EDU-14-16-00004-EP Interest Penalties for Late Annual Assessment Fees Paid by Licensed Private Career Schools

4/6/16 N.Y. St. Reg. EDU-14-16-00004-EP

NEW YORK STATE REGISTER

VOLUME XXXVIII, ISSUE 14

April 06, 2016

RULE MAKING ACTIVITIES

EDUCATION DEPARTMENT

EMERGENCY/PROPOSED RULE MAKING

NO HEARING(S) SCHEDULED

 

I.D No. EDU-14-16-00004-EP

Filing No. 342

Filing Date. Mar. 22, 2016

Effective Date. Mar. 22, 2016

Interest Penalties for Late Annual Assessment Fees Paid by Licensed Private Career Schools

PURSUANT TO THE PROVISIONS OF THE State Administrative Procedure Act, NOTICE is hereby given of the following action:

Proposed Action:

Amendment of section 126.14(c) of Title 8 NYCRR.

Statutory authority:

Education Law, sections 207(not subdivided), 305(1), (2) and 5001(9)

Finding of necessity for emergency rule:

Preservation of general welfare.

Specific reasons underlying the finding of necessity:

The proposed amendment is necessary to implement Regents policy and to properly implement Education Law § 5001(9)(d)by amending subdivision (c) of § 126.14 of the Commissioner's Regulations to reflect current practice relating to interest penalties for late payments of annual assessment fees by licensed private career schools. Section 126.14(c) allows the Department to subject annual assessment fees to interest penalties in the following magnitude:

(1) For payments received within the first 30 days after the due date the interest penalty shall be the product of the amount due multiplied by one twelfth of the sum of one plus the prevailing prime rate of interest on the due date as determined by the commissioner.

(2) For payments received more than 30 days after the due date the interest penalty shall be compounded daily for each day the payment is late at a rate of interest equal to the sum of one plus the prevailing prime rate of interest on the due date as determined by the commissioner.

(3) Interest penalties not paid within 15 days of notification of the amount of the penalty shall be increased in accordance with the method used by the commissioner to compute the interest penalty in the first instance.

The interest penalties in the current regulation are outside the scope of the plain language of Education Law § 5001(9), which provides for the payment of interest at one percent above the prevailing prime rate, and produce exorbitant penalty fees which most proprietary schools are unable to pay. As a result the revenues collected on principal owed the assessment fund are more difficult to collect and the Commissioner’s ability to gain payment of amounts in arrears by virtue of the threat of suspension of a school’s license loses its leverage. The Department can accomplish collection of due amounts related to the assessment fund through strict adherence to the plain meaning contained in the statute that the Commissioner’s regulations are meant to implement.

Because the Board of Regents meets at monthly intervals, the earliest the proposed amendment could be adopted by regular action, after publication of a Notice of Proposed Rule Making and expiration of the 45-day public comment period prescribed in State Administrative Procedure Act (SAPA) § 202, would be the June 13-14, 2016 Regents meeting, and pursuant to SAPA § 202, the earliest the amendment could take effect if adopted at the June 2016 Regents meeting is after publication of a Notice of Adoption in the State Register on June 29, 2016.

Emergency action is necessary for the preservation of the general welfare in order to immediately conform the Commissioner’s Regulations regarding interest penalties for late payments of annual assessment fees by licensed private career schools to reflect current practice in order to prevent exorbitantly high late fees from being calculated, thereby ensuring the State Education Department’s Bureau of Proprietary Schools is able to utilize its ability to suspend the licenses of private career schools and private schools to more effectively ensure timely payment of the annual assessment fee.

It is anticipated that the proposed amendment will be presented to the Board of Regents for adoption as a permanent rule at the June 13-14, 2016 meeting of the Board of Regents, which is the first scheduled meeting after expiration of the 45-day public comment period mandated by the State Administrative Procedure Act.

Subject:

Interest penalties for late annual assessment fees paid by licensed private career schools.

Purpose:

To conform regulations to reflect current practices.

