NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A5537
SPONSOR: Forrest TITLE OF BILL:
An act to amend the banking law and the civil practice law and rules, in
relation to licensing consumer debt collectors
PURPOSE OR GENERAL IDEA OF BILL:
The purpose of this bill is to protect consumers against unfair and
deceptive debt collection practices and maintain a high level of integ-
rity and professionalism in the debt collection industry, by requiring
third party debt collectors and debt buyers to obtain a license from the
Department of State.
SUMMARY OF SPECIFIC PROVISIONS:
This bill would require debt collection agencies, including those who
buy and sell consumer debt, operating in the state after May 1, 2021 to
obtain a license from the Department of Financial Services (DFS), which
would be valid for one year. The fee for a license or renewal, as well
as for changes to the name or address of the business, would be deter-
mined by DFS.
To obtain a license, the applicant would provide information including
business name, address, telephone numbers, length of time the applicant
has been a debt collection agency, and a statement of criminal histo-
ry.As deemed appropriate by the DFS superintendent, such information
would also be required of the agency's principals, partners, officers,
directors, and any person or entity controlling an interest greater than
ten percent. In addition, each applicant would be required to submit a
summary of the methods used to confirm the validity of the debts it
seeks to collect, recordkeeping policies, and whether the applicant
intends to sell debts.
The superintendent would be authorized to refuse to issue license to any
person, firm, or corporation whom he or she finds has been convicted of
any crime defined in article 155 of the penal law or article 22-A of the
general business law, or to have failed to pay any civil judgment relat-
ing to work as a debt collection agency. The superintendent could also
refuse to issue or renew a license to any applicant found to have
violated New York's Fair Debt Collection Practices Law (Article 29-H of
the General Business Law) or the federal Fair Debt Collection Practices
Act.
The Department would maintain and publish an online registry of all
licensed debt collection agencies in the state.Licenses issued to debt
collection agencies would not be transferable or assignable. Debt
collection agencies would be required to share their license number if
requested, and to, rint the license number on any advertisement, letter-
head, receipt or other printed materials.
The superintendent would also be authorized to perform investiga-
tions,conduct routine examinations and compel licensed agencies' to
share their books and records upon the superintendent's request. The
superintendent would have the power to revoke or suspend any license, or
impose a fine not less than one hundred dollars nor more than two thou-
sand dollars per violation, for failing to comply with the licensing
law, practicing fraud or misrepresentation, making a material misstate-
ment in the application, or demonstrating incompetence or untrustworthi-
ness.
Before suspension, revocation, or denial of a license, or imposition of
a fine, the debt collection agency would have a right to a hearing. As a
condition of obtaining a license, debt collection agencies would be
required to obtain surety bonding, which would be paid to the super-
intendent. The amount of the bond would range from $25,000 to $75,000,
depending on the number of people employed. The Attorney General would
also be authorized to enforce the provisions of this article by seeking
an injunction or a civil penalty of between $100 and $10,000 for each
violation. The bill also would provide for a private right of action for
consumers subject to unlicensed collection activity for the greater of
actual damages or $3,500, or both. The court could, in its discretion,
increase the award of damages to an amount up to three times the actual
damages up to $10,000, if a court finds the defendant willfully violated
the law.
The bill also includes requirements regarding recordkeeping and an annu-
al report to the DFS superintendent,and any additional reports the
superintendent may deem necessary. The bill also includes preemption
language.
JUSTIFICATION:
Federal and state laws regulate how debt collectors may communicate with
debtors and prohibit the use of certain threatening, deceptive and
unfair collection practices. Despite these legal protections, there
continue to be frequent consumer complaints regarding debt collection
practices. Due to the sensitive nature of the information used in the
course of debt collection agencies' work, and the vulnerable position
consumers may find themselves in when dealing with these agencies, it is
incumbent upon the legislature to ensure that agencies that engage in
unscrupulous or abusive practices shall not continue to operate in New
York.
To protect the interests, reputations, and financial well-being of state
residents of this state from unwarranted harm, this bill would prohibit
debt collection agencies from operating without a license. Licensure
would enable the state to hold debt collection agencies accountable and
would provide a mechanism for investigating improper behavior.
Third party debt collection agencies are currently required to be
licensed in thirty states, as well as the cities of Buffalo and New
York. This bill would provide all New York consumers with protections
against unfair and deceptive debt collection practices.
PRIOR LEGISLATIVE HISTORY:
2024: S666 (Kavanagh) - REPORTED AND COMMITTED TO FINANCE /A4088
(Gunther) reported referred to ways and means
2023: S666 (Kavanagh) - REPORTED AND COMMITTED TO FINANCE /A4088
(Gunther) referred to banks
2022: S3121 (Kavanagh) - REFERRED TO BANKS /A3041 (Gunther) - referred
to consumer affairs and protection
2021 S3121 (Kavanagh) - ADVANCED TO THIRD READING /A (Gunther) -
referred to consumer affairs and protection
2020: S2343 (Kavanagh) - REFERRED TO CONSUMER PROTECTION /A7191
(Gunther) referred to consumer affairs and protection
2019: S2343 (Kavanagh) - REFERRED TO CONSUMER PROTECTION /A7191
(Gunther) referred to consumer affairs and protection
2018: S7099 (Kavanagh) - REFERRED TO CONSUMER PROTECTION /A9766 (Titone)
reported referred to ways and means
FISCAL IMPLICATIONS:
The fiscal implications of this bill would be minimal and able to be
absorbed within the Agency's administrative resources
EFFECTIVE DATE:
This act shall take effect on the one hundred eightieth day after it
shall have become a law; provided, however that section one, two and
three of this act shall take effect January 1, 2027. The superintendent
of financial services shall allow any consumer debt collector which
submits an application prior to January 1, 2027 to operate pending the
approval or denial of the application. Effective immediately, the addi-
tion, amendment and/or repeal of any rule of regulation necessary for
the implementation of this act on its effective date are authorized to
be made and completed on or before such effective date. This act shall
not affect the validity of any civil actions or arbitrations commenced
or judgements entered prior to January 1, 2027.
