Bill Text: NY S02426 | 2019-2020 | General Assembly | Amended

Bill Title: Regulates the practice of student debt consultants by establishing prohibitions and requiring certain disclosures.

Spectrum: Partisan Bill (Democrat 2-0)

Status: (Introduced) 2019-06-20 - COMMITTED TO RULES [S02426 Detail]

Download: New_York-2019-S02426-Amended.html

                STATE OF NEW YORK
                               2019-2020 Regular Sessions
                    IN SENATE
                                    January 24, 2019
        Introduced  by  Sen.  KAPLAN -- read twice and ordered printed, and when
          printed to be committed to the Committee on Banks -- reported  favora-
          bly  from  said  committee  and committed to the Committee on Consumer
          Protection -- committee discharged, bill amended, ordered reprinted as
          amended and recommitted to said committee
        AN ACT to amend the financial services law, in relation to student  debt
          The  People of the State of New York, represented in Senate and Assem-
        bly, do enact as follows:
     1    Section 1. The financial services law is amended by adding a new arti-
     2  cle 7 to read as follows:
     3                                  ARTICLE 7
     4                          STUDENT DEBT CONSULTANTS
     5  Section 701. Definitions.
     6          702. Prohibitions.
     7          703. Disclosure requirements.
     8          704. Student debt consulting contracts.
     9          705. Penalties and other provisions.
    10          706. Rules and regulations.
    11    § 701. Definitions.  (a) The term "advertisement" shall  include,  but
    12  is  not  limited  to,  all  forms of marketing, solicitation, or dissem-
    13  ination of information related, directly or indirectly, to  securing  or
    14  obtaining  a  student  debt consulting contract or services. Further, it
    15  shall include all commonly recognized forms of media marketing via tele-
    16  vision, radio, print media, all forms of  electronic  communication  via
    17  the  internet,  and  all prepared sales presentations given in person or
    18  over the internet to the general public.
    19    (b) "Borrower" means any resident of this state  who  has  received  a
    20  student  loan  or  agreed in writing to pay a student loan or any person
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.

        S. 2426--A                          2
     1  who shares a legal obligation with such resident for repaying a  student
     2  loan.
     3    (c)  "FSA ID" means a username and password allocated to an individual
     4  by the federal government to enable the individual to log in to  certain
     5  United  States department of education websites, and may be used to sign
     6  certain documents electronically.
     7    (d) "Student loan" means any loan to a borrower to finance post-secon-
     8  dary education or expenses related to post-secondary education.
     9    (e) "Student debt consulting contract" or "contract" means  an  agree-
    10  ment  between  a  borrower  and  a consultant under which the consultant
    11  agrees to provide student debt consulting services.
    12    (f) "Student debt consultant" or "consultant" means an individual or a
    13  corporation, partnership, limited liability company  or  other  business
    14  entity  that,  directly or indirectly, solicits or undertakes employment
    15  to provide student debt  consulting  services.  A  consultant  does  not
    16  include the following:
    17    (1)  a  person  or  entity  who  holds or is owed an obligation on the
    18  student loan while the person or entity performs services in  connection
    19  with the student loan;
    20    (2)  a  bank,  trust  company,  private  banker, bank holding company,
    21  savings bank, savings and  loan  association,  thrift  holding  company,
    22  credit  union  or  insurance  company  organized  under the laws of this
    23  state, another state or the United States, or a subsidiary or  affiliate
    24  of  such  entity or a foreign banking corporation licensed by the super-
    25  intendent of financial services or the comptroller of the currency;
    26    (3) a bona fide not-for-profit organization that offers counseling  or
    27  advice to borrowers;
    28    (4) a public post-secondary educational institution or private nonpro-
    29  fit post-secondary educational institution; or
    30    (5) such other persons as the superintendent prescribes by rule.
    31    (g)  "Student  debt consulting services" means services that a student
    32  debt consultant provides to a borrower that  the  consultant  represents
    33  will help to achieve any of the following:
    34    (1)  stop,  enjoin,  delay, void, set aside, annul, stay or postpone a
    35  default, bankruptcy, tax offset, or garnishment proceeding;
    36    (2) obtain a forbearance, deferment, or other relief that  temporarily
    37  halts repayment of a student loan;
    38    (3)  assist the borrower with preparing or filing documents related to
    39  student loan repayment;
    40    (4) advise the borrower which student loan repayment plan or  forgive-
    41  ness program to consider;
    42    (5)  enroll  the  borrower in any student loan repayment, forgiveness,
    43  discharge, or consolidation program;
    44    (6) assist the borrower in  re-establishing  eligibility  for  federal
    45  student financial assistance;
    46    (7) assist the borrower in removing a student loan from default; or
    47    (8) educate the borrower about student loan repayment.
    48    §  702.  Prohibitions.    A student debt consultant is prohibited from
    49  doing the following:
    50    (a) performing student debt consulting services without a legal  writ-
    51  ten,  fully-executed  contract  with  a  borrower that comports with the
    52  provisions of this article;
    53    (b) charging for or accepting any payment for student debt  consulting
    54  services  before  the  full completion of all such services, including a
    55  payment to be  placed  in  escrow  or  any  other  account  pending  the
    56  completion of such services;

