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 would amend 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 usury rate. An exemption would be added for lenders making no more than five loans in anyone year, as long as the aggregate amount of loans outstanding at anyone time does not exceed $ 100,000. Clarifying language would also be added regarding when loans are deemed to be solicited in this State. An exemption would also be added giving the Superintendent authority to exempt from licensing any person he or she determines is not engaged in making loans in this state, other than as an incident to another legal business activity.

Section 2 of the bill would add a new definition section, which would include additional definitions for "person" and "control."

Section 3 of the bill would amend BL § 341(3) to delete the reference to the annual license fee. BL 341 (5) would be amended to change the net worth and other financial requirements from requirements that are calculated on a per branch basis to requirements that are calculated on a company-wide basis (although the number of branches may still be relevant). The amendment also clarifies that the Superintendent has discretion to set the amount of these requirements.

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

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

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

Section 7 of the bill would make changes to conform BL § 347 to the changes that would be made to other provisions of the BL related to grounds of suspension and termination of licenses. In particular, it would move 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 would add to BL 347(2), which deals with good· cause suspensions, a definition of "good cause" that appears in other BL articles dealing with licensed financial services firms. Also, the period during which a licensed lender may be suspended would be expanded to 90 days from 30 days.

Section 7 of the bill would also amend 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 within 30 days).

Section 7 of the bill would also amend BL § 347(3) to provide that, if the licensee has cured all deficiencies set forth in the suspension notice or order within 90 days after the date of the suspension, then 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), then the license will automatically terminate by operation of law. BL § 347(4) covers voluntary surrenders of licenses, and would make 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) would clarify 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 would repeal the first two unnumbered paragraphs of BL § 356, which would no longer be needed because BL § 340, as proposed, would require all persons making qualifying loans in New York to be licensed.

Section 9 of the bill would make amendments to Article 9-A of the BL (check cashers). A definition of "person" would be added to BL 366(1) and technical changes would be made to other definitions that use this new definition.

Section 10 of the bill would make 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) would be amended to recognize the use of limited liability companies. In BL § 367(4), the Superintendent would be 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 would amend 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 BL § 369(1-a) would contain 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 would amend 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 would amend the suspension, revocation and surrender provisions with respect to check cashers, and make them consistent with the similar provisions for other types of licensed financial services firms as discussed above with respect to § 347. The amendment would include 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.

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

Section 15 of the bill would make amendments to Article 11-B (sales finance companies). It would amend certain definitions in BL § 491 to conform them to each other. The section would make clear that the terms "retail instalment obligation" and "retail instalment credit agreement" include 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" would be amended to make clear it includes a retail seller of motor vehicles engaged in the business of holding retail installment contracts acquired from retail buyers if the number of retail installment contracts acquired in anyone year exceeds five such contracts, or if the aggregate unpaid balances on such contracts exceeds one hundred thousand dollars. Also, the types of transactions to which this article applies would be clarified, and the existence of a safe harbor for secondary transactions would be clarified.

Section 16 of the bill would amend 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 would make changes to BL § 492-a(2) to clarify the timeframe within which a change of control application must be approved.

Section 18 would repeal BL § 493(7) and amend BL § 493(4) to clarify the circumstances when a license terminates.

Section 19 of the bill would repeal paragraph (e) of subdivision 1 and subdivision 7 of BL § 495.

Section 20 would amend BL § 495, the suspension, revocation and surrender provisions with respect to sales finance companies and make 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 amounts due, failure to file reports, and the filing of a petition in bankruptcy. It would also extend from 30 to 90 days the amount of time for which the Superintendent may suspend a license while conducting an investigation. Technical changes would also be made to the provisions of BL § 495 regarding termination of a license by the Superintendent and when a licensee may surrender its license.

Section 21 of the bill would repeal BL §§ 497(3) and 497(4), which are outdated provisions.

Section 22 of the bill would amend BL § 499 to make the section gender-neutral.

Section 23 of the bill begins the amendments of Article 12-B of the BL (insurance premium finance agencies). It would amend the definition of a bank contained in § 554 to cover all banking institutions.

