NY State Senate Bill 2021-S7898

Archive: Last Bill Status - In Senate Committee Banks Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jan 18, 2022	referred to banks

2021-S7898 (ACTIVE) - Details

See Assembly Version of this Bill:: A3570
Current Committee:: Senate Banks
Law Section:: Banking Law
Laws Affected:: Add Art 9-B §§374-aa - 374-ee, Bank L
Versions Introduced in Other Legislative Sessions:: 2019-2020: A10309
2023-2024: A2495

2021-S7898 (ACTIVE) - Summary

Relates to the regulation and licensing of employer-integrated and non-verified on-demand pay providers.

2021-S7898 (ACTIVE) - Sponsor Memo

                                 
BILL NUMBER: S7898

SPONSOR: BAILEY
 
TITLE OF BILL:

An act to amend the banking law, in relation to on-demand pay providers

 
PURPOSE:

To provide regulatory clarity for on-demand pay providers so New York
workers can have flexible access to their pay.

 
SUMMARY OF PROVISIONS:

Section 1: Creates a new Article 9-B of the banking law "On-Demand Pay
Providers" with the following sections:

Section 374-aa. Definitions. 374-bb. Employer-integrated on-demand pay
providers. 374-cc. Non-verified on-demand pay providers. 374-dd.
Certain on-demand pay services to be considered loans. Provides that
interest and fees shall not exceed 105. 374-ee. Penalties.

Section 6: Sets the effective date.

 
JUSTIFICATION:

On-demand pay represents the most innovative and significant payroll
development since the advent of direct deposit. It enables workers to
view, access and control their pay as they earn it, instead of when it
is convenient for their employer to run payroll. It is especially valu-
able to the most financially vulnerable, who would otherwise need to pay
expensive overdraft fees to fund bills and emergency expenses prior to
payday. Over the next five years, on-demand pay is expected to grow from
6% market penetration to 30%.

There are two primary classifications of on-demand pay providers:
employer-integrated on-demand pay providers and non-verified on-demand
pay providers. An employer-integrated on-demand pay provider enters into
a contract with an employer whereby it integrates with the employer's
payroll and time management systems to track an employee's accrued pay
so that it can offer that employee access to her verified accrued pay in
real-tithe. A non-verified on-demand pay provider does not verify an
employee's pay through an employer contract. Instead, it enters into a
contract directly with the employee to deliver funds in a manner more
consistent with lending practices.

Employees receiving employer-integrated on-demand pay services report
substantial savings from avoiding overdraft fees, predatory loans and
late fees, improved financial health and reduced financial anxiety.  In
addition, employers who offer this benefit report turnover reduction and
increased productivity on account of improved employee financial well-
ness.

Since on-demand pay is a new service, it is in need of regulatory clari-
ty. Employer-integrated on-demand pay providers need to comply with
privacy, transparency and other relevant standards to protect an employ-
ee's right to control her pay. Non-verified on-demand pay providers need
to comply with applicable credit regulations since their services are
substantially similar to lending practices.
This bill provides that fees and interest charged for such loans shall
not exceed 10%.

 
LEGISLATIVE HISTORY:

2019-20: S.8206/A10309

2021: s6631 by Senator Benjamin

 
FISCAL IMPLICATIONS:

None

 
EFFECTIVE DATE:
Shall take effect on the 90th day following enactment.

