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A03525 Summary:

BILL NOA03525
 
SAME ASNo Same As
 
SPONSORDinowitz
 
COSPNSRBenedetto
 
MLTSPNSR
 
Amd §§455 & 457, Gen Bus L; amd §§579, 584-a, 584-b, 585, 36, 39 & 44, add Art 12-CC §§588-a - 588-v, Bank L
 
Provides for budget planning and debt settlement services.
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A03525 Actions:

BILL NOA03525
 
01/27/2021referred to consumer affairs and protection
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A03525 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                          3525
 
                               2021-2022 Regular Sessions
 
                   IN ASSEMBLY
 
                                    January 27, 2021
                                       ___________
 
        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.
                                                                   LBD06714-01-1

        A. 3525                             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. 3525                             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 may  determine,  either  personally  or  by  a
    20  person duly designated by him or her, investigate the business and exam-
    21  ine the books, accounts, records, and files used therein of every licen-
    22  see  hereunder.  For that purpose the superintendent and his or her duly
    23  designated representative shall have free  access  to  the  offices  and
    24  place  of  business,  books, accounts, papers, records, files, safes and
    25  vaults of all such licensees. The superintendent  and  any  person  duly
    26  designated  by him or her shall have authority to require the attendance
    27  of and to examine under oath all persons whose testimony he or  she  may
    28  require  relative  to such business. The expenses incurred in making any
    29  examination pursuant to this section shall be assessed against and  paid
    30  by  the  licensee  so  examined,  except  that traveling and subsistence
    31  expenses so incurred shall be charged against and paid by  licensees  in
    32  such  proportions  as the superintendent shall deem just and reasonable,
    33  and such proportionate charges shall be added to the assessment  of  the
    34  other  expenses  incurred  upon each examination. Upon written notice by
    35  the superintendent of the total amount of such assessment, the  licensee
    36  shall become liable for and shall pay such assessment to the superinten-
    37  dent.  If, upon review, the superintendent shall determine that the fees
    38  or service charges set by  the  licensee  are  unfair,  unreasonable  or
    39  unclear, he or she shall direct the licensee to make adjustments in said
    40  fees  and  service charges in accordance with his or her findings, which
    41  shall set forth a detailed factual basis and reasoning  supporting  such
    42  finding.
    43    §  7.  Subdivision  10 of section 36 of the banking law, as amended by
    44  section 2 of part L of chapter 58 of the laws of  2019,  is  amended  to
    45  read as follows:
    46    10. All reports of examinations and investigations, correspondence and
    47  memoranda  concerning  or  arising  out of such examination and investi-
    48  gations, including any duly authenticated copy or copies thereof in  the
    49  possession  of  any  banking  organization,  bank holding company or any
    50  subsidiary thereof (as such terms "bank holding  company"  and  "subsid-
    51  iary"  are  defined in article three-A of this chapter), any corporation
    52  or any other entity affiliated with a banking  organization  within  the
    53  meaning  of  subdivision six of this section and any non-banking subsid-
    54  iary of a corporation or any other entity which is  an  affiliate  of  a
    55  banking  organization  within  the  meaning of subdivision six-a of this
    56  section, foreign banking corporation, licensed lender,  licensed  casher

        A. 3525                             4
 
     1  of   checks,  licensed  mortgage  banker,  registered  mortgage  broker,
     2  licensed mortgage  loan  originator,  licensed  sales  finance  company,
     3  registered  mortgage  loan  servicer,  licensed  student  loan servicer,
     4  licensed  insurance  premium  finance  agency,  licensed  transmitter of
     5  money, licensed budget planner, licensed debt  settlement  company,  any
     6  other person or entity subject to supervision under this chapter, or the
     7  department,  shall  be confidential communications, shall not be subject
     8  to subpoena and shall not be made public unless, in the judgment of  the
     9  superintendent,  the  ends  of  justice and the public advantage will be
    10  subserved by the publication thereof, in which event the  superintendent
    11  may publish or authorize the publication of a copy of any such report or
    12  any  part  thereof in such manner as may be deemed proper or unless such
    13  laws specifically authorize such disclosure. For the  purposes  of  this
    14  subdivision, "reports of examinations and investigations, and any corre-
    15  spondence  and  memoranda concerning or arising out of such examinations
    16  and investigations", includes any such materials of a bank, insurance or
    17  securities regulatory agency or any unit of the  federal  government  or
    18  that  of  this  state, any other state or that of any foreign government
    19  which are considered confidential by such agency or unit and  which  are
    20  in  the possession of the department or which are otherwise confidential
    21  materials that have been shared by the department with any  such  agency
    22  or unit and are in the possession of such agency or unit.
    23    §  8.  Subdivisions 1, 2, 3 and 5 of section 39 of the banking law, as
    24  amended by section 3 of part L of chapter 58 of the laws  of  2019,  are
    25  amended to read as follows:
    26    1.  To  appear  and  explain  an apparent violation. Whenever it shall
    27  appear to the superintendent that any banking organization, bank holding
    28  company, registered mortgage broker, licensed mortgage banker,  licensed
    29  student loan servicer, registered mortgage loan servicer, licensed mort-
    30  gage  loan  originator,  licensed  lender,  licensed  casher  of checks,
    31  licensed sales finance company, licensed insurance premium finance agen-
    32  cy, licensed transmitter of money,  licensed  budget  planner,  licensed
    33  debt settlement company, out-of-state state bank that maintains a branch
    34  or branches or representative or other offices in this state, or foreign
    35  banking  corporation  licensed  by  the superintendent to do business or
    36  maintain a representative office in this state has violated any  law  or
    37  regulation,  he  or  she  may,  in his or her discretion, issue an order
    38  describing such apparent violation and requiring such banking  organiza-
    39  tion,  bank  holding company, registered mortgage broker, licensed mort-
    40  gage banker, licensed student  loan  servicer,  licensed  mortgage  loan
    41  originator,  licensed  lender, licensed casher of checks, licensed sales
    42  finance company, licensed insurance  premium  finance  agency,  licensed
    43  transmitter  of money, licensed budget planner, licensed debt settlement
    44  company, out-of-state state bank that maintains a branch or branches  or
    45  representative or other offices in this state, or foreign banking corpo-
    46  ration  to  appear  before him or her, at a time and place fixed in said
    47  order, to present an explanation of such apparent violation.
    48    2. To discontinue unauthorized or unsafe and unsound practices.  When-
    49  ever  it  shall  appear to the superintendent that any banking organiza-
    50  tion, bank holding company, registered mortgage broker,  licensed  mort-
    51  gage  banker,  licensed  student loan servicer, registered mortgage loan
    52  servicer, licensed mortgage loan originator, licensed  lender,  licensed
    53  casher  of  checks,  licensed  sales finance company, licensed insurance
    54  premium finance agency, licensed transmitter of money,  licensed  budget
    55  planner,  licensed debt settlement company, out-of-state state bank that
    56  maintains a branch or branches or representative  or  other  offices  in

