Bill Text: NY A03041 | 2021-2022 | General Assembly | Amended
Bill Title: Requires debt collection agencies to be licensed by the state; requires bonding and allows for penalties.
Spectrum: Partisan Bill (Democrat 3-0)
Status: (Introduced - Dead) 2022-01-05 - referred to consumer affairs and protection [A03041 Detail]
Download: New_York-2021-A03041-Amended.html
STATE OF NEW YORK ________________________________________________________________________ 3041--A 2021-2022 Regular Sessions IN ASSEMBLY January 22, 2021 ___________ Introduced by M. of A. GUNTHER, SEAWRIGHT -- read once and referred to the Committee on Consumer Affairs and Protection -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee AN ACT to amend the banking law and the civil practice law and rules, in relation to licensed consumer debt collectors The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. Legislative intent. The legislature hereby finds the 2 presence of consumer-related problems with respect to the practices of 3 debt collection agencies. Federal and state laws regulate how debt 4 collectors may communicate with debtors and prohibit the use of certain 5 threatening, deceptive and unfair collection practices. Despite 6 these legal protections, there continue to be frequent consumer 7 complaints regarding debt collection practices. Due to the sensitive 8 nature of the information used in the course of debt collection agen- 9 cies' work, and the vulnerable position consumers may find themselves in 10 when dealing with these agencies, it is incumbent upon this legislature 11 to ensure that agencies that engage in unscrupulous or abusive practices 12 shall not continue to operate in this state. To protect the interests, 13 reputations, and financial wellbeing of residents of this state from 14 unwarranted harm, the legislature hereby declares that the state should 15 not permit debt collection agencies to operate without a license from 16 the state. 17 § 2. The banking law is amended by adding a new article 7 to read as 18 follows: 19 ARTICLE 7 20 LICENSED CONSUMER DEBT COLLECTORS 21 Section 295. Definitions. 22 296. Debt collection agencies. 23 297. Surety bonding requirement. EXPLANATION--Matter in italics (underscored) is new; matter in brackets [] is old law to be omitted. LBD02792-04-1A. 3041--A 2 1 298. Penalties. 2 299. Examinations. 3 300. Applicability. 4 § 295. Definitions. As used in this article, the following terms shall 5 have the following meanings: 6 1. (a) "Debt collection agency" shall mean a person, firm or corpo- 7 ration engaged in business, the principal purpose of which is to regu- 8 larly collect or attempt to collect debts owed or due or asserted to be 9 owed or due to another and shall also include a buyer of delinquent debt 10 who seeks to collect such debt either directly or through the services 11 of another by, including but not limited to, initiating or using legal 12 processes or other means to collect or attempt to collect such debt. 13 (b) The term does not include: (i) any officer or employee of a credi- 14 tor while, in the name of the creditor, collecting debts for such credi- 15 tor; 16 (ii) any officer or employee of a debt collection agency; 17 (iii) any person while acting as a debt collection agency for another 18 person, both of whom are related by common ownership or affiliated by 19 corporate control, if the person acting as a debt collection agency does 20 so only for persons to whom it is so related or affiliated and if the 21 principal business of such person is not the collection of debts; 22 (iv) any person while serving or attempting to serve legal process on 23 any other person in connection with the judicial enforcement of any 24 debt; 25 (v) any attorney-at-law or law firm collecting a debt in such capacity 26 on behalf of and in the name of a client solely through activities that 27 may only be performed by a licensed attorney, but not any attorney-at- 28 law or law firm or part thereof who regularly engages in activities 29 traditionally performed by debt collectors, including, but not limited 30 to, contacting a debtor through the mail or via telephone with the 31 purpose of collecting a debt or other activities as determined by rule 32 of the superintendent; 33 (vi) any person employed by a utility regulated under the provisions 34 of the public service law, acting for such utility; 35 (vii) any person collecting or attempting to collect any debt owed or 36 due or asserted to be owed or due another to the extent such activity: 37 (A) is incidental to a bona fide fiduciary obligation or a bona fide 38 escrow agreement; (B) concerns a debt which was originated by such 39 person; or (C) concerns a debt which was not in default at the time it 40 was obtained by such person as a secured party in a commercial credit 41 transaction