Relates to licensed lenders, licensed cashers of checks, sales finance companies, premium finance companies, budget planners, and transmitters of money; repealer

Summary of provisions

Section 1 of the bill amends BL § 340 to increase the size of loans that require registration of the lender as a licensed lender, while eliminating the exemptions for entities that lend at interest rates below the general State rates. An exemption is added for lenders making no more than five loans at any time outstanding, as long as the aggregate amount does not exceed $100,000. A definition regarding when loans are solicited in this State also is added.

Section 2 of the bill adds a new definition section to make use of the article easier. In particular, it adds definitions of "person" and "control."

Section 3 of the bill amends BL § 341(3) to change the reference to the annual license fee to a reference to the appropriate section of the law. BL § 341(5) is amended to change the capital requirement from one that is calculated on a per branch basis to one calculated on a company-wide basis (although the number of branches may still be relevant) and clarifies that the Superintendent has discretion to require a higher amount.

Section 4 of the bill makes various technical changes throughout BL 342 to include limited liability companies as applicants and to clarify when an application is deemed complete. It also clarifies that the capital requirement is calculated under BL § 341 (5), rather than on a branch-by-branch basis.

Section 5 of the bill makes conforming changes (recognizing the existence of LLCs) to BL § 343(1).

Section 6 of the bill amends BL § 345 to conform it to the changes made in BL § 340-a (i.e. it deletes the definitions of "person" and "control", which were moved to a new definition section).

Section 7 of the bill makes changes to conform BL § 347 to the changes being made to other provisions of the BL related to grounds of suspension and termination of licenses. In particular, it moves to BL § 347(1) some language that applies to both suspensions and revocations that previously appeared in § 347(2) (which applies only to suspensions). The bill adds to BL § 347(2), which deals with good cause suspensions, a definition of "good cause" that appears in the other BL articles dealing with licensed financial services firms. Also, the period during which a licensed lender may be suspended is expanded to 90 days from 30 days.

Section 7 of the bill also amends BL § 347(2) to provide that the Superintendent may suspend a firm without a hearing for failure to make payments required by the BL (which would include assessments, fees or penalties or restitution ordered in accordance with the BL). Finally, it states that the Superintendent may suspend a firm without a hearing for other failures where there can be no factual question that should be tried by a hearing examiner, including failure to file any report required by the BL, filing a petition in bankruptcy, or having an involuntary bankruptcy petition filed against the firm (and not dismissed in 30 days).

Section 7 of the bill also amends BL § 347(3) to provide that, if the licensee has cured all deficiencies set forth in the suspension order within 90 days after the date of the suspension, the licensee's license may be reinstated; however, if the licensee has not cured the deficiencies and the deficiencies are pursuant to paragraph (b) or ( c) of BL 347(2), the license will automatically terminate by operation of law. BL . 347(4) deals with voluntary surrenders of licenses, and makes clear that surrender of a license becomes effective only upon the written approval of the Superintendent and that such surrender does not affect the licensee's obligations to the Superintendent for assessments, fees or administrative actions with respect to any period before the surrender. The changes in BL 347(5) and 347(6) are conforming changes that recognize the new termination provisions. Finally, BL § 347(8) makes clear that, when a license has been terminated by operation of law, the Superintendent must notify the licensee that the license has terminated and that the licensee may not engage in the licensed business.

Section 8 of the bill repeals the first two unnumbered paragraphs of BL § 356, which are no longer needed because BL § 340, as amended, requires all persons making qualifying loans in New York to be registered.

Section 9 of the bill begins the amendments to Article IX-A of the BL (check cashers). A definition of "person" is added to BL § 366(1) and technical changes are made to other definitions to use this new definition.

Section 10 of the bill makes technical changes to BL § 367 to incorporate the new definition of "person" and to recognize the

existence of licensees that are limited liability companies. BL § 367(2) is amended to recognize the use of limited liability companies. In BL § 367(4), the Superintendent is given flexibility to modify the amount of liquid assets required for a check cashing location that is a "limited station."

