Authorizes the department of financial services to prescribe by regulation the order of payment of checks and other debts, insufficient funds charges and return deposit item charges.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A5519
SPONSOR: Hunter TITLE OF BILL:
An act to amend the banking law, in relation to authorizing the depart-
ment of financial services to promulgate regulations relating to the
payment of debit and credit transactions and imposition of related fees
by banking organizations
PURPOSE OR GENERAL IDEA OF BILL:
The purpose of this bill is to require the Department of Financial
Services to promulgate regulations relating to the order in which
checks, debit and credit card transactions are processed and the imposi-
tion of overdraft and insufficient funds charges.
SUMMARY OF PROVISIONS:
Section one amends section 9-y of the banking law to require the Depart-
ment of Financial Services Superintendent to promulgate regulations
related to:
*the manner in which banking organizations process debit and credit
transactions,
*the charges that may be imposed in relation to bounced checks or elec-
tronic transfers upon a consumer's account that has insufficient funds,
*the charges that may be imposed in relation to deposited checks that
bounce,
*disclosures to consumers related to the manner in which the banking
organization processes transactions, and
*alerts notices and other disclosures relating to the imposition of such
fees and charges.
Section two is the effective date.
JUSTIFICATION:
The Banking Law currently limits how banking organizations may process
checks, requiring them to be processed either in the order received or
from the lowest amount to the highest amount. This ensures as many of
the checks can be processed before the account balance is overdrawn.
However, the Baking Law does not address the processing of non-check
payments. This bill would require the DFS Superintendent to provide
similar protections for non-check payments and additionally require the
DFS Superintendent to provide oversight and regulation relating to harm-
ful overdraft and insufficient funds fees.
PRIOR LEGISLATIVE HISTORY:
New bill.
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
None.
EFFECTIVE DATE:
This act shall take effect immediately.
STATE OF NEW YORK
________________________________________________________________________
5519
2023-2024 Regular Sessions
IN ASSEMBLY
March 16, 2023
___________
Introduced by M. of A. HUNTER -- read once and referred to the Committee
on Banks
AN ACT to amend the banking law, in relation to authorizing the depart-
ment of financial services to promulgate regulations relating to the
payment of debit and credit transactions and imposition of related
fees by banking organizations
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Section 9-y of the banking law, as added by chapter 398 of
2 the laws of 2021, is amended to read as follows:
3 § 9-y. [Banking institutions to pay checks drawn therein in order of
4 presentation] Order of payment of checks and other debits, insufficient
5 funds charges and return deposit item charges. 1. Order of paying
6 checks. (a) Notwithstanding any law, rule or regulation to the contrary,
7 every banking [institution] organization that provides checking services
8 to consumer [checking] accounts shall either pay checks in the order
9 wherein they are received or pay checks from smallest to largest dollar
10 amount for each business day's transactions.
11 [2.] (b) If a check is dishonored for insufficient funds and thereaft-
12 er smaller checks which could be paid are received, the smaller checks
13 shall be honored within amounts on deposit in the subject account.
14 [3.] (c) The banking [institution] organization shall disclose to
15 consumers in writing the order in which checks are drawn. The written
16 disclosure shall be provided to the consumer at the time the account is
17 opened and prior to any change in such policy.
18 (d) The superintendent shall promulgate rules and regulations neces-
19 sary for the implementation of this section.
20 [4.] 2. Regulation of other consumer account transactions and associ-
21 ated fees. (a) The superintendent shall have the power to prescribe by
22 regulation:
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD10261-01-3
A. 5519 2
1 i. the manner in which banking organizations process debit and credit
2 transactions, other than those specified in subdivision one of this
3 section, for consumer accounts maintained at such organization;
4 ii. the charges that may be imposed in connection with a check drawn
5 or other written order upon, or electronic transfer sought to be effec-
6 tuated against, insufficient funds or uncollected balances in a consumer
7 account, whether or not the banking organization pays such check, writ-
8 ten order, or electronic transfer;
9 iii. the charges that may be imposed in connection with a check or
10 other written order received by a banking organization for deposit or
11 collection drawn against a consumer account and subsequently dishonored
12 and returned for any reason by the drawee;
13 iv. disclosures provided to consumers regarding the processing of
14 transactions in a consumer account and the associated fees; and
15 v. alerts, notices, and other disclosures relating to the imposition
16 or possible imposition of a charge as provided in subparagraphs ii and
17 iii of this paragraph.
18 (b) In prescribing regulations regarding the manner in which banking
19 organizations process debit or credit transactions, or the charges that
20 may be imposed pursuant to subparagraphs ii or iii of paragraph (a) of
21 this subdivision, the superintendent shall consider, at a minimum, the
22 following factors:
23 i. the cost incurred by the banking organization, in providing any
24 services associated with such charges;
25 ii. the competitive position of the banking organization; and
26 iii. the maintenance of a safe and sound banking organization that
27 protects the public interest.
28 3. Definition. As used in this section, "consumer [checking] accounts"
29 means accounts at banking organizations established by natural persons
30 primarily for personal, family or household purposes.
31 § 2. This act shall take effect immediately.
