NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A8385
SPONSOR: Abbate
 
TITLE OF BILL: An act to amend the retirement and social security law
and the banking law, in relation to pension assignments
 
PURPOSE OR GENERAL IDEA OF BILL: Amends the retirement and social
security law and the banking law, in relation to pension assignments
 
SUMMARY OF PROVISIONS:
Section 1 of the bill amends section 110 of the retirement and social
security law to prohibit any person or entity from trying to evade
provisions of the law that prohibit the execution, garnishment, attach-
ment, or assignment of pension monies, except as specifically provided
in this chapter. Also establishes that any contracts made in violation
of this section shall be void and that any money collected in violation
of this section shall be returned.
Section 2 of the bill amends section 410 of the retirement and social
security law to prohibit any person or entity from trying to evade
provisions of the law that prohibit the execution, garnishment, attach-
ment, or assignment of pension monies, except as specifically provided
in this chapter. Also establishes that any contracts made in violation
of this section shall be void and that any money collected in violation
of this section shall be returned.
Section 3 of the bill amends section 340 of the banking law to clarify
that pension advances or agreements of their kind, are deemed to be in
the business of making loans and therefore subject to the licensing and
oversight of the Department of Financial Services.
Section 4 of the bill provides for the effective date.
 
JUSTIFICATION:
Pension advances, or financial transactions by which a company gives a
retiree payment in return for some or all of the retiree's future
pension payments have been shown to be increasingly risky and predatory
in nature across the country. Consumer fraud alerts have been issued
from the Financial Industry Regulatory Authority/the Securities Exchange
Commission (May 2013), Federal Trade Commission, the Consumer Financial
Protection Bureau, and states including Arkansas, California, Indiana,
Michigan, and others. In 2014, Missouri and Vermont became the first
states to address these types of instruments with legislation that
prohibited the assignment of pension benefits payable to public employ-
ees and regulated the sales and oversight of these securities, respec-
tively.
The concern regarding these types of arrangements is warranted. A 2013
review by the New York Times showed that of the two dozen contracts for
pension advances examined, the interest rates ranged from 27 to 106
percent, and were not disclosed in any of the information given to
applicants. To that end, in 2014, the Government Accountability Office
issued a report cautioning consumers about the practices of pension
advance companies that were specifically targeting government retirees
and vulnerable seniors. As part of their report, the GAO identified 38
companies that had offered these types of products, and 30 of the 38
were affiliated in some way with each other or a parent company.
Unfortunately, the deceptive practices of these companies have also been
felt in New York State. In 2015, the Consumer Financial Protection
Bureau and the New York State Department of Financial Services filed a
lawsuit against two California-based companies, Pension Funding, LLC,
and Pension Income, LLC for using deceptive practices to prey on
seniors. Included in the complaint were allegations that the companies
misrepresented their products as a sale and not a loan, and also that
they failed to disclose and/or misrepresented the interest rates for
their products. In May 2017, it was announced that Future Income
Payments would be repaying more than $500,000 in refunds to New York
pensioners and fines for making loans without a license as well as
charging usurious rates of interest.
While this case has been resolved in a way that has protected New York
retirees, it is imperative that statutory amendments be made to continue
to protect pensioners and bolster the State's oversight authority. Many
companies, like those at issue in New York, classify their products as
advances or sales, rather than loans, in order to circumvent state usury
laws that cap interest rates and provide for oversight by state enti-
ties. This legislation will specify that any type of arrangement where a
business offers consideration for an interest in all or part of pension
proceeds is considered to be a loan. To that end, the legislation will
prohibit the schemes and devices commonly used by these companies,
including deposits in joint accounts or authorizations through a power
of attorney, to avoid assignment provisions regarding public pension
benefits.
According to a 2013 New York Times article, the combined debt of Ameri-
cans from the ages of 65 to 74 is rising faster than that of any other
age group. Seniors who are on fixed incomes are consistently facing
increased costs regarding their housing, healthcare, and long term plan-
ning. As a result, pension advances seemingly offer quick relief to some
of the most vulnerable and desperate. Nevertheless, because of the
financial vulnerability of many applicants, as well as the significant
long-term implications of these types of loans, it is more important
that the State be equipped with as much oversight and regulatory author-
ity to combat predatory practices and lending.
 
