|SAME AS||No Same As|
|Add Art 7 §§701 - 706, Fin Serv L|
|Regulates the practice of student debt consultants by establishing prohibitions and requiring certain disclosures.|
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NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A10629 SPONSOR: Zebrowski
TITLE OF BILL: An act to amend the financial services law, in relation to student debt consultants   PURPOSE OR GENERAL IDEA OF BILL: This bill would set standards of practice for the student debt consult- ing industry in New York.   SUMMARY OF PROVISIONS: Section 1 of this bill amends banking law by adding a new article 7 related to standards for the student debt consulting industry. The section would set forth prohibited practices, disclosure requirements, mandatory contract language, establish penalties for violations and allow the Superintendent of the Department of Financial Services to promulgate rules and regulations for the student debt consulting indus- try consistent with the purpose of the article or appropriate for effec- tive administration thereof.   JUSTIFICATION: According to a 2016 report by the Comptroller, New York student loan debt is over $82 billion and growing exponentially. Over the past decade student loan debt in New York has grown by 112%, creating financial challenges for many New Yorkers. This legislation focuses on a segment of the student loan industry that often preys on vulnerable New Yorkers. Student Debt consultants, who often advertise on late night TV, take upfront fees and make dubious claims about resolution of student loan issues that, many times, can be reached by the borrower themselves. This legislation seeks to protect New Yorkers from such exploitation.   PRIOR LEGISLATIVE HISTORY: New bill.   FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS: None noted.   EFFECTIVE DATE: This act shall take effect on the one hundredth eightieth day after it shall have become law.
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STATE OF NEW YORK ________________________________________________________________________ 10629 IN ASSEMBLY May 9, 2018 ___________ Introduced by M. of A. ZEBROWSKI -- read once and referred to the Committee on Banks AN ACT to amend the financial services law, in relation to student debt consultants The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. The financial services law is amended by adding a new arti- 2 cle 7 to read as follows: 3 ARTICLE 7 4 STUDENT DEBT CONSULTANTS 5 Section 701. Definitions. 6 702. Prohibitions. 7 703. Disclosure requirements. 8 704. Student debt consulting contracts. 9 705. Penalties and other provisions. 10 706. Rules and regulations. 11 § 701. Definitions. (a) The term "advertisement" shall include, but 12 is not limited to, all forms of marketing, solicitation, or dissem- 13 ination of information related, directly or indirectly, to securing or 14 obtaining a student debt consulting contract or services. Further, it 15 shall include all commonly recognized forms of media marketing via tele- 16 vision, radio, print media, all forms of electronic communication via 17 the internet, and all prepared sales presentations given in person or 18 over the internet to the general public. 19 (b) "Borrower" means any resident of this state who has received a 20 student loan or agreed in writing to pay a student loan or any person 21 who shares a legal obligation with such resident for repaying a student 22 loan. 23 (c) "FSA ID" means a username and password allocated to an individual 24 by the federal government to enable the individual to log in to certain 25 United States department of education websites, and may be used to sign 26 certain documents electronically. EXPLANATION--Matter in italics (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD15455-01-8A. 10629 2 1 (d) "Student loan" means any loan to a borrower to finance post-secon- 2 dary education or expenses related to post-secondary education. 3 (e) "Student debt consulting contract" or "contract" means an agree- 4 ment between a borrower and a consultant under which the consultant 5 agrees to provide student debt consulting services. 6 (f) "Student debt consultant" or "consultant" means an individual or a 7 corporation, partnership, limited liability company or other business 8 entity that, directly or indirectly, solicits or undertakes employment 9 to provide student debt consulting services. A consultant does not 10 include the following: 11 (1) a person or entity who holds or is owed an obligation on the 12 student loan while the person or entity performs services in connection 13 with the student loan; 14 (2) a bank, trust company, private banker, bank holding company, 15 savings bank, savings and loan association, thrift holding company, 16 credit union or insurance company organized under the laws of this 17 state, another state or the United States, or a subsidiary or affiliate 18 of such entity or a foreign banking corporation licensed by the super- 19 intendent of financial services or the comptroller of the currency; 20 (3) a bona fide not-for-profit organization that offers counseling or 21 advice to borrowers; or 22 (4) such other persons as the superintendent prescribes by rule. 23 (g) "Student debt consulting services" means services that a student 24 debt consultant provides to a borrower that the consultant represents 25 will help to achieve any of the following: 26 (1) stop, enjoin, delay, void, set aside, annul, stay or postpone a 27 default, bankruptcy, tax offset, or garnishment proceeding; 28 (2) obtain a forbearance, deferment, or other relief that temporarily 29 halts repayment of a student loan; 30 (3) assist the borrower with preparing or filing documents related to 31 student loan repayment; 32 (4) advise the borrower which student loan repayment plan or forgive- 33 ness program to consider; 34 (5) enroll the borrower in any student loan repayment, forgiveness, 35 discharge, or consolidation program; 36 (6) assist the borrower in re-establishing eligibility for federal 37 student financial assistance; 38 (7) assist the borrower in removing a student loan from default; or 39 (8) educate the borrower about student loan repayment. 