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A07794 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A7794          Revised 6/26/23
 
SPONSOR: Mamdani
  TITLE OF BILL: An act to amend the executive law and the banking law, in relation to establishing the banking bill of rights   PURPOSE: To require banks to provide consumers with their reasons for denying a debit or credit card application or account closure, and to provide an opportunity for consumers to contest or correct the information used in such adverse actions.   SUMMARY OF SPECIFIC PROVISIONS: Section 1 sets forth the legislative intent. Section 2 adds 296-b to the banking law requiring financial institutions to: *Provide written notice of all the reasons for a denial of an applica- tion for credit or deposit account within 10 days of the denial *Provide written notice and reasons for any pending adverse action at least 30 days prior to taking such adverse action *Provide written notice and reason of any adverse action taken - result- ing from fraudulent or potentially unlawful behavior - within 5 days of that action taken *Provide a reasonable opportunity for an applicant to contest or correct the information used for the pending adverse action or for the denial *Consider the information provided by an applicant contesting the pend- ing adverse action or denial in making their final decision Subsection 3 sets forth enforcement requirements: financial institutions found in violation of this section will be liable to the applicant or customer for 1) $10,000 for each violation 2) actual damages resulting from any violation 3) reasonable attorney's fees and 4) punitive damages in the case of any repeat violations/violators. A violation will also create a presumption of unlawful discriminatory practice in favor of the applicant or customer. It also allows any applicant or customer seeking enforcement to file a verified complaint with the Superintendent of Financial Services and specifies further process for such complaint. Subsection 4 makes clear this act does not preempt any other state or federal law prohibiting the disclosure of certain protected consumer information or limit the ability of financial institutions to make reasonable business judgments. Subsection 5 authorizes the Superintendent of Financial Services to act in accordance with this law. Section 3 amends Paragraph a of subdivision 4 of section 296-a of the executive law to require creditors to automatically provide applicants with a statement of the specific reasons for their rejection. Section 4 updates section 9-d of the banking law to recognize this bill. Section 5 sets forth the effective date.   JUSTIFICATION: Across New York, major financial institutions are terminating individ- uals' bank accounts or denying their applications with no explanation provided. This practice disproportionately affects Muslim and Black clientele, who are more than twice as likely than the general public to have their account applications denied, their accounts frozen or suspended, or their payments placed under investigation. Muslim-owned non-profit accounts are over three times more likely to face these chal- lenges compared to all non-profits. These denials of service harm consumers' credit scores and histories, creating barriers to housing and education, and block millions of dollars in donations to Muslim-owned non-profits. This bill protects against these discriminatory banking practices ex ante by requiring financial institutions to provide reason and recourse before closing accounts or denying applications.   PRIOR LEGISLATIVE HISTORY: None.   FISCAL IMPLICATIONS: None.   EFFECTIVE DATE: This act shall take effect immediately.
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