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Speaker Carl E. Heastie
 
     
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A07892 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
 submitted in accordance with Assembly Rule III, Sec 1(f)




 
BILL NUMBER: A7892
 
SPONSOR: Dinowitz

 
TITLE OF BILL:
 
An act to amend the general business law, in relation to budget planning
 
 
PURPOSE:
 
To protect consumers from unfair and deceptive practices by clarifying
that companies offering debt settlement and debt relief services qualify
as engaged in the business of budget planning and must obtain a license
under article twelve-C of the banking law.
 
 
SUMMARY OF PROVISIONS:
 
Section one of the bill amends § 455 of the general business law to
amend the definition of "budget planning" to make it clear that debt
settlement and debt relief companies qualify as budget planners. This
bill would also provide an exception to licensing for attorneys, unless
budget planning is a principal purpose of their business.
 
Section two of the bill amends § 457 of the general business law to
provide for enforcement by the attorney general and civil penalties for
unlicensed entities who unlawfully engage in budget planning of up to
ten thousand dollars per debtor enrolled or three times the amount of
debt enrolled, as well as consumer restitution.
 
Section three of the bill provides the effective date.
 
 
JUSTIFICATION:
 
Advertisements for entities offering debt settlement services have
become ubiquitous. Many debt-laden consumers are confused as to which
entities offering help are legitimate. Calls for strict regulation of
the debt settlement services industry have increased significantly in
recent years. A May 2012 White Paper by the New York City Bar, titled
"Profiteering From Financial Distress:  An Examination of the Debt
Settlement Industry" highlights many of the problems and the need for
greater regulation.
 
This legislation is aimed at reining in the excesses of the debt settle-
ment services industry. The legislation provides for, among other
things, licensure requirements and penalties for non-compliance. This
proposal would apply all requirements for budget planners, including
non-profit status, to debt settlement and debt negotiation companies.
 
Many debt settlement companies use law firms as a front to attempt to
evade regulations. This act would exempt from licensing attorneys who
engage in debt settlement occasionally but would require licensure for
attorneys and law firms engaged in debt settlement as a principal
purpose of their business.
 
 
PRIOR LEGISLATIVE HISTORY:
 
This is a new bill.
 
 
FISCAL IMPLICATIONS:
 
No direct fiscal impact.
 
 
EFFECTIVE DATE:
Ninety days after the act becomes law.
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