BILL NUMBER: S3224
SPONSOR: KAVANAGH
 
TITLE OF BILL:
An act to amend the general business law, in relation to budget planning
 
PURPOSE OR GENERAL IDEA OF BILL:
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 12-C of the banking law.
 
SUMMARY OF PROVISIONS:
Section one of the bill amends section 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 section 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 needs for
greater regulation.
This legislation is aimed at reining in excesses of the debt settlement
services industry. The legislation provides for, among other things,
licensure requirements and penalties for non-compliance. This proposal
would apply to all requirements for budget planners, including non-pro-
fit 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 licensing attorneys and law
firms engaged in debt settlement as a principal purpose of their busi-
ness.
 
PRIOR LEGISLATIVE HISTORY:
2024: S9084 (Kavanagh) - REFERRED TO CONSUMER PROTECTION /A7892 (Dinow-
itz) referred to consumer affairs and protection
2023: A7892 (Dinowitz) - referred to consumer affairs and protection
 
FISCAL IMPLICATIONS:
No direct fiscal impact.
 
EFFECTIVE DATE:
This act shall take effect on the ninetieth day after it shall have
become a law.

Statutes affected:
S3224: 457 general business law