        A. 3525                             5
 
     1  this  state,  or foreign banking corporation licensed by the superinten-
     2  dent to do business in this state is conducting business in an unauthor-
     3  ized or unsafe and unsound  manner,  he  or  she  may,  in  his  or  her
     4  discretion,  issue  an  order directing the discontinuance of such unau-
     5  thorized or unsafe and unsound practices, and fixing a time and place at
     6  which such banking organization, bank holding company, registered  mort-
     7  gage  broker,  licensed mortgage banker, licensed student loan servicer,
     8  registered mortgage loan servicer, licensed  mortgage  loan  originator,
     9  licensed  lender,  licensed  casher  of  checks,  licensed sales finance
    10  company, licensed insurance premium finance agency, licensed transmitter
    11  of money, licensed budget planner,  licensed  debt  settlement  company,
    12  out-of-state state bank that maintains a branch or branches or represen-
    13  tative  or  other  offices in this state, or foreign banking corporation
    14  may voluntarily appear before him or her to present any  explanation  in
    15  defense of the practices directed in said order to be discontinued.
    16    3.  To  make  good  impairment of capital or to ensure compliance with
    17  financial requirements. Whenever it shall appear to  the  superintendent
    18  that  the  capital  or  capital  stock of any banking organization, bank
    19  holding company or any subsidiary thereof which is  organized,  licensed
    20  or  registered  pursuant  to this chapter, is impaired, or the financial
    21  requirements imposed by subdivision one of section two hundred two-b  of
    22  this  chapter  or  any regulation of the superintendent on any branch or
    23  agency of a foreign banking corporation or  the  financial  requirements
    24  imposed  by  this chapter or any regulation of the superintendent on any
    25  licensed lender, registered mortgage broker, licensed  mortgage  banker,
    26  licensed  student  loan  servicer,  licensed  casher of checks, licensed
    27  sales  finance  company,  licensed  insurance  premium  finance  agency,
    28  licensed  transmitter  of  money, licensed budget planner, licensed debt
    29  settlement company, or private banker are not satisfied, the superinten-
    30  dent may, in the superintendent's discretion, issue an  order  directing
    31  that  such  banking organization, bank holding company, branch or agency
    32  of a foreign banking corporation, registered mortgage  broker,  licensed
    33  mortgage  banker,  licensed  student  loan  servicer,  licensed  lender,
    34  licensed casher of checks,  licensed  sales  finance  company,  licensed
    35  insurance   premium  finance  agency,  licensed  transmitter  of  money,
    36  licensed budget planner, licensed debt settlement  company,  or  private
    37  banker make good such deficiency forthwith or within a time specified in
    38  such order.
    39    5.  To keep books and accounts as prescribed. Whenever it shall appear
    40  to the superintendent that any banking organization, bank holding compa-
    41  ny, registered  mortgage  broker,  licensed  mortgage  banker,  licensed
    42  student loan servicer, registered mortgage loan servicer, licensed mort-
    43  gage  loan  originator,  licensed  lender,  licensed  casher  of checks,
    44  licensed sales finance company, licensed insurance premium finance agen-
    45  cy, licensed transmitter of money,  licensed  budget  planner,  licensed
    46  debt  settlement  company,  agency or branch of a foreign banking corpo-
    47  ration licensed by the superintendent to do business in this state, does
    48  not keep its books and accounts in such manner as to enable him  or  her
    49  to  readily  ascertain  its true condition, he or she may, in his or her
    50  discretion, issue an order requiring  such  banking  organization,  bank
    51  holding  company,  registered mortgage broker, licensed mortgage banker,
    52  licensed student  loan  servicer,  registered  mortgage  loan  servicer,
    53  licensed  mortgage  loan originator, licensed lender, licensed casher of
    54  checks, licensed  sales  finance  company,  licensed  insurance  premium
    55  finance  agency, licensed transmitter of money, licensed budget planner,
    56  licensed debt settlement company, or foreign banking corporation, or the

        A. 3525                             6
 
     1  officers or agents thereof, or any of them, to open and keep such  books
     2  or  accounts  as  he or she may, in his or her discretion, determine and
     3  prescribe for the purpose of keeping accurate and convenient records  of
     4  its transactions and accounts.
     5    §  9. Paragraph (a) of subdivision 1 of section 44 of the banking law,
     6  as amended by section 4 of part L of chapter 58 of the laws of 2019,  is
     7  amended to read as follows:
     8    (a) Without limiting any power granted to the superintendent under any
     9  other provision of this chapter, the superintendent may, in a proceeding
    10  after  notice  and a hearing, require any safe deposit company, licensed
    11  lender, licensed casher  of  checks,  licensed  sales  finance  company,
    12  licensed  insurance  premium  finance  agency,  licensed  transmitter of
    13  money, licensed mortgage banker, licensed student loan servicer,  regis-
    14  tered  mortgage  broker,  licensed  mortgage loan originator, registered
    15  mortgage loan servicer[or], licensed budget  planner  or  licensed  debt
    16  settlement  company to pay to the people of this state a penalty for any
    17  violation of this chapter, any regulation  promulgated  thereunder,  any
    18  final  or temporary order issued pursuant to section thirty-nine of this
    19  article, any condition imposed  in  writing  by  the  superintendent  in
    20  connection  with the grant of any application or request, or any written
    21  agreement entered into with the superintendent.
    22    § 10. The banking law is amended by adding a new article 12-CC to read
    23  as follows:
    24                               ARTICLE XII-CC
    25                          DEBT SETTLEMENT COMPANIES
    26  Section 588-a. Definitions.
    27          588-b. Doing business without license prohibited.
    28          588-c. Application for license.
    29          588-d. Conditions for issuance of  a  license;  procedure  where
    30                   application denied.
    31          588-e. License provisions.
    32          588-f. Changes in officers or directors of licensee.
    33          588-g. Changes in control.
    34          588-h. Grounds  for  suspension,  revocation,  or termination of
    35                   license; procedure.
    36          588-i. Advertising and marketing practices.
    37          588-j. Individualized financial analysis; statement.
    38          588-k. Required pre-agreement disclosures and warnings.
    39          588-l. Debt settlement services agreements.
    40          588-m. Fees.
    41          588-n. Debtor settlement accounts; monthly accounting.
    42          588-o. Cancellation of debt settlement services agreement; right
    43                   to refunds.
    44          588-p. Obligation of good faith.
    45          588-q. Prohibited activities.
    46          588-r. Superintendent authorized to examine.
    47          588-s. Licensee's books and records; reports.
    48          588-t. Penalties; noncompliance.
    49          588-u. Authority of superintendent.
    50          588-v. Severability.
    51    § 588-a. Definitions. As used in this article:  1.  "Affiliate"  means
    52  any person that directly or indirectly controls, is controlled by, or is
    53  under common control with another person.
    54    2. "Clearly and conspicuously" means that a statement, representation,
    55  term, or disclosure is so presented as to be readily apparent and under-
    56  stood by the person to whom it is being addressed. Factors to be consid-

        A. 3525                             7
 
     1  ered  for  this  purpose include but are not limited to size, placement,
     2  color contrast, length, crawl time, and audibility.
     3    3. "Debtor" means any individual who has incurred indebtedness or owes
     4  a debt.
     5    4.  "Debtor  settlement  account"  means any account or other means or
     6  device in which payments, deposits, or other transfers from a debtor are
     7  arranged, held, or transferred by or to a debt  settlement  company  for
     8  the  accumulation of the debtor's funds in anticipation of proffering an
     9  adjustment or settlement of a debt or obligation of the debtor.
    10    5. "Debt settlement company" means any person:
    11    (a) engaging in, or holding himself, herself, or itself out as  engag-
    12  ing  in,  the business of providing debt settlement services in exchange
    13  for or in expectation of any compensation or gain; or
    14    (b) soliciting for or acting on behalf of any person engaging  in,  or
    15  holding  himself, herself, or itself out as engaging in, the business of
    16  providing debt settlement services in exchange for or in expectation  of
    17  any  compensation  or  gain;  provided,  however,  that "debt settlement
    18  company" shall not include:
    19    (i) the following exempt persons:
    20    (A) any attorney licensed to practice law in this state when acting in
    21  the ordinary practice of law and through the entity used by the attorney
    22  in the ordinary practice of law, and not holding himself or herself  out
    23  as  a  debt  settlement  company,  and  not  providing  debt  settlement
    24  services, except as incidental to legal representation;
    25    (B) any public officer while acting in an official  capacity  and  any
    26  person acting under court order; or
    27    (C)  any  person  while  performing services incidental to the dissol-
    28  ution, winding up, or liquidation  of  a  partnership,  corporation,  or
    29  other business enterprise; or
    30    (D)  any  bank,  trust company, savings bank, savings and loan associ-
    31  ation, or credit union, whether incorporated,  chartered,  or  organized
    32  under the laws of this state or any other state or the United States, or
    33  any  operating subsidiary of any such bank, trust company, savings bank,
    34  savings and loan association, or credit union.
    35    (ii) such other persons as may be specifically exempted by the  super-
    36  intendent in his or her sole discretion and consistent with the purposes
    37  of this article and the rules and regulations promulgated hereunder.
    38    6. "Debt settlement services" means:
    39    (a)  offering  to provide or providing advice or services, or offering
    40  to act or acting as an intermediary between or on behalf of a debtor and
    41  one or more of the debtor's creditors, where the primary purpose of  the
    42  advice,  service,  or  action  is to obtain a settlement, adjustment, or
    43  satisfaction of the debtor's unsecured debt to a creditor in  an  amount
    44  less than the principal amount of the debt or in an amount less than the
    45  current outstanding balance of the debt; or
    46    (b)  offering  to  provide  services  related to or providing services
    47  advising, encouraging, assisting, or counseling a debtor  to  accumulate
    48  funds  for  the  primary  purpose of proposing, obtaining, or seeking to
    49  obtain a settlement, adjustment, or satisfaction of the  debtor's  unse-
    50  cured  debt to a creditor in an amount less than the principal amount of
    51  the debt or in an amount less than the current  outstanding  balance  of
    52  the  debt;  provided,  however,  that debt settlement services shall not
    53  include:
    54    (i) "budget planning" as defined in section four hundred fifty-five of
    55  the general business law; or