Section 24 of the bill would amend BL § 555 to conform to the newly defined "banking institutions" in BL § 554 without changing the institutions to which the section applies. It also would add a safe-harbor for secondary market transactions.

Section 25 of the bill would repeal BL § 556(5), an outdated transition provision dating from 1961.

Section 26 of the bill would amend BL § 558 to clarify when relocation fees are required.

Section 27 of the hill would amend BL § 559, the suspension, revocation and surrender provisions with respect to premium finance agencies, and make them consistent with the similar provisions for other types of licensed financial services firms as discussed above with respect to § 347. This would include provisions with respect to suspensions "for good cause," for failure to pay assessments and other amounts due, failure to file reports, and the filing of a petition in bankruptcy. It would also extend from 30 to 90 days the amount of time for which the Superintendent may suspend a license while conducting an investigation.

Section 28 of the bill would repeal BL §§ 560(3) and 560(4). The substance of these provisions has previously been moved to other sections of law.

Section 29 of the bill would amend BL § 563 to make the section gender-neutral.

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

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

Section 32 of the bill would amend Article 12-C of the BL (budget planners). It would amend BL § 580 to eliminate outdated language and to clarify when fees for branch offices are required.

Section 33 of the bill would amend 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 would amend BL § 583-a to clarify when the Superintendent must act on a proposed change of control application.

Section 35 of the bill would amend BL § 584, the suspension, revocation and surrender provisions with respect to budget planners, and make them consistent with the similar provisions for other types of licensed financial services firms as discussed above with respect to § 347. This would include 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 would extend from 30 to 90 days the amount of time for which the superintendent may suspend a license while conducting an investigation. The effect of a revocation, surrender or termination of a license would also be clarified.

Section 36 of the bill begins the amendments of Article 13-B (money transmitters). It would amend BL § 641 to clarify when banking institutions are exempt from coverage of the article and when New York persons are covered by the protections of this article.

Section 37 of the bill would amend BL § 642, the suspension, revocation and surrender provisions with respect to money transmitters, and make them consistent with the similar provisions for other types of licensed financial services firms as discussed above with respect to § 347. This would include 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 would also extend from 30 to 90 days the amount of time for which the Superintendent may suspend a license while conducting an investigation.

Section 38 of the bill would repeal outdated language in the bond provisions of BL § 643.

Section 39 of the bill would repeal BL § 646(4), because the matter is covered by other parts of the BL.

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

Section 41 of the bill would amend 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 would amend BL § 657 to clarify when and how required payments into the money transmitter insurance fund are calculated.

Section 43 of the bill would provide the effective date. The act would be effective immediately except that applicants required to file applications for licensure because of the amendments to Section 1 of the bill are given extended periods within which to become licensed under certain circumstances.

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 at rates above the statutory limit. 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-the number of loans made in anyone year is not more than five loans and the aggregate amount of loans outstanding at anyone time does not exceed $100,000.

Article 9 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 an investigation fee but also the annual license fees. The words "and annual license fee" would be deleted.

Current BL § 341 (5) requires "liquid assets" of at least $50,000 at each location specified in the application for a license. The amendment also would require liquid assets, net worth and other liquidity facilities in amounts determined by the Superintendent. Also the reference to "per location" financial requirements is removed (in favor of company-wide requirements).

BL §342 does not provide for licensed lenders organized as limited liability companies. 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 such amounts 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, as opposed to 90 days from when the application is deemed complete by the Superintendent, which is what the amendment would clarify.

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

BL § 345 contains definitions of "person" and "control."

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 9 does not currently provide for licenses to terminate other than by revocation after a hearing.

BL § 366 currently has only a definition of "licensed casher of checks." It would be amended to apply to any "person" as defined in BL §367.

BL § 367 currently applies to any "person, partnership, association or corporation." The new definition of "person" would replace these terms. The amendment also provides flexibility to modify the amount of assets necessary for each limited station.

BL § 369 currently sets forth the conditions necessary to issuing a license, including the applicable geographic restrictions. The section is not broken into paragraphs, and it is somewhat disorganized.