Section 11 of the bill amends BL § 369(1) to clarify the meaning of the existing section, and is not intended to create new requirements or delete old requirements. A new 369(1-a) contains language taken from elsewhere in BL § 369 concerning the "3/10 of a mile" protected area around a check casher office.

Section 12 of the bill amends BL § 370-a to provide the Superintendent with flexibility in processing of applications under this article by measuring the approval time from the date the application became complete.

Section 13 of the bill amends the suspension, revocation and surrender provisions with respect to check cashers, and makes them consistent with the similar provisions for other types of licensed financial services firms as discussed above with respect to § 347. The amendment includes provisions with respect to suspensions "for cause", for failure to pay assessments and other amounts due, failure to file reports, and the filing of a petition in bankruptcy. The bill also makes the section gender-neutral.

Section 14 of the bill amends BL § 374(1) (the exemption from registration as a check casher) to make minor conforming changes.

Section 15 of the bill begins the amendments to Article ll-B (sales finance companies). It amends certain definitions in BL § 491 to conform them to each other. The section also makes clear that the term "retail installment obligation" includes an agreement no matter where entered into if it is executed by the buyer in this State and if solicited in person by a salesperson or other person acting on his or her own behalf or that of the seller. Similarly, the definition of "sales finance company" is amended to make clear that the article applies to agreements wherever entered into if they are executed by the buyer in New York and if they are solicited in person by a salesperson or other person acting on his or her own behalf or on behalf of the seller. Also, the types of transactions to which this article applies is clarified, and the existence of a safe harbor for secondary transactions is clarified. The bill also makes the section gender neutral.

Section 16 of the bill amends BL §§ 492(1) and 492(2) to clarify when banking institutions are exempt from coverage of the law and to clarify the procedure for an application for a sales finance company license.

Section 17 of the bill makes changes to BL § 492~a(2) to clarify when a change of control application must be approved.

Section 18 repeals BL § 493(7) and amends BL § 493(4) to clarify the circumstances when a license terminates.

Section 19 of the bill amends the suspension, revocation and surrender provisions with respect to sales finance companies, and makes them consistent with the similar provisions for other types of licensed financial services firms as discussed above with respect to § 347. This includes provisions with respect to suspensions "for cause", for failure to pay assessments and other amount due, failure to file reports, and the filing of a petition in bankruptcy. It also extends from 30 to 90 days the amount of time for which the Superintendent may suspend a license while conducting an investigation. Technical changes also are made to the provisions of BL § 495 regarding termination of a license by the Superintendent and when a licensee may surrender its license.

Section 20 of the bill repeals BL §§ 497(3) and 497(4), which are outdated provisions.

Section 21 of the bill amends BL § 499 to make the section gender neutral.

Section 22 of the bill begins the amendments of Article XII-B of the BL (Insurance Premium Finance Agencies). It amends the definition of a bank contained in § 554 to cover all banking institutions.

Section 23 of the bill amends BL § 555 to conform to the newly defined "banking institutions" in BL § 554 without changing the institutions to which the section applies.

Section 24 of the bill repeals BL § 556(5), a transition provision dating from 1961, as outdated.

Section 25 of the bill amends BL § 558 to clarify when relocation fees are required.

Section 26 of the bill amends BL § 559, the suspension, revocation and surrender provisions with respect to premium finance agencies, and makes them consistent with the similar provisions for other types of licensed financial services firms as discussed above with respect to § 347. This includes provisions with respect to suspensions "for good cause", for failure to pay assessments and other amount due, failure to file reports, and the filing of a petition in bankruptcy. It also extends from 30 to 90 days the amount of time for which the Superintendent may suspend a license while conducting an investigation.

Section 27 of the bill repeals BL §§ 560(3) and 560(4). The substance of these provisions has previously been moved to BL §§ 17 and 36(10), respectively.