2021-S7898 (ACTIVE) - Bill Text download pdf

                             
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   7898
 
                             I N  S E N A T E
 
                             January 18, 2022
                                ___________
 
 Introduced  by  Sen.  BAILEY -- read twice and ordered printed, and when
   printed to be committed to the Committee on Banks
 
 AN ACT to amend the banking law, in relation to on-demand pay providers
 
   THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section  1.  The banking law is amended by adding a new article 9-B to
 read as follows:
                                ARTICLE 9-B
                          ON-DEMAND PAY PROVIDERS
 SECTION 374-AA. DEFINITIONS.
         374-BB. EMPLOYER-INTEGRATED ON-DEMAND PAY PROVIDERS.
         374-CC. NON-VERIFIED ON-DEMAND PAY PROVIDERS.
         374-DD. CERTAIN ON-DEMAND PAY SERVICES TO BE CONSIDERED LOANS.
         374-EE. PENALTIES.
   § 374-AA. DEFINITIONS. FOR THE PURPOSES OF THIS ARTICLE, THE FOLLOWING
 TERMS SHALL HAVE THE FOLLOWING MEANINGS:
   1. "EARNED BUT UNPAID INCOME" MEANS EARNED INCOME  THAT  HAS  NOT  YET
 BEEN PAID TO A USER BY AN EMPLOYER.
   2.  "EARNED INCOME" MEANS MONEYS THAT HAVE ACCRUED TO THE BENEFIT OF A
 USER FOR SERVICES RENDERED TO AN EMPLOYER.
   3. "EMPLOYER" MEANS ANY PERSON, CORPORATION, LIMITED LIABILITY  COMPA-
 NY,  OR ASSOCIATION EMPLOYING A USER IN ANY OCCUPATION, INDUSTRY, TRADE,
 BUSINESS OR SERVICE, OR ANY OTHER PERSON WHO IS CONTRACTUALLY  OBLIGATED
 TO  PAY  A USER ANY SUM OF MONEY ON AN HOURLY, PROJECT-BASED, PIECEWORK,
 OR OTHER BASIS FOR LABOR OR SERVICES PROVIDED BY SUCH USER.   "EMPLOYER"
 SHALL  NOT  INCLUDE A CUSTOMER OF AN EMPLOYER OR OTHER THIRD PARTY WHOSE
 OBLIGATION TO MAKE ANY PAYMENT TO A USER IS BASED SOLELY ON SUCH  USER'S
 AGENCY RELATIONSHIP WITH THE EMPLOYER.
   4. "EMPLOYER-INTEGRATED ON-DEMAND PAY PROVIDER" MEANS AN ON-DEMAND PAY
 PROVIDER  THAT  OFFERS  ON-DEMAND  PAY  SERVICES  THROUGH  A CONTRACTUAL
 ARRANGEMENT WITH (I) AN EMPLOYER, OR  (II)  A  SERVICE  PROVIDER  TO  AN
 EMPLOYER, IN WHICH PROVIDER VERIFIES A USER'S EARNED INCOME THROUGH DATA
 OR INFORMATION PROVIDED BY OR THROUGH SUCH EMPLOYER OR SERVICE PROVIDER.
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD11123-01-1

