Requires agents of licensed money transmitters to remit moneys to the licensee within the time frame provided in the contract between the agent and the licensee

BILL NUMBER:S1279

Title of bill

An act to amend the banking law, in relation to remittances of moneys by agents of licensed transmitters of money

Purpose

To authorize treble damages in order to deter agents of licensed money transmitters from abusing business relationships and consumer trust by absconding with funds.

Summary of provisions

Section 1 amends the banking law to impose treble damages for agents of money transmitters who fail to remit moneys within a time period to be established by the superintendent.

Section 2 establishes the effective date.

Justification

Money transmitters play a critical role in the economy of New York State, providing consumers with safe and secure financial services including money orders, bill payments, and secure local, national and international funds transfers. In order to reach a broad spectrum of consumers, money transmitters transact business through agents who, in turn, provide direct services to a local customer base. As soon as the agent receives funds from the customer, the money transmitter is legally obligated to pay the funds to a beneficiary as directed by the customer, whether or not the money transmitter ever receives the funds from the agent. These agents are legitimized in the eyes of consumers by their relationships with known and reliable money transmitters. Unfortunately, despite the best efforts at screening, an alarming number of agents abscond with funds collected from customers and fail to remit the funds to the transmitter. This leaves the money transmitter legally obligated to pay for the instrument the rogue agent sold despite never having received the funds from the agent for the transaction and forces the money transmitter to take costly measures to attempt to recoup the funds from the dishonest agents. Moreover, these bad actors abuse the public trust and drive up the cost of doing business, which hurts consumers.

This bill, modeled after existing law in jurisdictions including New Jersey, North Carolina, Illinois and the District of Columbia, would serve to deter these bad actors by authorizing treble damages against agents who abscond with funds owed to the money transmitting companies. This legislation is necessary to protect both money transmitters and consumers because prosecuting agencies most often consider these actions to be civil matters, leaving money transmitters no recourse but to undertake costly litigation and pass at least some of the costs onto consumers. The threat of treble damages will change the calculus for potential bad actors, help make wronged money transmitters whole, and provide potentially significant savings to consumers.

Legislative history

2013-2014: S.3930

Fiscal implications

To be determined.

Effective date

This act shall take effect on the one hundred eightieth day after it shall have become law; provided that, effective immediately, any rules and regulations necessary to implement the provisions of this act on its effective date are authorized and directed to be completed on or before such date.