involving the creditor; 42 (viii) any officer or employee of the United States, any state thereof 43 or any political subdivision of any state to the extent that collecting 44 or attempting to collect any debt owed is in the performance of his or 45 her official duties; 46 (ix) any non-profit organization which, at the request of consumers, 47 performs bona fide consumer credit counseling and assists customers in 48 the liquidation of their debts by receiving payments from such customers 49 and distributing such amounts to creditors; or 50 (x) any person, firm or corporation engaged in business, the principal 51 purpose of which is to regularly collect or attempt to collect debts 52 owed or due or asserted to be owed or due to another person where the 53 debt is enforced for child support, spousal support, maintenance or 54 alimony, provided, however, that if such person, firm or corporation 55 also regularly collects or attempts to collect debts other than thoseA. 3041--A 3 1 enforced for child support, spousal support, maintenance or alimony, 2 such person must comply with the requirements of this article. 3 2. "Consumer" means any natural person obligated or allegedly obli- 4 gated to pay any debt. 5 3. "Debt" means any obligation or alleged obligation of a consumer to 6 pay money arising out of a transaction in which the money, property, 7 insurance, or services which are the subject of the transaction are 8 primarily for personal, family, or household purposes, whether or not 9 such obligation has been reduced to judgment. 10 § 296. Debt collection agencies. 1. On or after May first, two thou- 11 sand twenty-two, no person shall act as a debt collection agency without 12 first having obtained a license in accordance with the provisions of 13 this article, and without first being in compliance with all other 14 applicable laws, rules and regulations. 15 2. (a) All licenses issued pursuant to this article shall be valid for 16 one year unless sooner suspended or revoked. The superintendent shall 17 establish by regulation the expiration date of such licenses. 18 (b) The fee for a license or renewal thereof shall be as prescribed 19 pursuant to section eighteen-a of this chapter. 20 3. (a) Each person applying for a debt collection agency license or 21 renewal thereof shall file an application in such form and detail as the 22 superintendent may prescribe and shall pay the fee required by this 23 section. 24 (b) In addition to any other information required, the superintendent 25 shall require, but not be limited to, the following information, and 26 shall, as appropriate, require such information not only of the appli- 27 cant but also of any of its principals, partners, officers and direc- 28 tors, or any person or entity controlling an interest greater than ten 29 percent: 30 (i) the name and residence address of the applicant; 31 (ii) the business name, if other than applicant; 32 (iii) the place, including the city, town or village, with the street 33 and number, where the business is to be located; 34 (iv) the business telephone of the applicant; 35 (v) the length of time that the applicant has been a debt collection 36 agency; 37 (vi) a statement indicating whether the applicant has: 38 (A) been convicted of any crime or is a debtor on any unpaid civil 39 judgment relating to work as a debt collection agency; and 40 (B) at any time in the past been issued a license pursuant to this 41 article, or has been issued a license for debt collection activities by 42 any other state or local authority, and if so, whether such license was 43 ever revoked or suspended; 44 (vii) a detailed description of the business practices or methods 45 used, or intended to be used, by the applicant to confirm the validity 46 of the debts it seeks to collect from consumers; 47 (viii) a summary of the applicant's record-keeping policy, including, 48 but not limited to: 49 (A) the length of time the applicant maintains, or intends to main- 50 tain, records pertaining to consumers; and 51 (B) the manner in which the applicant records and stores, or intends 52 to record and store: consumer challenges to the validity of debt; bill- 53 ing errors; payments made by a consumer; settlement agreements; informa- 54 tion regarding parties responsible for debt; any statements made by a 55 consumer alleging that the debt arose from identity theft; and any 56 statements made by a consumer stating that the consumer received statu-A. 3041--A 4 1 torily exempt income as defined in section fifty-two hundred twenty-two 2 of the civil practice law and rules; 3 (ix) whether the applicant regularly sells, or intends to sell, debts. 