Relates to powers of banking board, restrictions on employees of the banking department, collecting assessment fees, suspending mortgage bankers; repealer

Summary of provisions

This bill makes a number of amendments that clarify, correct or modernize various provisions in the Banking Law ("BL").

Section 1 of the bill would amend the requirement of BL § 9-q that the Superintendent report annually to the Governor and legislative leaders with respect to lending to small businesses and small farms. In particular, the amendment would require that the reports also be provided to the ranking member of the Senate Standing Committee on Banks and the ranking member of the Assembly Standing Committee on Banks.

Section 2 of the bill would delete BL § 14(1 )(ii), which refers to reserve requirements the state no longer imposes.

Section 3 of the bill would amend BL § 14 to clarify that the Superintendent may make informational presentations or briefings to the Banking Board without public notice, provided that the information presented is subject to certain confidentiality provisions and that the Banking Board conducts no public business at any such presentation or briefing.

Section 4 of the bill would amend BL § 14-d(7) to clarify the institutions to which the subdivision applies.

Section 5 of the bill would amend BL § 16(3) to delete certain outdated references to life insurance departments of savings banks.

Section 6 of the bill would repeal BL § 17(5), because the operative provisions have been moved to other sections.

Section 7 of the bill would amend BL § 17(2) to give the Department more flexibility with respect to quarterly expense payments, and provides that, where a licensed entity has overpaid, in an amount that is less than or equal to the amount of the next quarterly assessment, the overpayment will be applied against the next estimated quarterly assessment, rather than refunded to the entity, with any excess so refunded.

Section 8 of the bill would amend BL § 22 with respect to the Superintendent's authority to require that applicants for a license be fingerprinted. It also authorizes the Superintendent to update a criminal background check done by another entity if it is more than five years old, and makes provision for a federal criminal history report to be obtained other than through the DCJS (e.g. through the NMLS under Article 12-E).

Section 9 of the bill would amend BL § 23 to authorize the Department to retain investigation fees paid even if a certificate of organization is not "filed."

Section 10 of the bill would amend BL § 24 to clarify that extension of the 90 day period for the examination and approval of an organization certificate is within the sale discretion of the Superintendent. There are also a number of amendments to make the section gender-neutral. The amendment in BL § 24(3) is not intended to have substantive effect, since the requirements for approval appear elsewhere in this Article. Finally, a missing reference to BL § 136 is added to BL § 24(4).

Section 11 of the bill would amend BL § 25(1) and (3)with respect to the approval of authorization certificates. Several of the changes make references to the Superintendent gender-neutral. Another amendment would increase from 60 to 90 days the discretion of the Superintendent to extend the time period in which to issue the authorization certificate, where the applicant needs the time to raise capital or fulfill other conditions precedent to starting business. The amendment would also authorize the Superintendent to extend the time period for longer than 90 days where he or she determines that "extraordinary circumstances" exist Similarly, the amendment in subdivision 3 provides that the Superintendent may grant more than a single extension of time for the applicant to commence business.

Sections 12, 13 and 14 of the bill would make amendments to BL §§ 28, 28-a and 28-b, respectively. All three sections contain amendments designed to make references to the Superintendent gender-neutral. In addition, BL § 28-b would be amended to delete Subdivision 2, which concerned an outdated committee created by its enacting legislation.

Section 15 of the bill would amend BL § 28-b(5) to delete superfluous language.

Section 16 of the bill would add a new BL § 36-b. This section of the bill would clarify how records required by other sections of the Banking Law may be preserved, including by electronic storage media and set forth criteria for electronic storage.

Section 17 of the bill would amend BL § 75-g to clarify that ATM reports may be required to be filed electronically.

Section 18 of the bill would amend BL § 42 to allow the Superintendent to modify the notice provisions otherwise contained in tile section, where the public interest will be served.

Section 19 of the bill would amend BL § 229 to eliminate a reference to a section that has been repealed.

Section 20 of the bill would amend BL § 413 to delete the reference to BL § 142b, which has been repealed.

Section 21 of the bill would amend BL § 460(2) to delete a reference to section 458, which has been repealed.

Section 22 of the bill would amend BL § 4002 consistent with the changes to BL § 22 described above. Also, a limited exception to the requirement that fingerprint reviews be completed before an approval is granted by the Superintendent is added for the limited situation where a proposed entity has a surplus of incorporators.

Section 23 of the bill would amend BL § 5004(8) to delete the references to sections that have been repealed.

Section 24 of the bill would amend BL § 591(1) (b) to make the fingerprint requirements of Article 12-D consistent with those of BL § 22.

Section 25 of the bill would amend BL § 592-a to correct a reference from "licensee" to "registrant" and to refer to the new termination provisions in BL § 595(2).

Section 26 of the bill would amend subdivisions 1,2,4, 4-a, 5,6 and 7-a of BL § 595 and add a new Subdivision 3. Subdivision 2 would extend the suspension period from 30 to 90 days, and add to the list of violations for which a suspension may be imposed without a hearing, those set forth in paragraphs (b) and (c). New Subdivision 3 would clarify when any such suspended license or registration maybe reinstated; otherwise, the license or registration will terminate by operation of law after 90 days. Conforming changes are made to the other amended subdivisions.

Section 27 of the bill would amend Real Property Law § 254-b, which currently prohibits "late charges" in excess of 2 percent of the delinquent installment, so that it explicitly bars interest rate

increases on loans secured by residential homes and cooperative apartments arising from a default.