        A. 3525                             8

     1    (ii) the services of an attorney in providing information, advice,  or
     2  legal  representation  with respect to filing a case or proceeding under
     3  Title 11 of the United States Code.
     4    7.  "Debt  settlement  services  agreement"  means a contract or other
     5  agreement with a debtor related to  the  provision  of  debt  settlement
     6  services.
     7    8. "Enrollment fee" means any fee, obligation, or compensation paid or
     8  to  be  paid by the debtor to a debt settlement company in consideration
     9  of or in connection with establishing a debt settlement services  agree-
    10  ment.
    11    9.  "Maintenance  fee" means any fee, obligation, or compensation paid
    12  or to be paid by a debtor to a debt settlement company in  consideration
    13  of  or  in  connection  with  maintaining  the relationship and services
    14  provided by a debt settlement company in accordance with a debt  settle-
    15  ment services agreement.
    16    10.  "Person"  means  an  individual,  partnership,  limited liability
    17  company, corporation, association, or any other legal entity.
    18    11. "Principal amount of the debt" means the total amount  owed  by  a
    19  debtor  to  one  or more creditors for a debt that is included in a debt
    20  settlement services agreement at the time when the  debtor  enters  into
    21  such agreement.
    22    12.  "Settlement  fee" means any fee, obligation, or compensation paid
    23  or to be paid by a debtor to a debt settlement company in  consideration
    24  of  or  in connection with an agreement or other arrangement on the part
    25  of a creditor to accept less than the principal amount of  the  debt  as
    26  satisfaction of the creditor's claim against the debtor.
    27    §  588-b.  Doing  business  without  license  prohibited. 1. Except as
    28  provided in subdivision three of this section, no person shall engage in
    29  the business of a debt settlement company in this  state  without  first
    30  obtaining  a  license  from  the  superintendent  in accordance with the
    31  licensing procedure provided in this article and such  rules  and  regu-
    32  lations as may be promulgated hereunder.
    33    2.  The  business  of  a  debt settlement company is conducted in this
    34  state if the debt settlement company, its employees, or its  agents  are
    35  located  in  this  state  or  if the debt settlement company advertises,
    36  solicits, offers, or contracts to provide debt  settlement  services  to
    37  debtors then resident in this state.
    38    3. If a debt settlement company is licensed under this article, subdi-
    39  vision one of this section does not apply to any employee of such licen-
    40  see.
    41    §  588-c.  Application  for  license.  1.  Application  for  a license
    42  required under this article shall be in writing, under oath, and in  the
    43  form prescribed by the superintendent, and shall contain the following:
    44    (a)  the  exact name and complete street address of the applicant and,
    45  if applicable, its date of incorporation or organization;
    46    (b) the name and complete business and residential address and occupa-
    47  tion of each officer and director of the applicant and each person  that
    48  owns  at least ten percent of the shares or other ownership interests of
    49  the applicant;
    50    (c) the complete street address of the principal office from which the
    51  business is to be conducted;
    52    (d) if the applicant has one or more branches, subsidiaries, or affil-
    53  iates located in this state, soliciting business in this state, or doing
    54  business with residents of this state, the complete address of each such
    55  place of business; and

        A. 3525                             9

     1    (e)  such  other  pertinent  information  as  the  superintendent  may
     2  require,  including  but  not  limited  to  evidence indicating that the
     3  applicant, or an officer, director, or manager of such applicant has  at
     4  least  one  year  of  experience in financial services or related fields
     5  applicable to debt settlement services.
     6    2.  An  applicant  shall  file  a master application for its principal
     7  office and supplemental applications for each branch  office  that  will
     8  conduct the business of a debt settlement company in this state.
     9    3.  Upon original application for a license or licenses, the applicant
    10  shall pay an investigation fee in  an  aggregate  amount  as  prescribed
    11  pursuant  to  section eighteen-a of this chapter. No additional investi-
    12  gation fee shall be  required  for  any  subsequent  application  for  a
    13  license  unless  such application is subsequent to a denial of a license
    14  or to a revocation, suspension, surrender, or termination of a  license;
    15  provided,  however,  that an application to establish a branch office of
    16  the licensee shall be accompanied by the fee prescribed in section eigh-
    17  teen-a of this chapter.
    18    4. As a condition for the issuance and retention  of  a  license,  and
    19  subject  to  such  regulations  as  the  superintendent shall prescribe,
    20  applicants for a license shall file with  the  superintendent  a  surety
    21  bond  in  favor  or  the  superintendent, issued by a bonding company or
    22  insurance company authorized to do business in this state, and in a form
    23  satisfactory to the superintendent.
    24    (a) In lieu of the surety bond required by this subdivision, an appli-
    25  cant may pledge to the superintendent and maintain in a  pledge  account
    26  with  such  banks,  savings  banks, savings and loan associations, trust
    27  companies, national banks, federal savings banks, or federal savings and
    28  loan associations in the state as such licensee may  designate  and  the
    29  superintendent may approve:
    30    (i)  interest-bearing  bills, notes, bonds, debentures, or other obli-
    31  gations issued or guaranteed by the United States or any state or  other
    32  local  governmental  entity  or  any  instrumentality thereof, bearing a
    33  rating of one of the three highest grades  by  a  nationally  recognized
    34  statistical  rating  organization  that has been engaged in rating state
    35  and municipal issues for a period of not less than five years;
    36    (ii) dollar deposits; or
    37    (iii) such other assets or letters of  credit  as  the  superintendent
    38  shall by rule or regulation permit.
    39    (b)  Except as provided hereunder, the principal amount of such surety
    40  bond or deposit shall be two hundred fifty thousand dollars. The  super-
    41  intendent may:
    42    (i)  require  a larger bond or deposit if he or she determines, in his
    43  or her sole discretion, that a licensee has  engaged  in  a  pattern  of
    44  conduct  resulting in bona fide debtor complaints of misconduct and that
    45  such increased bond or  deposit  is  necessary  for  the  protection  of
    46  debtors; or
    47    (ii)  increase  or  decrease  the amount of such bond or deposit based
    48  upon the applicant's or licensee's financial condition,  business  plan,
    49  business  experience,  or  any other factor the superintendent considers
    50  appropriate.
    51    (c) The proceeds of such surety bond or  deposit  shall  constitute  a
    52  trust fund to be used exclusively:
    53    (i)  to  reimburse  fees  that  have  been  improperly  charged  to or
    54  collected from debtors with respect to the business of a debt settlement
    55  company in this state, as such business is  described  in  section  five
    56  hundred eighty-eight-b of this article;