4 If the applicant sells, or intends to sell debts, such applicant shall 5 be required to provide the superintendent with a summary of the appli- 6 cant's policy with respect to the information regarding a consumer's 7 account that it transmits, or will transmit, to the purchaser of a debt; 8 and 9 (x) a sworn statement by the applicant that the information set forth 10 in the application is current and accurate. 11 (c) An applicant who is a non-resident of the state shall provide the 12 name and address of a registered agent within the state or designate the 13 superintendent as his or her agent upon whom process or other notifica- 14 tion may be served. 15 4. In determining whether to issue, renew or suspend a license, the 16 superintendent shall consider the character, competency and integrity of 17 the applicant. The superintendent may refuse to issue or renew a license 18 to any person, firm or corporation whom he or she finds has: (a) been 19 convicted of any crime defined in article one hundred fifty-five of the 20 penal law or article twenty-two-A of the general business law or failed 21 to pay any final civil judgment relating to work as a debt collection 22 agency, if such refusal, in the judgment of the superintendent, best 23 promotes the interests of the people of this state; or 24 (b) violated article twenty-nine-H of the general business law, the 25 federal Fair Debt Collection Practices Act (15 USC § 1692 et seq.), or 26 any provision of this article. 27 All determinations by the superintendent to issue or renew a license 28 shall be made in accordance with subdivision sixteen of section two 29 hundred ninety-six of the executive law and article twenty-three-A of 30 the correction law. 31 5. Notice in writing in the manner and form prescribed by the depart- 32 ment shall be given to the department at its offices in Albany within 33 ten days of changes of name or address by licensed debt collection agen- 34 cies. The fee for filing each change of name or address notice shall be 35 determined pursuant to section eighteen-a of this chapter. 36 6. The fees established by this section shall not be refundable. 37 7. Each debt collection agency engaged in collecting debts shall 38 communicate his or her license number upon the request of any interested 39 party. Any advertisement, letterhead, receipt or other printed matter of 40 a licensee must contain the license number assigned to the licensee by 41 the department. Such license number shall be clearly and conspicuously 42 displayed. 43 8. No person, firm or corporation shall: (a) present, or attempt to 44 present, as his, her or its own, the license number of another; 45 (b) knowingly give false evidence of a material nature to the depart- 46 ment for the purpose of procuring a license; 47 (c) falsely represent themselves to be a licensed debt collection 48 agency; 49 (d) use or attempt to use a license which has expired; 50 (e) offer to perform or perform any collection of debts without having 51 a current license as is required under this article; or 52 (f) represent in any manner that his, her or its license constitutes 53 an endorsement of the quality of workmanship or competency of the debt 54 collection agency. 55 9. Licenses issued to debt collection agencies shall not be transfera- 56 ble or assignable.A. 3041--A 5 1 10. The superintendent shall issue each debt collection agency a 2 unique license number. 3 11. The department shall maintain and publish a registry of all 4 licensed debt collection agencies, which shall list and identify, all 5 licensed debt collection agencies doing business in this state. The 6 department shall make the registry available on its website. 7 12. (a) The superintendent shall adopt such rules and regulations as 8 he or she may determine are necessary for the administration and 9 enforcement of this article, and shall provide written notification of 10 the provisions of this article to all debt collection agencies licensed 11 pursuant to this article. 12 (b) In addition to any other powers of the superintendent, not in 13 limitation thereof, he or she shall have the power to enforce the 14 provisions of this article, to investigate any violation thereof, to 15 investigate the business, business practices and business methods of any 16 debt collection agency, and to conduct routine examinations of the 17 financial solvency of any debt collection agency, if in the opinion of 18 the superintendent, such investigation or examination is warranted. Each 19 debt collection agency shall be obliged, on request of the superinten- 20 dent, to supply such information, books, papers or records as may be 21 required concerning his, her or its business, business practices or 22 business methods, or proposed business practices or methods. Failure to 23 comply with a lawful request of the superintendent shall be a ground for 24 denying an application for a license, or for revoking, suspending, or 25 failing to renew a license issued under this article. 