|SAME AS||No same as|
|COSPNSR||Millman, Colton, Rivera P, Galef, Jaffee, Cahill, Robinson, Rosenthal, Clark, Hooper|
|MLTSPNSR||Boyland, Glick, Hoyt, Lancman, Magee, Maisel, McEneny, Perry, Reilly, Rivera J, Scarborough, Sweeney, Weinstein, Weisenberg|
|Add Art 29-HHH SS604-k - 604-o, Gen Bus L; amd R3015, CPLR|
|Requires debt collection agencies to be licensed by the state; requires bonding and allows for penalties.|
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STATE OF NEW YORK ________________________________________________________________________ 8429--B 2011-2012 Regular Sessions IN ASSEMBLY June 15, 2011 ___________ Introduced by M. of A. DINOWITZ, MILLMAN, COLTON, P. RIVERA, GALEF, JAFFEE, CAHILL, ROBINSON, ROSENTHAL, CLARK, HOOPER -- Multi-Sponsored by -- M. of A. BOYLAND, GLICK, LANCMAN, MAGEE, MAISEL, McENENY, PERRY, REILLY, J. RIVERA, SCARBOROUGH, SWEENEY, WEINSTEIN, WEISENBERG -- read once and referred to the Committee on Consumer Affairs and Protection -- recommitted to the Committee on Consumer Affairs and Protection in accordance with Assembly Rule 3, sec. 2 -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee -- reported and referred to the Committee on Ways and Means -- committee discharged, bill amended, ordered reprinted as amended and recommitted to said committee AN ACT to amend the general business law and the civil practice law and rules, in relation to debt collection agencies The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. Legislative intent. The legislature hereby finds the pres- 2 ence of consumer-related problems with respect to the practices of debt 3 collection agencies. Federal and state laws regulate how debt collectors 4 may communicate with debtors and prohibit the use of certain threaten- 5 ing, deceptive and unfair collection practices. Despite these legal 6 protections, the number of consumer complaints regarding debt collection 7 practices continue to rise. Consumer complaints received by the Federal 8 Trade Commission regarding third-party debt collectors grew for the 9 thirteenth consecutive year in 2010, and consumers filed with the 10 Commission more complaints against third-party collectors than against 11 any other specific industry. While the majority of those engaged in the 12 business of debt collection are honest and ethical in their dealings, 13 there is a minority of unscrupulous collection agencies in operation 14 that practice abusive tactics. Due to the sensitive nature of the infor- 15 mation used in the course of such agency's everyday business, and the 16 vulnerable position consumers find themselves in when dealing with these 17 agencies, it is incumbent upon this legislature to protect the inter- 18 ests, reputations and fiscal well-being of the citizens of this state 19 against those agencies who would abuse their privilege of operation. EXPLANATION--Matter in italics (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD00800-04-2A. 8429--B 2 1 Therefore, it is herein declared that the state should license debt 2 collection agencies. 3 § 2. The general business law is amended by adding a new article 4 29-HHH to read as follows: 5 ARTICLE 29-HHH 6 DEBT COLLECTION AGENCIES 7 Section 604-k. Definitions. 8 604-l. Debt collection agencies. 9 604-m. Surety bonding requirement. 10 604-n. Penalties. 11 604-o. Applicability. 12 § 604-k. Definitions. As used in this article, the following terms 13 shall have the following meanings: 14 1. (a) "Debt collection agency" shall mean a person, firm or corpo- 15 ration engaged in business, the principal purpose of which is to regu- 16 larly collect or attempt to collect debts owed or due or asserted to be 17 owed or due to another and shall also include a buyer of delinquent debt 18 who seeks to collect such debt either directly or through the services 19 of another by, including but not limited to, initiating or using legal 20 processes or other means to collect or attempt to collect such debt. 21 (b) The term does not include: (i) any officer or employee of a credi- 22 tor while, in the name of the creditor, collecting debts for such credi- 23 tor; 24 (ii) any officer or employee of a debt collection agency; 25 (iii) any person while acting as a debt collection agency for another 26 person, both of whom are related by common ownership or affiliated by 27 corporate control, if the person acting as a debt collection agency does 28 so only for persons to whom it is so related or affiliated and if the 29 principal business of such person is not the collection of debts; 30 (iv) any person while serving or attempting to serve legal process on 31 any other person in connection with the judicial enforcement of any 32 debt; 33 (v) any