BILL NUMBER: S3332A
SPONSOR: COONEY
 
TITLE OF BILL:
An act to amend the banking law, in relation to providing for income
access services in the state
 
PURPOSE OR GENERAL IDEA OF BILL:
Provides for income access services in the state.
 
SUMMARY OF SPECIFIC PROVISIONS:
Section 374-aa defines terms used in the article.
Section 374-bb states that no person or entity, except for an exempt
organization as defined in the article, can engage in the business of
providing or offering earned income access transactions to consumers or
enter into an earned income access transaction with a consumer without
first obtaining a license.
Section 374-cc states that the superintendent will review and may issue
a license for earned income access transactions after an application and
fees are filed.
Section 374-dd sets the rules for the public posting of licenses and the
content of the licenses.
Section 374-ee outlines the procedure for revoking, suspending or
annulling a license issued under this article.
Section 374-ff states that the Superintendent has the power to investi-
gate and examine any providers, licensees or other persons in order to
determine whether they have violated any provisions of this article.
Section 374-gg states the various rules that income access service
providers must comply with in order to operate in New York.
Section 374-hh sets advertising restrictions.
Section 374-ii provides the superintendent with rulemaking authority.
374-jj states the rules for changes in control of a business of a licen-
see.
374-kk lays out the penalties for violation of any provision of the
article.
374-11 states the rules for annual reports and the preservation of a
licensee's books and records. 374-mm states that each provision is
severable.
 
DIFFERENCE BETWEEN ORIGINAL AND AMENDED:
374-aa(4): Changes the earned income access cap from a rate cap to a
dollar cap, and sets the cap based on the amount of the transaction.
374-aa(11): Removes voluntary tips from being calculated in the earned
income access cap.
374-dd(1)(b): Creates an intent requirement for violations that can be
cause for revocation or suspension of a license.
374-gg(1)(c): Changes the requirement to comply with the National Auto-
mated clearing House Association Rules to the applicable provisions of
the Electronic Funds Transfer Act.
374-gg(1)(d): Removes the prohibition on data sharing provided that all
local, state, and federal privacy and security laws are complied with.
NEW 374-gg(1)(e): Requires a licensee to provide at least one no-cost
method to use the services.
374-gg(1)(g): Changes the requirement for the provider to require notice
to the consumer containing an itemization of the consumers transaction
costs and fees automatically to be required to be sent when the consumer
requests it.
374-gg(2)(b): Removed to conform to the new earned income access cap
requirements.
374-gg(2)(e): Creates an exception to the prohibition on using proceeds
from a prior earned wage access transaction to permit consumers to pay
back unpaid remittances in order to continue to use the service.
374-gg(2)(g): Removes the probation against using earned wage access
services less than one day prior to pay day,
UPDATED 374-gg()2(g): Makes technical changes to conform to the new
definition of fee.
374-gg(5): Exempts bundled groups of bona fide services from the fee
cap.
374-gg(6): Permits lawful contract law remedies to recover remittances
from users where such remittances were procured through fraudulent
means.
374-jj. Creates data collection provisions that shall be publicized by
the superintendent. Requires that the superintendent, after four years,
make a recommendation to the legislature on whether earned income access
transactions should be prohibits less than one day before pay day and
whether voluntary tips should be included in the earned income access
cap. This subdivision also permits the superintendent to set a new cap
after 4 years by regulation based on the data it receives.
 