Text of emergency/proposed rule:

Subdivision (c) of section 126.14 of the regulations of the Commissioner of Education is amended, effective March 22, 2016, as follows:

(c) Pursuant to section 5001(9) of the Education Law, any annual assessment fees submitted by the schools to the department after the due date shall be subject to an interest penalty. The commissioner shall calculate the amount of the interest penalty as follows:

(1) [For payments received] For each due date, payments made within [the first] 30 days [after the] following such due date [the interest penalty] shall be [the product of the amount due multiplied by one twelfth of the sum of one plus the prevailing prime rate of interest on the due date as determined by the commissioner] subject to an interest penalty of one percent above the prevailing prime rate.

[(2) For payments received more than 30 days after the due date the interest penalty shall be compounded daily for each day the payment is late at a rate of interest equal to the sum of one plus the prevailing prime rate of interest on the due date as determined by the commissioner.]

[(3)] (2) Interest penalties not paid within 15 days of notification of the amount of the penalty [shall] may be increased in accordance with the method used by the commissioner to compute the interest penalty in the first instance.

This notice is intended:

to serve as both a notice of emergency adoption and a notice of proposed rule making. The emergency rule will expire June 19, 2016.

Text of rule and any required statements and analyses may be obtained from:

Kirti Goswami, State Education Department, Office of Counsel, State Education Building, Room 148, 89 Washington Ave., Albany, NY 12234, [phone], email: [e-mail]

Data, views or arguments may be submitted to:

Christopher Ronk, Senior Attorney, NYSED Bureau of Proprietary School Supervision, 116 West 32nd Street, 5th Floor, New York, NY 10001, [phone], email: [e-mail]

Public comment will be received until:

45 days after publication of this notice.

This rule was not under consideration at the time this agency submitted its Regulatory Agenda for publication in the Register.

Regulatory Impact Statement

1. STATUTORY AUTHORITY:

Education Law section 207 grants general rule-making authority to the Regents to carry into effect State educational laws and policies.

Education Law section 305(1) and (2) provide that the Commissioner, as chief executive officer of the State system of education and of the Board of Regents, shall have general supervision over all schools and institutions subject to the provisions of the Education Law, or of any statute relating to education, and shall execute all educational policies determined by the Board of Regents.

Article 101 of the Education Law (Education Law §§ 5001 through 5010) authorizes the State Education Department to license and regulate private career schools. Education Law § 5001 sets forth the requirements for licensure of private career schools. Pursuant to Education Law § 5001(9), the Commissioner is directed to annually assess each school a total percentage of the school’s gross tuition based upon the previous year (“annual assessment fee”), which shall be payable in equal quarterly installments due on June 1st, September 1st, December 1st and March 1st. The statute provides that any annual assessment fees submitted by the schools after the due date shall be subject to interest at one percent above the prevailing prime rate. Annual assessment fees and interest penalties are used to fund the Department’s supervision and regulation of licensed private schools (Annual Supervision Fund). Payments of such fees and interest penalties are deemed to be a condition of a school’s licensure, and the statute authorizes the Commissioner to suspend licensure for late payments.

2. LEGISLATIVE OBJECTIVES:

Consistent with the above authority, the proposed amendment is necessary to implement Regents policy, and to properly implement Education Law § 5001(9)(d), by amending subdivision (c) of § 126.14 of the Commissioner's Regulations to reflect current Department practice relating to interest penalties for late payments of annual assessment fees by licensed private career schools.

3. NEEDS AND BENEFITS:

The proposed amendment is necessary to implement Regents policy and to properly implement Education Law § 5001(9)(d) by amending subdivision (c) of § 126.14 of the Commissioner's Regulations to reflect current Department practice relating to interest penalties for late payments of annual assessment fees by licensed private career schools. Section 126.14(c) allows the Department to subject annual assessment fees to interest penalties in the following magnitude:

(1) For payments received within the first 30 days after the due date the interest penalty shall be the product of the amount due multiplied by one twelfth of the sum of one plus the prevailing prime rate of interest on the due date as determined by the commissioner.

