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The Business Council strongly opposes S3789/A3459, would amend Financial Services Law to remove the intentional requirement for fraud and replace it with a negligence standard under which the Department of Financial Services (DFS) would be able to impose a civil penalty against financial services entities including banks and insurance companies.
This legislation would make simple accidental mistakes now be treated as fraudulent acts. Fraud almost by definition is intentional, and the removal of “intentional” from the law diminishes the weight of what fraud really is and the destruction it can have. Both the financial service industry and the insurance industry work toward and are committed to compliance with the law and ethical practices while ensuring consumers are protected from fraud.
Under several existing statues DFS already has the authority to investigate, bring enforcement actions, and impose sanctions on entities for fraud and material misrepresentation or other unlawful practices. Specifically, Article 24 (Unfair Methods of Competition and Unfair and Deceptive Acts and Practices), Article 26 (Unfair Claim Settlement Practices; Other Misconduct; Discrimination), Article 4 (Insurance Frauds Prevention), and Article 42 (governing Life Insurance Companies, Accident and Health Insurance Companies, and Legal Services Insurance Companies). Additionally, Section 408 of the Financial Services Law points to penalties being based on intentional fraud or misrepresentation.
This legislation is overly broad and there is great concern that this new standard would punish those in the financial services and insurance industries for unintentional misstatements or mistakes. New York does not need to be enacting more unnecessary, administratively burdensome laws. For these reasons, The Business Council opposes the above-mentioned legislation.