40 § 702. Prohibitions. A student debt consultant is prohibited from 41 doing the following: 42 (a) performing student debt consulting services without a legal writ- 43 ten, fully-executed contract with a borrower that comports with the 44 provisions of this article; 45 (b) charging for or accepting any payment for student debt consulting 46 services before the full completion of all such services, including a 47 payment to be placed in escrow or any other account pending the 48 completion of such services; 49 (c) taking a power of attorney from a borrower; 50 (d) retaining any original loan document or other original document 51 related to a borrower's student loan; 52 (e) requesting that a borrower provide his or her FSA ID to the 53 consultant, or accepting a borrower's FSA ID; 54 (f) stating or implying that a borrower will not be able to obtain 55 relief on their own; 56 (g) misrepresenting, expressly or by implication, that:A. 10629 3 1 (1) the consultant is a part of, affiliated with, or endorsed or spon- 2 sored by the government, government loan programs, the United States 3 department of education, or borrowers' student loan servicers; or 4 (2) some or all of a borrower's payments to the consultant will be 5 applied towards the borrower's student loans. 6 (h) inducing or attempting to induce a student debtor to enter a 7 contract that does not fully comply with the provisions of this article; 8 or 9 (i) engaging in any unfair, deceptive, or abusive act or practice. 10 § 703. Disclosure requirements. (a) A student debt consultant shall 11 clearly and conspicuously disclose in all advertisements: 12 (1) the actual services the consultant provides to borrowers; 13 (2) that borrowers may apply for consolidation loans from the United 14 States department of education at no cost, including providing a direct 15 link in all online advertising and contact information in all print 16 advertising to the application materials for a Direct Consolidation Loan 17 from the United States department of education; 18 (3) that consolidation or other services offered by the consultant may 19 not be the best or only option for borrowers; 20 (4) that alternative federal student loan repayment plans, including 21 income-based programs, that do not require consolidating existing feder- 22 al student loans may be available; and 23 (5) that borrowers should consider consulting their student loan 24 servicer before signing any legal document concerning a student loan. 25 (b) The disclosures required by subsection (a) of this section, if 26 disseminated through print media or the internet, shall be clearly and 27 legibly printed or displayed in not less than twelve-point bold type, 28 or, if the advertisement is printed to be displayed in print that is 29 smaller than twelve point, in bold type print that is no smaller than 30 the print in which the text of the advertisement is printed or 31 displayed. 32 (c) The provisions of this section shall apply to all consultants who 33 disseminate advertisements in the state of New York or who intend to 34 directly or indirectly contact a borrower who has a student loan and is 35 in New York state. Consultants shall establish and at all times maintain 36 control over the content, form and method of dissemination of all adver- 37 tisements of their services. Further, all advertisements shall be 38 sufficiently complete and clear to avoid the possibility to mislead or 39 deceive. 40 § 704. Student debt consulting contracts. (a) A student debt consult- 41 ing contract shall: 42 (1) contain the entire agreement of the parties; 43 (2) be provided in writing to the borrower for review before signing; 44 (3) be printed in at least twelve-point type and written in the same 45 language that is used by the borrower and was used in discussions 46 between the consultant and the borrower to describe the borrower's 47 services or to negotiate the contract; 48 (4) fully disclose the exact nature of the services to be provided by 49 the consultant or anyone working in association with the consultant; 50 (5) fully disclose the total amount and terms of compensation for such 51 services; 52 (6) contain the name, business address and telephone number of the 53 consultant and the street address, if different, and facsimile number or 54 email address of the consultant where communications from the debtor may 55 be delivered;A. 10629 4 1 (7) be dated and personally signed by the borrower and the consultant 2 and be witnessed and acknowledged by a New York notary public; and 3 (8) contain the following notice, which shall be printed in at least 4 fourteen-point boldface type, completed with the name of the Provider, 5 and located in immediate proximity to the space reserved for the 6 debtor's signature: 7 "NOTICE REQUIRED BY NEW YORK LAW 8 You may cancel this contract, without any penalty or obligation, at any 9 time before midnight of 10 ......... (fifth business day after execution). 