attorney-at-law or law firm collecting a debt in such capacity 34 on behalf of and in the name of a client solely through activities that 35 may only be performed by a licensed attorney, but not any attorney-at- 36 law or law firm or part thereof who regularly engages in activities 37 traditionally performed by debt collectors, including, but not limited 38 to, contacting a debtor through the mail or via telephone with the 39 purpose of collecting a debt or other activities as determined by rule 40 of the secretary; 41 (vi) any person employed by a utility regulated under the provisions 42 of the public service law, acting for such utility; 43 (vii) any person collecting or attempting to collect any debt owed or 44 due or asserted to be owed or due another to the extent such activity: 45 (A) is incidental to a bona fide fiduciary obligation or a bona fide 46 escrow agreement; (B) concerns a debt which was originated by such 47 person; or (C) concerns a debt which was not in default at the time it 48 was obtained by such person as a secured party in a commercial credit 49 transaction involving the creditor; 50 (viii) any officer or employee of the United States, any state thereof 51 or any political subdivision of any state to the extent that collecting 52 or attempting to collect any debt owed is in the performance of his or 53 her official duties; 54 (ix) any non-profit organization which, at the request of consumers, 55 performs bona fide consumer credit counseling and assists customers inA. 8429--B 3 1 the liquidation of their debts by receiving payments from such customers 2 and distributing such amounts to creditors; or 3 (x) any person, firm or corporation engaged in business, the principal 4 purpose of which is to regularly collect or attempt to collect debts 5 owed or due or asserted to be owed or due to another person where the 6 debt is enforced for child support, spousal support, maintenance or 7 alimony, provided, however, that if such person, firm or corporation 8 also regularly collects or attempts to collect debts other than those 9 enforced for child support, spousal support, maintenance or alimony, 10 such person must comply with the requirements of this article. 11 2. "Consumer" means any natural person obligated or allegedly obli- 12 gated to pay any debt. 13 3. "Debt" means any obligation or alleged obligation of a consumer to 14 pay money arising out of a transaction in which the money, property, 15 insurance, or services which are the subject of the transaction are 16 primarily for personal, family, or household purposes, whether or not 17 such obligation has been reduced to judgment. 18 4. "Department" means the department of state. 19 5. "Division" means the division of criminal justice services. 20 6. "Secretary" means the secretary of state. 21 § 604-l. Debt collection agencies. 1. On or after October first, two 22 thousand thirteen, no person shall act as a debt collection agency with- 23 out first having obtained a license in accordance with the provisions of 24 this article, and without first being in compliance with all other 25 applicable laws, rules and regulations. 26 2. (a) All licenses issued pursuant to this article shall be valid for 27 two years unless sooner suspended or revoked. The secretary shall estab- 28 lish by regulation the expiration date of such licenses. 29 (b) The fee for a license or renewal thereof shall be five hundred 30 dollars. 31 3. (a) Each person applying for a debt collection agency license or 32 renewal thereof shall file an application in such form and detail as the 33 secretary may prescribe and shall pay the fee required by this section. 34 (b) In addition to any other information required, the secretary shall 35 require the following information, and shall, as appropriate, require 36 such information not only of the applicant but also of any of its prin- 37 cipals, partners, officers and directors, or any person or entity 38 controlling an interest greater than ten percent: 39 (i) the name and residence address of the applicant; 40 (ii) the business name, if other than applicant; 41 (iii) the place, including the city, town or village, with the street 42 and number, where the business is to be located; 43 (iv) the business telephone of the applicant; 44 (v) the length of time that the applicant has been a debt collection 45 agency; 46 (vi) a statement indicating whether the applicant has: 47 (A) been convicted of any crime or is a debtor on any unpaid civil 48 judgment relating to work as a debt collection agency; and 49 (B) at any time in the past been issued a license pursuant to this 50 article, or has been issued a license for debt collection activities by 51 any other