On July 19, 2023, New York State Assembly Member Jeffrey Dinowitz introduced Assembly Bill (AB) A7829, which seeks to amend and expand the application of New York general business law in relation to budget planning. Assemblymember Dinowitz previously attempted to introduce similar legislation affecting the debt settlement industry by establishing a Uniform Debt-management Services Act in 2013, 2015, 2017, 2019, 2021, and early 2023; however, his proposed legislation has never passed the Committee stage. As it stands, A7829 has been referred to the Committee on Assembly Consumer Affairs and Protection, where it will be evaluated by Committee members, who will then decide whether or not to “report” it (send it) to the NY Assembly and Senate floors for a final decision by the full membership.

Similar to Assemblymember Dinowitz’s previously proposed legislation, these amendments would require all for-profit debt settlement companies (DSCs) doing business within the state of New York to obtain a budget-planning license. The bill would broadly expand the definition of “budget planning” to include “debt relief and debt settlement” companies and any attorney or law firm licensed to practice law in the state whose “principal purpose of its practice includes budget planning.” The Bill would also allow for the New York Attorney General to apply for an order enjoining or restraining commission or continuance of any violation of this proposed law, with a civil penalty of up to $10,000 per each debtor enrolled or three times the amount of debt enrolled for budget planning, whichever is greater, where appropriate, order restitution to aggrieved parties, including a refund of all fees paid by a debtor to an unlicensed budget planner.

Furthermore, by expanding the definition of “budget planning,” DSCs and attorneys and law firms primarily engaging in debt settlement would be required to adhere to the requirements and prohibitions of Article 12-C of the Banking Law, sections 579 to 587, regarding “budget planners.” Some of the most notable requirements and prohibitions aside from a licensing requirement would include the following:

• A $250,000 surety bond is to be filed with the superintendent; please note that a larger bond could be required should the superintendent determine it is necessary;
• contractual term requirements with debtors;
• prohibitions on referral fees;
• prohibitions on false and deceptive advertising; and
• notification requirements for changes in control and ownership.

As it stands, A7829 would significantly impact the debt settlement services industry by requiring not only debt relief and debt settlement companies to be licensed but also attorneys and law firms primarily engaging in debt settlement. These entities alike would now be required to follow all the terms of Article 12-C of the NY Banking Law. We will continue to update you on the trajectory of this bill through the New York Legislature.

The entire text of the proposed legislation can be found here: https://legiscan.com/NY/text/A07892/id/2834694.