        S. 2426--A                          3
     1    (c) taking a power of attorney from a borrower;
     2    (d)  retaining  any  original loan document or other original document
     3  related to a borrower's student loan;
     4    (e) requesting that a borrower provide  his  or  her  FSA  ID  to  the
     5  consultant, or accepting a borrower's FSA ID;
     6    (f)  stating  or  implying  that a borrower will not be able to obtain
     7  relief on their own;
     8    (g) misrepresenting, expressly or by implication, that:
     9    (1) the consultant is a part of, affiliated with, or endorsed or spon-
    10  sored by the government, government loan  programs,  the  United  States
    11  department of education, or borrowers' student loan servicers; or
    12    (2)  some  or  all  of a borrower's payments to the consultant will be
    13  applied towards the borrower's student loans.
    14    (h) inducing or attempting to induce  a  student  debtor  to  enter  a
    15  contract that does not fully comply with the provisions of this article;
    16  or
    17    (i) engaging in any unfair, deceptive, or abusive act or practice.
    18    §  703.  Disclosure requirements.  (a) A student debt consultant shall
    19  clearly and conspicuously disclose in all advertisements:
    20    (1) the actual services the consultant provides to borrowers;
    21    (2) that borrowers may apply for consolidation loans from  the  United
    22  States  department of education at no cost, including providing a direct
    23  link in all online advertising and  contact  information  in  all  print
    24  advertising to the application materials for a Direct Consolidation Loan
    25  from the United States department of education;
    26    (3) that consolidation or other services offered by the consultant may
    27  not be the best or only option for borrowers;
    28    (4)  that  alternative federal student loan repayment plans, including
    29  income-based programs, that do not require consolidating existing feder-
    30  al student loans may be available; and
    31    (5) that borrowers  should  consider  consulting  their  student  loan
    32  servicer before signing any legal document concerning a student loan.
    33    (b)  The  disclosures  required  by subsection (a) of this section, if
    34  disseminated through print media or the internet, shall be  clearly  and
    35  legibly  printed  or  displayed in not less than twelve-point bold type,
    36  or, if the advertisement is printed to be displayed  in  print  that  is
    37  smaller  than  twelve  point, in bold type print that is no smaller than
    38  the print  in  which  the  text  of  the  advertisement  is  printed  or
    39  displayed.
    40    (c)  The provisions of this section shall apply to all consultants who
    41  disseminate advertisements in the state of New York  or  who  intend  to
    42  directly  or indirectly contact a borrower who has a student loan and is
    43  in New York state. Consultants shall establish and at all times maintain
    44  control over the content, form and method of dissemination of all adver-
    45  tisements of their services.    Further,  all  advertisements  shall  be
    46  sufficiently  complete  and clear to avoid the possibility to mislead or
    47  deceive.
    48    § 704. Student debt consulting contracts.  (a) A student debt consult-
    49  ing contract shall:
    50    (1) contain the entire agreement of the parties;
    51    (2) be provided in writing to the borrower for review before signing;
    52    (3) be printed in at least twelve-point type and written in  the  same
    53  language  that  is  used  by  the  borrower  and was used in discussions
    54  between the consultant and  the  borrower  to  describe  the  borrower's
    55  services or to negotiate the contract;

