Section 20-494.1. Prohibited and required practices relating to the collection of child support payments

a. For purposes  of  this  section  the following terms shall have the following meanings:
    1.  "Current  payment  of  child  support"  shall  mean a payment made
  pursuant to a schedule arising out of a judgment or valid agreement  for
  the  payment  of  child support which is made within thirty days of such
  payment's due date.
    2. "Potential client" shall mean a person seeking child  support  debt
  collection services from a debt collection agency.
    b.  Any  agreement  or  contract  for  the collection of child support
  payments shall  be  in  writing  and  shall  not  extend  beyond  twelve
  consecutive months. Renewal of such contracts shall not be automatic and
  shall require the consent in writing of all parties to the contract.
    c.  No  debt  collection  agency  that collects child support payments
  shall:
    1. charge interest or  otherwise  impose  a  charge  or  fee  for  its
  services  that  exceeds  fifteen  percent  of each child support payment
  collected.
    2. charge interest or otherwise impose a charge or fee with respect to
  child support payments collected primarily  through  the  efforts  of  a
  governmental entity.
    3.  charge  interest or otherwise impose a charge or fee for a current
  payment of child support.
    4. impose a charge or fee for the costs of an application.
    5. impose a charge or  fee  for  legal  services  unless  paid  to  an
  independent  firm,  practitioner or agency for actual costs incurred and
  unless agreed upon in writing by the potential client.
    6. impose a charge or fee for the termination of a  contract  for  the
  collection of child support.
    7. impose a charge or fee that does not bear a reasonable relationship
  to the amount of child support actually collected.
    8. designate a current payment of child support as arrears.
    9.  prohibit the termination of a contract for the collection of child
  support payments until arrears are paid.
    10. include any terms in  a  contract  for  the  collection  of  child
  support that conflict or are inconsistent with the terms set out in this
  subchapter.
    d.  an  agreement  for the collection of child support shall terminate
  automatically if no payment of child support has been collected by  such
  debt collection agency for a period of six consecutive months.
    e.  Any  debt  collection  agency that collects child support payments
  shall provide to a potential client a written  disclosure  form  at  the
  same  time as such agency first furnishes such potential client with any
  informational or promotional  materials,  application  or  contract  for
  services,  regardless of the manner in which such materials are provided
  including, but not limited to, in-person  contact,  fax,  regular  mail,
  internet  or other electronic means, containing, but not limited to, the
  following information prominently disclosed in a meaningful sequence:
    1. No obligation. A potential client shall be advised that such client
  is under no obligation to hire a debt collection agency to collect child
  support payments on behalf of such client and that:
    (i) New  York  city's  office  of  child  support  enforcement  (OCSE)
  provides  child  support  enforcement  services  at  no cost to families
  regardless of income and
    (ii) OCSE's powers include,  but  are  not  limited  to,  garnishments
  against   wages,  liens  on  bank  accounts  and  property,  tax  refund
  intercepts and the initiation of incarceration proceedings.
    2. Fees.

    (i) Application fees. A potential client shall be advised  that  child
  support  debt  collection agencies are prohibited by law from charging a
  fee for the costs of an application.
    (ii)  Prohibition  against  collection fees for child support payments
  that are not in arrears. A potential client shall be advised  that  debt
  collection agencies are prohibited by law from collecting fees for child
  support  payments  that  are  not in arrears and that it is unlawful for
  such an agency to designate  a  current  payment  of  child  support  as
  arrears.
    (iii)  Legal  fees.  A  potential  client  shall be advised that child
  support debt collection agencies are prohibited by law from charging for
  legal services unless  such  fees  are  paid  to  an  independent  firm,
  practitioner  or agency for actual costs incurred and unless agreed upon
  in writing by the potential client.
    (iv) Early termination penalty. A potential client  shall  be  advised
  that child support debt collection agencies are prohibited from imposing
  a charge or fee for the termination of a contract.
    (v) Additional fees. A potential client shall be advised regarding any
  additional  fees or potential additional fees, including but not limited
  to, the services for which such fees may be imposed, how such  fees  are
  calculated  and when such fees are billed. A potential client shall also
  be advised that any fees must bear  a  reasonable  relationship  to  the
  amount of child support actually collected.
    (vi)  A  potential  client  shall  be  advised that child support debt
  collection agencies are prohibited by law  from  imposing  any  contract
  terms that conflict or are inconsistent with the provisions specified in
  the required disclosure form required under section 20-494.1 (e).
    3. Contract terms and renewals.
    (i)  A  potential  client shall be advised that, by law, contracts for
  the collection of child support payments shall not be entered  into  for
  periods of longer than twelve consecutive months.
    (ii)  A  potential  client  shall  be  advised  that  renewal  of such
  contracts shall not be automatic and shall require the  written  consent
  of all parties to the contract.
    (iii)  A  potential client shall be provided a summary of all contract
  termination provisions, including, but not limited to, the specific date
  on which such contract shall terminate. If no specific date is  provided
  in  the contract, the debt collection agency shall describe how and when
  such contract will terminate.
    (iv) A potential client shall be advised  that,  by  law,  a  contract
  cannot  be  renewed  if,  upon  the  renewal  date,  there  has  been no
  collection  activity  for  the  immediately  preceding  six  consecutive
  months.
    f.  Any  debt  collection  agency that collects child support payments
  shall furnish to the commissioner a current version  of  the  disclosure
  form  required  under  section 20-494.1 (e) together with a copy of such
  agency's standard contract for child  support  payment  debt  collection
  services within sixty days following the effective date of the local law
  that added such section.
    g.  As  a  condition  to  the  issuance  of a license to provide child
  support payment debt collection services, each applicant  shall  furnish
  to  the  commissioner a surety bond in the sum of five thousand dollars,
  payable to the city of New York, executed by such applicant and a surety
  approved by the commissioner. Such bond shall be  conditioned  upon  the
  applicant's  compliance  with  the provisions of this subchapter and any
  rules  or  regulations  promulgated  hereunder,  and  upon  the  further
  condition  that such applicant will pay to the city any fine, penalty or
  other obligation within thirty days of  its  imposition,  or  any  final

  judgment recovered by any person who received child support payment debt
  collection  services from a licensee thereunder and was damaged thereby.
  The commissioner may, by rule, increase the amount of  the  surety  bond
  required by this section to an amount not to exceed twenty-five thousand
  dollars. The commissioner may by rule authorize an applicant to, in lieu
  of  a  bond, deposit cash to satisfy the requirements of this section in
  an amount equal to the sum of the surety bond required by this section.
    h. The commissioner may by rule establish a fund to be administered by
  the comptroller and authorize an applicant  for  a  license  to  provide
  child  support payment debt collection services to, in lieu of a bond or
  cash  equivalent,  make  contributions  to  such  fund  to  satisfy  the
  requirements  of  subdivision  g  of  this section. The commissioner may
  promulgate  such  rules  or  regulations  as  are  necessary   for   the
  administration of such fund including, but not limited to, rules setting
  forth  the  conditions  for participation in the fund, the contributions
  required to be made to  the  fund  and  the  circumstances  under  which
  disbursements will be made from the fund.
    i.  The  commissioner may promulgate such rules as may be necessary to
  carry out the provisions of this section.