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A10629 Summary:

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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A10629 Memo:

submitted in accordance with Assembly Rule III, Sec 1(f)
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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A10629 Text:

                STATE OF NEW YORK
                   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
          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.

        A. 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:
     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:
    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.
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