        A. 3525                            10
 
     1    (ii)  to  reimburse amounts that have not been properly distributed to
     2  creditors or properly returned to debtors with respect to  the  business
     3  of  a  debt  settlement  company  in  this  state,  as  such business is
     4  described in section five hundred eighty-eight-b of this article; and
     5    (iii)  to  pay  outstanding  banking  department examination costs and
     6  assessments.
     7    § 588-d. Conditions for issuance of a license; procedure where  appli-
     8  cation  denied.  Upon the filing of an application for a license, if the
     9  superintendent shall find that the financial responsibility, experience,
    10  character, and general fitness of the  applicant,  and  of  the  control
    11  persons,  officers,  and  directors  thereof  are such as to command the
    12  confidence of the community and to warrant belief that the business will
    13  be operated honestly, fairly, and efficiently  within  the  purposes  of
    14  this  article, he or she shall thereupon issue a license in duplicate to
    15  engage in debt settlement services in accordance with the provisions  of
    16  this  article.    The  superintendent  shall  transmit  one copy of such
    17  license to the applicant and file the other in the office of the depart-
    18  ment. Such license shall remain in full force and  effect  until  it  is
    19  surrendered  by  the  licensee  or  revoked, suspended, or terminated as
    20  hereinafter provided.  If the superintendent shall not so  find,  he  or
    21  she  shall  not issue such license and he or she shall notify the appli-
    22  cant of the denial.
    23    § 588-e. License provisions. Each license issued  under  this  article
    24  shall state the principal office address and, if applicable, the address
    25  of  the  branch office for which it was issued. Such license shall state
    26  fully the name of the licensee and, if applicable, the date and place of
    27  its incorporation or organization. A copy of such license shall be prom-
    28  inently posted in the principal office and, if applicable,  such  branch
    29  office.    Such  license shall not be transferable or assignable. In the
    30  event the location at which the business is to  be  conducted  shall  be
    31  changed,  the  licensee  shall  forthwith  notify the superintendent who
    32  shall thereupon without charge attach to the  license  a  rider  setting
    33  forth such changed location.
    34    §  588-f.  Changes  in officers or directors of licensee. In the event
    35  that there shall be any change among the officers or  directors  of  any
    36  licensee,  the  licensee shall promptly notify the superintendent of the
    37  name, address, and occupation  of  each  new  officer  or  director  and
    38  provide such other information as the superintendent may require.
    39    §  588-g.  Changes in control. 1. It shall be unlawful except with the
    40  prior approval of the superintendent for any action to  be  taken  which
    41  results  in  a change of control of the business of a licensee. Prior to
    42  any change of control, the person desirous of acquiring control  of  the
    43  business of a licensee shall make written application to the superinten-
    44  dent  and  pay  an  investigation  fee as prescribed pursuant to section
    45  eighteen-a of this chapter to the superintendent.  The application shall
    46  contain such information as the superintendent may prescribe  as  neces-
    47  sary or appropriate for the purpose of making the determination required
    48  by subdivision two of this section.
    49    2.  The superintendent shall approve or disapprove the proposed change
    50  of control of a licensee in accordance with the  provisions  of  section
    51  five hundred eighty-eight-d of this article.
    52    3.  As  used in this section, the term "control" means the possession,
    53  directly or indirectly, of the power to direct or cause the direction of
    54  the management and policies of a licensee, whether through the ownership
    55  of voting stock of such licensee, the ownership of voting stock  of  any
    56  person  which  possesses  such  power  or  otherwise.  Control  shall be

        A. 3525                            11
 
     1  presumed to exist if any person, directly or indirectly, owns,  controls
     2  or  holds  with power to vote ten percent or more of the voting stock of
     3  any licensee or of any person which owns, controls or holds  with  power
     4  to  vote ten percent or more of the voting stock of any licensee, but no
     5  person shall be deemed to control a licensee solely by reason  of  being
     6  an  officer  or  director of such licensee or person. The superintendent
     7  may in his or her discretion, upon the application of a licensee or  any
     8  person  who,  directly or indirectly, owns, controls or holds with power
     9  to vote or seeks to own, control or hold with power to vote  any  voting
    10  stock  of such licensee, determine whether or not the ownership, control
    11  or holding of such voting stock constitutes or would constitute  control
    12  of such licensee for purposes of this section.
    13    §  588-h.  Grounds  for  suspension,  revocation,  or  termination  of
    14  license; procedure. 1. In addition to the authority set forth in  subdi-
    15  vision two of this section, the superintendent may suspend or revoke any
    16  license  issued under this article if, after notice and a hearing, he or
    17  she shall find that:
    18    (a) the licensee has violated any provisions of this  article,  or  of
    19  any  rule  or regulation made by the superintendent under and within the
    20  authority of this article;
    21    (b) any fact or condition exists which, if it had existed at the  time
    22  of  the  original application for such license, would have warranted the
    23  superintendent in refusing originally to issue such license; or
    24    (c) the licensee or an officer, director, or  control  person  of  the
    25  licensee has been convicted of a crime against the laws of this state or
    26  any  other  state  or  of the United States involving moral turpitude or
    27  fraudulent or dishonest actions, or a  final  judgment  in  a  court  of
    28  competent jurisdiction has been entered against the licensee or an offi-
    29  cer, director, or control person of the licensee in a civil action aris-
    30  ing from fraud, misrepresentation, or deceit.
    31    2.  (a)  The  superintendent  may, for good cause, without notice or a
    32  hearing, issue an order suspending any license issued pursuant  to  this
    33  article  for  a period not exceeding ninety days, pending investigation.
    34  "Good cause", as used in this subdivision, shall  exist  only  when  the
    35  licensee  has defaulted or is likely to default in performing its finan-
    36  cial engagements or engages or has engaged in dishonest  or  inequitable
    37  practices  which  may cause substantial harm to the persons afforded the
    38  protection of this article.
    39    (b) The superintendent may, in his or  her  sole  discretion,  without
    40  notice or a hearing, issue an order suspending any license issued pursu-
    41  ant  to  the authority of this article upon the failure of such licensee
    42  to make any payments as required by this chapter.
    43    (c) The superintendent may, in his or  her  sole  discretion,  without
    44  notice or a hearing, issue an order suspending any license issued pursu-
    45  ant to the authority of this article:
    46    (i)  thirty  days after the date the licensee fails to file any report
    47  required under this article to be filed by it with the superintendent;
    48    (ii) immediately upon the licensee filing a petition in bankruptcy;
    49    (iii) at least thirty days after the licensee has had filed against it
    50  a petition in bankruptcy; or
    51    (iv) immediately upon the receipt by the superintendent of notice that
    52  the surety bond required pursuant to section five hundred eighty-eight-c
    53  of this article is no longer in effect or that the value  of  assets  in
    54  the pledge account is less than the required amount.
    55    3.  If  the  superintendent  has  issued an order suspending a license
    56  issued pursuant to the authority of this article pursuant  to  paragraph

