What's happening
This bill gives the Department of Financial Services expanded authority to penalize and oversee unlicensed banks and insurance companies operating in New York.
Why it matters
Closes a major enforcement gap. by allowing the Department of Financial Services (DFS) to impose the same civil penalties on unlicensed banks and insurance companies as on licensed ones, making it riskier to operate illegally and removing any incentive to avoid licensing requirements.
Expands protection for consumers. by targeting unlicensed actors who harm customers, allowing for penalties up to double the standard amount if consumer harm is found, and authorizing restitution orders to help make victims whole.
Creates a unified oversight framework. by letting DFS investigate and penalize any person or entity that should be licensed but isn’t, regardless of whether they ever held a license, and aligning penalties across the banking and insurance sectors to deter unauthorized operations.
Streamlines enforcement and coordination. by enabling administrative findings of liability to be quickly converted into enforceable civil judgments, and requiring DFS to coordinate with other law enforcement agencies to address violations, increasing the likelihood of criminal prosecution where warranted.
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Who cares
Department of Financial Services
The bill would expand its authority to investigate and penalize unlawful unlicensed activities and order restitution after notice and a hearing.
Unlicensed financial services providers
Providers operating without required approval or an exemption would face civil penalties both for operating unlawfully and for conduct that would violate the law if they were licensed.
Financial services consumers
The bill would authorize restitution for unlicensed acts and penalties of up to twice the otherwise applicable amount when those acts cause consumer harm.
Licensed banks and insurance companies
The bill would address a penalty gap that can leave unlicensed competitors facing fewer penalties for conduct punishable when committed by licensed providers.
Headline styles
Penalize Unlicensed Financial Operators
Plain English, a few words. Used as the page title.
Sponsors
No co-sponsors yet.
History
- Referred to banks
- Returned to senate
- Died in assembly
- Referred to banks
- Delivered to assembly
- Passed senateVote 44–13
- Advanced to third reading
- 2nd report cal.
- 1st report cal.388
- Referred to banks
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Penalize Unlicensed Financial Operators
In Assembly Committee · Banks · Sponsor Alex Bores
Full text
3 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
1290
2025-2026 Regular Sessions
IN SENATE
January 9, 2025
Introduced by Sen. KRUEGER -- read twice and ordered printed, and when printed to be committed to the Committee on Banks
AN ACT to amend the financial services law, in relation to allowing the department of financial services to have additional oversight of banks and insurance companies that are not currently licensed
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. The legislature finds that it is essential to the protection of users of financial products and services from imprudent conduct and harmful business practices in the financial services marketplace that all persons offering financial products and services in New York State be sufficiently deterred from disregarding the laws and regulations governing the offering of financial products or services, regardless of whether they are properly licensed. Furthermore, to ensure that the business of, and the persons providing, financial products and services are appropriately supervised, the law should not advantage persons who disregard licensing requirements. Currently, as to engagement in many activities for which a license from the superintendent of financial services is required, an unlicensed person not exempt from licensing is not subject to civil penalty for acts that would constitute violations subject to penalty if the person were licensed; such an unlicensed person may be subject to only a limited civil penalty for engaging in activity without a required license. This act remediates this fault in the law by providing that any person engaged in activity for which such person must be licensed by the superintendent of financial services will be subject to a civil penalty for conducting such activity in a manner inconsistent with the law, regardless of such person's licensure status.
§ 2. Subsections (a) and (b) of section 305 of the financial services law are amended to read as follows:
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD02257-02-5
(a) Unless otherwise provided in this chapter, the banking law, the insurance law or any other law, any hearing pursuant to any such law may be held before the superintendent, any deputy superintendent, or any designated salaried employee of the department authorized by the superintendent for such purpose. Any adjudicatory proceeding, including any hearings to assess civil penalties under section four hundred eight or four hundred eight-a of this chapter, held pursuant to the provisions of this chapter, the insurance law or the banking law shall be noticed, conducted and administered in compliance with the state administrative procedure act.
(b) The person conducting such hearing shall have power to administer oaths, examine and cross-examine witnesses and receive documentary evidence, and shall report [his or her] such person's findings, orally or in writing, to the superintendent with or without recommendation. Such report, if adopted by the superintendent may be the basis of any determination made by the superintendent. One hundred twenty days after the effective date of a determination of liability for a civil penalty pursuant to section four hundred eight or four hundred eight-a of this chapter or four hundred three, one thousand one hundred two, two thousand one hundred two, two thousand one hundred seventeen, two thousand one hundred thirty-three or seven thousand eight hundred sixteen of the insurance law, such determination of liability for a civil penalty may be entered as a judgment and enforced, without court proceedings, in the same manner as the enforcement of a money judgment in civil actions in any court of competent jurisdiction or any other place provided for the entry of civil judgment within this state.
