pay taxes on any amount of debt that 16 is forgiven. 17 2. The written notice required by subdivision one of this section 18 shall be entitled "Debtor Notice and Rights Form". 19 3. Prior to signing a debt settlement services agreement, the debtor 20 shall sign and date an acknowledgment form at the end of the Debtor 21 Notice and Rights Form. The acknowledgment form shall state: "I, the 22 debtor, have received from the debt settlement company a copy of the 23 form entitled Debtor Notice and Rights Form." The debt settlement compa- 24 ny or its representative shall also sign and date the acknowledgment 25 form, which shall include the name and address of the debt settlement 26 company. The acknowledgment form shall be in duplicate and incorporated 27 into the Debtor Notice and Rights Form. The original acknowledgment form 28 shall be retained by the debt settlement company, and the duplicate copy 29 shall be given to the debtor. 30 4. The requirements of this section are satisfied if the debt settle- 31 ment company gives the debtor the following warning verbatim, both oral- 32 ly and in writing, with the caption "DEBTOR NOTICE AND RIGHTS FORM" in 33 at least twenty-eight-point font and the remaining portion in at least 34 fourteen-point font, before the debtor signs a debt settlement services 35 agreement: 36 "DEBTOR NOTICE AND RIGHTS FORM 37 CAUTION 38 Using debt settlement services will LIKELY HARM your credit history, 39 credit rating, and credit score. 40 We CANNOT GUARANTEE that you will successfully reduce or eliminate 41 your debt. 42 YOU REMAIN OBLIGATED TO MAKE PAYMENTS TO YOUR CREDITORS. If you stop 43 paying your creditors, there is a strong likelihood some or all of the 44 following may happen: 45 - CREDITORS MAY STILL CONTACT YOU AND TRY TO COLLECT. 46 - CREDITORS MAY STILL SUE YOU FOR THE MONEY YOU OWE. 47 - YOUR WAGES OR BANK ACCOUNT MAY STILL BE GARNISHED. 48 - LIENS MAY STILL BE PLACED ON YOUR PROPERTY. 49 - YOUR CREDIT HISTORY, CREDIT RATING, AND/OR CREDIT SCORE LIKELY WILL 50 BE HARMED. 51 - THE AMOUNT OF MONEY YOU OWE MAY INCREASE DUE TO CREDITOR IMPOSITION 52 OF INTEREST CHARGES, LATE FEES, AND OTHER PENALTY FEES. 53 - NOT ALL CREDITORS WILL AGREE TO ACCEPT A BALANCE REDUCTION. 54 IF WE DO SETTLE YOUR DEBT, YOU MAY BE REQUIRED TO PAY TAXES ON THE 55 AMOUNT FORGIVEN.
A. 1427 15 1 DEBT SETTLEMENT SERVICES ARE NOT RIGHT FOR EVERYONE. YOU SHOULD 2 CONSIDER ALL YOUR OPTIONS FOR ADDRESSING YOUR DEBT, SUCH AS BUDGET PLAN- 3 NING OR A BANKRUPTCY FILING. 4 YOUR RIGHT TO CANCEL 5 If you sign a debt settlement services agreement, you have the right 6 to cancel at any time and receive a full refund of all unearned fees you 7 have paid to the debt settlement company and all funds placed in your 8 debtor settlement account that have not been paid to any creditors. If 9 you cancel within ninety days of signing the debt settlement services 10 agreement you also have the right to receive a full refund of any 11 enrollment fees you have paid. 12 ACKNOWLEDGMENT BY DEBTOR 13 I, the debtor, have received from the debt settlement company a copy 14 of the form entitled Debtor Notice and Rights Form." 15 § 588-l. Debt settlement services agreements. 1. A debt settlement 16 company shall not provide debt settlement services to a debtor without a 17 written debt settlement services agreement signed and dated by both the 18 debtor and the debt settlement company. 19 2. Any debt settlement services agreement entered into in violation of 20 the provisions of this section is void. 21 3. Each debt settlement company shall submit to the banking department 22 any form of debt settlement services agreement it intends to use. 23 4. A debt settlement services agreement shall disclose all of the 24 following clearly and conspicuously: 25 (a) the name and address of the debtor; 26 (b) the date of execution of the debt settlement services agreement; 27 (c) the legal name of the debt settlement company, including any other 28 business names used in this state by the debt settlement company; 29 (d) the complete street address of the debt settlement company, which 30 shall conform to an address on record with the department; 31 (e) the license number of the principal office and, if applicable, of 32 the branch office under which the debt settlement company is licensed in 33 this state; 34 (f) a toll-free telephone number at which the debtor may speak with a 35 representative of the debt settlement company during normal business 36 hours; 37 (g) a complete list of the debtor's accounts, debts, and obligations 38 covered by the debt