state or local authority, and if so, whether such license was 52 ever revoked or suspended; 53 (vii) a detailed description of the business practices or methods 54 used, or intended to be used, by the applicant to confirm the validity 55 of the debts it seeks to collect from consumers;A. 8429--B 4 1 (viii) a summary of the applicant's record-keeping policy, including, 2 but not limited to: 3 (A) the length of time the applicant maintains, or intends to main- 4 tain, records pertaining to consumers; and 5 (B) the manner in which the applicant records and stores, or intends 6 to record and store: consumer challenges to the validity of debt; bill- 7 ing errors; payments made by a consumer; settlement agreements; informa- 8 tion regarding parties responsible for debt; any statements made by a 9 consumer alleging that the debt arose from identity theft; and any 10 statements made by a consumer stating that the consumer received statu- 11 torily exempt income as defined in section fifty-two hundred twenty-two 12 of the civil practice law and rules; 13 (ix) whether the applicant regularly sells, or intends to sell, debts. 14 If the applicant sells, or intends to sell debts, such applicant shall 15 be required to provide the secretary with a summary of the applicant's 16 policy with respect to the information regarding a consumer's account 17 that it transmits, or will transmit, to the purchaser of a debt; and 18 (x) a sworn statement by the applicant that the information set forth 19 in the application is current and accurate. 20 (c) An applicant who is a non-resident of the state shall provide the 21 name and address of a registered agent within the state or designate the 22 secretary as his or her agent upon whom process or other notification 23 may be served. 24 4. In determining whether to issue or renew a license, the secretary 25 shall consider the character, competency and integrity of the applicant. 26 The secretary may refuse to issue or renew a license to any person, firm 27 or corporation whom he or she finds has: (a) been convicted of any crime 28 defined in article one hundred fifty-five of the penal law or article 29 twenty-two-A of this chapter or failed to pay any final civil judgment 30 relating to work as a debt collection agency, if such refusal, in the 31 judgment of the secretary, best promotes the interests of the people of 32 this state; or 33 (b) violated article twenty-nine-H of this chapter or the federal Fair 34 Debt Collection Practices Act (15 USC § 1692 et seq.). 35 All determinations by the secretary to issue or renew a license shall 36 be made in accordance with subdivision sixteen of section two hundred 37 ninety-six of the executive law and article twenty-three-A of the 38 correction law. 39 5. Notice in writing in the manner and form prescribed by the depart- 40 ment shall be given to the department at its offices in Albany within 41 ten days of changes of name or address by licensed debt collection agen- 42 cies. The fee for filing each change of name or address notice shall be 43 ten dollars. 44 6. The fees established by this section shall not be refundable. 45 7. Each debt collection agency engaged in collecting debts shall 46 communicate his or her license number upon the request of any interested 47 party. Any advertisement, letterhead, receipt or other printed matter of 48 a licensee must contain the license number assigned to the licensee by 49 the department. Such license number shall be clearly and conspicuously 50 displayed. 51 8. No person, firm or corporation shall: (a) present, or attempt to 52 present, as his, her or its own, the license number of another; 53 (b) knowingly give false evidence of a material nature to the depart- 54 ment for the purpose of procuring a license; 55 (c) falsely represent themselves to be a licensed debt collection 56 agency;A. 8429--B 5 1 (d) use or attempt to use a license which has expired; 2 (e) offer to perform or perform any collection of debts without having 3 a current license as is required under this article; or 4 (f) represent in any manner that his, her or its license constitutes 5 an endorsement of the quality of workmanship or competency of the debt 6 collection agency. 7 9. Licenses issued to debt collection agencies shall not be transfera- 8 ble or assignable. 9 10. The secretary shall issue each debt collection agency a unique 10 license number. 11 11. The department shall maintain and publish a registry of all 12 licensed debt collection agencies, which shall list and identify, all 13 licensed debt collection agencies doing business in this state. The 14 department shall make the registry available on its website. 