November 14, 2022
Industry Letter: Consideration of Proposed Fee Modifications for Licensed Budget Planners
TO: Licensed Budget Planners
The New York State Department of Financial Services (the “Department”) is issuing this guidance (“Guidance”) to all organizations licensed under Article 12-C of the Banking Law to engage in the business of budget planning (“Budget Planners”). Under 3 NYCRR § 402.14, a Budget Planner that desires to modify their fee structure is required to notify the Superintendent of Financial Services at least 30 days prior to the implementation of the modification, during which time the Department will consider the request. Pursuant to 3 NYCRR § 402.14, in considering a proposed fee modification, the Superintendent “shall review the fee structure taking into consideration the expenses of the operation, the financial status of the debtor(s) and such other factors as the superintendent shall deem relevant.” This Guidance serves to inform the Budget Planners of the information the Department will typically seek in determining whether to approve a request for a fee modification.
Procedure to Request a Fee Modification
A Budget Planner that is licensed with DFS and in good standing and that wishes to modify its fee structure should contact the Department through the organization’s existing relationship manager contact.
In order to assess a proposed fee modification, the Department will need sufficient information to determine whether the proposed change is substantially reasonable, justified, and fair.
To facilitate the Department’s review of a proposed fee modification, this Guidance identifies in broad terms important information that the Department will look for in connection with any request to modify a fee structure. If the Department does not have adequate information to evaluate the proposal, the review process may be delayed.
Budget Planners will be notified in writing of the Department’s decision regarding their request for a fee modification.
Assessment of the Proposed Fee Modification
To review a request for a fee modification and reach a decision with respect thereto, the Department will review results of, and reports from, any examinations, visitations, or other supervisory interactions with the requesting Budget Planner during the year in which such request is made, as well as during a three year period immediately preceding such request, to determine whether any matters identified as requiring attention have been fully addressed. To support this assessment, the Department may request, as necessary, evidence of this fact, up to and including a certification by the chief executive, board of directors, or equivalent governing body.
The Department may also request from the Budget Planner, a list and description of all substantial contracts or service agreements or arrangements between the Budget Planner and its affiliate(s) and any non-arm’s-length person(s), meaning any person or entity in which a substantial economic interest is held by a person who also holds a substantial economic interest or controlling interest in the Budget Planner, or in any of its affiliates. If any such substantial contracts, agreements, or arrangements exist, the Department will seek further explanation, including dollar amounts.
The Department will assess existing financial reports filed by the Budget Planner to consider the Budget Planner’s typical expenses and revenues, including the proportion of its revenue comprising “fair-share” revenue paid by creditors. Based on review of this information, the Department will determine whether the requested fee modification appears justified, including by any increase in the difference between relevant expenses and fair-share revenue. If a fee increase appears to be substantially unjustified by this analysis, the Department may seek an explanation of the discrepancy, including specific evidence supporting the explanation.
Finally, the Department will perform an analysis of the proposed new fees (net of the requested change) and consider whether these fees, as adjusted, would be significantly higher than the New York-based fees of other similarly situated Budget Planners. If the Department finds the proposed fees are significantly higher compared to fees charged to customers by other NYS licensees, it will seek additional information from the Budget Planner to explain the discrepancy.
A requested modification that is ultimately determined to be substantially unjustified, unreasonable, or unfair will be denied.
Deputy Superintendent-Licensed Financial Services
New York State Department of Financial Services