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
________________________________________________________________________
8385
2017-2018 Regular Sessions
IN ASSEMBLY
June 12, 2017
___________
Introduced by M. of A. ABBATE -- read once and referred to the Committee
on Governmental Employees
AN ACT to amend the retirement and social security law and the banking
law, in relation to pension assignments
The People of the State of New York, represented in Senate and Assem-bly, do enact as follows:
1 Section 1. Section 110 of the retirement and social security law, as
2 amended by chapter 291 of the laws of 1999, is amended to read as
3 follows:
4 § 110. Exemption from taxes and legal process. a. The right of a
5 person to a pension, a pension-providing-for-increased-take-home-pay, an
6 annuity or a retirement allowance, to the return of contributions, the
7 pension, the pension-providing-for-increased-take-home-pay, annuity, or
8 retirement allowance itself, any optional benefit, including any benefit
9 or monies accruing under an optional retirement program pursuant to
10 article eight-B or one hundred twenty-five-A of the education law, any
11 other right accrued or accruing to any person under the provisions of
12 this chapter and the monies in the various funds continued under this
13 chapter:
14 1. Are hereby exempt from any state or municipal tax, except the
15 estate tax, and
16 2. Shall not be subject to execution, garnishment, attachment, or any
17 other process whatsoever, and
18 3. Shall be unassignable, except as in this chapter specifically
19 provided.
20 b. Except as specifically provided in this chapter, a person or entity
21 shall not use any device, scheme, transfer or other artifice to evade
22 the applicability and prohibition or paragraphs two and three of subdi-
23 vision a of this section, including the deposit of such benefits or
24 funds into a joint account with the person or entity or the authori-
25 zation to a person or entity under a power of attorney or other instru-
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[] is old law to be omitted.
LBD11808-04-7
A. 8385 2
1 ment or document to access an account or otherwise obtain funds from an
2 account to which benefits or funds have been deposited.
3 c. Any contract or agreement made in violation of this section shall
4 be void. All sums paid to or collected by a person or entity in
5 violation of this section shall be returned by the person or entity to
6 the benefit recipient or his or her heirs or beneficiaries as restitu-
7 tion.
8 d. Any benefit recipient, his or her guardian or conservator, or heir
9 or beneficiary may bring an action to enforce the restitution author-
10 ized.
11 § 2. Section 410 of the retirement and social security law, as amended
12 by chapter 549 of the laws of 1983, is amended to read as follows:
13 § 410. Exemption from taxes and legal process. a. The right of a
14 person to a pension, a pension-providing-for-increased-take-home-pay, an
15 annuity or a retirement allowance, to the return of contributions, the
16 pensions, the pension-providing-for-increased-take-home-pay, annuity, or
17 retirement allowance itself, any optional benefit, any other right
18 accrued or accruing to any person under the provisions of this chapter
19 and the monies in the various funds continued under this chapter:
20 1. Are hereby exempt from any state or municipal tax, except the
21 estate tax, and
22 2. Shall not be subject to execution, garnishment, attachment, or any
23 other process whatsoever, and
24 3. Shall be unassignable, except as in this chapter specifically
25 provided.
26 b. Except as specifically provided in this chapter, a person or entity
27 shall not use any device, scheme, transfer or other artifice to evade
28 the applicability and prohibition or paragraphs two and three of subdi-
29 vision a of this section, including the deposit of such benefits or
30 funds into a joint account with the person or entity or the authori-
31 zation to a person or entity under a power of attorney or other instru-
32 ment or document to access an account or otherwise obtain funds from an
33 account to which benefits or funds have been deposited.
34 c. Any contract or agreement made in violation of this section shall
35 be void. All sums paid to or collected by a person or entity in
36 violation of this section shall be returned by the person or entity to
37 the benefit recipient or his or her heirs or beneficiaries as restitu-
38 tion.
39 d. Any benefit recipient, his or her guardian or conservator, or heir
40 or beneficiary may bring an action to enforce the restitution author-
41 ized.
42 § 3. Section 340 of the banking law, as amended by chapter 22 of the
43 laws of 1990, is amended to read as follows:
44 § 340. Doing business without license prohibited. (a) No person or
45 other entity shall engage in the business of making loans in the princi-
46 pal amount of twenty-five thousand dollars or less for any loan to an
47 individual for personal, family, household, or investment purposes and
48 in a principal amount of fifty thousand dollars or less for business and
49 commercial loans, and charge, contract for, or receive a greater rate of
50 interest than the lender would be permitted by law to charge if he were
51 not a licensee hereunder except as authorized by this article and with-
52 out first obtaining a license from the superintendent.
53 (b) For the purposes of this section, a person or entity shall be
54 considered as engaging in the business of making loans in New York, and
55 subject to the licensing and other requirements of this article, if it
56 solicits loans in the amounts prescribed by this section within this
A. 8385 3
1 state and, in connection with such solicitation, makes loans to individ-
2 uals then resident in this state, except that no person or entity shall
3 be considered as engaging in the business of making loans in this state
4 on the basis of isolated, incidental or occasional transactions which
5 otherwise meet the requirements of this section.
6 (c) Nothing in this article shall apply to licensed collateral loan
7 brokers.
8 (d) Any person who engages in the business of offering consideration
9 in exchange for a secured interest in all or part of pension proceeds in
10 the possession of a participant, beneficiary, or member of a pension
11 plan, program, or system shall be deemed to be engaged in the business
12 of making loans and shall be subject to the licensing and other require-
13 ments of this article.
14 § 4. This act shall take effect immediately.