settlement services agreement, including the name of 39 each creditor and the principal amount of each debt; 40 (h) a description of the services to be provided by the debt settle- 41 ment company, including the expected time frame for settlement for each 42 account, debt, or obligation included in paragraph (g) of this subdivi- 43 sion; 44 (i) an itemized list of all fees, including any enrollment fee and 45 settlement fees to be paid by the debtor to the debt settlement company, 46 and the date, approximate date, or circumstances under which each fee 47 will become due; 48 (j) a good faith estimate of the total amount of all fees to be 49 collected by the debt settlement company from the debtor for the 50 provision of debt settlement services under the debt settlement services 51 agreement; 52 (k) a statement of the proposed savings goals for the debtor, stating: 53 (i) the amount to be saved per month; 54 (ii) the time period over which the savings goals extend; 55 (iii) the amount of money the debtor must save before a settlement 56 offer will be made to each of the debtor's creditors; and
A. 1427 16 1 (iv) the total amount of the savings expected to be paid by the debtor 2 pursuant to the terms of the debt settlement services agreement; 3 (l) the written individualized financial analysis required by section 4 five hundred eighty-eight-j of this article; 5 (m) a written notice to the debtor stating: 6 (i) that the debtor may cancel the debt settlement services agreement 7 at any time; and 8 (ii) that upon such cancellation: 9 (A) all powers of attorney granted to the debt settlement company by 10 the debtor shall be considered revoked and voided; and 11 (B) the debtor may be entitled to a refund. The terms of such refund 12 shall also be stated and shall be consistent with the requirements of 13 section five hundred eighty-eight-o of this article; 14 (n) a form the debtor may use to cancel the debt settlement services 15 agreement pursuant to the provisions of section five hundred eighty- 16 eight-o of this article. The form shall disclose clearly and conspicu- 17 ously how the debtor can cancel the debt settlement services agreement, 18 including applicable addresses, telephone numbers, facsimile numbers, 19 and electronic mail addresses the debtor can use to cancel the debt 20 settlement services agreement; and 21 (o) a clear and conspicuous notice to the debtor that the debtor may 22 contact the department with any questions or complaints regarding the 23 debt settlement company along with the address, telephone number and 24 internet website of the department. 25 5. (a) A debt settlement services agreement may confer on a debt 26 settlement company a power of attorney to settle the debtor's debt for 27 no more than fifty percent of the principal amount of the debt. An 28 agreement may not confer a power of attorney to settle a debt for more 29 than fifty percent of that amount, but may confer a power of attorney to 30 negotiate with creditors of the debtor on behalf of the debtor. A debt 31 settlement services agreement must provide that the debt settlement 32 company will obtain the assent of the debtor after a creditor has 33 assented to a settlement for more than fifty percent of the principal 34 amount of the debt. 35 (b) A debt settlement services agreement may not provide for applica- 36 tion of the law of any jurisdiction other than the United States and 37 this state. 38 6. If a debt settlement company communicates with a debtor primarily 39 in a language other than English, then the debt settlement company shall 40 furnish to the debtor a written translation in that other language of 41 all the disclosures and documents required by this article. 42 § 588-m. Fees. 1. The types of fees that a debt settlement company may 43 charge a debtor are the following: 44 (a) enrollment fees; and 45 (b) settlement fees. 46 2. All fee types not included under subdivision one of this section 47 are prohibited, including maintenance fees. 48 3. The amount of an enrollment fee charged by a debt settlement compa- 49 ny shall not exceed fifty dollars or such other amount as set by the 50 superintendent. 51 4. The amount of the settlement fee charged by a debt settlement 52 company with respect to each debt covered by a debt settlement services 53 agreement shall not exceed the lesser of: 54 (a) the amount that is reasonable and commensurate to the debt settle- 55 ment services provided to the debtor; and 56 (b) the amount that is twenty percent of the difference between:
A. 1427 17 1 (i) the principal amount of the debt; and 2 (ii) the amount: 3 (A) paid by the debt settlement company to the creditor pursuant to 4 the settlement negotiated by the debt settlement company on behalf of 5 the debtor as full and complete satisfaction of the creditor's claim 6 with regard to that debt; or 7 (B) negotiated by the debt settlement company and paid by the debtor 8 to the creditor pursuant to a settlement negotiated by the debt settle- 9 ment company on behalf of the debtor as full and complete satisfaction 10 of the creditor's claim with regard to that debt. 11 5. A debt settlement company shall not collect any settlement fee from 12 a debtor until: 13 (a) the creditor enters into a legally enforceable agreement with the 14 debtor to accept funds in a specific dollar amount as full and complete 15 satisfaction of the creditor's claim with regard to that debt; and 16 (b) those funds are provided to the creditor: 17 (i) by the debt settlement company on behalf of the debtor; or 18 (ii) directly by the debtor pursuant to a settlement negotiated by the 19 debt settlement company. 20 6. It shall be unlawful to split or divide the provision of debt 21 settlement services to a debtor into separate debt settlement services 22 agreements for the purpose of collecting additional fees from such 23 debtor. 24 § 588-n. Debtor settlement accounts; monthly accounting. 1. A debt 25 settlement company that receives funds from a debtor shall hold all 26 funds received for a debtor settlement account in a properly designated 27 bank account in a federally insured depository institution. 28 (a) Such funds shall: 29 (i) constitute trust funds owned by the debtor from whom they were 30 received; 31 (ii) remain the property of such debtor until the debt settlement 32 company disburses the funds to a creditor on behalf of such debtor; 33 (iii) be kept separate and apart at all times from funds belonging to 34 the debt settlement company or any of its officers, employees, or 35 agents; and 36 (iv) be deposited in such bank account not later than the end of the 37 business day following receipt by the debt settlement company or its 38 agent. 39 (b) A debt settlement company or its agent that maintains one or more 40 debtor settlement accounts shall obtain and preserve a written agreement 41 from each bank in which any such account is maintained. Such written 42 agreement shall expressly provide that the funds in such debtor settle- 43 ment account shall be subject to no right, charge, security interest, 44 lien, or claim of any kind in favor of such bank or any person claiming 45 through such bank. 46 (c) Any interest earned on a debtor settlement account shall be cred- 47 ited to the debtor. If the funds of multiple debtors are kept in a 48 single interest earning bank account, then the interest earned shall be 49 deposited pro rata among the debtors whose funds are in the account. 50 (d) A debt settlement company may not hold funds received for a debtor 51 settlement account in an account administered by a person that gives or 52 accepts any money or other compensation in exchange for referrals of 53 business involving the debt settlement company. 54 2. A debt settlement company shall, no less than monthly, provide each 55 debtor with which it has a debt settlement services agreement a state- 56 ment of fees paid, settlements completed, remaining debts and, if funds
A. 1427 18 1 are held in a bank account pursuant to subdivision one of this section, 2 account balances. 3 3. Nothing in this article requires the establishment of a debtor 4 settlement account if no debtor funds other than enrollment fees or 5 earned settlement fees are held or controlled by a debt settlement 6 company. 7 § 588-o. Cancellation of debt settlement services agreement; right to 8 refunds. 1. A debtor may cancel a debt settlement services agreement at 9 any time until after the debt settlement company has fully performed 10 each service the debt settlement company contracted to perform or 11 represented that it would perform. 12 2. If a debtor cancels a debt settlement services agreement not later 13 than ninety days after the date of the execution of the debt settlement 14 services agreement or at any time upon a violation of a provision of 15 this article by the debt settlement company, the debt settlement company 16 shall refund to the debtor: 17 (a) all fees paid to the debt settlement company by the debtor, with 18 the exception of any earned settlement fee; and 19 (b) all funds provided by the debtor to the debt settlement company 20 that: 21 (i) have accumulated in a debtor settlement account; and 22 (ii) the debt settlement company has not disbursed to creditors. 