26 (c) The superintendent shall have the power to revoke or suspend any 27 license, or in lieu thereof to impose a fine not less than one hundred 28 dollars nor more than two thousand dollars per violation or instance, 29 payable to the department, or reprimand any licensee or deny an applica- 30 tion for a license or renewal thereof upon proof: 31 (i) that the applicant or licensee has violated any of the provisions 32 of this article or the rules and regulations promulgated pursuant to 33 this article; 34 (ii) that the applicant or licensee has practiced fraud, deceit or 35 misrepresentation; 36 (iii) that the applicant or licensee has made a material misstatement 37 in the application for or renewal of his or her license; or 38 (iv) that the applicant or licensee has demonstrated incompetence or 39 untrustworthiness in his or her actions. 40 13. The department shall before denying an application for a license 41 or before revoking or suspending any license, or imposing any fine or 42 reprimand, and at least fifteen days prior to the date set for the hear- 43 ing, and upon due notice to the complainant or objector, notify in writ- 44 ing the applicant, or the holder of such license, of any charge made and 45 shall afford such applicant or licensee an opportunity to be heard in 46 person or by counsel in reference thereto. Such written notice may be 47 served personally to the applicant or licensee, or by certified mail to 48 the last known business address of such applicant or licensee. 49 14. The hearing on such charges shall be at such time and place as the 50 department shall prescribe and shall be conducted by such officer or 51 person in the department as the superintendent may designate, who shall 52 have the power to subpoena and bring before the officer, or person so 53 designated, any person in this state and administer an oath to and take 54 testimony of any person or cause his or her deposition to be taken. A 55 subpoena issued under this section shall be regulated by the civil prac- 56 tice law and rules. Such officer or person in the department designatedA. 3041--A 6 1 to take such testimony shall not be bound by common law or statutory 2 rules of evidence or by technical or formal rules of procedure. 3 15. In the event that the department shall deny the application for, 4 or revoke or suspend any such license, or impose any fine or reprimand, 5 its determination shall be in writing and officially signed. The 6 original of such determinations, when so signed, shall be filed in the 7 office of the department and copies thereof shall be mailed to the 8 applicant or licensee and to the complainant within two days after such 9 filing. 10 16. The department, acting by the office or person designated to 11 conduct the hearing pursuant to subdivision thirteen of this section or 12 by such other officer or person in the department as the superintendent 13 may designate, shall have the power to suspend the license of any licen- 14 see who has been convicted in this state or any other state or territory 15 of a felony or of any misdemeanor for a period not exceeding thirty days 16 pending a hearing and a determination of charges made against him or 17 her. If such hearing is adjourned at the request of the licensee, or by 18 reason of any act or omission by him or her or on his or her behalf, 19 such suspension may be continued for the additional period of such 20 adjournment. 21 17. The action of the department in granting or refusing to grant or 22 to renew a license under this article or in revoking or suspending or 23 refusing to revoke or suspend such a license or imposing any fine or 24 reprimand shall be subject to review by a proceeding instituted under 25 article seventy-eight of the civil practice law and rules at the 26 instance of the applicant for such license, the holder of a license so 27 revoked, suspended, fined or reprimanded. 28 18. For the purpose of this article, licensees may be held responsible 29 for statements, representations, promises or acts of their employees or 30 their agents within the scope of their authority; provided, however, 31 that licensees shall not be held responsible for statements, representa- 32 tions, promises or acts which are contrary to instructions or which 33 constitute gross negligence or intentional torts unless specifically 34 authorized by the licensee. 35 19. (a) Any person, firm or corporation that operates as a debt 36 collection agency without a license shall be required to pay a civil 37 penalty to the department of not more than five hundred dollars per 38 attempt to collect a debt in violation of this section. 39 (b) In addition to any other penalties, if a person is found to have 40 committed repeated, multiple or persistent violations of any provision 41 of this article, such person may be responsible for the cost of the 42 department's investigation. 