        A. 3525                            12
 
     1  (a)  of  subdivision two of this section, such license may be reinstated
     2  if the superintendent determines, in his or her  sole  discretion  after
     3  investigation,  that  good  cause  therefor  did  not exist or no longer
     4  exists.  If  the superintendent has issued an order suspending a license
     5  issued pursuant to paragraph (b) or  (c)  of  subdivision  two  of  this
     6  section,  such  license  may be reinstated, if the superintendent deter-
     7  mines, in his or her sole discretion, that the licensee  has  cured  all
     8  deficiencies  set  forth  in  such order by the close of business ninety
     9  days after the date of such suspension order, including, without limita-
    10  tion, making any overdue payment, having any  such  bankruptcy  petition
    11  dismissed,  or  having  such  bond reinstated or depositing all required
    12  additional assets. Otherwise, in the case of a  suspension  pursuant  to
    13  paragraph  (b)  or  (c)  of  subdivision two of this section, unless the
    14  superintendent has, in his or her sole discretion, extended such suspen-
    15  sion, all licenses of such licensee shall be deemed to be  automatically
    16  terminated  by operation of law at the close of business on such nineti-
    17  eth day.
    18    4. Except as provided for in  subdivision  two  of  this  section,  no
    19  license  shall be revoked or suspended except after notice and a hearing
    20  thereon.
    21    5. With the prior consent of  the  superintendent,  any  licensee  may
    22  surrender any license by delivering to the superintendent written notice
    23  that  it  thereby  surrenders such license, but such surrender shall not
    24  affect such licensee's civil or criminal liability  for  acts  committed
    25  prior  to  such  surrender  or its obligations to the superintendent for
    26  assessments, fees, or administrative actions with respect to the periods
    27  before such surrender.
    28    6. No revocation, suspension, termination, or surrender of any license
    29  shall impair  or  affect  the  obligation  of  any  pre-existing  lawful
    30  contract between the licensee and any person.
    31    7.  Every  license  issued  hereunder shall remain in force and effect
    32  until the same shall  have  been  surrendered,  revoked,  suspended,  or
    33  terminated  in  accordance  with the provisions of this article, but the
    34  superintendent shall have authority to reinstate a suspended license  or
    35  to  issue  a  new  license  to  a licensee whose license shall have been
    36  revoked if no fact or condition then exists which would  have  warranted
    37  the  superintendent  in  refusing originally to issue such license under
    38  this article.
    39    8. Whenever the superintendent  shall  revoke  or  suspend  a  license
    40  issued  pursuant  to  this article, he or she shall forthwith execute in
    41  duplicate a written order to that effect. The superintendent shall  file
    42  one  copy of such order in the office of the department and shall forth-
    43  with serve the other copy upon the  licensee.  Any  such  order  may  be
    44  reviewed  in  the  manner provided by article seventy-eight of the civil
    45  practice law and rules. Such application for  review  as  authorized  by
    46  this section must be made within thirty days from the date of such order
    47  of suspension or revocation.
    48    9.  Whenever  a  license shall have terminated in accordance with this
    49  article, the superintendent shall notify the licensee that  the  license
    50  has terminated and that the licensee may not engage in the business of a
    51  debt settlement company in this state.
    52    §  588-i.  Advertising  and  marketing practices. 1. A debt settlement
    53  company shall not, expressly or  by  implication,  make  any  unfair  or
    54  deceptive representations, or any omissions of material facts, in any of
    55  its  advertising  or marketing communications concerning debt settlement
    56  services.

        A. 3525                            13
 
     1    2.  All  advertising  and  marketing  communications  concerning  debt
     2  settlement services shall disclose the following information clearly and
     3  conspicuously:  "Debt settlement services are not appropriate for every-
     4  one. Failure to pay your monthly bills in a timely manner will result in
     5  increased  balances  and will harm your credit rating. Not all creditors
     6  will agree to reduce the amount you owe, and they may pursue collection,
     7  including lawsuits."
     8    3. All advertising and marketing communications  of  a  licensed  debt
     9  settlement  company  concerning  debt settlement services shall indicate
    10  that the debt settlement company is licensed by the department and shall
    11  contain the name and office address of  such  debt  settlement  company,
    12  which shall conform to a name and address on record with the department.
    13    §  588-j.  Individualized  financial  analysis; statement. 1. Prior to
    14  entering into a debt settlement services agreement,  a  debt  settlement
    15  company  shall prepare and provide to the debtor in writing and retain a
    16  copy of:
    17    (a) an individualized financial analysis, including a listing  of  the
    18  debtor's income, expenses, and debts; and
    19    (b) a statement containing:
    20    (i)  a  description  of the services to be provided under the proposed
    21  debt settlement services agreement;
    22    (ii) a good faith estimate of the time it will take  to  complete  all
    23  steps  necessary  for  a  settlement  of  each  debt  included under the
    24  proposed debt settlement services agreement;
    25    (iii) the total amount of debt owed to each  creditor  included  under
    26  the proposed debt settlement services agreement;
    27    (iv)  the  total amount of money estimated to be necessary to complete
    28  all steps necessary for a settlement of each  debt  included  under  the
    29  proposed debt settlement services agreement; and
    30    (v)  the  monthly  targeted  amount of money necessary to complete all
    31  steps necessary for  a  settlement  of  each  debt  included  under  the
    32  proposed debt settlement services agreement.
    33    2.  A  debt  settlement company shall not enter into a debt settlement
    34  services agreement unless it makes written determinations, supported  by
    35  the financial analysis, that:
    36    (a)  the  debtor can reasonably meet the requirements of such proposed
    37  debt settlement services agreement, including the fees and  the  savings
    38  goals; and
    39    (b)  such proposed debt settlement services agreement will be suitable
    40  for the debtor at the time it is to be signed.
    41    § 588-k. Required pre-agreement disclosures and  warnings.  1.  Before
    42  the  debtor signs a debt settlement services agreement, the debt settle-
    43  ment company shall provide an oral and written notice to the debtor that
    44  clearly and conspicuously discloses all of the following:
    45    (a) debt settlement services may not be suitable for all debtors;
    46    (b) using debt settlement services likely will harm the debtor's cred-
    47  it history, credit rating, and credit score;
    48    (c) using debt settlement services does not stop  creditor  collection
    49  activity, including creditor lawsuits and garnishments;
    50    (d) not all creditors will accept a reduction in the balance, interest
    51  rate, or fees a debtor owes;
    52    (e)  the debtor should inquire about other means of dealing with debt,
    53  including but not limited to budget planning and bankruptcy;
    54    (f) the  debtor  remains  obligated  to  make  periodic  or  scheduled
    55  payments to creditors while participating in a debt settlement program;

        A. 3525                            14
 
     1    (g)  the  failure to make periodic or scheduled payments to a creditor
     2  is likely to:
     3    (i)  harm  the  debtor's  credit history, credit rating, and/or credit
     4  score;
     5    (ii) lead the creditor to increase lawful collection activity, includ-
     6  ing litigation, garnishment of the debtor's wages, and judgment liens on
     7  the debtor's property; and
     8    (iii) lead to the imposition by the creditor of interest charges, late
     9  fees, and other penalty fees, increasing the amount owed by the  debtor;
    10  and
    11    (h) the debtor may be required to pay taxes on any amount of debt that
    12  is forgiven.
    13    2.  The  written  notice  required  by subdivision one of this section
    14  shall be entitled "Debtor Notice and Rights Form".
    15    3. Prior to signing a debt settlement services agreement,  the  debtor
    16  shall  sign  and  date  an  acknowledgment form at the end of the Debtor
    17  Notice and Rights Form.  The acknowledgment form shall  state:  "I,  the
    18  debtor,  have  received  from  the debt settlement company a copy of the
    19  form entitled Debtor Notice and Rights Form." The debt settlement compa-
    20  ny or its representative shall also sign  and  date  the  acknowledgment
    21  form,  which  shall  include the name and address of the debt settlement
    22  company. The acknowledgment form shall be in duplicate and  incorporated
    23  into the Debtor Notice and Rights Form. The original acknowledgment form
    24  shall be retained by the debt settlement company, and the duplicate copy
    25  shall be given to the debtor.
    26    4.  The requirements of this section are satisfied if the debt settle-
    27  ment company gives the debtor the following warning verbatim, both oral-
    28  ly and in writing, with the caption "DEBTOR NOTICE AND RIGHTS  FORM"  in
    29  at  least  twenty-eight-point font and the remaining portion in at least
    30  fourteen-point font, before the debtor signs a debt settlement  services
    31  agreement:
 
    32                       "DEBTOR NOTICE AND RIGHTS FORM
    33                                   CAUTION
    34    Using  debt  settlement services will LIKELY HARM your credit history,
    35  credit rating, and credit score.
    36    We CANNOT GUARANTEE that you will  successfully  reduce  or  eliminate
    37  your debt.
    38    YOU  REMAIN OBLIGATED TO MAKE PAYMENTS TO YOUR CREDITORS.  If you stop
    39  paying your creditors, there is a strong likelihood some or all  of  the
    40  following may happen:
    41    - CREDITORS MAY STILL CONTACT YOU AND TRY TO COLLECT.
    42    - CREDITORS MAY STILL SUE YOU FOR THE MONEY YOU OWE.
    43    - YOUR WAGES OR BANK ACCOUNT MAY STILL BE GARNISHED.
    44    - LIENS MAY STILL BE PLACED ON YOUR PROPERTY.
    45    -  YOUR CREDIT HISTORY, CREDIT RATING, AND/OR CREDIT SCORE LIKELY WILL
    46  BE HARMED.
    47    - THE AMOUNT OF MONEY YOU OWE MAY INCREASE DUE TO CREDITOR  IMPOSITION
    48  OF INTEREST CHARGES, LATE FEES, AND OTHER PENALTY FEES.
    49    - NOT ALL CREDITORS WILL AGREE TO ACCEPT A BALANCE REDUCTION.
    50    IF  WE  DO  SETTLE  YOUR DEBT, YOU MAY BE REQUIRED TO PAY TAXES ON THE
    51  AMOUNT FORGIVEN.
    52    DEBT SETTLEMENT SERVICES  ARE  NOT  RIGHT  FOR  EVERYONE.  YOU  SHOULD
    53  CONSIDER ALL YOUR OPTIONS FOR ADDRESSING YOUR DEBT, SUCH AS BUDGET PLAN-
    54  NING OR A BANKRUPTCY FILING.
    55    YOUR RIGHT TO CANCEL