§ 3. Subsection (a) of section 404 of the financial services law is amended to read as follows:
(a) The superintendent has authority under this article, the banking law, the insurance law and other applicable laws to investigate activities that may constitute violations subject to section four hundred eight or four hundred eight-a of this article or violations of the insurance law or banking law and to develop evidence thereon.
§ 4. The financial services law is amended by adding a new section 408-a to read as follows:
§ 408-a. Unlicensed activities prohibited. (a) For the purposes of this section, a "prohibited unlicensed act" shall mean:
(1) engaging in an activity in this state for which a license, certification, registration, authorization, charter, accreditation, incorporation, or approval by the superintendent is required by this chapter, the banking law, the insurance law, or the regulations promulgated thereunder, without such license, certification, registration, authorization, charter, accreditation, incorporation or approval or an exemption from such requirement; or
(2) any act or omission by a person who is required by this chapter, the banking law, the insurance law or the regulations promulgated thereunder, to be licensed, certified, registered, authorized, chartered, accredited, incorporated or otherwise approved by the superintendent and is not so licensed, certified, registered, authorized, chartered, accredited, incorporated, approved or exempted from such requirement, if such act or omission would constitute a violation of this chapter, the banking law, the insurance law or the regulations promulgated thereunder if such person were so licensed, certified, registered, authorized, chartered, accredited, incorporated or approved.
(b) In addition to any civil or criminal liability provided by law, the superintendent may, after notice and a hearing, levy a civil penalty for any prohibited unlicensed act as follows:
(1) The penalty for a prohibited unlicensed act that relates to the requirements of the banking law or the regulations promulgated thereunder shall be the same as the penalty provided in section forty-four of the banking law for any violation of the banking law.
(2) The penalty for a prohibited unlicensed act described in paragraph one of subsection (a) of this section that relates to the requirements of the insurance law or the regulations promulgated thereunder shall be the same as the penalty for violations set forth in section one thousand one hundred two of the insurance law.
(3) The penalty for a prohibited unlicensed act described in paragraph two of subsection (a) of this section that relates to the requirements of the insurance law or the regulations promulgated thereunder shall be the same as the penalty for violations set forth in section one hundred nine of the insurance law or any other applicable provision of the insurance law, whichever is higher.
(4) The penalty for a prohibited unlicensed act that relates to the requirements of this chapter or the regulations promulgated thereunder shall be the same as the penalty provided for in section four hundred eight of this article for violations of this chapter or the regulations promulgated thereunder.
(5) If a prohibited unlicensed act results in consumer harm, the penalty shall be not more than double the penalty amount applicable to such violation set forth in paragraph one, two, three or four of this subsection, as applicable.
(c) The superintendent shall not impose or collect any penalty for a prohibited unlicensed act pursuant to paragraph four of subsection (b) of this section if the superintendent imposes or collects any penalty pursuant to paragraph one, two or three of subsection (b) of this section for the same act or omission.
(d) Civil penalties received by the superintendent pursuant to this section shall be applied in the same manner as civil penalties received by the superintendent pursuant to section four hundred eight of this article.
(e) In addition to any other penalty or sanction imposed upon a person by law for an unlicensed act, after notice and a hearing, the superintendent may issue an order directing such person to pay restitution for such unlicensed act.
§ 5. Subsection (a) of section 409 of the financial services law is amended to read as follows:
(a) Whenever the superintendent is satisfied that a violation subject to section four hundred eight or four hundred eight-a of this article or fraud or other criminal activity under the insurance law or banking law has been committed or attempted, the superintendent shall report any such violation of law, as the superintendent deems appropriate, to the appropriate licensing agency, the district attorney of the county in which such acts were committed, to the attorney general, and where appropriate, to the person who submitted the report of fraudulent activity, as provided by the provisions of this article. Within one hundred twenty days of receipt of the superintendent's report, the attorney general or the district attorney concerned shall inform the superintendent as to the status of the reported violations.
§ 6. This act shall take effect immediately.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the financial services law, in relation to allowing the department of financial services to have additional oversight of banks and insurance companies that are not currently licensed
Purpose or general idea of bill
This bill will resolve faults in penalty provisions of the Banking Law, Insurance Law, and Financial Services Law that advantage persons who disregard licensing, registration, and similar authorization require- ments. The bill does this imposing a penalty for "prohibited unlicensed acts," which are defined as (1) "engaging in an activity in this state for which (authorization) by the superintendent is required by" the Banking, Insurance, or Financial Services laws or the regulations promulgated thereunder, without being so authorized, and (2) "any act or omission by a person who is required by (the Banking, Insurance, or Financial Services laws or the regulations promulgated thereunder, to be" authorized by the Superintendent to do such business and is not so authorized, "if such act or omission would constitute a violation of
THE BANKING, INSURANCE, OR FINANCIAL SERVICES LAWS) OR THE REGULATIONS PROMULGATED THEREUNDER, IF SUCH PERSON WERE SO (AUTHORIZED)."