        S. 2426--A                          4
     1    (4)  fully disclose the exact nature of the services to be provided by
     2  the consultant or anyone working in association with the consultant;
     3    (5) fully disclose the total amount and terms of compensation for such
     4  services;
     5    (6)  contain  the  name,  business address and telephone number of the
     6  consultant and the street address, if different, and facsimile number or
     7  email address of the consultant where communications from the debtor may
     8  be delivered;
     9    (7) be dated and personally signed by the borrower and the  consultant
    10  and be witnessed and acknowledged by a New York notary public; and
    11    (8)  contain  the following notice, which shall be printed in at least
    12  fourteen-point boldface type, completed with the name of  the  Provider,
    13  and  located  in  immediate  proximity  to  the  space  reserved for the
    14  debtor's signature:
    16  You may cancel this contract, without any penalty or obligation, at  any
    17  time before midnight of
    18  ......... (fifth business day after execution).
    19  ......... (Name  of consultant) (the "Consultant") or anyone working for
    20  the Consultant may not take any money from you  or  ask  you  for  money
    21  until  the  consultant  has  completely  finished  doing everything this
    22  Contract says the Consultant will do.
    23  You should consider contacting your student loan servicer before signing
    24  any legal document concerning your student loan. In  addition,  you  may
    25  want  to  visit  the  New  York  State Department of Financial Services'
    26  student lending resource center at The
    27  law requires that this contract contain the entire agreement between you
    28  and the Provider. You should not rely upon any  other  written  or  oral
    29  agreement or promise."
    30  The  Provider  shall  accurately  enter  the  date on which the right to
    31  cancel ends.
    32    (b) (1) The borrower has the right to cancel, without any  penalty  or
    33  obligation,  any  contract with a consultant until midnight of the fifth
    34  business day following the day on which the consultant and the  borrower
    35  sign  a consulting contract. Cancellation occurs when the borrower, or a
    36  representative of  the  borrower,  either  delivers  written  notice  of
    37  cancellation  in  person  to  the  address  specified  in the consulting
    38  contract or sends a written communication by facsimile, by United States
    39  mail or by an established commercial letter delivery  service.  A  dated
    40  proof  of  facsimile  delivery or proof of mailing creates a presumption
    41  that the notice of cancellation has  been  delivered  on  the  date  the
    42  facsimile  is  sent  or  the notice is deposited in the mail or with the
    43  delivery service. Cancellation of the contract shall release the borrow-
    44  er from all obligations to pay fees or any  other  compensation  to  the
    45  consultant.
    46    (2)  The  contract  shall  be  accompanied  by  two  copies of a form,
    47  captioned "notice of cancellation" in at least twelve-point  bold  type.
    48  This form shall be attached to the contract, shall be easily detachable,
    49  and  shall  contain the following statement written in the same language
    50  as used in the contract, and the contractor shall insert accurate infor-
    51  mation as to the date on which the right to cancel ends and the contrac-
    52  tor's contact information:
    54  Note: You may cancel this contract, without any penalty  or  obligation,
    55  at any time before midnight of (Enter date)

        S. 2426--A                          5
     1  To  cancel this contract, sign and date both copies of this cancellation
     2  notice and personally deliver one copy or send it by  facsimile,  United
     3  States mail, or an established commercial letter delivery service, indi-
     4  cating cancellation to the Consultant at one of the following:
     5  Name of Consultant
     6  Street Address
     7  City, State, Zip
     8  Facsimile:
     9  I hereby cancel this transaction.
    10  Name of Borrower:
    11  Signature of Borrower:
    12  Date:             "
    13    (3)  Within  ten  days  following  receipt of a notice of cancellation
    14  given in accordance with this subsection, the  consultant  shall  return
    15  any  original  contract and any other documents signed by or provided by
    16  the borrower. Cancellation shall release the borrower of all obligations
    17  to pay any fees or compensation to the consultant.
    18    § 705. Penalties and other provisions.    (a)  If  the  superintendent
    19  finds,  after  notice  and  hearing, that a consultant has intentionally
    20  violated any provision of this article, the superintendent may: (1) make
    21  null and void any agreement between the borrower and the consultant; and
    22  (2) impose a civil penalty of not more than  ten  thousand  dollars  for
    23  each violation.
    24    (b)  If  the consultant violates any provision of this article and the
    25  borrower suffers damage because  of  the  violation,  the  borrower  may
    26  recover  actual  and consequential damages and costs from the consultant
    27  in an action based on  this  article.    If  the  consultant  recklessly
    28  violates  any  provision of this article, the court may award attorneys'
    29  fees and costs.  If the consultant intentionally violates any  provision
    30  of this article, the court may award treble damages, attorneys' fees and
    31  costs.
    32    (c)  Any provision of a student debt consulting contract that attempts
    33  or purports to limit the liability of the consultant under this  article
    34  shall  be null and void. Inclusion of such provision shall at the option
    35  of the borrower render the contract void. Any provision  in  a  contract
    36  which attempts or purports to require arbitration of any dispute arising
    37  under  this  article  shall  be  void at the option of the borrower. Any
    38  waiver of the provisions of this article shall be void and unenforceable
    39  as contrary to public policy.
    40    (d) The provisions of this article are not exclusive and are in  addi-
    41  tion to any other requirements, rights, remedies, and penalties provided
    42  by law.
    43    §  706.  Rules  and  regulations.    In addition to such powers as may
    44  otherwise be prescribed by this chapter, the  superintendent  is  hereby
    45  authorized and empowered to promulgate such rules and regulations as may
    46  in the judgment of the superintendent be consistent with the purposes of
    47  this  article,  or  appropriate for the effective administration of this
    48  article.
    49    § 2. This act shall take effect on the one hundred eightieth day after
    50  it shall have become a law.