        A. 3525                            15
 
     1    If  you  sign a debt settlement services agreement, you have the right
     2  to cancel at any time and receive a full refund of all unearned fees you
     3  have paid to the debt settlement company and all funds  placed  in  your
     4  debtor  settlement  account that have not been paid to any creditors. If
     5  you  cancel  within  ninety days of signing the debt settlement services
     6  agreement you also have the right  to  receive  a  full  refund  of  any
     7  enrollment fees you have paid.
     8    ACKNOWLEDGMENT BY DEBTOR
     9    I,  the  debtor, have received from the debt settlement company a copy
    10  of the form entitled Debtor Notice and Rights Form."
    11    § 588-l. Debt settlement services agreements.  1.  A  debt  settlement
    12  company shall not provide debt settlement services to a debtor without a
    13  written  debt settlement services agreement signed and dated by both the
    14  debtor and the debt settlement company.
    15    2. Any debt settlement services agreement entered into in violation of
    16  the provisions of this section is void.
    17    3. Each debt settlement company shall submit to the banking department
    18  any form of debt settlement services agreement it intends to use.
    19    4. A debt settlement services agreement  shall  disclose  all  of  the
    20  following clearly and conspicuously:
    21    (a) the name and address of the debtor;
    22    (b) the date of execution of the debt settlement services agreement;
    23    (c) the legal name of the debt settlement company, including any other
    24  business names used in this state by the debt settlement company;
    25    (d)  the complete street address of the debt settlement company, which
    26  shall conform to an address on record with the department;
    27    (e) the license number of the principal office and, if applicable,  of
    28  the branch office under which the debt settlement company is licensed in
    29  this state;
    30    (f)  a toll-free telephone number at which the debtor may speak with a
    31  representative of the debt settlement  company  during  normal  business
    32  hours;
    33    (g)  a  complete list of the debtor's accounts, debts, and obligations
    34  covered by the debt settlement services agreement, including the name of
    35  each creditor and the principal amount of each debt;
    36    (h) a description of the services to be provided by the  debt  settle-
    37  ment  company, including the expected time frame for settlement for each
    38  account, debt, or obligation included in paragraph (g) of this  subdivi-
    39  sion;
    40    (i)  an  itemized  list  of all fees, including any enrollment fee and
    41  settlement fees to be paid by the debtor to the debt settlement company,
    42  and the date, approximate date, or circumstances under  which  each  fee
    43  will become due;
    44    (j)  a  good  faith  estimate  of  the  total amount of all fees to be
    45  collected by the  debt  settlement  company  from  the  debtor  for  the
    46  provision of debt settlement services under the debt settlement services
    47  agreement;
    48    (k) a statement of the proposed savings goals for the debtor, stating:
    49    (i) the amount to be saved per month;
    50    (ii) the time period over which the savings goals extend;
    51    (iii)  the  amount  of  money the debtor must save before a settlement
    52  offer will be made to each of the debtor's creditors; and
    53    (iv) the total amount of the savings expected to be paid by the debtor
    54  pursuant to the terms of the debt settlement services agreement;
    55    (l) the written individualized financial analysis required by  section
    56  five hundred eighty-eight-j of this article;

        A. 3525                            16
 
     1    (m) a written notice to the debtor stating:
     2    (i)  that the debtor may cancel the debt settlement services agreement
     3  at any time; and
     4    (ii) that upon such cancellation:
     5    (A) all powers of attorney granted to the debt settlement  company  by
     6  the debtor shall be considered revoked and voided; and
     7    (B)  the  debtor may be entitled to a refund. The terms of such refund
     8  shall also be stated and shall be consistent with  the  requirements  of
     9  section five hundred eighty-eight-o of this article.
    10    (n)  a  form the debtor may use to cancel the debt settlement services
    11  agreement pursuant to the provisions of  section  five  hundred  eighty-
    12  eight-o  of  this article. The form shall disclose clearly and conspicu-
    13  ously how the debtor can cancel the debt settlement services  agreement,
    14  including  applicable  addresses,  telephone numbers, facsimile numbers,
    15  and electronic mail addresses the debtor can  use  to  cancel  the  debt
    16  settlement services agreement;
    17    (o)  a  clear and conspicuous notice to the debtor that the debtor may
    18  contact the department with any questions or  complaints  regarding  the
    19  debt  settlement  company  along  with the address, telephone number and
    20  internet website of the department.
    21    5. (a) A debt settlement services  agreement  may  confer  on  a  debt
    22  settlement  company  a power of attorney to settle the debtor's debt for
    23  no more than fifty percent of the  principal  amount  of  the  debt.  An
    24  agreement  may  not confer a power of attorney to settle a debt for more
    25  than fifty percent of that amount, but may confer a power of attorney to
    26  negotiate with creditors of the debtor on behalf of the debtor.  A  debt
    27  settlement  services  agreement  must  provide  that the debt settlement
    28  company will obtain the assent  of  the  debtor  after  a  creditor  has
    29  assented  to  a  settlement for more than fifty percent of the principal
    30  amount of the debt.
    31    (b) A debt settlement services agreement may not provide for  applica-
    32  tion  of  the  law  of any jurisdiction other than the United States and
    33  this state.
    34    6. If a debt settlement company communicates with a  debtor  primarily
    35  in a language other than English, then the debt settlement company shall
    36  furnish  to  the  debtor a written translation in that other language of
    37  all the disclosures and documents required by this article.
    38    § 588-m. Fees. 1. The types of fees that a debt settlement company may
    39  charge a debtor are the following:
    40    (a) enrollment fees; and
    41    (b) settlement fees.
    42    2. All fee types not included under subdivision one  of  this  section
    43  are prohibited, including maintenance fees.
    44    3. The amount of an enrollment fee charged by a debt settlement compa-
    45  ny  shall  not  exceed  fifty dollars or such other amount as set by the
    46  superintendent.
    47    4. The amount of the settlement  fee  charged  by  a  debt  settlement
    48  company  with respect to each debt covered by a debt settlement services
    49  agreement shall not exceed the lesser of:
    50    (a) the amount that is reasonable and commensurate to the debt settle-
    51  ment services provided to the debtor; and
    52    (b) the amount that is twenty percent of the difference between:
    53    (i) the principal amount of the debt; and
    54    (ii) the amount:
    55    (A) paid by the debt settlement company to the  creditor  pursuant  to
    56  the  settlement  negotiated  by the debt settlement company on behalf of