23 3. If a debtor cancels a debt settlement services agreement later than 24 ninety days after the date of the execution of the debt settlement 25 services agreement and for any reason other than for a violation of a 26 provision of this article by the debt settlement company, the debt 27 settlement company shall refund to the debtor: 28 (a) all fees paid to the debt settlement company by the debtor, with 29 the exception of any earned settlement fee and any enrollment fee; and 30 (b) all funds provided by the debtor to the debt settlement company 31 that: 32 (i) have accumulated in a debtor settlement account; and 33 (ii) the debt settlement company has not disbursed to creditors. 34 4. A debt settlement company shall make any refund required under this 35 section within five business days after receipt of written notice of 36 cancellation, and shall include with such refund a full statement of 37 account showing: 38 (a) the fees received by the debt settlement company from the debtor; 39 (b) the fees refunded to the debtor by the debt settlement company; 40 (c) the payments made by the debt settlement company to creditors on 41 behalf of the debtor; 42 (d) the settlement fees earned, if any, by the debt settlement company 43 by settling debt on behalf of the debtor; 44 (e) the savings of the debtor held by the debt settlement company 45 immediately prior to such refund; and 46 (f) the savings of the debtor refunded to the debtor by the debt 47 settlement company. 48 5. Upon cancellation of a debt settlement services agreement by the 49 debtor: 50 (a) all powers of attorney and direct debit authorizations granted to 51 the debt settlement company by the debtor shall be considered revoked 52 and voided; and 53 (b) the debt settlement company shall immediately take any action 54 necessary to reflect cancellation of the debt settlement services agree- 55 ment, including but not limited to notifying the recipient of any direct 56 debit authorization.
A. 1427 19 1 6. Upon the cancellation of a debt settlement services agreement, the 2 debt settlement company shall provide timely written notice of the 3 cancellation of such agreement to each of the creditors with whom the 4 debt settlement company has had any prior communication on behalf of the 5 debtor in connection with the provision of any debt settlement services. 6 § 588-p. Obligation of good faith. A debt settlement company shall act 7 in good faith in all matters under this article. 8 § 588-q. Prohibited activities. 1. No person, except a licensee, may 9 make any representation, directly or indirectly, orally or in writing 10 that they, or it is licensed under this article. 11 2. No person, other than a licensee or a person exempt from the 12 licensing requirements of this article, shall use the title "debt 13 settlement company" or the terms "debt settlement" or "debt settlement 14 services" in any advertising, marketing communication, business card, or 15 letterhead. 16 3. A debt settlement company shall not do any of the following: 17 (a) charge or collect from a debtor any fee not permitted by, in an 18 amount in excess of the maximum amount permitted by, or at a time earli- 19 er than permitted by section five hundred eighty-eight-m of this arti- 20 cle; 21 (b) include in a debt settlement services agreement any secured debt; 22 (c) advise or represent, expressly or by implication, that debtors 23 should stop making payments to their creditors; 24 (d) advise or represent, expressly or by implication, that debtors 25 should stop communicating with their creditors; 26 (e) engage in any practice that prohibits or limits the debtor or any 27 creditor from communication directly with one another; 28 (f) change the mailing address on any of a debtor's statements from a 29 creditor; 30 (g) make loans or offer credit or solicit or accept any note, mort- 31 gage, or negotiable instrument other than a check signed by the debtor 32 and dated no later than the date of signature; 33 (h) take any confession of judgment or power of attorney to confess 34 judgment against the debtor or appear as the debtor or on behalf of the 35 debtor in any judicial, administrative, or other action or proceeding; 36 (i) take any release or waiver of any obligation to be performed on 37 the part of the debt settlement company or any right of the debtor; 38 (j) advertise, display, distribute, broadcast, or televise services or 39 permit services to be advertised, displayed, distributed, broadcasted, 40 