Section 28 of the bill repeals BL § 562, since the subject matter (hearings and investigations) is already covered in Article II.

Section 29 of the bill amends BL § 563 to make the section gender neutral.

Section 30 of the bill amends BL § 576 to clarify the ability of the Superintendent to provide notice by electronic means.

Section 31 of the bill amends BL § 577 to eliminate outdated language.

Section 32 of the bill amends BL § 580 to eliminate outdated language and to clarify when fees for branch offices are required.

Section 33 of the bill amends BL § 581 to clarify that the time period for approving an application runs from the time the application is deemed complete.

Section 34 of the bill amends BL § 583-a to clarify when the Superintendent must act on an application.

Section 35 of the bill amends BL § 584, the suspension, revocation and surrender provisions with respect to budget planners, and makes them consistent with the similar provisions for other types of licensed financial services firms as discussed above with respect to § 347. This includes provisions with respect to suspensions "for good cause", for failure to pay assessments and other amounts due, failure to file reports, the filing of a petition in bankruptcy, and failure to maintain the bond required under BL § 580. It also extends from 30 to 90 days the amount of time for which the Superintendent may suspend a license while conducting an investigation. The effect of the revocation, surrender or termination of a license also is clarified.

Section 36 of the bill amends BL § 586 to clarify that electronic storage of records is permissible.

Section 37 of the bill begins the amendments to Article XIII-B (Money Transmitters). It amends BL § 641 to clarify when banking institutions are exempt from coverage of the article and when New York persons are subject to the protections of this article.

Section 38 of the bill amends BL § 642, the suspension, revocation and surrender provisions with respect to money transmitters, and makes them consistent with the similar provisions for other types of licensed financial services firms with respect to § 347. This includes provisions with respect to suspensions "for good cause", for failure to pay assessments and other amounts due, failure to file reports, the filing of a petition in bankruptcy, and failure to maintain the bond or securities required under BL § 643 or the investments required by BL § 651. It also extends from 30 to 90 days the amount of time for which the Superintendent may suspend a license while conducting an investigation.

Section 39 of the bill repeals outdated language in the bond provisions of BL § 643.

Section 40 of the bill repeals BL § 647 to eliminate outdated language.

Section 41 of the bill amends BL § 651 to increase the amount of the required bond for money transmitters from 80% to 90% of the net carrying value of outstanding instruments.

Section 42 of the bill amends BL § 657 to clarify when and how required payments into the money transmitter insurance fund are calculated.

Section 43 of the bill provides the effective date.

EXISTING LAW

BL § 340 requires registration as a licensed lender where a person is engaged in the business of making loans in the principal amount of $25,000 or less for loans to an individual for personal, family, household or investment purposes and in a principal amount of $50,000 or less for business and commercial purposes. The amendment changes these thresholds to $50,000 and $100,000. In addition, the current law requires registration if a person solicits loans "within this state." The amendment makes clear when solicitation occurs within this state. The current law exempted persons from registration if their loans were isolated, incidental or occasional. The amendment replaces that standard with a numerical threshold - i.e. the number of loans made in any one year is not more than five loans and the aggregate amount of loans outstanding at any one time does not exceed $100,000.

Article IX did not previously have a definition section. The definitions in BL § 340-a are moved from BL § 345(1).

BL § 341 (3) provides that licensed lenders will pay not only the investigation fee but also the annual license fees provided for in BL § 17. The words "and annual license fee" would be deleted, since Section 17 provides for several fees.

Current BL § 341(5) requires "liquid assets" of at least $50,000 at each location specified in the application for a license. The amendment would require total net worth of at least $50,000, or such other amount as may be determined by the Superintendent.