 S. 7898                             2
 
   5.  "NON-VERIFIED  ON-DEMAND  PAY  PROVIDER"  MEANS  AN  ON-DEMAND PAY
 PROVIDER THAT IS NOT AN EMPLOYER-INTEGRATED ON-DEMAND PAY PROVIDER.
   6.  "ON-DEMAND  PAY  PROVIDER"  OR "PROVIDER" MEANS ANY PERSON THAT IS
 ENGAGED IN THE BUSINESS OF DELIVERING ON-DEMAND PAY SERVICES TO  A  USER
 IN NEW YORK STATE.
   7. "ON-DEMAND PAY SERVICES" MEANS THE DELIVERY OF FUNDS TO A USER THAT
 REPRESENT EARNED BUT UNPAID INCOME.
   8. "USER" MEANS ANY NATURAL PERSON.
   §  374-BB.  EMPLOYER-INTEGRATED ON-DEMAND PAY PROVIDERS. 1. NO EMPLOY-
 ER-INTEGRATED ON-DEMAND PAY PROVIDER SHALL OPERATE WITHOUT FIRST  REGIS-
 TERING  WITH  THE  SUPERINTENDENT.  AN EMPLOYER-INTEGRATED ON-DEMAND PAY
 PROVIDER SHALL BE DEEMED REGISTERED IF IT PROVIDES,  ON  A  CONFIDENTIAL
 BASIS, THE FOLLOWING INFORMATION TO THE SUPERINTENDENT:
   (A) THE PROVIDER'S NAME AND ADDRESS;
   (B) AUDITED FINANCIAL STATEMENTS FOR THE PRIOR YEAR;
   (C)  A  STATEMENT  OR SUMMARY OF FEES CHARGED TO USERS OR OBLIGORS FOR
 ON-DEMAND PAY SERVICES BY THE PROVIDER IN NORMAL COURSE; AND
   (D) COPIES OF THE PROVIDER'S END  USER  TERMS  AND  CONDITIONS  AND/OR
 TERMS OF USE, AND PRIVACY POLICIES.
   2. EACH EMPLOYER-INTEGRATED ON-DEMAND PAY PROVIDER SHALL:
   (A)  DELIVER  TO  THE  SUPERINTENDENT ON A CONFIDENTIAL BASIS NO LATER
 THAN JUNE THIRTIETH OF EACH CALENDAR YEAR THE FOLLOWING  ITEMS  FOR  THE
 PRIOR CALENDAR YEAR:
   (I)  THE  PROVIDER'S  AUDITED  FINANCIAL STATEMENTS, PROVIDED, THAT IF
 AUDITED FINANCIAL STATEMENTS ARE UNAVAILABLE BY  THE  DATE  SUCH  ANNUAL
 REPORT  IS  DUE,  SUCH PROVIDER SHALL PROVIDE UNAUDITED FINANCIAL STATE-
 MENTS AT SUCH TIME, PROVIDED  THAT  PROVIDER  SHALL  FILE  SUCH  AUDITED
 FINANCIAL STATEMENTS TO THE SUPERINTENDENT PROMPTLY UPON RECEIPT OF SUCH
 FINANCIAL STATEMENTS; AND
   (II)  COPIES  OF USER COMPLAINTS FILED WITH THE BETTER BUSINESS BUREAU
 OR THE CONSUMER FINANCIAL PROTECTION BUREAU, WITH  THE  RECORDED  RESOL-
 UTION OF SUCH COMPLAINTS;
   (B)  DEVELOP  AND IMPLEMENT POLICIES AND PROCEDURES TO QUICKLY RESPOND
 TO QUESTIONS RAISED BY USERS AND  TO  QUICKLY  ADDRESS  COMPLAINTS  FROM
 USERS;
   (C)  FULLY  AND  CLEARLY  STATE ALL FEES FOR ON-DEMAND PAY SERVICES TO
 BEST PREVENT MISUNDERSTANDING BY PROSPECTIVE USERS;
   (D) INFORM USERS, PRIOR TO ENTERING INTO  AN  ON-DEMAND  PAY  SERVICES
 CONTRACT, OF SUCH USER'S RIGHTS UNDER THE PROGRAM;
   (E)  AFFORD  USERS THE RIGHT TO CANCEL, AT ANY TIME AND WITHOUT INCUR-
 RING A CHARGE, PARTICIPATION IN AN ON-DEMAND PAY SERVICES PROGRAM;
   (F) ABSENT EVIDENCE OF FRAUD BY A USER, BE RESTRICTED FROM  INITIATING
 A COLLECTION ACTION, SUING SUCH USER, OR REPORTING SUCH USER TO A CREDIT
 REPORTING  AGENCY  IF SUCH EMPLOYER-INTEGRATED ON-DEMAND PAY PROVIDER IS
 UNABLE TO BE REPAID FOR FUNDS DELIVERED TO SUCH USER;
   (G) COMPLY WITH ALL APPLICABLE LAWS, RULES,  REGULATIONS,  AND  ORDERS
 REGARDING THE DUTY TO SAFEGUARD A USER'S PERSONAL INFORMATION; AND
   (H)  NOT SHARE ANY FEES WITH AN EMPLOYER OR PAY ANY OTHER COMPENSATION
 TO AN EMPLOYER THAT IS DIRECTLY RELATED TO FEES RECEIVED FROM OR CHARGED
 TO USERS.
   3. EMPLOYER-INTEGRATED ON-DEMAND PAY PROVIDERS SHALL NOT  BE  REQUIRED
 TO BE REGISTERED AS A MONEY TRANSMITTER UNDER ARTICLE THIRTEEN-B OF THIS
 CHAPTER  TO  ENGAGE  IN  THE  ACTIVITIES  OF  AN ON-DEMAND PAY PROVIDER,
 PROVIDED THAT SUCH PROVIDER COMPLIES WITH THE REQUIREMENTS OF THIS ARTI-
 CLE.
 S. 7898                             3
 
