Regulate Debt Settlement Services

Section 1. Section 455 of the general business law, as amended by chapter 629 of the laws of 2002, subdivision 1 as amended by chapter 456 of the laws of 2006, and subdivision 4 as amended by chapter 549 of the laws of 2013, is amended to read as follows:

§ 455. Definitions. 1. Budget planning, as used in this article, means the making of a contract between a person or entity engaged in the business of budget planning with a particular debtor whereby:

(i) the debtor agrees to pay a sum or sums of money in any manner or form and the person or entity engaged in the business of budget planning distributes, or supervises, coordinates or controls the distribution of, or has a contractual relationship with another person or entity that distributes, or supervises, coordinates or controls such distribution of, the same among certain specified creditors in accordance with a periodic payment plan agreed upon; and

(ii) the debtor agrees to pay to such person or entity, or such other person or entity that distributes, or supervises, coordinates or controls such distribution of, a sum or sums of money, any valuable consideration for such services or for any other services rendered in connection therewith; provided, however, that "budget planning" does not include "debt settlement services" as defined in section five hundred eighty-eight-a of the banking law. For the purposes of this article, a person or entity shall be considered as engaged in the business of budget planning in New York, and subject to this article and the licensing and other requirements of article twelve-C of the banking law, if such 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.

LBD01348-01-9

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and, in connection with such solicitation, enters into a contract for budget planning with an individual then resident in this state.

2. Person, as used in this article, shall not include a person admitted to practice law in this state.

3. Entity, as used in this article, shall not include a firm, partnership, professional corporation, or other organization, all of the members or principals of which are admitted to practice law in this state.

4. [Person or entity as used in this article shall not include a charitable corporation as defined in paragraph (a) of section one hundred two (Definitions) of the not-for-profit corporation law of this state, or an entity incorporated in another state and having a similar not-forprofit status, licensed by the superintendent, to engage in the business of budget planning as defined in this section.

5.] Any attorney licensed to practice law in this state who is engaged in budget planning shall:

(a) negotiate directly with creditors on behalf of the client;

(b) ensure that all moneys received from the client are deposited in the attorney's account maintained for client funds;

(c) pay creditors from such account; and

(d) offer budget planning services through the same legal entity that the attorney uses to practice law.

§ 2. Section 457 of the general business law, as amended by chapter 629 of the laws of 2002, is amended to read as follows:

§ 457. [Penalty] Penalties for violation of this article; criminal and civil. (a) Whoever either individually or as officer, director or employee of any person, firm, association or corporation, violates any of the provisions of the preceding section shall be guilty of a class A misdemeanor [for each such violation] punishable as provided in articles seventy and eighty of the penal law.

(b) Whenever there shall be a violation of this article, application may be made by the attorney general in the name of the people of the state of New York to a court or justice having jurisdiction by a special proceeding to issue an injunction, and upon notice to the defendant of not less than five days, to enjoin and restrain the continuance of such violations; and if it shall appear to the satisfaction of the court or justice that the defendant has, in fact, violated this article, an injunction may be issued by such court or justice, enjoining and restraining any further violation, without requiring proof that any person has, in fact, been injured or damaged thereby. In connection with any such proposed application, the attorney general is authorized to take proof and make a determination of the relevant facts and to issue subpoenas in accordance with the civil practice law and rules. Whenever the court shall determine that a violation of section four hundred fifty-six of this article has occurred, the court may impose a civil penalty of not more than five hundred dollars per contract made in violation of such section, not to exceed one hundred thousand dollars.

§ 3. Section 579 of the banking law, as amended by chapter 549 of the laws of 2013, is amended to read as follows:

§ 579. Doing business without license prohibited. [Only a charitable corporation as defined in paragraph (a) of section one hundred two (Definitions) of the not-for-profit corporation law of this state, or an entity incorporated in another state and having a similar not-for-profit status,] No person or entity shall engage in the business of budget planning as defined in subdivision one of section four hundred fiftyfive of the general business law [of this state] except as authorized by

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this article and without first obtaining a license from the superintendent.

§ 4. Subdivision 2 of section 584-a of the banking law, as added by chapter 629 of the laws of 2002, is amended to read as follows:

2. the total fees agreed to for such services, including any adjustments for estimated available rebates from creditors, provided that nothing in this subdivision shall require a licensee to share rebates with its clients and provided that any fees or charges imposed must be fair, reasonable and easily understood;

§ 5. Section 584-b of the banking law is amended by adding a new subdivision 4-a to read as follows:

4-a. No licensee shall impose any fee or charge whatsoever that is not fair, reasonable and able to be easily understood.