Section 28 of the bill would amend BL § 9001-a consistent with the amendments to BL §§ 22 and 4002. Also, a limited exception to the requirement that fingerprint reviews be completed before an approval is granted by the Superintendent is added for the limited situation where a proposed entity has a surplus of incorporators.

Sections 29 to 44 of the bill would make similar changes to various recordkeeping provisions in the Banking Law. These changes would also modernize and conform the recordkeeping requirements applicable to regulated entities consistent with new BL § 36b.

Section 45 of the bill would provide for the effective date of the bill.

Existing law

The Banking Law currently contains many outdated references and outdated ,language. Also, confidential briefings may not be held without triggering the provisions of the Open Meetings Law. Under Banking Law § 17, the Superintendent is authorized to assess various entities to cover the cost of operating the Department. Numerous sections on recordkeeping authorize preservation of photographic records but do not mention electronic recordkeeping. In addition, recordkeeping obligations of sales finance companies and money transmitters are provided in regulations rather than by statute. Also, the ability of the Superintendent to suspend a license or registration are now limited under Banking Law § 595. The Real property Law permits certain late fees in times of default, but its provisions have been subject to misinterpretation.

Legislative history

This is a new proposal.

Statement in support

This bill would demonstrate the ongoing commitment of New York to update its statutory framework for the regulation of entities subject to its jurisdiction. The vast majority of the changes would remove outdated references and make other nonsubstantive changes in the Banking Law to reflect the environment within which financial services now operate.

In addition, the following substantive changes would be made:

The bill makes amendments BL § 14(2) to permit the, Superintendent to bold without public notice briefing sessions for the Banking Board regarding matters subject to confidential treatment under federal or state law~ Because the Banking Board meets only once a month, the Superintendent occasionally must update the Banking Board on

developments between Board meetings. Since matters discussed often are matters subject to confidential treatment, if these matters came up at a Banking Board meeting, they would be covered in a closed session. Board members have requested that the staff make these presentations in a conference call and the amendments in this bill would facilitate such briefings.

BL § 42 contains the requirements for publication of certain information on the Department's bulletin board (now electronic). On the rare occasion when approval of an application or order is time sensitive, publication of a notice under BL § 42 is not feasible or cannot be done consistent with Banking Law § 36(10). The proposed amendment to BL § 42 would allow the Superintendent to vary or waive notice periods under that section as long as he or she determines that consideration of the matter is in the public interest and such waiver is necessary because of unusual and extraordinary circumstances.

Currently, banking institutions covered by Article II-AA must submit written annual reports to the Department regarding their compliance with the article. This is costly for institutions submitting such reports and for the Department to process. The proposed amendments would automate this process by requiring the requisite reports to be submitted electronically.

BL § 595 sets forth the circumstances under which the Department can suspend the license or registration of a mortgage banker or mortgage broker. In dealing with licensed financial service providers, including mortgage bankers and brokers, during the recent subprime mortgage and credit crisis, the Department has determined that the current Banking Law provisions for suspensions and revocations of licenses or registrations do not provide sufficient flexibility and are unnecessarily costly. Most provisions of the Banking Law governing the suspension of non-banking entities limit the Superintendent's ability to suspend a license to 30 days and require a hearing to revoke a license. Thus, as a practical matter, the Superintendent must simultaneously issue an order of suspension and schedule a revocation hearing. Moreover, licensed entities often ask for time to hire counsel and prepare for a hearing and therefore request postponement of the hearing. Consequently, the proposed amendment would extend to 90 days the Superintendent's authority to suspend a license of a mortgage banker or the registration of a mortgage broker for cause, as defined in the Banking Law.

As a result of the current state budget crisis, the Department has analyzed areas where it believes it is incurring needless expense. One such area is in holding revocation hearings for non-bank licensed financial services providers, in this case mortgage bankers and brokers, who have violated certain key legal obligations and where there is no defense in the statute and where hearings are unnecessarily costly, especially because the respondent often does not appear at the hearing. The proposed

amendments to BL § 595 would eliminate the need for such hearings in the case of the mortgage bankers and brokers.

The amendment to BL § 25 would increase from 60 days to 90 days, the discretion of the Superintendent to extend the time period in which to issue the authorization certificate, where the applicant needs the time to raise capital or fulfill other conditions precedent to starting a business. The amendment also authorizes the Superintendent to extend the time period for longer than 90 days where he or she determines that "extraordinary circumstances" exist. The first amendment would give start-up banks a longer period of time in which to complete their "launch" activities. The amendment for "extraordinary circumstances" would, for example, allow the Superintendent to consider recommending that the Banking Board approve a new bank that will be used by the sponsors to bid on assets being sold by the FDIC, where the bank will not be launched unless the sponsors' bid is accepted.

The amendments to the Real Property Law would remove any confusion over whether a lender could increase the interest rate on a loan in addition to charging late fees in default situations. While the Department believes that increasing the interest rate in such situations is not currently permissible, some institutions have reached a contrary conclusion based on their interpretation of the wording of the statute. The instant amendment would eliminate any such confusion.

Budgetary implications

This bill will not have an impact on State finances.

Effective date

This bill would take effect immediately, provided that the amendments to the Real Property Law would only apply to loans made after the effective date of the act, and Sections 34 and 39 of the bill would be effective sixty days after the act became effective.