   § 374-CC. NON-VERIFIED  ON-DEMAND  PAY  PROVIDERS.  EACH  NON-VERIFIED
 ON-DEMAND PAY PROVIDER SHALL BE SUBJECT TO:
   1. SECTION 190.40 OF THE PENAL LAW;
   2. THE LICENSURE REQUIREMENTS OF ARTICLE NINE OF THIS CHAPTER, AND ANY
 OTHER  PROVISIONS  OF  THIS  CHAPTER  WOULD OTHERWISE APPLY TO A LOAN OR
 CREDIT TRANSACTION; AND
   3. THE FEDERAL TRUTH IN LENDING ACT, AND THE REGULATIONS  IMPLEMENTING
 SUCH ACT, TO PROVIDE ANY DISCLOSURES REQUIRED FOR CLOSED-END LOANS.
   §  374-DD.  CERTAIN  ON-DEMAND PAY SERVICES TO BE CONSIDERED LOANS. 1.
 NON-VERIFIED ON-DEMAND PAY SERVICES SHALL BE CONSIDERED A LOAN, AND  ANY
 FEES  OR OTHER REQUIRED OR OPTIONAL CONTRIBUTIONS OF SUCH SERVICES SHALL
 BE CONSIDERED AS INTEREST WHEN DETERMINING  THE  RATE  OF  INTEREST  FOR
 PURPOSES OF COMPLIANCE WITH THIS CHAPTER.  ANY SUCH INTEREST RATES SHALL
 NOT EXCEED TEN PERCENT PER YEAR.
   2.  EMPLOYER-INTEGRATED ON-DEMAND PAY SERVICES SHALL NOT BE CONSIDERED
 A LOAN.
   § 374-EE. PENALTIES. ANY CORPORATIONS, LIMITED LIABILITY  COMPANY,  OR
 OTHER ENTITY THAT VIOLATES ANY PROVISION OF THIS ARTICLE SHALL BE LIABLE
 FOR  A  PENALTY, IN ADDITION TO ANY OTHER PENALTY IMPOSED BY LAW, OF NOT
 MORE THAN ONE THOUSAND DOLLARS FOR EACH VIOLATION.
   § 2. This act shall take effect on the ninetieth day  after  it  shall
 have  become  a  law.    Effective  immediately, the addition, 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.

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Senate Bill S7898

Sponsored By

Archive: Last Bill Status - In Senate Committee Banks Committee

2021-S7898 (ACTIVE) - Details

2021-S7898 (ACTIVE) - Summary

2021-S7898 (ACTIVE) - Sponsor Memo

2021-S7898 (ACTIVE) - Bill Text download pdf

Comments

Senate Bill S7898

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Sponsored By

Jamaal T. Bailey

Archive: Last Bill Status - In Senate Committee Banks Committee

2021-S7898 (ACTIVE) - Details

2021-S7898 (ACTIVE) - Summary

2021-S7898 (ACTIVE) - Sponsor Memo

2021-S7898 (ACTIVE) - Bill Text download pdf

Comments