§ 6. Section 585 of the banking law, as amended by chapter 629 of the laws of 2002, is amended to read as follows:

§ 585. Superintendent authorized to examine. For the purpose of discovering violations of this article or securing information lawfully required by him or her hereunder, the superintendent may at any time, and as often as he or she may determine, either personally or by a person duly designated by him or her, investigate the business and examine the books, accounts, records, and files used therein of every licensee hereunder. For that purpose the superintendent and his or her duly designated representative shall have free access to the offices and place of business, books, accounts, papers, records, files, safes and vaults of all such licensees. The superintendent and any person duly designated by him or her shall have authority to require the attendance of and to examine under oath all persons whose testimony he or she may require relative to such business. The expenses incurred in making any examination pursuant to this section shall be assessed against and paid by the licensee so examined, except that traveling and subsistence expenses so incurred shall be charged against and paid by licensees in such proportions as the superintendent shall deem just and reasonable, and such proportionate charges shall be added to the assessment of the other expenses incurred upon each examination. Upon written notice by the superintendent of the total amount of such assessment, the licensee shall become liable for and shall pay such assessment to the superintendent. If, upon review, the superintendent shall determine that the fees or service charges set by the licensee are unfair, unreasonable or unclear, he or she shall direct the licensee to make adjustments in said fees and service charges in accordance with his or her findings, which shall set forth a detailed factual basis and reasoning supporting such finding.

§ 7. Subdivision 10 of section 36 of the banking law, as amended by chapter 182 of the laws of 2011, is amended to read as follows:

10. All reports of examinations and investigations, correspondence and memoranda concerning or arising out of such examination and investigations, including any duly authenticated copy or copies thereof in the possession of any banking organization, bank holding company or any subsidiary thereof (as such terms "bank holding company" and "subsidiary" are defined in article three-A of this chapter), any corporation or any other entity affiliated with a banking organization within the meaning of subdivision six of this section and any non-banking subsidiary of a corporation or any other entity which is an affiliate of a banking organization within the meaning of subdivision six-a of this section, foreign banking corporation, licensed lender, licensed casher of checks, licensed mortgage banker, registered mortgage broker,

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licensed mortgage loan originator, licensed sales finance company, registered mortgage loan servicer, licensed insurance premium finance agency, licensed transmitter of money, licensed budget planner, licensed debt settlement company, any other person or entity subject to supervision under this chapter, or the department, shall be confidential communications, shall not be subject to subpoena and shall not be made public unless, in the judgment of the superintendent, the ends of justice and the public advantage will be subserved by the publication thereof, in which event the superintendent may publish or authorize the publication of a copy of any such report or any part thereof in such manner as may be deemed proper or unless such laws specifically authorize such disclosure. For the purposes of this subdivision, "reports of examinations and investigations, and any correspondence and memoranda concerning or arising out of such examinations and investigations", includes any such materials of a bank, insurance or securities regulatory agency or any unit of the federal government or that of this state any other state or that of any foreign government which are considered confidential by such agency or unit and which are in the possession of the department or which are otherwise confidential materials that have been shared by the department with any such agency or unit and are in the possession of such agency or unit.

§ 8. Subdivisions 1, 2, 3 and 5 of section 39 of the banking law, subdivisions 1, 2 and 5 as amended by chapter 123 of the laws of 2009 and subdivision 3 as amended by chapter 155 of the laws of 2012, are amended to read as follows:

1. To appear and explain an apparent violation. Whenever it shall appear to the superintendent that any banking organization, bank holding company, registered mortgage broker, licensed mortgage banker, registered mortgage loan servicer, licensed mortgage loan originator, licensed lender, licensed casher of checks, licensed sales finance company, licensed insurance premium finance agency, licensed transmitter of money, licensed budget planner, licensed debt settlement company, out-of-state state bank that maintains a branch or branches or representative or other offices in this state, or foreign banking corporation licensed by the superintendent to do business or maintain a representative office in this state has violated any law or regulation, he or she may, in his or her discretion, issue an order describing such apparent violation and requiring such banking organization, bank holding company, registered mortgage broker, licensed mortgage banker, licensed mortgage loan originator, licensed lender, licensed casher of checks, licensed sales finance company, licensed insurance premium finance agency, licensed transmitter of money, licensed budget planner, licensed debt settlement company, out-of-state state bank that maintains a branch or branches or representative or other offices in this state, or foreign banking corporation to appear before him or her, at a time and place fixed in said order, to present an explanation of such apparent violation.

2. To discontinue unauthorized or unsafe and unsound practices. Whenever it shall appear to the superintendent that any banking organization, bank holding company, registered mortgage broker, licensed mortgage banker, registered mortgage loan servicer, licensed mortgage loan originator, licensed lender, licensed casher of checks, licensed sales finance company, licensed insurance premium finance agency, licensed transmitter of money, licensed budget planner, licensed debt settlement company, out-of-state state bank that maintains a branch or branches or representative or other offices in this state, or foreign banking corpo-

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