BILL NUMBER: S4271A
SPONSOR: KAVANAGH
 
TITLE OF BILL:
An act to amend the banking law and the civil practice law and rules, in
relation to licensing consumer debt collectors
 
PURPOSE OR GENERAL IDEA OF BILL:
The purpose of this bill is to protect consumers against unfair and
deceptive debt collection practices and maintain a high level of integ-
rity and professionalism in the debt collection industry, by requiring
third party debt collectors and debt buyers to obtain a license from the
Department of Financial Services.
 
SUMMARY OF PROVISIONS:
Section one of the bill amends the banking law by adding a new article 7
dealing with licensed consumer debt collectors.
Section 295 of the new Article 7 sets forth definitions.
Section 296 of the new Article 7 requires that those operating as
consumer debt collectors be registered with the superintendent and
provides exemptions from this requirement for certain entities.
Section 297 of the new Article 7 sets forth the application procedures
for consumer debt collectors. This section also authorizes the super-
intendent to charge an application fee.
Section 298 of the new Article 7 requires consumer debt collectors to
file and maintain a surety bond, with a bond amount determined on a
sliding scale based on the collector's gross profit in the preceding
year.
Section 299 of the new Article 7 sets forth the examination power of the
superintendent as well as the record keeping and reporting requirements
of consumer debt collectors. 151
Section 300 of the new. Article 7 prohibits certain acts and practices
of consumer debt collectors including the engagement in unfair, uncon-
scionable, deceptive, false, misleading, abusive, or unlawful acts or
practices.
Section 301 of the new Article 7 authorizes the superintendent to
promulgate rules and regulations to implement the article.
Section 302 of the new Article 7 sets forth procedures for the acquisi-
tion of control of any consumer debt collector.
Section 303 of the new Article 7 provides the superintendent with the
power to suspend and revoke the license of a consumer debt collector
after notice and an opportunity to be heard.
Section 304 of the new Article 7 provides the superintendent with the
authority to require a licensee to remove any individual director, offi-
cer, or employee who has themselves had a license suspended or revoked
under this article.
Section 305 of the new Article 7 provides for civil penalties of $500
per violation for those who knowingly operate as a consumer debt collec-
tor without a license. This section also gives the attorney general
authority to enforce the provisions of the article.
Section 306 of the new Article 7 sets forth a preemption clause.
Section two of the bill amends subdivision 10 of section 36 of the bank-
ing law as amended by section 2 of part L of chapter 58 of the laws Of
2019.
Section three of the bill amends paragraph (a) of subdivision 1 of
section 44 of the banking law as amended by section 4 of part L of chap-
ter 58 of the laws of 2019.
Section four of the bill amends the opening paragraph of subdivision (a)
of section 3218 of the civil practice law and rules, as amended by chap-
ter 311 of the laws of 1963.
Section five of the bill amends section 3218 of the civil practice law
and rules by adding a new subdivision (e).
Section six of the bill amends the civil practice law and rules by
adding a new section 5022 which nullifies any judgment obtained against
a consumer debtor by a consumer debt collector operating without a
license.
Section seven of the bill sets forth the effective date.
 
JUSTIFICATION:
Federal and state laws regulate how debt collectors may communicate with
debtors and prohibit the use of certain threatening, deceptive and
unfair collection practices. Despite these legal protections, there
continue to be frequent consumer complaints regarding debt collection
practices. Due to the sensitive nature of the information used in the
course of debt collection agencies' work, and the vulnerable position
consumers may find themselves when dealing with these agencies, it is
incumbent upon the legislature to ensure that agencies that engage in
unscrupulous or abusive practices shall not continue to operate in New
York.
To protect the interests, reputations, and financial well-being of the
residents of this state from unwarranted harm, this bill would prohibit
debt collection agencies from operating without a license. Licensure
would enable the state to hold debt collection agencies accountable and
would provide a mechanism for investigating improper behavior.
Third party debt collection agencies are currently required to be
licensed in thirty states, as well as the cities of Buffalo and New
York. This bill would not preempt Buffalo's or New York City's licensing
requirements, but would provide all New York consumers with protections
against unfair and deceptive debt collection practices.
 
LEGISLATIVE HISTORY:
2025: S4271 (Kavanagh) - Passed Senate A5537 (Forrest) - Referred to
Banks
2024: S666 (Kavanagh) Reported and Committed to Finance A4088 (Gunther)
- Reported and Referred to Ways and Means
2023: S666 (Kavanagh) Reported and Committed to Finance A4088 (Gunther)
- Referred to Banks
2022: S3121 (Kavanagh) - Referred to Banks A3041 (Gunther) - Referred to
Consumer Affairs and Protection
2021: S3121 (Kavanagh) - Advanced to Third Reading A3041 (Gunther) -
Referred to Consumer Affairs and Protection
2020: S2343 (Kavanagh) - Referred to Consumer Protection A7191
(Gunther)- Referred to Consumer Affairs and Protection S7508/A9508
(Budget), Part LL - The Fiscal 2020-2021 executive proposal in relation
to transportation, economic development and environmental conservation
budget included similar provisions that were omitted from the adopted
budget
2019: S2343 (Kavanagh) - Referred to Consumer Protection A7191 (Gunther)
- Referred to Consumer Affairs and Protection
2018: S7099 (Kavanagh) - Referred to Consumer Protection A9766 (Titone)-
Reported and Referred to Ways and Means
2017: A8112 (Kavanagh) - Enacting Clause Stricken A5244 (Dinowitz) -
Enacting Clause Stricken S1999 (Squadron) - Referred to Consumer
Protection
2016: S190 (Squadron) - Referred to Consumer Protection
2014: S219 (Squadron) - Referred to Consumer Protection A455 (Dinowitz)
- Passed Assembly
2012: S1439 (Squadron) - Referred to Consumer Protection
2010: S7071 (Schneiderman) - Referred to to Consumer Protection A3926
(Pheffer) - Passed Assembly
 
FISCAL IMPLICATIONS:
The fiscal implications of this bill would be minimal and would be
expected to be absorbed within the Department of Financial Services'
administrative resources.
 
EFFECTIVE DATE:
This act shall take effect on the one hundred eightieth day after it
shall have become a law; provided, however, that sections one, two and
three of this act shall take effect January 1, 2028. The superintendent
of financial services shall allow any consumer debt collector which
submits an application prior to January 1, 2028 to operate pending the
approval or denial of the application. Effective immediately, the addi-
tion, 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. This act shall
not affect the validity of any civil actions or arbitrations commenced
or judgments entered prior to January 1, 2028.

Statutes affected:
S4271: 36 banking law, 36(10) banking law, 44 banking law, 44(1) banking law, 3218 civil practice law
S4271A: 36 banking law, 36(10) banking law, 44 banking law, 44(1) banking law, 3218 civil practice law