15 12. (a) The secretary shall adopt such rules and regulations as he or 16 she may determine are necessary for the administration and enforcement 17 of this article, and shall provide written notification of the 18 provisions of this article to all debt collection agencies licensed 19 pursuant to this article. 20 (b) In addition to any other powers of the secretary, not in limita- 21 tion thereof, he or she shall have the power to enforce the provisions 22 of this article, to investigate any violation thereof, to investigate 23 the business, business practices and business methods of any debt 24 collection agency, and to conduct routine examinations of the financial 25 solvency of any debt collection agency, if in the opinion of the secre- 26 tary, such investigation or examination is warranted. Each debt 27 collection agency shall be obliged, on request of the secretary of 28 state, to supply such information, books, papers or records as may be 29 required concerning his, her or its business, business practices or 30 business methods, or proposed business practices or methods. Failure to 31 comply with a lawful request of the secretary shall be a ground for 32 denying an application for a license, or for revoking, suspending, or 33 failing to renew a license issued under this article. 34 (c) The department shall have the power to revoke or suspend any 35 license, or in lieu thereof to impose a fine not less than one hundred 36 dollars nor more than two thousand dollars per violation or instance, 37 payable to the department, or reprimand any licensee or deny an applica- 38 tion for a license or renewal thereof upon proof: 39 (i) that the applicant or licensee has violated any of the provisions 40 of this article or the rules and regulations promulgated pursuant to 41 this article; 42 (ii) that the applicant or licensee has practiced fraud, deceit or 43 misrepresentation; 44 (iii) that the applicant or licensee has made a material misstatement 45 in the application for or renewal of his or her license; or 46 (iv) that the applicant or licensee has demonstrated incompetence or 47 untrustworthiness in his or her actions. 48 13. The department shall before denying an application for a license 49 or before revoking or suspending any license, or imposing any fine or 50 reprimand, and at least fifteen days prior to the date set for the hear- 51 ing, and upon due notice to the complainant or objector, notify in writ- 52 ing the applicant, or the holder of such license, of any charge made and 53 shall afford such applicant or licensee an opportunity to be heard in 54 person or by counsel in reference thereto. Such written notice may be 55 served personally to the applicant or licensee, or by certified mail to 56 the last known business address of such applicant or licensee.A. 8429--B 6 1 14. The hearing on such charges shall be at such time and place as the 2 department shall prescribe and shall be conducted by such officer or 3 person in the department as the secretary may designate, who shall have 4 the power to subpoena and bring before the officer, or person so desig- 5 nated, any person in this state and administer an oath to and take 6 testimony of any person or cause his or her deposition to be taken. A 7 subpoena issued under this section shall be regulated by the civil prac- 8 tice law and rules. Such officer or person in the department designated 9 to take such testimony shall not be bound by common law or statutory 10 rules of evidence or by technical or formal rules of procedure. 11 15. In the event that the department shall deny the application for, 12 or revoke or suspend any such license, or impose any fine or reprimand, 13 its determination shall be in writing and officially signed. The 14 original of such determinations, when so signed, shall be filed in the 15 office of the department and copies thereof shall be mailed to the 16 applicant or licensee and to the complainant within two days after such 17 filing. 18 16. The department, acting by the office or person designated to 19 conduct the hearing pursuant to subdivision thirteen of this section or 20 by such other officer or person in the department as the secretary of 21 state may designate, shall have the power to suspend the license of any 22 licensee who has been convicted in this state or any other state or 23 territory of a felony or of any misdemeanor for a period not exceeding 24 thirty days pending a hearing and a determination of charges made 25 against him or her. If such hearing is adjourned at the request of the 26 licensee, or by reason of any act or omission by him or her or on his or 27 her behalf, such suspension may be continued for the additional period 28 of such adjournment. 