(2) For payments received more than 30 days after the due date the interest penalty shall be compounded daily for each day the payment is late at a rate of interest equal to the sum of one plus the prevailing prime rate of interest on the due date as determined by the commissioner.

(3) Interest penalties not paid within 15 days of notification of the amount of the penalty shall be increased in accordance with the method used by the commissioner to compute the interest penalty in the first instance.

The interest penalties in the current regulation are outside the scope of the plain language of Education Law § 5001(9), which provides for the payment of interest at one percent above the prevailing prime rate, and produce exorbitant penalty fees which most proprietary schools are unable to pay. As a result the revenues collected on principal owed the assessment fund are more difficult to collect and the Commissioner’s ability to gain payment of amounts in arrears by virtue of the threat of suspension of a school’s license loses its leverage. The Department can accomplish collection of due amounts related to the assessment fund through strict adherence to the plain meaning contained in the statute that the Commissioner’s regulations are meant to implement.

4. COSTS:

(a) Costs to State government: none.

(b) Costs to local governments: none.

(c) Costs to private, regulated parties: none.

(d) Costs to regulating agency for implementation and continued administration of this rule: none.

The proposed amendment relates to interest penalties for late annual assessment fees paid by licensed private career schools and is necessary to implement Regents policy and properly implement Education Law § 5001(9)(d) by amending subdivision (c) of § 126.14 of the Commissioner's Regulations to reflect current Department practice in order to prevent exorbitantly high late fees from being calculated which most proprietary schools are unable to pay. As a result the revenues collected on principal owed the assessment fund are more difficult to collect and the Commissioner’s ability to gain payment of amounts in arrears by virtue of the threat of suspension of a school’s license loses its leverage. The Department can accomplish collection of due amounts related to the assessment fund through strict adherence to the plain meaning contained in the statute that the Commissioner’s regulations are meant to implement.

5. LOCAL GOVERNMENT MANDATES:

The proposed amendment does not impose any mandatory program, service, duty, or responsibility upon local government, including school districts or BOCES.

6. PAPERWORK:

There are no additional paperwork or recordkeeping requirements beyond those inherent in the statute.

7. DUPLICATION:

The amendment does not duplicate any existing State or Federal requirements.

8. ALTERNATIVES:

There were no significant alternatives and none were considered.

9. FEDERAL STANDARDS:

There are no applicable Federal standards.

10. COMPLIANCE SCHEDULE:

It is anticipated that regulated parties will be able to achieve compliance with the proposed amendment by its effective date. The proposed amendment relates to interest penalties for late annual assessment fees paid by licensed private career schools and does not impose any additional costs or compliance requirements on such schools. The proposed amendment is necessary to implement Regents policy and properly implement Education Law § 5001(9)(d) by amending subdivision (c) of § 126.14 of the Commissioner's Regulations to reflect current Department practice in order to prevent exorbitantly high late fees from being calculated which most proprietary schools are unable to pay. As a result the revenues collected on principal owed the assessment fund are more difficult to collect and the Commissioner’s ability to gain payment of amounts in arrears by virtue of the threat of suspension of a school’s license loses its leverage. The Department can accomplish collection of due amounts related to the assessment fund through strict adherence to the plain meaning contained in the statute that the Commissioner’s regulations are meant to implement.

Regulatory Flexibility Analysis

(a) Small Businesses:

1. EFFECT OF THE RULE:

The proposed amendment is applicable to all licensed private career schools and certified English as a second language schools in the State. There are 397 such schools in the State. The Department does not keep records on the number of such schools that are small businesses, however it is believed that almost all of the 397 schools are small businesses.

2. COMPLIANCE REQUIREMENTS:

The proposed amendment relates to interest penalties for late annual assessment fees paid by licensed private career schools and does not impose any additional compliance requirements on such schools. Section 126.14(c) allows the Department to subject annual assessment fees to interest penalties in the following magnitude:

(1) For payments received within the first 30 days after the due date the interest penalty shall be the product of the amount due multiplied by one twelfth of the sum of one plus the prevailing prime rate of interest on the due date as determined by the commissioner.

