N.Y. Comp. Codes R. & Regs. tit. 3 § 404.4

Current through Register Vol. 46, No. 45, November 2, 2024

Section 404.4 - Servicing by a non-licensee service provider

(a) If a licensee seeks to utilize a non-licensee service provider to hold, or have access to, or to effectuate possession of, by any means, the monies of the licensee's debtors in contract with the licensee for budget planning services, or to distribute, or to be in the chain of distribution of such monies, to the creditors of the licensee's debtors, the licensee shall give the superintendent 10 days written notice of its intention to do so.

(b) Notice to the superintendent shall contain the following information:

(1) name and address of the non-licensee service provider;

(2) name, address, social security number and resume of the officers and directors of the non-licensee service provider, any other individual(s) who supervises the daily operations of the non-licensee service provider and any persons having a 10 percent or more ownership interest, directly or indirectly, in the non-licensee service provider. If an individual(s) has a 10 percent or more ownership interest in the non-licensee service provider and such individual is not a control party of the licensee with whom the non-licensee service provider is in contract to provide the services described in subdivision (a) of this section, such individual shall provide an affidavit attesting to that fact;

(3) a description of the services to be provided to the licensee by the non-licensee service provider;

(4) a copy of the agreement or contract between the licensee and the non-licensee service provider with respect to the provision of any or all of the services described in subdivision (a) of this section; and

(5) the highest daily amount of debtor funds to be held by the non-licensee service provider, or to which access is given to the non-licensee service provider, or to which possession can be effectuated, by any means, by the non-licensee service provider, or which are distributed by the non-licensee service provider, or are in the chain of distribution, to the creditors of the debtors.

(c) A licensee shall not use a non-licensee service provider for the services described in subdivision (a) of this section until:

(1) the non-licensee service provider gives the superintendent or his/her authorized representative written authorization to examine all books, records, documents and materials, including those maintained in electronic form, as they relate to the debtors monies held by, or distributed by the non-licensee service provider to the creditors of the debtors, as the superintendent in his/her discretion deems necessary to protect the interests of the debtors. The cost of such examination shall be borne by the licensee in contract with the non-licensee service provider; and

(2) unless the licensee maintains assets on deposit in lieu of a surety bond, pursuant to Banking Law, section 580.4, the non-licensee service provider shall maintain assets on deposit for the protection of the debtors whose monies it holds, or has access to, or can effectuate possession of, by any means, or which are distributed, or are in the chain of distribution, by the non-licensee service provider, to the creditors of the debtors. The maintenance of such assets shall be in accordance with the terms and conditions as set forth in sections 402.6 and 402.7 of this Title; and

(3) all information required in subdivision (b) of this section and a copy of the non-licensee service provider's asset deposit agreement, if required under paragraph (2) of this subdivision, have been provided to the superintendent, and the licensee receives written notice from the superintendent confirming that the superintendent has received all such information.

(d) Notwithstanding the provisions of paragraph (c)(2) of this section, if a licensee maintains a surety bond and seeks to utilize a non-licensee service provider, as defined in section 404.1(d) of this Part, the superintendent, in his/her sole discretion, may permit the use of an alternate mechanism to the non-licensee service provider maintaining assets on deposit, consistent with the purposes of section 580.4 of article 12-C of New York's Banking Law and the requirements of this Part.

(e) If the use of an alternate mechanism pursuant to subdivision (d) of this section is proposed by a licensee, the licensee must provide a description of the alternate mechanism and a copy of all applicable documents and records, as well as any other information requested by the superintendent, in connection with obtaining and/or using the alternate mechanism, including all contracts/ agreements pertaining or related thereto.

(f) If a licensee proposes the use of an alternate mechanism to a non-licensee service provider maintaining assets on deposit pursuant to subdivision (d) of this section, use of the alternate mechanism shall not be permitted until the licensee receives written notice from the superintendent that he/she has no objection to such alternate mechanism.

N.Y. Comp. Codes R. & Regs. Tit. 3 § 404.4