Require Debt Collector Licenses

Section 1. Legislative intent. The legislature hereby finds the presence of consumer-related problems with respect to the practices of debt collection agencies. Federal and state laws regulate how debt collectors may communicate with debtors and prohibit the use of certain threatening, deceptive and unfair collection practices. Despite these legal protections, there continue to be frequent consumer complaints regarding debt collection practices. Due to the sensitive nature of the information used in the course of debt collection agencies' work, and the vulnerable position consumers may find themselves in when dealing with these agencies, it is incumbent upon this legislature to ensure that agencies that engage in unscrupulous or abusive practices shall not continue to operate in this state. To protect the interests, reputations, and financial wellbeing of residents of this state from unwarranted harm, the legislature hereby declares that the state should not permit debt collection agencies to operate without a license from the state.

§ 2. The banking law is amended by adding a new article 7 to read as follows:

ARTICLE 7

LICENSED CONSUMER DEBT COLLECTORS Section 295. Definitions.

296. Debt collection agencies.

EXPLANATION--Matter in italics (underscored) is new; matter in brackets

[ ] is old law to be omitted.

LBD02284-16-0

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297. Surety bonding requirement.

298. Penalties.

299. Examinations.

300. Applicability.

§ 295. Definitions. As used in this article, the following terms shall have the following meanings:

1. (a) "Debt collection agency" shall mean a person, firm or corporation engaged in business, the principal purpose of which is to regularly collect or attempt to collect debts owed or due or asserted to be owed or due to another and shall also include a buyer of delinquent debt who seeks to collect such debt either directly or through the services of another by, including but not limited to, initiating or using legal processes or other means to collect or attempt to collect such debt.

(b) The term does not include: (i) any officer or employee of a creditor while, in the name of the creditor, collecting debts for such creditor;

(ii) any officer or employee of a debt collection agency;

(iii) any person while acting as a debt collection agency for another person, both of whom are related by common ownership or affiliated by corporate control, if the person acting as a debt collection agency does so only for persons to whom it is so related or affiliated and if the principal business of such person is not the collection of debts;

(iv) any person while serving or attempting to serve legal process on any other person in connection with the judicial enforcement of any debt;

(v) any attorney-at-law or law firm collecting a debt in such capacity on behalf of and in the name of a client solely through activities that may only be performed by a licensed attorney, but not any attorney-atlaw or law firm or part thereof who regularly engages in activities traditionally performed by debt collectors, including, but not limited to, contacting a debtor through the mail or via telephone with the purpose of collecting a debt or other activities as determined by rule of the superintendent;

(vi) any person employed by a utility regulated under the provisions of the public service law, acting for such utility;

(vii) any person collecting or attempting to collect any debt owed or due or asserted to be owed or due another to the extent such activity: (A) is incidental to a bona fide fiduciary obligation or a bona fide escrow agreement; (B) concerns a debt which was originated by such person; or (C) concerns a debt which was not in default at the time it was obtained by such person as a secured party in a commercial credit transaction involving the creditor;

(viii) any officer or employee of the United States, any state thereof or any political subdivision of any state to the extent that collecting or attempting to collect any debt owed is in the performance of his or her official duties;

(ix) any non-profit organization which, at the request of consumers, performs bona fide consumer credit counseling and assists customers in the liquidation of their debts by receiving payments from such customers and distributing such amounts to creditors; or

(x) any person, firm or corporation engaged in business, the principal purpose of which is to regularly collect or attempt to collect debts owed or due or asserted to be owed or due to another person where the debt is enforced for child support, spousal support, maintenance or alimony, provided, however, that if such person, firm or corporation also regularly collects or attempts to collect debts other than those

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enforced for child support, spousal support, maintenance or alimony, such person must comply with the requirements of this article.

2. "Consumer" means any natural person obligated or allegedly obligated to pay any debt.

3. "Debt" means any obligation or alleged obligation of a consumer to pay money arising out of a transaction in which the money, property, insurance, or services which are the subject of the transaction are primarily for personal, family, or household purposes, whether or not such obligation has been reduced to judgment.

§ 296. Debt collection agencies. 1. On or after May first, two thousand twenty-one, no person shall act as a debt collection agency without first having obtained a license in accordance with the provisions of this article, and without first being in compliance with all other applicable laws, rules and regulations.

2. (a) All licenses issued pursuant to this article shall be valid for one year unless sooner suspended or revoked. The superintendent shall establish by regulation the expiration date of such licenses.

(b) The fee for a license or renewal thereof shall be as prescribed pursuant to section eighteen-a of this chapter.

3. (a) Each person applying for a debt collection agency license or renewal thereof shall file an application in such form and detail as the superintendent may prescribe and shall pay the fee required by this section.