BL §342 does not provide for licensed lenders organized as limited liability companies. The amendment would recognize that licensed lenders may be organized in that form. Like BL § 341 (5), this section required an applicant to have liquid assets of at least $50,000 in each location and is being amended to require total net worth of at least $50,000 or such other amount as may be determined by the Superintendent. This section did not previously refer to

termination of licenses. Previously, this section provided that, if an application was denied or withdrawn the Superintendent would return the license fee and retain only the investigation fee. Finally, this section requires the Superintendent to approve or deny an application for a master license within 90 days of filing.

BL § 343 does not provide for licensed lenders organized as limited liability companies.

BL § 345 contains definitions of "person" and "control." Those definitions are now moved to new BL § 340-a.

BL § 347 did not previously have subdivisions. Although the section allowed the Superintendent to suspend a license for good cause shown there was no definition of "good cause." The section currently allows the Superintendent to suspend a license for good cause for 30 days. The amendment would extend the suspension for 90 days, unless the licensee cures the violation before that time. The amendment also adds a list of grounds for suspensions, including any failure to make required payments to the Department 30 days after the due date, failure to file any required report by the 30th day after the due date, the filing of a voluntary petition in bankruptcy and the filing of an involuntary petition in bankruptcy that is not dismissed within 30 days. In addition, if the cause of such suspension has not been cured within 90 days after the date of the suspension order (including making overdue payments or filings), then the license is deemed automatically terminated. Article IX does not currently provide for licenses to terminate other than by revocation after a hearing.

BL § 356 currently limits the amount that a person not licensed as a licensed lender may charge or receive as interest on a loan to a person in the state. These provisions would be eliminated, since the amendments to BL § 340 would make out-of-state lenders that make covered loans to New York residents subject to Article IX, unless they met the de minimis test.

BL §§ 497(3) and 497(4) currently cover examination expenses and the confidentiality of examination reports. However, those provisions are also founds in BL §§ 17 and 36(10). Consequently, they are being deleted here.

BL § 554(2) currently defines a bank, trust company, private banker, investment company, or national bank with a principal office in New York as a "bank." The amendment would expand on the included institutions and change the term to "banking institution," which is the term used for such a group of institutions elsewhere in the BL.

BL § 555(1) previously referred to "lending institutions." The section would be amended to use the defined term "banking institution."

BL §556(5) previously contained transition provisions for licensing as a premium finance agency that dated from 1960. The amendment eliminates them.

BL §558 concerns change of address notices for premium finance agencies. It previously required only a notice to the Superintendent without a fee. Under the amendment, a change of address requires a written application and involves a fee prescribed in BL § 18-a.

BL § 559 covers grounds for suspension or revocation of a license. It currently authorizes suspension or revocation for failure to pay the annual license fee. The amendment broadens the grounds to failure to pay any sum of money lawfully demanded by the Superintendent. In addition, the amendment adds the "good cause" bases for 90day suspensions found in other Articles covering licensed financial service providers, along with the same definition of "good cause". Additional grounds for suspension include any failure to make required payments to the Department by the 30 day after the due date, failure to file any required report by the 30th day after the due date, the filing of a voluntary petition in bankruptcy and the filing of an involuntary petition in bankruptcy that is not dismissed within 30 days. In addition, if the cause of such suspension has not been cured within 90 days after the date of the suspension order (including making overdue payments or filings), then the license is deemed automatically terminated.. Article XII-B does not currently provide for licenses to terminate other than by revocation after a hearing.

BL §§ 560(3) and 560(4) address examination expenses and the confidentiality of examination reports. However, those provisions are also founds in BL §§ 17 and 36(10). Consequently, they are being deleted here.

BL § 576 provides for 10 days' written notice of the cancellation of the insurance policy to be mailed to certain persons. New § 576(4) would allow notice to be delivered by other means, including electronic means, as long as the delivery method includes evidence of receipt, including a receipt created and maintained in electronic form.

