Relates to civil enforcement and penalties for unauthorized operations

Title of bill

An act to amend the banking law, in relation to the enforcement of provisions relating to unlicensed operations

Purpose

This bill would provide the Banking Department with the authority to undertake civil enforcement proceedings and impose civil penalties against persons who are violating the Banking Law by operating without the required banking charter or financial service license.

Summary

This bill adds a new Section 44-b to the Banking Law to authorize the Banking Department to issue cease and desist orders and seek civil restitution from persons who are violating the Banking Law by operating without the required banking charter or financial service license. Civil penalties of up to $5,000 per day may be imposed for each violation, and the person may also be ordered to make restitution to those who are affected by such violation.

Justification

New York State has established a comprehensive system for regulating, examining and overseeing the activities and operations of banking institutions and financial service companies. This regulatory system is important for the promotion and protection of the financial system, and for ensuring the protection of consumers.

However, there continue to be concerns and some problems with persons performing such financial activities without the required approval and oversight of the Banking Department. Licensing and regulation are crucial for the protection of consumers. Because some entities may be avoiding regulation and not complying with rules established to protect consumers, there is a much greater likelihood that consumers will be defrauded and that the entity will be engaged in other illegal activities.

Although operating without the required authorization under the Banking Law is already a crime, the current system is not always adequate to protect the public. Therefore, this legislation will complement the existing criminal penalties by giving the Banking Department the ability to assess and enforce specific sanctions against persons and entities who violate the Banking Law by operating without the required charter or license. This may be a more appropriate approach in certain situations to ensure compliance with the law. This new mechanism will serve as an additional deterrent to violations and will result in meaningful sanctions when necessary. This will help protect consumers and the integrity of the financial system.

This bill is modeled after Chapter 615 of 2003, which established a similar civil enforcement process to enable the State Education Department to take action against individuals engaged in the unauthorized practice of a licensed profession.

Legislative history

Bill S.2864: passed Senate in 2007 and 2008 Bill S.2860 of 2005-06: passed Senate in 2005 and 2006

Fiscal impact

Minimal. Enforcement actions may result in fine revenues to the State.

Effective date

Immediately.