(2) For payments received more than 30 days after the due date the interest penalty shall be compounded daily for each day the payment is late at a rate of interest equal to the sum of one plus the prevailing prime rate of interest on the due date as determined by the commissioner.

(3) Interest penalties not paid within 15 days of notification of the amount of the penalty shall be increased in accordance with the method used by the commissioner to compute the interest penalty in the first instance.

The interest penalties in the current regulation are outside the scope of the plain language of Education Law § 5001(9), which provides for the payment of interest at one percent above the prevailing prime rate, and produce exorbitant penalty fees which most proprietary schools are unable to pay. As a result the revenues collected on principal owed the assessment fund are more difficult to collect and the Commissioner’s ability to gain payment of amounts in arrears by virtue of the threat of suspension of a school’s license loses its leverage. The Department can accomplish collection of due amounts related to the assessment fund through strict adherence to the plain meaning contained in the statute that the Commissioner’s regulations are meant to implement.

3. PROFESSIONAL SERVICES:

The proposed amendment will not require any additional professional services in order to comply.

4. COMPLIANCE COSTS:

The proposed amendment relates to interest penalties for late annual assessment fees paid by licensed private career schools and does not impose any additional costs on such schools. The proposed amendment is necessary to implement Regents policy and properly implement Education Law § 5001(9)(d) by amending subdivision (c) of § 126.14 of the Commissioner's Regulations to reflect current Department practice in order to prevent exorbitantly high late fees from being calculated which most proprietary schools are unable to pay. As a result the revenues collected on principal owed the assessment fund are more difficult to collect and the Commissioner’s ability to gain payment of amounts in arrears by virtue of the threat of suspension of a school’s license loses its leverage. The Department can accomplish collection of due amounts related to the assessment fund through strict adherence to the plain meaning contained in the statute that the Commissioner’s regulations are meant to implement.

5. ECONOMIC AND TECHNOLOGICAL FEASIBILITY:

The proposed amendment does not impose any additional technological requirements on small businesses. Economic feasibility is discussed in the above Costs section.

6. MINIMIZING ADVERSE IMPACT:

The proposed amendment relates to interest penalties for late annual assessment fees paid by licensed private career schools and does not impose any additional compliance requirements or costs on such schools. The proposed amendment is necessary to implement Regents policy and properly implement Education Law § 5001(9)(d) by amending subdivision (c) of § 126.14 of the Commissioner's Regulations to reflect current Department practice in order to prevent exorbitantly high late fees from being calculated which most proprietary schools are unable to pay. As a result the revenues collected on principal owed the assessment fund are more difficult to collect and the Commissioner’s ability to gain payment of amounts in arrears by virtue of the threat of suspension of a school’s license loses its leverage. The Department can accomplish collection of due amounts related to the assessment fund through strict adherence to the plain meaning contained in the statute that the Commissioner’s regulations are meant to implement.

7. SMALL BUSINESS PARTICIPATION:

The State Education Department has posted the proposed regulation on its website for comments from interested parties, and has notified two large associations representing the majority of licensed private career schools in the State, so that they can inform their respective members of the proposed amendment.

Local Governments:

The proposed amendment relates to interest penalties for late payment of annual assessment fees by licensed private career schools. It is clear from the nature of the proposed amendment that it does not impose any adverse economic impact, reporting, recordkeeping or other compliance requirements on local governments. No further steps were needed to ascertain that fact and none were taken. Accordingly, a regulatory flexibility analysis for local governments is not required and none has been prepared.

Rural Area Flexibility Analysis

1. TYPES AND ESTIMATED NUMBER OF RURAL AREAS:

The proposed amendment is applicable to all licensed private career schools and certified English as a second language schools in the State, including those located in the 44 rural counties with less than 200,000 inhabitants and the 71 towns in urban counties with a population density of 150 per square mile or less. Currently, there are 397 such schools. Of these, approximately 15 are located in a rural area of the State.