Read the full memo (1,031 words)
Summary of provisions
SECTION 1 STATES THE PURPOSE OF THE BILL.
SECTION 2 PROVIDES THAT THE SUPERINTENDENT OF FINANCIAL SERVICES MAY HOLD ADJUDICATORY PROCEEDINGS TO ASSESS CIVIL PENALTIES AGAINST PERSONS WHO HAVE COMMITTED PROHIBITED UNLICENSED ACTS, AS THE SUPERINTENDENT MAY DO FOR OTHER VIOLATIONS OF THE BANKING, INSURANCE, AND FINANCIAL SERVICES LAWS.
SECTION 3 AUTHORIZES THE SUPERINTENDENT OF FINANCIAL SERVICES TO INVES- TIGATE ACTIVITIES THAT MAY CONSTITUTE PROHIBITED UNLICENSED ACTS, AS THE SUPERINTENDENT MAY DO WITH RESPECT TO OTHER ACTIVITIES WITHIN THE SUPER- INTENDENT'S JURISDICTION.
SECTION 4 CREATES A NEW SECTION OF LAW, FINANCIAL SERVICES LAW SECTION 408-A, WHICH DEFINES "PROHIBITED UNLICENSED ACT" AND ESTABLISHES THE APPLICABLE PENALTIES, WHICH MAY BE ASSESSED BY THE SUPERINTENDENT AFTER NOTICE AND A HEARING. THE PENALTIES ARE AS FOLLOWS:
FOR A PROHIBITED UNLICENSED ACT THAT RELATES TO THE REQUIREMENTS OF THE BANKING LAW OR THE REGULATIONS PROMULGATED THEREUNDER, THE PENALTY IS AS PROVIDED IN SECTION 44 OF THE BANKING LAW FOR ANY VIOLATION OF THE BANK- ING LAW.
FOR ENGAGING WITHOUT AUTHORIZATION IN A BUSINESS FOR WHICH AUTHORIZATION IS REQUIRED UNDER THE INSURANCE LAW OR THE REGULATIONS PROMULGATED THER- EUNDER, THE PENALTY IS THE SAME AS THE PENALTY SET FORTH IN SECTION 1102 OF THE INSURANCE LAW.
FOR ENGAGING WITHOUT AUTHORIZATION IN A BUSINESS FOR WHICH AUTHORIZATION IS REQUIRED UNDER THE INSURANCE LAW OR THE REGULATIONS PROMULGATED THER- EUNDER AND, FURTHER, ENGAGING IN AN ACT THAT CONSTITUTES A VIOLATION OF THE INSURANCE LAW OR THE REGULATIONS PROMULGATED THEREUNDER FOR THOSE PERSONS WHO ARE PROPERLY AUTHORIZED, THE PENALTY IS THE SAME AS THE PENALTY FOR VIOLATIONS SET FORTH IN SECTION 109 OF THE INSURANCE LAW OR ANY OTHER PROVISION OF THE INSURANCE LAW APPLICABLE TO THE ACTIVITY, WHICHEVER IS HIGHER.
FOR A PROHIBITED UNLICENSED ACT THAT RELATES TO THE REQUIREMENTS OF THE FINANCIAL SERVICES LAW OR THE REGULATIONS PROMULGATED THEREUNDER, THE PENALTY IS THE SAME AS THE PENALTY PROVIDED FOR IN FINANCIAL SERVICES LAW SECTION 408 FOR VIOLATIONS OF THE FINANCIAL SERVICES LAW OR THE REGULATIONS PROMULGATED THEREUNDER.
ADDITIONALLY, FOR A PROHIBITED UNLICENSED ACT THAT RESULTS IN CONSUMER HARM, THE SUPERINTENDENT MAY IMPOSE A PENALTY UP TO DOUBLE THE AMOUNT APPLICABLE TO SUCH VIOLATION SET FORTH ABOVE, AND THE SUPERINTENDENT MAY ORDER RESTITUTION TO HARMED CONSUMERS.