(b) In addition to any other information required, the superintendent shall require, but not be limited to, the following information, and shall, as appropriate, require such information not only of the applicant but also of any of its principals, partners, officers and directors, or any person or entity controlling an interest greater than ten percent:

(i) the name and residence address of the applicant;

(ii) the business name, if other than applicant;

(iii) the place, including the city, town or village, with the street and number, where the business is to be located;

(iv) the business telephone of the applicant;

(v) the length of time that the applicant has been a debt collection agency;

(vi) a statement indicating whether the applicant has:

(A) been convicted of any crime or is a debtor on any unpaid civil judgment relating to work as a debt collection agency; and

(B) at any time in the past been issued a license pursuant to this article, or has been issued a license for debt collection activities by any other state or local authority, and if so, whether such license was ever revoked or suspended;

(vii) a detailed description of the business practices or methods used, or intended to be used, by the applicant to confirm the validity of the debts it seeks to collect from consumers;

(viii) a summary of the applicant's record-keeping policy, including, but not limited to:

(A) the length of time the applicant maintains, or intends to maintain, records pertaining to consumers; and

(B) the manner in which the applicant records and stores, or intends to record and store: consumer challenges to the validity of debt; billing errors; payments made by a consumer; settlement agreements; information regarding parties responsible for debt; any statements made by a consumer alleging that the debt arose from identity theft; and any statements made by a consumer stating that the consumer received statu-

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torily exempt income as defined in section fifty-two hundred twenty-two of the civil practice law and rules;

(ix) whether the applicant regularly sells, or intends to sell, debts. If the applicant sells, or intends to sell debts, such applicant shall be required to provide the superintendent with a summary of the applicant's policy with respect to the information regarding a consumer's account that it transmits, or will transmit, to the purchaser of a debt; and

(x) a sworn statement by the applicant that the information set forth in the application is current and accurate.

(c) An applicant who is a non-resident of the state shall provide the name and address of a registered agent within the state or designate the superintendent as his or her agent upon whom process or other notification may be served.

4. In determining whether to issue, renew or suspend a license, the superintendent shall consider the character, competency and integrity of the applicant. The superintendent may refuse to issue or renew a license to any person, firm or corporation whom he or she finds has: (a) been convicted of any crime defined in article one hundred fifty-five of the penal law or article twenty-two-A of the general business law or failed to pay any final civil judgment relating to work as a debt collection agency, if such refusal, in the judgment of the superintendent, best promotes the interests of the people of this state; or

(b) violated article twenty-nine-H of the general business law, the federal Fair Debt Collection Practices Act (15 USC § 1692 et seq.), or any provision of this article.

All determinations by the superintendent to issue or renew a license shall be made in accordance with subdivision sixteen of section two hundred ninety-six of the executive law and article twenty-three-A of the correction law.

5. Notice in writing in the manner and form prescribed by the department shall be given to the department at its offices in Albany within ten days of changes of name or address by licensed debt collection agencies. The fee for filing each change of name or address notice shall be determined pursuant to section eighteen-a of this chapter.

6. The fees established by this section shall not be refundable.

7. Each debt collection agency engaged in collecting debts shall communicate his or her license number upon the request of any interested party. Any advertisement, letterhead, receipt or other printed matter of a licensee must contain the license number assigned to the licensee by the department. Such license number shall be clearly and conspicuously displayed.

8. No person, firm or corporation shall: (a) present, or attempt to present, as his, her or its own, the license number of another;

(b) knowingly give false evidence of a material nature to the department for the purpose of procuring a license;

(c) falsely represent themselves to be a licensed debt collection agency;

(d) use or attempt to use a license which has expired;

(e) offer to perform or perform any collection of debts without having a current license as is required under this article; or

(f) represent in any manner that his, her or its license constitutes an endorsement of the quality of workmanship or competency of the debt collection agency.

9. Licenses issued to debt collection agencies shall not be transferable or assignable.

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10. The superintendent shall issue each debt collection agency a unique license number.

11. The department shall maintain and publish a registry of all licensed debt collection agencies, which shall list and identify, all licensed debt collection agencies doing business in this state. The department shall make the registry available on its website.

12. (a) The superintendent shall adopt such rules and regulations as he or she may determine are necessary for the administration and enforcement of this article, and shall provide written notification of the provisions of this article to all debt collection agencies licensed pursuant to this article.

(b) In addition to any other powers of the superintendent, not in limitation thereof, he or she shall have the power to enforce the provisions of this article, to investigate any violation thereof, to investigate the business, business practices and business methods of any debt collection agency, and to conduct routine examinations of the financial solvency of any debt collection agency, if in the opinion of the superintendent, such investigation or examination is warranted. Each debt collection agency shall be obliged, on request of the superintendent, to supply such information, books, papers or records as may be required concerning his, her or its business, business practices or business methods, or proposed business practices or methods. Failure to comply with a lawful request of the superintendent shall be a ground for denying an application for a license, or for revoking, suspending, or failing to renew a license issued under this article.