        A. 3525                            17
 
     1  the debtor as full and complete satisfaction  of  the  creditor's  claim
     2  with regard to that debt; or
     3    (B)  negotiated  by the debt settlement company and paid by the debtor
     4  to the creditor pursuant to a settlement negotiated by the debt  settle-
     5  ment  company  on behalf of the debtor as full and complete satisfaction
     6  of the creditor's claim with regard to that debt.
     7    5. A debt settlement company shall not collect any settlement fee from
     8  a debtor until:
     9    (a) the creditor enters into a legally enforceable agreement with  the
    10  debtor  to accept funds in a specific dollar amount as full and complete
    11  satisfaction of the creditor's claim with regard to that debt; and
    12    (b) those funds are provided to the creditor:
    13    (i) by the debt settlement company on behalf of the debtor; or
    14    (ii) directly by the debtor pursuant to a settlement negotiated by the
    15  debt settlement company.
    16    6. It shall be unlawful to split  or  divide  the  provision  of  debt
    17  settlement  services  to a debtor into separate debt settlement services
    18  agreements for the purpose  of  collecting  additional  fees  from  such
    19  debtor.
    20    §  588-n.  Debtor  settlement  accounts; monthly accounting. 1. A debt
    21  settlement company that receives funds from  a  debtor  shall  hold  all
    22  funds  received for a debtor settlement account in a properly designated
    23  bank account in a federally insured depository institution.
    24    (a) Such funds shall:
    25    (i) constitute trust funds owned by the debtor  from  whom  they  were
    26  received;
    27    (ii)  remain  the  property  of  such debtor until the debt settlement
    28  company disburses the funds to a creditor on behalf of such debtor;
    29    (iii) be kept separate and apart at all times from funds belonging  to
    30  the  debt  settlement  company  or  any  of  its officers, employees, or
    31  agents; and
    32    (iv) be deposited in such bank account not later than the end  of  the
    33  business  day  following  receipt  by the debt settlement company or its
    34  agent.
    35    (b) A debt settlement company or its agent that maintains one or  more
    36  debtor settlement accounts shall obtain and preserve a written agreement
    37  from  each  bank  in  which any such account is maintained. Such written
    38  agreement shall expressly provide that the funds in such debtor  settle-
    39  ment  account  shall  be subject to no right, charge, security interest,
    40  lien, or claim of any kind in favor of such bank or any person  claiming
    41  through such bank.
    42    (c)  Any interest earned on a debtor settlement account shall be cred-
    43  ited to the debtor. If the funds of  multiple  debtors  are  kept  in  a
    44  single  interest earning bank account, then the interest earned shall be
    45  deposited pro rata among the debtors whose funds are in the account.
    46    (d) A debt settlement company may not hold funds received for a debtor
    47  settlement account in an account administered by a person that gives  or
    48  accepts  any  money  or  other compensation in exchange for referrals of
    49  business involving the debt settlement company.
    50    2. A debt settlement company shall, no less than monthly, provide each
    51  debtor with which it has a debt settlement services agreement  a  state-
    52  ment  of fees paid, settlements completed, remaining debts and, if funds
    53  are held in a bank account pursuant to subdivision one of this  section,
    54  account balances.
    55    3.  Nothing  in  this  article  requires the establishment of a debtor
    56  settlement account if no debtor funds  other  than  enrollment  fees  or

        A. 3525                            18
 
     1  earned  settlement  fees  are  held  or  controlled by a debt settlement
     2  company.
     3    §  588-o. Cancellation of debt settlement services agreement; right to
     4  refunds. 1.  A debtor may cancel a debt settlement services agreement at
     5  any time until after the debt settlement  company  has  fully  performed
     6  each  service  the  debt  settlement  company  contracted  to perform or
     7  represented that it would perform.
     8    2. If a debtor cancels a debt settlement services agreement not  later
     9  than  ninety days after the date of the execution of the debt settlement
    10  services agreement or at any time upon a violation  of  a  provision  of
    11  this article by the debt settlement company, the debt settlement company
    12  shall refund to the debtor:
    13    (a)  all  fees paid to the debt settlement company by the debtor, with
    14  the exception of any earned settlement fee; and
    15    (b) all funds provided by the debtor to the  debt  settlement  company
    16  that:
    17    (i) have accumulated in a debtor settlement account; and
    18    (ii) the debt settlement company has not disbursed to creditors.
    19    3. If a debtor cancels a debt settlement services agreement later than
    20  ninety  days  after  the  date  of  the execution of the debt settlement
    21  services agreement and for any reason other than for a  violation  of  a
    22  provision  of  this  article  by  the  debt settlement company, the debt
    23  settlement company shall refund to the debtor:
    24    (a) all fees paid to the debt settlement company by the  debtor,  with
    25  the exception of any earned settlement fee and any enrollment fee; and
    26    (b)  all  funds  provided by the debtor to the debt settlement company
    27  that:
    28    (i) have accumulated in a debtor settlement account; and
    29    (ii) the debt settlement company has not disbursed to creditors.
    30    4. A debt settlement company shall make any refund required under this
    31  section within five business days after receipt  of  written  notice  of
    32  cancellation,  and  shall  include  with such refund a full statement of
    33  account showing:
    34    (a) the fees received by the debt settlement company from the debtor;
    35    (b) the fees refunded to the debtor by the debt settlement company;
    36    (c) the payments made by the debt settlement company to  creditors  on
    37  behalf of the debtor;
    38    (d) the settlement fees earned, if any, by the debt settlement company
    39  by settling debt on behalf of the debtor;
    40    (e)  the  savings  of  the  debtor held by the debt settlement company
    41  immediately prior to such refund; and
    42    (f) the savings of the debtor refunded  to  the  debtor  by  the  debt
    43  settlement company.
    44    5.  Upon  cancellation  of a debt settlement services agreement by the
    45  debtor:
    46    (a) all powers of attorney and direct debit authorizations granted  to
    47  the  debt  settlement  company by the debtor shall be considered revoked
    48  and voided; and
    49    (b) the debt settlement company  shall  immediately  take  any  action
    50  necessary to reflect cancellation of the debt settlement services agree-
    51  ment, including but not limited to notifying the recipient of any direct
    52  debit authorization.
    53    6.  Upon the cancellation of a debt settlement services agreement, the
    54  debt settlement company shall  provide  timely  written  notice  of  the
    55  cancellation  of  such  agreement to each of the creditors with whom the

        A. 3525                            19
 
     1  debt settlement company has had any prior communication on behalf of the
     2  debtor in connection with the provision of any debt settlement services.
     3    § 588-p. Obligation of good faith. A debt settlement company shall act
     4  in good faith in all matters under this article.
     5    §  588-q.  Prohibited activities. 1. No person, except a licensee, may
     6  make any representation, directly or indirectly, orally  or  in  writing
     7  that he, she, or it is licensed under this article.
     8    2.  No  person,  other  than  a  licensee  or a person exempt from the
     9  licensing requirements of  this  article,  shall  use  the  title  "debt
    10  settlement  company"  or the terms "debt settlement" or "debt settlement
    11  services" in any advertising, marketing communication, business card, or
    12  letterhead.
    13    3. A debt settlement company shall not do any of the following:
    14    (a) charge or collect from a debtor any fee not permitted  by,  in  an
    15  amount in excess of the maximum amount permitted by, or at a time earli-
    16  er  than  permitted by section five hundred eighty-eight-m of this arti-
    17  cle;
    18    (b) include in a debt settlement services agreement any secured debt;
    19    (c) advise or represent, expressly or  by  implication,  that  debtors
    20  should stop making payments to their creditors;
    21    (d)  advise  or  represent,  expressly or by implication, that debtors
    22  should stop communicating with their creditors;
    23    (e) engage in any practice that prohibits or limits the debtor or  any
    24  creditor from communication directly with one another;
    25    (f)  change the mailing address on any of a debtor's statements from a
    26  creditor;
    27    (g) make loans or offer credit or solicit or accept  any  note,  mort-
    28  gage,  or  negotiable instrument other than a check signed by the debtor
    29  and dated no later than the date of signature;
    30    (h) take any confession of judgment or power of  attorney  to  confess
    31  judgment  against the debtor or appear as the debtor or on behalf of the
    32  debtor in any judicial, administrative, or other action or proceeding;
    33    (i) take any release or waiver of any obligation to  be  performed  on
    34  the part of the debt settlement company or any right of the debtor;
    35    (j) advertise, display, distribute, broadcast, or televise services or
    36  permit  services  to be advertised, displayed, distributed, broadcasted,
    37  or televised,  in  any  manner  whatsoever,  that  contains  any  false,
    38  misleading,  or  deceptive  statements or representations with regard to
    39  any matter involving the business of debt settlement services, including
    40  but not limited to the fees to be charged, the services to be performed,
    41  the results or outcomes of those services, or the effect those  services
    42  will have on a debtor's credit rating or on creditor collection efforts;
    43    (k)  receive  any  cash,  fee,  gift, bonus, premium, reward, or other
    44  compensation from any person other than the debtor  explicitly  for  the
    45  provision of debt settlement services to that debtor;
    46    (l)  offer  or  provide gifts or bonuses to debtors for signing a debt
    47  settlement services agreement or for referring another potential custom-
    48  er or customers;
    49    (m) except with the prior consent of the debtor,  disclose  to  anyone
    50  the  name  or  any  personal  information  of a debtor for whom the debt
    51  settlement company has provided or is providing debt settlement services
    52  other than to a debtor's own creditors or the debt settlement  company's
    53  agents  or  affiliates  for  the  purpose  of  providing debt settlement
    54  services. "Personal information  of  a  debtor"  as  used  herein  shall
    55  include  but  not  be  limited  to a debtor's name, photograph, address,
    56  telephone number, social security number, date of birth, driver's  iden-

