Mandates the registration of home improvement contractors

Summary of provisions

Section 1 defines Certificate, Board, Fund, Private Residence and Final Judgment for purposes of this section.

Section 2 requires: 1.) Registration by home improvement contractors and firms engaged in such business with the Consumer Protection Board; 2.) Details the initial application process; 3.) Provides for 2 year registry; 4.) Provides for renewal of registration; 5.) $150 fee for registration with Board; 6.) Dictates practices of registrants; 7.) Requires surety bonds; 8.) Established the home improvement trust fund; 9.) Gives the Board the power to promulgate rules and regulations pertaining to home improvement contractors; 10.) Requires Board to keep a registry of home improvement contractors accessible by the Internet; 11.) Sets penalty of $2,000 per home improvement contract and enjoins a contractor from seeking monetary damages for nonpayment if they are not registered.

Section 3 amends section 771 of the GBL as added by chapter 421 of the laws of 1987 providing for a toll-free complaint line;

Section 4 raises the penalties for violations of this section;

Section 5 exempts the City of New York;

Section 6 establishes the Home Improvement Trust Fund.

Section 7 is the effective date.

Justification

This legislation gives primacy to surety bonding over a public recovery fund to protect homeowners from unscrupulous home improvement contractors by requiring that contractors post a surety bond in order to work legally in New York State. As a safeguard measure, a new home improvement trust..fund is established in the unlikely event that bonding has proved to be insufficient to cover all damages that have occurred.

There are a number of reasons why corporate surety bonds are superior to recovery funds when ensuring that the public is protected from negligent home improvement contractors or outright fraud. Surety companies provide the invaluable service of prescreening all applicants. One of the main purposes of requiring a surety bond is in gain the benefit of pre-qualification. In the absence of prescreening, more people who are financially or otherwise unqualified are allowed into the regulated business. This causes more problems for the public, and would constitute a drain on the assets of any newly established state recovery fund. Entering into a recovery fund does not require prescreening.

Surety companies have a long history of separating illegitimate claims from the valid ones and insuring that the requested dollar amount is realistic. There is no way a state fund could achieve this same efficiency without substantial, additional help.

Additionally recovery from a state fund is more restrictive and difficult than recovery from a corporate surety. Most recovery funds require the consumer to obtain judgments and exhaust al1 civil and administrative remedies before submitting a claim against the fund. And, in Some cases, state funds have been too generous in their payment of claims resulting in the fund becoming insolvent. When that happens, the state or the licensees must make up the difference, or the consumers must go without recovery.

Recovery funds attempt to provide the same services which corporate sureties have efficiently provided for decades in America. Previous experience indicates these funds ultimately cost the state money and are not efficient or fair to the consumer.

Legislative history

2008: S.6395 Referred to Consumer Protection

Fiscal implications

Undetermined.

Effective date

This bill will take effect 120 Days after it has become law.