Permits remote deposit capture machines, clarifies the definition of capital impairment for banking institutions, and makes other technical changes

Section 2 of the bill would amend BL § 2 to provide a definition of the term remote deposit capture machine, a machine located at a business customer's place of business and operated by the customer's employees, that remotely transmits check data to a bank.

Section 3 of the bill would amend BL § 28-b(3)(a) to clarify the ATMs to which the section applies.

Section 4 of the bill would amend BL § 37 with regard to the Superintendent's ability to require the filing of periodic reports of condition from banking institutions.

Section 5 of the bill would amend BL § 39 to clarify the grounds for the Superintendent's issuance of a regulatory enforcement order based on a deficiency in an institution's capital condition.

Section 6 of the bill would amend BL § 42 with regard to the posting of information concerning the work of the Department. The amendment would give the Superintendent the flexibility to post notices more than once a week.

Section 7 of the bill would delete Subdivision 2 of BL § 75-g, which requires the Department to provide a report to the Legislature with respect to compliance by banks with the ATM Safety Act.

Sections 8 through 10 of the bill would amend BL §§ 105-a, 240-a and 396-a, respectively, to include remote deposit capture machines within the ambit of these sections.

Section 11 of the bill would amend the heading of Article 12-D to clarify that the article covers mortgage brokers and mortgage loan servicers in addition to mortgage bankers.

Section 12 of the bill would amend paragraph (c) of subdivision 2 of BL § 590 to clarify the provision by insertion of a comma.

Section 13 of the bill would amend BL § 592 to conform the felony restrictions imposed on mortgage bankers to those imposed on mortgage loan originators. The Banking Department would be permanently prohibited from licensing a felon guilty of a fraud related crime. There would be a seven-year bar on licensing for those convicted of all other felonies. As with the felony restrictions applicable to mortgage loan originators, these amended restrictions would bar the Department from licensing a mortgage banker if an individual associated with such entity has one of the listed felony convictions, notwithstanding any other provision of New York law.

Section 14 of the bill would amend BL § 592-a to conform the felony restrictions on mortgage brokers to those imposed on mortgage loan originators and mortgage bankers.

Section 15 of the bill would amend BL § 601-a with regard to branches and agencies of foreign banking corporations. It would treat a branch or agency of a foreign banking corporation licensed under BL Article V as a banking institution for the purposes of the Section.

Section 16 of the bill would amend BL § 604-a to treat a branch or agency of a foreign banking corporation as a banking institution with regard to the transfer of fiduciary relationships.

Section 17 of the bill would amend BL § 606 to clarify the grounds for the Superintendent to take possession of a banking institution based on the institution's capital level. The provision is amended to reference modem capital standards; in particular, federal banking agency capital standards.

Section 18 of the bill would amend BL § 609 to eliminate references to industrial banks, and to make the section gender neutral.

Section 19 of the bill would amend GBL § 520-c to allow the Banking Department to make available information on credit cards more cost-effectively than is required by current law. GBL § 520-c requires the Superintendent to conduct an annual survey of information with respect to credit cards, such as annual percentage rates, annual fees, per-transaction charges, late payment fees and grace period, and to make such information available to members of the public. This survey has proved very expensive to conduct and collate, and is wasteful, given the availability of similar information on a number of financial websites. The bill would eliminate the need to conduct the survey and would instead direct the Department to make such information available on a toll-free telephone line and on its internet website (either directly or through hyperlinks to other sites).

Section 20 of the bill would provide for the effective date of the bill. All provisions would be effective upon enactment, except for the requirement of credit card issuers to print certain information on credit card statements, which would become effective 30 days after the bill becomes law.

Existing law

BL § 28-b(3) provides standards for evaluating the Community Reinvestment Act practices of banking institutions.

BL § 37 contains the procedures to be followed by the Superintendent when requesting institutions to submit quarterly reports of condition.

BL § 39 sets the various circumstances under which the Superintendent can impose orders on regulated entities. Currently, the language used in Section 39 concerning imposing an order for deficient capital levels contains only a reference to "making good an impairment of capital", which is an outdated concept as it relates to capital adequacy. This is particularly true for banking institutions, which currently have very detailed capital ratio requirements established under federal law and regulations. BL § 42 requires the Superintendent to publish a weekly bulletin regarding the Department's activities.

BL § 75-g requires the Department to provide a report to the Legislature with respect to compliance by banks with the ATM Safety Act.

BL §§ 105-a and 240-a set forth the authority of banks, trust companies and savings banks to operate electronic facilities.

BL § 396-a sets forth the authority of savings and loan associations to operate electronic facilities.

Article 12-D of the BL provides for the regulation of mortgage bankers, mortgage brokers and mortgage loan servicers. The current title of the article does not reflect the extent of its reach.