        A. 3525                            20
 
     1  tification  number,  credit  card  number, bank account number, mother's
     2  maiden name, medical or disability information, if any, as well  as  any
     3  other identification number which a licensee may possess;
     4    (n)  enter  into  a  debt  settlement services agreement with a debtor
     5  without first providing  the  disclosures  and  financial  analysis  and
     6  making the determinations required by this article;
     7    (o)  misrepresent any material fact, make a material omission, or make
     8  a false promise directed to one or more debtors in connection  with  the
     9  solicitation,  offering,  contracting,  or  provision of debt settlement
    10  services;
    11    (p) violate the provisions of applicable do-not-call statutes;
    12    (q) purchase debts or engage in  the  practice  or  business  of  debt
    13  collection;
    14    (r)  represent  or  imply  to a person participating in or considering
    15  debt settlement services that the purchase of  any  ancillary  goods  or
    16  services is required;
    17    (s) use a communication which simulates in any manner a legal or judi-
    18  cial  process,  or which gives the false appearance of being authorized,
    19  issued, or approved by a government, governmental agency,  or  attorney-
    20  at-law; or
    21    (t)  make  a  representation  that  the  debt  settlement company will
    22  furnish money to pay bills or prevent attachment.
    23    § 588-r. Superintendent authorized to  examine.  For  the  purpose  of
    24  discovering  violations of this article or securing information lawfully
    25  required by him or her hereunder, the superintendent may  at  any  time,
    26  and  as  often  as  he  or  she may determine, either personally or by a
    27  person duly designated by him or her, investigate the business and exam-
    28  ine the books, accounts, records, and files used therein of every licen-
    29  see hereunder. For that purpose the superintendent and his or  her  duly
    30  designated  representative  shall  have  free  access to the offices and
    31  place of business, books, accounts, papers, records,  files,  safes  and
    32  vaults  of  all  such  licensees. The superintendent and any person duly
    33  designated by him or her shall have authority to require the  attendance
    34  of  and  to examine under oath all persons whose testimony he or she may
    35  require relative to such business. The expenses incurred in  making  any
    36  examination  pursuant to this section shall be assessed against and paid
    37  by the licensee so  examined,  except  that  traveling  and  subsistence
    38  expenses  so  incurred shall be charged against and paid by licensees in
    39  such proportions as the superintendent shall deem just  and  reasonable,
    40  and  such  proportionate charges shall be added to the assessment of the
    41  other expenses incurred upon each examination. Upon  written  notice  by
    42  the  superintendent of the total amount of such assessment, the licensee
    43  shall become liable for and shall pay such assessment to the superinten-
    44  dent.
    45    § 588-s. Licensee's books and records; reports. 1. The licensee  shall
    46  create and use in its business such books, accounts, and records as will
    47  enable  the superintendent to determine whether such licensee is comply-
    48  ing with the provisions of this article and with  the  rules  and  regu-
    49  lations  lawfully  made  by the superintendent hereunder. Every licensee
    50  shall preserve such books, accounts, and records for at least six  years
    51  by any manner permitted by this chapter.
    52    2.  Each licensee shall annually, on or before the first day of Febru-
    53  ary, file a report with the superintendent giving  such  information  as
    54  the  superintendent  may  require concerning the business and operations
    55  during the preceding calendar year of such licensee under  authority  of
    56  this  article.  Such  report shall be subscribed and affirmed as true by

        A. 3525                            21
 
     1  the licensee under the penalties of perjury and shall  be  in  the  form
     2  prescribed  by  the  superintendent.  In addition to annual reports, the
     3  superintendent may require such additional regular or special reports as
     4  he  or  she  may  deem  necessary to the proper supervision of licensees
     5  under this article.  Such  additional  reports  shall  be  in  the  form
     6  prescribed by the superintendent and shall be subscribed and affirmed as
     7  true under the penalties of perjury.
     8    3.  Each  licensee, within one hundred twenty days of the close of the
     9  licensee's fiscal year, shall submit an independently audited  financial
    10  statement to the superintendent.
    11    §  588-t.  Penalties;  noncompliance.  1.  Any person who violates any
    12  provision of the licensing requirements of section five hundred  eighty-
    13  eight-b  of  this  article  shall  be  guilty  of a class A misdemeanor,
    14  punishable as provided in articles seventy and eighty of the penal law.
    15    2. Any debt settlement services agreement that does  not  comply  with
    16  the provisions of this article is void.
    17    3.  Any  waiver by a debtor of any protection provided by or any right
    18  of the debtor under this article is void.
    19    4. Any attempt by any person to obtain a waiver from any debtor of any
    20  protection provided by or any right or protection of the debtor  or  any
    21  obligation  or  requirement  of  the  debt settlement company under this
    22  article shall be a violation of this article.
    23    5. Upon proper notice of a void debt  settlement  services  agreement,
    24  the  debt settlement company shall make a refund to the debtor as if the
    25  debt settlement services agreement had been  cancelled  as  provided  in
    26  subdivision two of section five hundred eighty-eight-o of this article.
    27    6.  In  addition  to  such penalties as may otherwise be applicable by
    28  law, the superintendent may, after notice and hearing as provided  else-
    29  where in this article, require any person found violating the provisions
    30  of this article or the rules or regulations promulgated hereunder to pay
    31  to  the people of this state an additional penalty for each violation of
    32  the article or any regulation or policy promulgated hereunder a sum  not
    33  to exceed an amount as determined pursuant to section forty-four of this
    34  chapter for each such violation.
    35    7.  Nothing  in this article shall create a private right of action on
    36  behalf of a debtor against a debt settlement company for  violations  of
    37  this article.
    38    8.  Nothing  in  this  article shall limit any statutory or common-law
    39  right of any person to bring any action in any court for any act, or the
    40  right of the state to punish any person for any violation of any law.
    41    § 588-u. Authority of superintendent.  The  superintendent  is  hereby
    42  authorized  and empowered to make, in addition hereto and not inconsist-
    43  ent herewith, such general rules  and  regulations,  and  such  specific
    44  rulings,  demands,  and findings as he or she may deem necessary for the
    45  proper conduct of the business authorized and licensed hereunder and for
    46  the enforcement of this article.
    47    § 588-v. Severability. If any word, phrase,  clause,  sentence,  para-
    48  graph,  subdivision,  section, or part of this article shall be adjudged
    49  by any court of competent jurisdiction  to  be  invalid,  such  judgment
    50  shall  not affect, impair, or invalidate the remainder thereof which can
    51  be given effect without the invalid provision, but shall be confined  in
    52  its operation to the word, phrase, clause, sentence, paragraph, subdivi-
    53  sion,  section, or part of this article directly involved in the contro-
    54  versy in which the judgment shall have been rendered.
    55    § 11. This act shall take effect on  the  one  hundred  eightieth  day
    56  after  it shall have become a law and shall apply to all debt settlement

        A. 3525                            22

     1  services agreements entered into or  offered  on  or  after  such  date;
     2  provided,  however,  that  effective  immediately, the superintendent of
     3  financial services shall add, amend, and/or repeal  any  rule  or  regu-
     4  lation he or she deems necessary or desirable for implementation of this
     5  act.
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