BL § 577(a) refers to a rate of interest prescribed by the banking board under BL § 14-a, or, if no such rate has been prescribed, 6% per annum. However, a fixed rate of 16% has been set forth in that section, and the amendment reflects this change.

BL § 580(3) does not require payment of a fee for the opening of a branch by a Budget Planner. The amendment authorizes the charging of such a fee. The last sentence of BL § 5 80(4) is a transition provision that applied in 1975 when the provisions regarding surety bonds took effect. It is now outdated and is being deleted.

BL § 581 provides that the Superintendent must approve or deny an application for a Budget Planner license within 90 days of the filing of the application. The amendment would have the 90 days begin to run from the date the application is deemed complete by the Superintendent.

BL § 583-a provides that the Superintendent must approve or deny an application for a change of control of a Budget Planner within 90 days after the date the application is filed with the Superintendent. The amendment would have the 90 days begin to run from the date the application is deemed complete by the Superintendent.

BL § 584 covers the procedures for suspensions and revocations of licenses of Budget Planners. Although the section allows the Superintendent to suspend a license for good cause shown there is no definition of "good cause." The amendment supplies a definition, which is based in part on the definition in § 495. The section currently allows the Superintendent to suspend a license for good cause for 30 days. The amendment would extend the suspension for 90 days, unless the licensee cures the violation before that time. The amendment also adds a list of grounds for suspension, including any failure to make required payments to the Department 30 days after the due date, failure to file any required report by the 30th day after the due date, the filing of a voluntary petition in bankruptcy and the filing of an involuntary petition in bankruptcy that is not dismissed within 30 days. In addition, if the cause of such suspension has not been cured within 90 days after the date of the suspension order (including making overdue payments or filings), then the license is deemed automatically terminated. Article XII-C does not currently provide for licenses to terminate other than by revocation after a hearing.

BL § 584(5) currently provides that a Budget Planner may surrender a license by delivering written notice to the Superintendent, but that surrender does not affect the licensee's civil or criminal liability for acts committed prior to the surrender. The amendment adds that surrender of a license does not affect the licensee's obligations to the superintendent for assessments, fees or administrative actions with respect to the period before such surrender. It also makes clear that a surrender of a license does not become effective until approved in writing by the Superintendent.

BL § 586 currently permits books and records to be maintained in photographic reproductions as well as in paper form. The amendment would authorize records to be maintained in electronic reproductions, as well.

BL § 641(1) requires registration as a Money Transmitter if a person is in the business of selling or issuing checks or receiving money for transmission. It has routinely been interpreted as not requiting out-of-state money transmitters to register unless they had a place or business or agents in New York. The amendment makes clear that an out-of-state money transmitter must register if it engages in

business in this state, and that the definition of engaging in such business occurs when the money transmitter induces a person who is a resident or is located in New York to enter into a transaction by any means, including the mail, electronic mail, telephone, radio, television, the internet or any other electronic means.

BL § 643 contains an outdated transitional provision.

BL § 647 contains transitional language that is outdated.

BL § 651 provides that a money transmitter must have a surety bond in the amount of 80% of the net carrying value of outstanding instruments. The amendment would raise the required amount to 90% of net carrying value.

BL § 657 prohibits the amount assessed against any uninsured money transmitter from exceeding two per cent of the New York instruments insured. The amendment decreases the fee to one percent of the annual volume of New York instruments for the preceding calendar year or $ I 25,000, whichever is less.

Legislative history

This is a new proposal.

Statement in support

The amendments made in this proposal are largely technical in nature, and are needed to clarify the Banking Law. In addition, the reach of Article XIII-B is expanded to cover all situations where money transmission services are extended to persons located in New York, even though the vendor is located in another state. Where out-of-state money transmitters without a physical presence or agents in New York are soliciting and doing business with persons located in New York, this state has an interest in consumer protection that will be addressed if such out-of-state money transmitter must be registered here.

Budget implications

This bill would not have an impact on state finances.

Effective date

This bill would take effect immediately.