43 § 297. Surety bonding requirement. 1. As a condition of obtaining a 44 license pursuant to this article, every debt collection agency applicant 45 who is applying for a license and employs between one and four individ- 46 uals engaged in the collection of debts shall obtain and continue in 47 full force and effect a bond, contract of indemnity, or irrevocable 48 letter of credit in the amount of twenty-five thousand dollars to be 49 filed with the superintendent. 50 2. As a condition to obtaining a license pursuant to this article, 51 every debt collection agency applicant who is applying for a license and 52 employs between five and nine individuals engaged in the collection of 53 debts shall obtain and continue in full force and effect a bond, 54 contract of indemnity, or irrevocable letter of credit in the amount of 55 twenty-seven thousand five hundred dollars to be filed with the super- 56 intendent.A. 3041--A 7 1 3. As a condition to obtaining a license pursuant to this article, 2 every debt collection agency applicant who is applying for a license and 3 employs between ten and twenty individuals engaged in the collection of 4 debts shall obtain and continue in full force and effect a bond, 5 contract of indemnity, or irrevocable letter of credit in the amount of 6 fifty-six thousand two hundred dollars to be filed with the superinten- 7 dent. 8 4. As a condition to obtaining a license pursuant to this article, 9 every debt collection agency applicant who is applying for a license and 10 employs twenty or more individuals engaged in the collection of debts 11 shall obtain and continue in full force and effect a bond, contract of 12 indemnity, or irrevocable letter of credit, in the amount of seventy- 13 five thousand dollars to be filed with the superintendent. 14 5. Such surety bond, contract of indemnity, or irrevocable letter of 15 credit shall be conditioned that the applicant will comply with this 16 article, article twenty-nine-H, and article twenty-nine-HH of the gener- 17 al business law and pay all civil penalties, fines, or other obligations 18 imposed by the superintendent or a court of law, investigatory costs 19 required to be paid, or any final judgment against the licensee pursuant 20 to such articles. 21 6. The total liability imposed on the surety bond under this section 22 for all breaches of the bond condition is limited to the face amount of 23 the bond. Such liability is limited to the amount of the penalty or 24 investigatory costs. In no event will the surety on a bond be liable for 25 total claims in excess of the bond amount, regardless of the number or 26 nature of claims made against the bond or the number of years the bond 27 remained in force. 28 7. Any surety issuing a bond pursuant to this section and any licensee 29 shall be required to provide thirty days notice to the superintendent 30 prior to the effective date of cancellation of the bond. The failure to 31 maintain such a bond shall operate to revoke the license of the debt 32 collection agency upon notice and hearing. 33 § 298. Penalties. 1. Wherever there shall be a violation of this 34 article, an application may be made by the attorney general in the name 35 of the people of the state of New York to a court or justice having 36 jurisdiction by a special proceeding to issue an injunction, and upon 37 notice to the defendant of not less than five days, to enjoin or 38 restrain the continuance of such violation; and if it shall appear to 39 the satisfaction of the court or justice that the defendant has, in 40 fact, violated this section, an injunction may be issued by such court 41 or justice, enjoining and restraining any further violation, without 42 requiring proof that any person has, in fact, been injured or damaged 43 thereby. In any such proceeding, the court may make allowances to the 44 attorney general as provided in paragraph six of subdivision (a) of 45 section eighty-three hundred three of the civil practice law and rules, 46 and direct restitution. Whenever the court shall determine that a 47 violation of this section has occurred, the court may impose a civil 48 penalty of not less than one hundred dollars nor more than ten thousand 49 dollars for each violation. In connection with any such proposed appli- 50 cation, the attorney general is authorized to take proof and make a 51 determination of the relevant facts and to issue subpoenas in accordance 52 with the civil practice law and rules. 53 2. Any person who has been the subject of an attempt to collect a debt 54 by a debt collection agency that is not licensed pursuant to this arti- 55 cle may bring an action in his or her own name to enjoin such unlawful 56 act or practice, an action to recover his or her actual damages or threeA. 