29 17. The action of the department in granting or refusing to grant or 30 to renew a license under this article or in revoking or suspending or 31 refusing to revoke or suspend such a license or imposing any fine or 32 reprimand shall be subject to review by a proceeding instituted under 33 article seventy-eight of the civil practice law and rules at the 34 instance of the applicant for such license, the holder of a license so 35 revoked, suspended, fined or reprimanded. 36 18. For the purpose of this article, licensees may be held responsible 37 for statements, representations, promises or acts of their employees or 38 their agents within the scope of their authority; provided, however, 39 that licensees shall not be held responsible for statements, representa- 40 tions, promises or acts which are contrary to instructions or which 41 constitute gross negligence or intentional torts unless specifically 42 authorized by the licensee. 43 19. (a) Any person, firm or corporation that operates as a debt 44 collection agency without a license shall be required to pay a civil 45 penalty to the department of not more than five hundred dollars per 46 attempt to collect a debt in violation of this section. 47 (b) In addition to any other penalties, if a person is found to have 48 committed repeated, multiple or persistent violations of any provision 49 of this article, such person may be responsible for the cost of the 50 department's investigation. 51 § 604-m. Surety bonding requirement. 1. As a condition of obtaining a 52 license pursuant to this article, every debt collection agency applicant 53 who is applying for a license and employs between one and four individ- 54 uals engaged in the collection of debts shall obtain and continue in 55 full force and effect a bond, contract of indemnity, or irrevocableA. 8429--B 7 1 letter of credit in the amount of ten thousand dollars to be filed with 2 the secretary. 3 2. As a condition to obtaining a license pursuant to this article, 4 every debt collection agency applicant who is applying for a license and 5 employs between five and nine individuals engaged in the collection of 6 debts shall obtain and continue in full force and effect a bond, 7 contract of indemnity, or irrevocable letter of credit in the amount of 8 twenty-five thousand dollars to be filed with the secretary. 9 3. As a condition to obtaining a license pursuant to this article, 10 every debt collection agency applicant who is applying for a license and 11 employs between ten and twenty individuals engaged in the collection of 12 debts shall obtain and continue in full force and effect a bond, 13 contract of indemnity, or irrevocable letter of credit in the amount of 14 fifty thousand dollars to be filed with the secretary. 15 4. As a condition to obtaining a license pursuant to this article, 16 every debt collection agency applicant who is applying for a license and 17 employs twenty or more individuals engaged in the collection of debts 18 shall obtain and continue in full force and effect a bond, contract of 19 indemnity, or irrevocable letter of credit, in the amount of seventy- 20 five thousand dollars to be filed with the secretary. 21 5. Such surety bond, contract of indemnity, or irrevocable letter of 22 credit shall be conditioned that the applicant will comply with this 23 article, article twenty-nine-H, and article twenty-nine-HH of this chap- 24 ter and pay all civil penalties, fines, or other obligations imposed by 25 the secretary or a court of law, investigatory costs required to be 26 paid, or any final judgment against the licensee pursuant to such arti- 27 cles. 28 6. The total liability imposed on the surety bond under this section 29 for all breaches of the bond condition is limited to the face amount of 30 the bond. Such liability is limited to the amount of the penalty or 31 investigatory costs. In no event will the surety on a bond be liable for 32 total claims in excess of the bond amount, regardless of the number or 33 nature of claims made against the bond or the number of years the bond 34 remained in force. 35 7. Any surety issuing a bond pursuant to this section and any licensee 36 shall be required to provide thirty days notice to the secretary prior 37 to the effective date of cancellation of the bond. The failure to main- 38 tain such a bond shall operate to revoke the license of the debt 39 collection agency upon notice and hearing. 40 § 604-n. Penalties. 