2. REPORTING, RECORDKEEPING, AND OTHER COMPLIANCE REQUIREMENTS; AND PROFESSIONAL SERVICES:

The proposed amendment relates to interest penalties for late annual assessment fees paid by licensed private career schools and does not impose any additional compliance requirements on such schools. Section 126.14(c) allows the Department to subject annual assessment fees to interest penalties in the following magnitude:

(1) For payments received within the first 30 days after the due date the interest penalty shall be the product of the amount due multiplied by one twelfth of the sum of one plus the prevailing prime rate of interest on the due date as determined by the commissioner.

(2) For payments received more than 30 days after the due date the interest penalty shall be compounded daily for each day the payment is late at a rate of interest equal to the sum of one plus the prevailing prime rate of interest on the due date as determined by the commissioner.

(3) Interest penalties not paid within 15 days of notification of the amount of the penalty shall be increased in accordance with the method used by the commissioner to compute the interest penalty in the first instance.

The interest penalties in the current regulation are outside the scope of the plain language of Education Law § 5001(9), which provides for the payment of interest at one percent above the prevailing prime rate, and produce exorbitant penalty fees which most proprietary schools are unable to pay. As a result the revenues collected on principal owed the assessment fund are more difficult to collect and the Commissioner’s ability to gain payment of amounts in arrears by virtue of the threat of suspension of a school’s license loses its leverage. The Department can accomplish collection of due amounts related to the assessment fund through strict adherence to the plain meaning contained in the statute that the Commissioner’s regulations are meant to implement.

The proposed amendment will not require any additional professional services in order to comply.

3. COSTS:

The proposed amendment relates to interest penalties for late annual assessment fees paid by licensed private career schools and does not impose any additional costs on such schools. The proposed amendment is necessary to implement Regents policy and properly implement Education Law § 5001(9)(d) by amending subdivision (c) of § 126.14 of the Commissioner's Regulations to reflect current Department practice in order to prevent exorbitantly high late fees from being calculated which most proprietary schools are unable to pay. As a result the revenues collected on principal owed the assessment fund are more difficult to collect and the Commissioner’s ability to gain payment of amounts in arrears by virtue of the threat of suspension of a school’s license loses its leverage. The Department can accomplish collection of due amounts related to the assessment fund through strict adherence to the plain meaning contained in the statute that the Commissioner’s regulations are meant to implement.

4. MINIMIZING ADVERSE IMPACT:

The proposed amendment relates to interest penalties for late annual assessment fees paid by licensed private career schools and does not impose any additional compliance requirements or costs on such schools. The proposed amendment is necessary to implement Regents policy and properly implement Education Law § 5001(9)(d) by amending subdivision (c) of § 126.14 of the Commissioner's Regulations to reflect current Department practice in order to prevent exorbitantly high late fees from being calculated which most proprietary schools are unable to pay. As a result the revenues collected on principal owed the assessment fund are more difficult to collect and the Commissioner’s ability to gain payment of amounts in arrears by virtue of the threat of suspension of a school’s license loses its leverage. The Department can accomplish collection of due amounts related to the assessment fund through strict adherence to the plain meaning contained in the statute that the Commissioner’s regulations are meant to implement.

5. RURAL AREA PARTICIPATION:

The State Education Department has posted the proposed regulation on its website for comments from interested parties, and has notified two large associations representing the majority of licensed private career schools in the State, including some located in rural areas, so that they can inform their respective members of the proposed amendment.

Job Impact Statement

The proposed amendment is necessary to implement Regents policy and to properly implement Education Law § 5001(9)(d) by amending subdivision (c) of § 126.14 of the Commissioner's Regulations to reflect current practice in order to prevent exorbitantly high late fees from being calculated, thereby ensuring the State Education Department’s Bureau of Proprietary Schools is able to utilize its ability to suspend the licenses of private career schools and private schools to more effectively ensure timely payment of the annual assessment fee.

The proposed amendment will not have a substantial adverse impact on jobs or employment opportunities. Because it is evident from the nature of the proposed amendment that it will not have a substantial impact on jobs and employment opportunities, no further steps were needed to ascertain that fact and none were taken. Accordingly, a job impact statement is not required and one has not been prepared.