JUSTIFICATION:
Most of us face the fact that when we work, we don't get paid for that
work until payday. The most common scenario is that a person will be
required to wait two weeks between paychecks. This poses a particularly
troubling issue for many New Yorkers who struggle with their bills and
who may forced to contend with unforeseen financial obligations, such as
for gas, food, repairs, and medical bills. Income access services
provide capital, similar to a payment advance by employers, to alleviate
these problems faced by New Yorkers by providing them with earned, but
unpaid income when they need it through easy-to-use mobile and web
applications or through services provided to employers. However, it is
critical that we recognize that people who need to use these apps are
the most vulnerable, and so we must have rules in place to ensure that
they are protected.
With any remittance of money comes risk. Which is why it is critical
that New York have laws to place limits on certain conduct by any entity
that provides income access services. This bill requires that the char-
acteristics of these remittances are limited so as to not be considered
"loans." This works to eliminate any ongoing financial obligations in
relation to the transaction, meaning that those who are struggling
financially and who need this product the most will not be further
burdened by using it. This strikes a good balance between permitting
income access service providers to make remittances without needing to
follow the usual rules surrounding loans, and providing fair rules to
protect consumers.
This bill establishes a comprehensive licensing program to safeguard New
Yorkers from any illicit activity, providing the Department of Financial
Services with oversight authority for all companies, excluding exempt
organizations, that offer income access services.
Various other issues arise with income access transactions that are
addressed. Three important issues include the rate cap, tipping, and
debt cycle issues.
Income access transactions, on their own, are not subject to rate caps
because they do not exhibit any loan characteristics. As a result, with-
out a licensing scheme that places rate limits on these transactions,
income wage access companies can charge any amount of money they please.
Of course, this does not mean that they will, however, the nature of
these transactions, that they exist to alleviate the short-term finan-
cial obligations of those facing economic hardship, requires that we
ensure that no bad actors take advantage of our laws and place vulner-
able New Yorkers in even more difficult financial situations. Therefore,
this bill sets dollar caps for fees charged.
"Tipping," as it is referred to in the income access industry, is the
act of a consumer voluntarily providing the income wage access company
with any amount of money as a "tip" - a "thank you" -- for being remit-
ted the money. Currently, companies that accept tips will prepopulate
the tip section with a suggested amount, forcing the user to take an
affirmative action to not tip. Continuing to permit this type of conduct
would be contrary to the policy of protecting consumers, thus, suggest-
ing or prepopulating voluntary amounts is prohibited under this bill.
This bill also addresses the issue of debt cycles that can be caused by
consumers engaged in income wage access transactions. Debt cycles can
occur in income wage access transactions where a consumer uses the tran-
sactions in such a way that they are financially compelled to engage in
another transaction the following pay period and periods thereafter.
This can occur because income access transactions will generally be
subject to automatic account debits, meaning that a person who takes out
money today will not have that money come payday. Thus, if they need
that money on payday, they will have to take more money out - and so on.
This bill will work to ensure that these situations are limited, by
requiring that, in accordance with the regulations of the superinten-
dent, notice be given to persons engaging in income access transactions
which highlight the costs associated with the transaction - ensuring
that consumers are more informed of the transactions that they are
engaging in.
Further, the bill provides a data collection and analysis period in
which the Department of Financial Services will have the authority to
review relevant data related to these services and make a recommendation
to the legislature on whether earned income access services can be
utilized by persons less than one day prior to pay day and whether
voluntary tips can lawfully and should be added to the fee cap. Further,
it permits the superintendent to, after 4 years, set by regulation a new
earned income access cap.
In the Amendments to this bill, the APR rate cap was removed and
replaced with a dollar cap as utilizing APR would be inappropriate as
applied in a short-term, flat fee remittance context. APR is designed to
show the cost of borrowing over a full year and is based on interest
rather than one-time, small-dollar flat fees. In an earned wage access
transaction, users do not pay interest and they do not accrue debt - no
money is owed in an earned wage access transaction. By annualizing
earned wage access transactions, the APR is grossly distorted and unrep-
resentative of the true cost of borrowing.
Finally, the oversight of income access services would pose no signif-
icant financial burden on the Department of Financial Services as the
department will have assessment authority over these entities.
 
PRIOR LEGISLATIVE HISTORY:
01/09/23 REFERRED TO BANKS
05/25/23 AMEND (T) AND RECOMMIT TO BANKS
05/25/23 PRINT NUMBER 916A
05/26/23 AMEND AND RECOMMIT TO BANKS
05/26/23 PRINT NUMBER 916B
01/03/24 REFERRED TO BANKS
 
FISCAL IMPLICATIONS:
TBD
 
EFFECTIVE DATE:
This act shall take effect on the one hundred eightieth day after it
shall have become a law. Effective immediately, the addition, amendment
and/or repeal of any rule or regulation necessary for the implementation
of this act on its effective date are authorized to be made and
completed on or before such effective date.

Statutes affected:
S3332: 36 banking law, 36(1) banking law, 39 banking law, 44 banking law, 44(1) banking law
S3332A: 36 banking law, 36(1) banking law, 39 banking law, 44 banking law, 44(1) banking law