1. Wherever there shall be a violation of this 41 article, an application may be made by the attorney general in the name 42 of the people of the state of New York to a court or justice having 43 jurisdiction by a special proceeding to issue an injunction, and upon 44 notice to the defendant of not less than five days, to enjoin or 45 restrain the continuance of such violation; and if it shall appear to 46 the satisfaction of the court or justice that the defendant has, in 47 fact, violated this section, an injunction may be issued by such court 48 or justice, enjoining and restraining any further violation, without 49 requiring proof that any person has, in fact, been injured or damaged 50 thereby. In any such proceeding, the court may make allowances to the 51 attorney general as provided in paragraph six of subdivision (a) of 52 section eighty-three hundred three of the civil practice law and rules, 53 and direct restitution. Whenever the court shall determine that a 54 violation of this section has occurred, the court may impose a civil 55 penalty of not less than one hundred dollars nor more than ten thousand 56 dollars for each violation. In connection with any such proposed appli-A. 8429--B 8 1 cation, the attorney general is authorized to take proof and make a 2 determination of the relevant facts and to issue subpoenas in accordance 3 with the civil practice law and rules. 4 2. Any person who has been the subject of an attempt to collect a debt 5 by a debt collection agency that is not licensed pursuant to this arti- 6 cle may bring an action in his or her own name to enjoin such unlawful 7 act or practice, an action to recover his or her actual damages or three 8 thousand five hundred dollars, whichever is greater, or both such 9 actions. The court may, in its discretion, increase the award of damages 10 to an amount not to exceed three times the actual damages up to ten 11 thousand dollars, if the court finds the defendant willfully violated 12 this article. In the case of any successful action to enforce the fore- 13 going liability, the court may award the costs of the action together 14 with reasonable attorney's fees. 15 § 604-o. Applicability. 1. Except as provided in subdivision two of 16 this section, the provisions of this article shall exclusively govern 17 the licensing of debt collection agencies notwithstanding the provisions 18 of any other law to the contrary and further, no local law shall be 19 enacted which shall require any fee or license for the licensure or 20 registration of debt collection agencies. 21 2. The provisions of this article shall not be construed to limit in 22 any way the authority of a political subdivision to enact, implement and 23 continue to enforce local laws and regulations governing the licensure 24 or registration of debt collection agencies that were in effect prior to 25 the effective date of this article, or to enact, implement and enforce 26 any amendments thereto. 27 § 3. Subdivision (e) of rule 3015 of the civil practice law and rules, 28 as amended by chapter 465 of the laws of 1996, is amended to read as 29 follows: 30 (e) License to do business. Where the plaintiff's cause of action 31 against a consumer arises from the plaintiff's conduct of a business 32 which is required by state or local law to be licensed by the department 33 of consumer affairs of the city of New York, the Suffolk county depart- 34 ment of consumer affairs, the Westchester county department of consumer 35 affairs/weight-measures, the county of Rockland, the county of Putnam 36 [ or], the Nassau county department of consumer affairs or the department 37 of state pursuant to article twenty-nine-HHH of the general business 38 law, the complaint shall allege, as part of the cause of action, that 39 plaintiff is duly licensed and shall contain the name and number, if 40 any, of such license and the governmental agency which issued such 41 license; provided, however, that where the plaintiff does not have a 42 license at the commencement of the action the plaintiff may, subject to 43 the provisions of rule [ thirty hundred] three thousand twenty-five of 44 this article, amend the complaint with the name and number of an after- 45 acquired license and the name of the governmental agency which issued 46 such license or move for leave to amend the complaint in accordance with 47 such provisions. The failure of the plaintiff to comply with this subdi- 48 vision will permit the defendant to move for dismissal pursuant to para- 49 graph seven of subdivision (a) of rule thirty-two hundred eleven of this 50 chapter. 51 § 4. This act shall take effect on the one hundred eightieth day after 52 it shall have become a law; provided, however, that effective immediate- 53 ly, the addition, amendment and/or repeal of any rule or regulation 54 necessary for the implementation of this act on its effective date is 55 authorized and directed to be made and completed on or before such 56 effective date.