CONSISTENT WITH EXITING LAW, SECTION 4 OF THE BILL ALSO PROVIDES THAT A PARTICULAR ACT OR OMISSION CONSTITUTING A PROHIBITED UNLICENSED ACT CANNOT BE PENALIZED TWICE. IF THE SUPERINTENDENT IMPOSES A FINE FOR A PROHIBITED UNLICENSED ACT PURSUANT TO THE PROVISIONS OF THE INSURANCE LAW OR BANKING LAW, THE SUPERINTENDENT MAY NOT ADDITIONALLY IMPOSE A PENALTY FOR THE SAME ACT OR OMISSION PURSUANT TO THE FINANCIAL SERVICES LAW.
ALSO CONSISTENT WITH EXISTING LAW, THIS SECTION ESTABLISHES THAT THE CIVIL PENALTIES THAT THE SUPERINTENDENT OF FINANCIAL SERVICES COLLECTS FOR PROHIBITED UNLICENSED ACTS MUST BE APPLIED IN THE SAME MANNER AS CIVIL PENALTIES RECEIVED BY THE SUPERINTENDENT FOR OTHER VIOLATIONS OF THE FINANCIAL SERVICES LAW.
SECTION 5 OF THE BILL PROVIDES, CONSISTENT WITH EXISTING LAW, THAT IF THE SUPERINTENDENT BELIEVES THAT A VIOLATION OF THE NEWLY CREATED
SECTION 408-A HAS BEEN ATTEMPTED OR COMMITTED, THE SUPERINTENDENT, IN THEIR DISCRETION, MAY REPORT SUCH ACTIVITY TO THE APPROPRIATE LICENSING AUTHORITY OR DISTRICT ATTORNEY OR TO THE NEW YORK STATE ATTORNEY GENER- AL.
Justification
TO PROTECT OF USERS OF FINANCIAL PRODUCTS AND SERVICES FROM IMPRUDENT CONDUCT AND HARMFUL BUSINESS PRACTICES IN NEW YORK'S FINANCIAL SERVICES MARKETPLACE, ALL PERSONS OFFERING FINANCIAL PRODUCTS AND SERVICES IN NEW YORK STATE SHOULD BE SUFFICIENTLY DETERRED FROM DISREGARDING THE LAWS AND REGULATIONS GOVERNING THE OFFERING OF FINANCIAL PRODUCTS OR SERVICES, REGARDLESS OF WHETHER THEY ARE PROPERLY LICENSED, REGISTERED, OR OTHERWISE AUTHORIZED TO CONDUCT SUCH BUSINESS. FURTHERMORE, PERSONS PROVIDING FINANCIAL PRODUCTS AND SERVICES SHOULD NOT BENEFIT FROM THEIR FAILURE TO BE SO AUTHORIZED. CURRENTLY, AS TO ENGAGEMENT IN MANY ACTIV- ITIES FOR WHICH AUTHORIZATION FROM THE SUPERINTENDENT OF FINANCIAL SERVICES IS REQUIRED, A PERSON LACKING SUCH AUTHORIZATION IS NOT SUBJECT TO CIVIL PENALTY FOR ACTS THAT WOULD CONSTITUTE VIOLATIONS SUBJECT TO PENALTY IF THE PERSON DID HAVE PROPER AUTHORIZATION, AND THE PERSON MAY NOT EVEN BE SUBJECT TO A PENALTY FOR CARRYING ON SUCH A BUSINESS WITHOUT THE REQUIRED AUTHORIZATION. THIS MEANS, FOR EXAMPLE, THAT A PERSON CONDUCTING A LOAN BUSINESS FOR WHICH A LICENSE IS REQUIRED CANNOT BE FINED BY THE SUPERINTENDENT FOR DOING THAT BUSINESS WITHOUT A LICENSE. MOREOVER, IF THAT UNLICENSED PERSON CHARGES AN ILLEGAL RATE OF INTEREST, THE SUPERINTENDENT STILL CANNOT IMPOSE A FINE. THIS IS INCONGRUOUS WITH THE PROVISIONS OF THE BANKING LAW THAT SUBJECT PROPERLY LICENSED LENDERS TO FINES FOR VIOLATING INTEREST RATE LIMITS.
THIS ACT REMEDIATES THIS FAULT IN THE LAW BY PROVIDING THAT ANY PERSON ENGAGED IN ACTIVITY FOR WHICH SUCH PERSON MUST BE LICENSED BY THE SUPER- INTENDENT OF FINANCIAL SERVICES WILL BE SUBJECT TO A CIVIL PENALTY FOR CONDUCTING SUCH ACTIVITY IN A MANNER INCONSISTENT WITH THE LAW, REGARD- LESS OF SUCH PERSON'S LICENSURE STATUS.
Prior legislative history
2023-24: S.7420/A7770 (BORES) - PASSED SENATE
Fiscal implications for state and local governments
NONE.
Effective date
THIS BILL WOULD TAKE EFFECT IMMEDIATELY.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.