11 ......... (Name of consultant) (the "Consultant") or anyone working for 12 the Consultant may not take any money from you or ask you for money 13 until the consultant has completely finished doing everything this 14 Contract says the Consultant will do. 15 You should consider contacting your student loan servicer before signing 16 any legal document concerning your student loan. In addition, you may 17 want to visit the New York State Department of Financial Services' 18 student lending resource center at www.dfs.ny.gov/studentprotection. The 19 law requires that this contract contain the entire agreement between you 20 and the Provider. You should not rely upon any other written or oral 21 agreement or promise." 22 The Provider shall accurately enter the date on which the right to 23 cancel ends. 24 (b) (1) The borrower has the right to cancel, without any penalty or 25 obligation, any contract with a consultant until midnight of the fifth 26 business day following the day on which the consultant and the borrower 27 sign a consulting contract. Cancellation occurs when the borrower, or a 28 representative of the borrower, either delivers written notice of 29 cancellation in person to the address specified in the consulting 30 contract or sends a written communication by facsimile, by United States 31 mail or by an established commercial letter delivery service. A dated 32 proof of facsimile delivery or proof of mailing creates a presumption 33 that the notice of cancellation has been delivered on the date the 34 facsimile is sent or the notice is deposited in the mail or with the 35 delivery service. Cancellation of the contract shall release the borrow- 36 er from all obligations to pay fees or any other compensation to the 37 consultant. 38 (2) The contract shall be accompanied by two copies of a form, 39 captioned "notice of cancellation" in at least twelve-point bold type. 40 This form shall be attached to the contract, shall be easily detachable, 41 and shall contain the following statement written in the same language 42 as used in the contract, and the contractor shall insert accurate infor- 43 mation as to the date on which the right to cancel ends and the contrac- 44 tor's contact information: 45 "NOTICE OF CANCELLATION 46 Note: You may cancel this contract, without any penalty or obligation, 47 at any time before midnight of (Enter date) 48 To cancel this contract, sign and date both copies of this cancellation 49 notice and personally deliver one copy or send it by facsimile, United 50 States mail, or an established commercial letter delivery service, indi- 51 cating cancellation to the Consultant at one of the following: 52 Name of Consultant 53 Street Address 54 City, State, Zip 55 Facsimile: 56 I hereby cancel this transaction.A. 10629 5 1 Name of Borrower: 2 Signature of Borrower: 3 Date: " 4 (3) Within ten days following receipt of a notice of cancellation 5 given in accordance with this subsection, the consultant shall return 6 any original contract and any other documents signed by or provided by 7 the borrower. Cancellation shall release the borrower of all obligations 8 to pay any fees or compensation to the consultant. 9 § 705. Penalties and other provisions. (a) If the superintendent 10 finds, after notice and hearing, that a consultant has intentionally 11 violated any provision of this article, the superintendent may: (1) make 12 null and void any agreement between the borrower and the consultant; and 13 (2) impose a civil penalty of not more than ten thousand dollars for 14 each violation. 15 (b) If the consultant violates any provision of this article and the 16 borrower suffers damage because of the violation, the borrower may 17 recover actual and consequential damages and costs from the consultant 18 in an action based on this article. If the consultant recklessly 19 violates any provision of this article, the court may award attorneys' 20 fees and costs. If the consultant intentionally violates any provision 21 of this article, the court may award treble damages, attorneys' fees and 22 costs. 23 (c) Any provision of a student debt consulting contract that attempts 24 or purports to limit the liability of the consultant under this article 25 shall be null and void. Inclusion of such provision shall at the option 26 of the borrower render the contract void. Any provision in a contract 27 which attempts or purports to require arbitration of any dispute arising 28 under this article shall be void at the option of the borrower. Any 29 waiver of the provisions of this article shall be void and unenforceable 30 as contrary to public policy. 31 (d) The provisions of this article are not exclusive and are in addi- 32 tion to any other requirements, rights, remedies, and penalties provided 33 by law. 34 § 706. Rules and regulations. In addition to such powers as may 35 otherwise be prescribed by this chapter, the superintendent is hereby 36 authorized and empowered to promulgate such rules and regulations as may 37 in the judgment of the superintendent be consistent with the purposes of 38 this article, or appropriate for the effective administration of this 39 article. 40 § 2. This act shall take effect on the one hundred eightieth day after 41 it shall have become a law.