3041--A 8 1 thousand five hundred dollars, whichever is greater, or both such 2 actions. The court may, in its discretion, increase the award of damages 3 to an amount not to exceed three times the actual damages up to ten 4 thousand dollars, if the court finds the defendant willfully violated 5 this article. In the case of any successful action to enforce the fore- 6 going liability, the court may award the costs of the action together 7 with reasonable attorney's fees. 8 § 299. Examinations. 1. Each licensed debt collection agency shall 9 keep and use in its business such books, accounts, and records as will 10 enable the superintendent to determine whether such licensee is comply- 11 ing with the provisions of this article and with the rules and regu- 12 lations promulgated hereunder. Every licensed debt collection agency 13 shall preserve such books, accounts, and records, for at least five 14 years after making the final entry regarding a consumer debt. Preserva- 15 tion of photographic reproduction thereof or records in photographic 16 form, including an optical disk storage system and the use of electronic 17 data processing equipment that provides comparable records to those 18 otherwise required and which are available for examination upon request 19 shall constitute compliance with the requirements of this section. 20 2. Each licensed debt collection agency shall annually, on or before 21 April first, file a report with the superintendent giving such informa- 22 tion as the superintendent may require concerning the business and oper- 23 ations during the preceding calendar year of each licensed place of 24 business conducted by such licensed debt collection agency within the 25 state under authority of this article. Such report shall be subscribed 26 and affirmed as true by the licensed debt collection agency under the 27 penalties of perjury and shall be in the form prescribed by the super- 28 intendent. 29 3. In addition to annual reports, the superintendent may require such 30 additional regular or special reports as may be deemed necessary to the 31 proper supervision of a licensed debt collection agency under this arti- 32 cle. Such additional reports shall be in the form prescribed by the 33 superintendent and shall be subscribed and affirmed as true under the 34 penalties of perjury. 35 4. The expenses of every examination of the affairs of a licensed debt 36 collection agency subject to this section shall be borne and paid by the 37 licensed debt collection agency. 38 § 300. Applicability. 1. Except as provided in subdivision two of this 39 section, the provisions of this article shall exclusively govern the 40 licensing of debt collection agencies notwithstanding the provisions of 41 any other law to the contrary and further, no local law shall be enacted 42 which shall require any fee or license for the licensure or registration 43 of debt collection agencies. 44 2. The provisions of this article shall not be construed to limit in 45 any way the authority of a political subdivision to enact, implement and 46 continue to enforce local laws and regulations governing the licensure 47 or registration of debt collection agencies that were in effect prior to 48 the effective date of this article, or to enact, implement and enforce 49 any amendments thereto. 50 § 3. Subdivision (e) of rule 3015 of the civil practice law and rules, 51 as amended by chapter 693 of the laws of 2019, is amended to read as 52 follows: 53 (e) License to do business. Where the plaintiff's cause of action 54 against a consumer arises from the plaintiff's conduct of a business 55 which is required by state or local law to be licensed by the department 56 of consumer affairs of the city of New York, the Suffolk county depart-A. 3041--A 9 1 ment of consumer affairs, the county of Rockland, the county of Putnam, 2 the county of Westchester, [or] the Nassau county department of consumer 3 affairs or the department of financial services pursuant to article 4 seven of the banking law, the complaint shall allege, as part of the 5 cause of action, that plaintiff was duly licensed at the time of 6 services rendered and shall contain the name and number, if any, of such 7 license and the governmental agency which issued such license. The fail- 8 ure of the plaintiff to comply with this subdivision will permit the 9 defendant to move for dismissal pursuant to paragraph seven of subdivi- 10 sion (a) of rule thirty-two hundred eleven of this chapter. 11 § 4. This act shall take effect on the one hundred eightieth day after 12 it shall have become a law. Effective immediately, the addition, amend- 13 ment and/or repeal of any rule or regulation necessary for the implemen- 14 tation of this act on its effective date are authorized to be made and 15 completed on or before such effective date.
