New York Considers Debt Management Service Bond Requirement

Debt Management Service Bond

If passed, New York AB 597 would “amend the general business law and the banking law, in relation to providing for budget planning and debt settlement services.” This bill is sponsored by assemblymen Jeffrey Dinowitz and Michael Bendetto and was referred to the Consumer Affairs and Protection Committee on January 9, 2013.

If approved, AB 597 will require all license applicants to post a debt management service bond — or another form of financial security — according to the following stipulations.

“(B) EXCEPT AS PROVIDED HEREUNDER, THE PRINCIPAL AMOUNT OF SUCH SURETY BOND OR DEPOSIT SHALL BE TWO HUNDRED FIFTY THOUSAND DOLLARS. THE SUPERINTENDENT MAY:

(I) REQUIRE A LARGER BOND OR DEPOSIT IF HE OR SHE DETERMINES, IN HIS OR HER SOLE DISCRETION, THAT A LICENSEE HAS ENGAGED IN A PATTERN OF CONDUCT RESULTING IN BONA FIDE DEBTOR COMPLAINTS OF MISCONDUCT AND THAT SUCH INCREASED BOND OR DEPOSIT IS NECESSARY FOR THE PROTECTION OF DEBTORS; OR

(II) INCREASE OR DECREASE THE AMOUNT OF SUCH BOND OR DEPOSIT BASED UPON THE APPLICANT’S OR LICENSEE’S FINANCIAL CONDITION, BUSINESS PLAN, BUSINESS EXPERIENCE, OR ANY OTHER FACTOR THE SUPERINTENDENT CONSIDERS APPROPRIATE.”

Additionally, AB 597 states that the proceeds of a surety bond or deposit required under the bill “shall constitute a trust fund to be used exclusively to reimburse fees that have been improperly charged to or collected from debtors with respect to the business of a debt settlement company in this state,” or “to reimburse amounts that have not been properly distributed to creditors or properly returned to debtors with respect to the business.”

Click here to read AB 597 in its entirety. The bill is currently pending approval, so check back with the Surety Bond Insider for updates.

If you need a surety bond in New York or any other state, contact a surety expert online 24/7 or by phone at 1 (800) 308-4358 Monday through Friday, 8 a.m. through 7 p.m. CST.