BL § 590(2)(c) authorizes licensees and registrants under Article 12-D to apply for branch offices.

BL § 592(2) sets forth the restrictions on felons who apply for licenses as mortgage bankers or who work for such entities. The amendments would conform these standards to those applicable to mortgage loan originators.

BL § 592-a(2) sets forth the restrictions on felons who apply for registration as mortgage brokers or who work for such entities. The amendments would conform these standards to those applicable to mortgage loan originators.

BL § 601-a provides the circumstances pursuant to which various types of banking institutions can enter into purchase and assumption agreements.

BL § 604-a allows various banking institutions to transfer their fiduciary relationships.

BL § 606(1)(e) contains one ground, relating to erosion of an institution's capital level, on which the Superintendent may take possession of a banking organization. The current language in this section is inadequate to reflect modem capital concepts and when a banking organization is considered to have deficient regulatory capital.

BL § 609 sets forth the circumstances where the Superintendent may allow certain banking institutions to resume business after he or she has taken possession of them.

BL § 599-b provides the definitions used in the regulation of mortgage loan originators.

GBL § 520-c requires the Superintendent to conduct an annual survey of information with respect to credit cards, such as annual percentage rates, annual fees, per-transaction charges, late payment fees and grace period, and to make such information available to members of the public.

Prior legislative history

This is a new bill.

Statement in support

This bill continues the Banking Department's longstanding effort to update its statutory framework for the regulation of entities subject to its jurisdiction. Many of the amendments in the bill are non-substantive and would not change the way the Banking Law is currently interpreted. The amendments in sections 1, 2, 3, 4, 11, 12, and 19 are designed to clarify existing law or interpretations.

The amendment in Section 5 of the bill is intended to provide a more accurate description of the capital deficiency scenarios in which the Superintendent will impose a regulatory order.

The amendment in Section 6 would allow the Department to post items in its "bulletin" on days other the regular Friday printing. This will make some items available for a longer period than would otherwise be possible if items are posted only once a week.

The amendment in Section 7 will enable the Department to rely more heavily on the existing self-reporting system under BL § 75-g, which will enable it to concentrate its resources on safety and soundness examinations.

Sections 8, 9 and 10 are designed to bring clarity to the regulation of a new form of electronic facility - remote deposit capture machines, which have become prevalent since 2003, when the so-called "Check 21" legislation was adopted to streamline and speed up the processing of checks by encouraging the replacement of paper checks with digital images, which have the same legal status as paper checks.

Section 13 and 14 of the bill would amend the character requirements for mortgage bankers and mortgage brokers to make them consistent with the similar requirements for mortgage loan originators, which were adopted by the Legislature during the 2009 session. The Department believes that, if the standards in Article 12-D are not conformed to the more stringent standards set forth in Article 12-E, individuals who are denied authority to engage in mortgage loan origination activities will move into positions as non-MLO officers and directors of mortgage bankers and brokers. Given the extent of the foreclosure problem in New York, and the number of foreclosures resulting from mortgage underwriting practices that border on the fraudulent, the Department believes that elevating the character of officers, directors and associated persons of mortgage bankers and brokers is vital to protecting consumers.

Sections 15 and 16 - the amendments to BL §§ 601-a and 604-a - would facilitate the transfer of fiduciary businesses to the branch or agency of a foreign bank. The authority to make such transfers is unclear under current law. This will enhance the attractiveness of the New York license for foreign banking corporations seeking to operate in New York.

The amendment in Section 17 of the bill would amend BL § 606(1)(e) and is intended to provide a more accurate description of potential capital deficiency scenarios under which the Superintendent is authorized to take possession of an institution. Federal banking laws now contain detailed regulatory capital requirements for banking institutions, including target ratios that trigger mandatory closure of insured institutions if not improved. The existing reference in BL § 606(1)(e) to an "impairment of capital" of a banking organization is a narrow and outdated capital concept that alone is insufficient to describe when the Superintendent may have adequate grounds for finding that an institution's capital is deficient given the nature and extent of its operations. The new language incorporates a reference to the federal "significantly under capitalized" capital level as a non-exclusive example of a capital level at which the Superintendent might find an institution to have deficient capital so as to provide a ground for possession.

Section 18 of the bill would remove references to industrial banks, a form of banking organization that no longer exists, and make other non-substantive changes.

Section 19 of the bill would amend General Business Law § 520-c, which requires the Banking Department to conduct an annual survey of credit card rates. Because credit card rates may change frequently, an annual survey does not provide consumers with the up-to-date information they need. The Department has been putting on its website more current information that it obtains free of charge from other websites. Consequently, the expenditure of the Department's funds on the current survey seems wasteful.

Budget implications

This bill is expected to generate cost efficiencies derived from more streamlined operations.

Effective date

This bill will take effect immediately.