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The Business Council opposes S.363 (Gianaris), known as the “New York Junk Fee Prevention Act.” While it is important for consumers to understand the costs of goods and services, this bill is overly ambiguous and fails to contemplate general business practices or industry variations. By applying a broad stroke to all industries, the proposed bill will adversely impact numerous industries and individual businesses that do not engage in misleading or deceptive pricing practices, impose burdensome and expensive compliance costs, and negatively impact consumer affordability.
This bill will only add it New York’s affordability crisis. Like so many other bills proposed each year, this bill creates a new private right of action. Additional private rights of action continue to add to the numerous frivolous lawsuits and class action suits that drive up business costs and lead to higher consumer prices. The bill’s enforcement language permitting enjoinment without requiring proof of consumer injury is out of line with other advertising enforcement, as is the damages awarded. This type of costly litigation could chill legitimate business conduct and drive-up compliance costs, increasing the cost of doing business and costs to consumers.
Additionally, fines whether intentional or unintentional, should be limited regardless of the number of times one advertisement is displayed multiple times. The language contained in the bill is unclear and does not clearly state that one advertisement displayed multiple times is one single violation. Further, this bill faces federal pre-emption issues. It attempts to prohibit arbitration (§396(3)(d)), yet that is preempted by the Federal Arbitration Act. Existing case law generally holds that states efforts to prohibit arbitration are preempted.
New York ranks #2 in states with the highest per-household tort costs. In 2022, New York households paid $7,027 in tort costs, almost $3,000 more than the national average, according to a recently released study by the U.S Chamber of Commerce. These costs on New York households are a direct result of the ever-growing list of private rights of action under New York law. As a state, if we are to truly address affordability and lower costs for New Yorkers, we must take a very hard look at tort costs and their impact on the costs of goods and services. New York’s overactive litigious environment only harms consumers and small businesses.
The bill rightly attempts to exempt financial institutions; however, the language must be amended to ensure that institutions that offer bank, insurance, securities and other financial products. Financial institutions that offer bank, insurance, securities, and other financial products, whether regulated by the Department of Financial Services or at the federal level, are heavily regulated and subject to numerous comprehensive regulations governing fee and cost disclosure to their clients, including advertisement. Financial services products are generally not paid for in the same manner as other goods and services because they are priced to ever-changing market prices, indices and other variables that can only be estimated at the time parties agree to a financial transaction, making the “total price” unknowable at the time prescribed in the bill.
The same also applies to insurance products, as those products are varied due to underwriting purposes. In comparing two properties with a value of $250,000, the insurance premium for the two properties could be varied based on several factors including, but not limited to, location, coverage limits and the home’s characteristics. The same would apply to other types of insurance products, including health plans which offer different plans which have different amounts and total prices based off what a specific plan offers.
We suggest the following to appropriately exempt these highly regulated entities from the requirements of this bill:
4. (b) The following entities, including any persons, agents, or affiliates acting on behalf of such entities, are exempt from compliance with the provisions of this section:
- Any “financial institution” as defined in section eight hundred one of the of the New York Financial Services Law;
- Any insurer licensed or otherwise authorized to do business in the state of New York under the New York Insurance Law;
- Any broker or dealer registered under the Securities Exchange Act of 1934;
- Any investment adviser registered under the Investment Advisers Act of 1940;
- Any investment company registered under the Investment Company Act of 1940; and
- Any collective trust fund that qualifies for exclusion from the definition of an “investment company” under the Investment Compact Act of 1940; and
- Any private fund advised by an investment adviser registered under the Investment Advisers Act of 1940.
Lastly, the bill’s effective date is unworkable and does not account for actual business practices. By failing to account for marketing strategies that are planned months to years in advance, the bill fails to account for the time and logistics that it would take not only business, but vendors and state and local governments (the MTA, for example), to switch out advertisements and replace them with advertisements that fall in compliance of this law. It fails to account for factors that are outside the control of a business while unjustly penalizing them at the same time.
For these reasons, The Business Council opposes S.363 (Gianaris) and urges the Legislature to reject its passage.