or televised, in any manner whatsoever, that contains any false, 41 misleading, or deceptive statements or representations with regard to 42 any matter involving the business of debt settlement services, including 43 but not limited to the fees to be charged, the services to be performed, 44 the results or outcomes of those services, or the effect those services 45 will have on a debtor's credit rating or on creditor collection efforts; 46 (k) receive any cash, fee, gift, bonus, premium, reward, or other 47 compensation from any person other than the debtor explicitly for the 48 provision of debt settlement services to that debtor; 49 (l) offer or provide gifts or bonuses to debtors for signing a debt 50 settlement services agreement or for referring another potential custom- 51 er or customers; 52 (m) except with the prior consent of the debtor, disclose to anyone 53 the name or any personal information of a debtor for whom the debt 54 settlement company has provided or is providing debt settlement services 55 other than to a debtor's own creditors or the debt settlement company's 56 agents or affiliates for the purpose of providing debt settlement
A. 1427 20 1 services. "Personal information of a debtor" as used herein shall 2 include but not be limited to a debtor's name, photograph, address, 3 telephone number, social security number, date of birth, driver's iden- 4 tification number, credit card number, bank account number, mother's 5 maiden name, medical or disability information, if any, as well as any 6 other identification number which a licensee may possess; 7 (n) enter into a debt settlement services agreement with a debtor 8 without first providing the disclosures and financial analysis and 9 making the determinations required by this article; 10 (o) misrepresent any material fact, make a material omission, or make 11 a false promise directed to one or more debtors in connection with the 12 solicitation, offering, contracting, or provision of debt settlement 13 services; 14 (p) violate the provisions of applicable do-not-call statutes; 15 (q) purchase debts or engage in the practice or business of debt 16 collection; 17 (r) represent or imply to a person participating in or considering 18 debt settlement services that the purchase of any ancillary goods or 19 services is required; 20 (s) use a communication which simulates in any manner a legal or judi- 21 cial process, or which gives the false appearance of being authorized, 22 issued, or approved by a government, governmental agency, or attorney- 23 at-law; or 24 (t) make a representation that the debt settlement company will 25 furnish money to pay bills or prevent attachment. 26 § 588-r. Superintendent authorized to examine. For the purpose of 27 discovering violations of this article or securing information lawfully 28 required by the superintendent hereunder, the superintendent may at any 29 time, and as often as they may determine, either personally or by a 30 person duly designated by them, investigate the business and examine the 31 books, accounts, records, and files used therein of every licensee here- 32 under. For that purpose the superintendent and their duly designated 33 representative shall have free access to the offices and place of busi- 34 ness, books, accounts, papers, records, files, safes and vaults of all 35 such licensees. The superintendent and any person duly designated by 36 them shall have authority to require the attendance of and to examine 37 under oath all persons whose testimony the superintendent may require 38 relative to such business. The expenses incurred in making any examina- 39 tion pursuant to this section shall be assessed against and paid by the 40 licensee so examined, except that traveling and subsistence expenses so 41 incurred shall be charged against and paid by licensees in such 42 proportions as the superintendent shall deem just and reasonable, and 43 such proportionate charges shall be added to the assessment of the other 44 expenses incurred upon each examination. Upon written notice by the 45 superintendent of the total amount of such assessment, the licensee 46 shall become liable for and shall pay such assessment to the superinten- 47 dent. 48 § 588-s. Licensee's books and records; reports. 1. The licensee shall 49 create and use in its business such books, accounts, and records as will 50 enable the superintendent to determine whether such licensee is comply- 51 ing with the provisions of this article and with the rules and regu- 52 lations lawfully made by the superintendent hereunder. Every licensee 53 shall preserve such books, accounts, and records for at least six years 54 by any manner permitted by this chapter. 55 2. Each licensee shall annually, on or before the first day of Febru- 56 ary, file a report with the superintendent giving such information as
