BILL NUMBER:S1279

TITLE OF BILL:  An act to amend the banking law, in relation to
remittances of moneys by agents of licensed transmitters of money

PURPOSE:  To authorize treble damages in order to deter agents of
licensed money transmitters from abusing business relationships and
consumer trust by absconding with funds.

SUMMARY OF PROVISIONS:

Section 1 amends the banking law to impose treble damages for agents
of money transmitters who fail to remit moneys within a time period to
be established by the superintendent.

Section 2 establishes the effective date.

JUSTIFICATION:  Money transmitters play a critical role in the economy
of New York State, providing consumers with safe and secure financial
services including money orders, bill payments, and secure local,
national and international funds transfers. In order to reach a broad
spectrum of consumers, money transmitters transact business through
agents who, in turn, provide direct services to a local customer base.
As soon as the agent receives funds from the customer, the money
transmitter is legally obligated to pay the funds to a beneficiary as
directed by the customer, whether or not the money transmitter ever
              

receives the funds from the agent. These agents are legitimized in the
eyes of consumers by their relationships with known and reliable money
transmitters. Unfortunately, despite the best efforts at screening, an
alarming number of agents abscond with funds collected from customers
and fail to remit the funds to the transmitter. This leaves the money
transmitter legally obligated to pay for the instrument the rogue
agent sold despite never having received the funds from the agent for
the transaction and forces the money transmitter to take costly
measures to attempt to recoup the funds from the dishonest agents.
Moreover, these bad actors abuse the public trust and drive up the
cost of doing business, which hurts consumers.

This bill, modeled after existing law in jurisdictions including New
Jersey, North Carolina, Illinois and the District of Columbia, would
serve to deter these bad actors by authorizing treble damages against
agents who abscond with funds owed to the money transmitting
companies. This legislation is necessary to protect both money
transmitters and consumers because prosecuting agencies most often
consider these actions to be civil matters, leaving money transmitters
no recourse but to undertake costly litigation and pass at least some
of the costs onto consumers. The threat of treble damages will change
the calculus for potential bad actors, help make wronged money
transmitters whole, and provide potentially significant savings to
consumers.

LEGISLATIVE HISTORY:  2013-2014: S.3930

FISCAL IMPLICATIONS: To be determined.


EFFECTIVE DATE:  This act shall take effect on the one hundred
eightieth day after it shall have become law; provided that, effective
immediately, any rules and regulations necessary to implement the
provisions of this act on its effective date are authorized and
directed to be completed on or before such date.