BL § 370-a(2) currently provides that an application shall be approved or denied within 90 days of its filing. The amendment provides that the 90 days begins when the application is deemed complete by the Superintendent.

BL § 373 currently sets forth the activities prohibited for check cashers and provides the authority for the Superintendent after notice and hearing to suspend or revoke a license. Although the section allowed the Superintendent to suspend a license for a temporary basis if he or she finds it in the public interest, there was no definition of "good cause" or the "public interest." The amendment would make changes to this section consistent with those made for other licensees as described above.

BL § 374 currently excludes from its coverage any "person, partnership, association, corporation, or other organization doing business under or pursuant to the provisions of this chapter." The amendment would delete the reference to partnership, association, corporation or other organization since the Article now applies to any "person" as defined in BL § 366.

BL § 491 currently provides the definitions used in the sales finance company Article. However, the definitions of "retail installment obligation" and "retail installment credit agreement" do not include specific language covering contracts executed in this State if

solicited in New York. The current statute excludes from the definition of "sales finance company" a retail seller of motor vehicles who holds "retail installment obligations" with an aggregate unpaid balance of less than twenty-five thousand dollars.

BL § 492 currently sets forth the requirement to be licensed to engage in sales finance activities and the procedure to become a licensed sales finance company and excludes certain entities from this requirement. The amendment simplifies and clarifies the wording without substantively affecting the meaning of the section.

BL § 492-a currently provides that the Superintendent must approve an application within 90 days of its filing. The amendment provides that the 90 days begins when the application is deemed complete by the Superintendent.

BL § 493(4) provides that a license shall remain in force until it is revoked, suspended or surrendered. The amendment would add the concept that a license can be terminated. Section 493(7) contained outdated transitional language.

BL § 495 currently sets forth the authority of the Superintendent to revoke or suspend a license. It also sets forth the right of a licensee to surrender a license. The section currently allows the Superintendent to suspend a license for good cause for 30 days. The amendment would make changes to the section consistent with those made for other licensees as described above.

BL §§ 497(3) and 497(4) currently cover examination expenses and the confidentiality of examination reports.

BL § 499 provides the penalties for certain violations of the Article 11-B of the BL.

BL § 554(2) currently defines the term "bank" for purposes of Article 12-B of the BL to include various types of New York-chartered banking organizations, as well as certain federally-chartered banking institutions having a principal office in New York. 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.

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 premium finance agency license. It currently authorizes suspension or revocation for failure to pay the annual license fee. Article 12-B does not currently provide for licenses to terminate other than by

revocation after a hearing. The amendment would make changes to the section consistent with those made for other licensees as described above.

BL §§ 560(3) and 560(4) address examination expenses and the confidentiality of examination reports.

BL § 563 provides the penalties for certain violations of the Article 12-B of the BL.

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 interest has been set forth in BL 14-a, 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 § 580(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.

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.

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." Article 12-C does not currently provide for licenses to terminate other than by revocation after a hearing. The amendment would make changes to the section consistent with those made for other licensees as described above.

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. 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 § 642 currently sets forth the process for approving an application by the Superintendent, the authority of the Superintendent to revoke or suspend a license and the right of a licensee to surrender a

license. The amendment would make changes to this section consistent with those made for other licensees as described above.

BL § 643 contains an outdated transitional provision.

BL § 646(4) contains a confidentiality provision that is being deleted.

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 of the transmitter that were outstanding at the end of the preceding year. The amendment decreases the fee to one percent and bases it on the annual volume of New York instruments for the preceding calendar year or $125,000, whichever is less.

Prior legislative history

This proposal was introduced in a similar form in 2009, 2010 and 2011.

Statement in support

The amendments made in this proposal are largely technical in nature. In addition, this bill would increase the time period for which the Department could suspend various licensees from 30 days to 90 days, a change that would conform to changes recommended for mortgage bankers and brokers, and provide for automatic termination of licenses suspended for certain types of deficiencies if the deficiencies remain uncured 90 days after the suspension.

Fiscal implications

There are no fiscal implications from this bill.

Effective date

The bill would be effective immediately, but section one will be effective 180 days after enactment.