A. 1427 21 1 the superintendent may require concerning the business and operations 2 during the preceding calendar year of such licensee under authority of 3 this article. Such report shall be subscribed and affirmed as true by 4 the licensee under the penalties of perjury and shall be in the form 5 prescribed by the superintendent. In addition to annual reports, the 6 superintendent may require such additional regular or special reports as 7 they may deem necessary to the proper supervision of licensees under 8 this article. Such additional reports shall be in the form prescribed by 9 the superintendent and shall be subscribed and affirmed as true under 10 the penalties of perjury. 11 3. Each licensee, within one hundred twenty days of the close of the 12 licensee's fiscal year, shall submit an independently audited financial 13 statement to the superintendent. 14 § 588-t. Penalties; noncompliance. 1. Any person who violates any 15 provision of the licensing requirements of section five hundred eighty- 16 eight-b of this article shall be guilty of a class A misdemeanor, 17 punishable as provided in articles seventy and eighty of the penal law. 18 2. Any debt settlement services agreement that does not comply with 19 the provisions of this article is void. 20 3. Any waiver by a debtor of any protection provided by or any right 21 of the debtor under this article is void. 22 4. Any attempt by any person to obtain a waiver from any debtor of any 23 protection provided by or any right or protection of the debtor or any 24 obligation or requirement of the debt settlement company under this 25 article shall be a violation of this article. 26 5. Upon proper notice of a void debt settlement services agreement, 27 the debt settlement company shall make a refund to the debtor as if the 28 debt settlement services agreement had been cancelled as provided in 29 subdivision two of section five hundred eighty-eight-o of this article. 30 6. In addition to such penalties as may otherwise be applicable by 31 law, the superintendent may, after notice and hearing as provided else- 32 where in this article, require any person found violating the provisions 33 of this article or the rules or regulations promulgated hereunder to pay 34 to the people of this state an additional penalty for each violation of 35 the article or any regulation or policy promulgated hereunder a sum not 36 to exceed an amount as determined pursuant to section forty-four of this 37 chapter for each such violation. 38 7. Nothing in this article shall create a private right of action on 39 behalf of a debtor against a debt settlement company for violations of 40 this article. 41 8. Nothing in this article shall limit any statutory or common-law 42 right of any person to bring any action in any court for any act, or the 43 right of the state to punish any person for any violation of any law. 44 § 588-u. Authority of superintendent. The superintendent is hereby 45 authorized and empowered to make, in addition hereto and not inconsist- 46 ent herewith, such general rules and regulations, and such specific 47 rulings, demands, and findings as he or she may deem necessary for the 48 proper conduct of the business authorized and licensed hereunder and for 49 the enforcement of this article. 50 § 588-v. Severability. If any word, phrase, clause, sentence, para- 51 graph, subdivision, section, or part of this article shall be adjudged 52 by any court of competent jurisdiction to be invalid, such judgment 53 shall not affect, impair, or invalidate the remainder thereof which can 54 be given effect without the invalid provision, but shall be confined in 55 its operation to the word, phrase, clause, sentence, paragraph, subdivi-
A. 1427 22 1 sion, section, or part of this article directly involved in the contro- 2 versy in which the judgment shall have been rendered. 3 § 11. This act shall take effect on the one hundred eightieth day 4 after it shall have become a law and shall apply to all debt settlement 5 services agreements entered into or offered on or after such date; 6 provided, however, that effective immediately, the superintendent of 7 financial services shall add, amend, and/or repeal any rule or regu- 8 lation the superintendent deems necessary or desirable for implementa- 9 tion of this act.