Relates to enacting the "community financial services access and modernization act of 2016"

§ 2 - amends paragraph (b) of subdivision 5 of section 18-a of the banking law to change "mobile unit" to "limited station" and "casher of checks" to "financial services provider"

§ 3 - amends the third undesignated paragraph of section 340 of the banking law to add "financial services providers"

§ 4 - amends section 366 of the banking law - definitions as follows: *Deletes the terms "casher of checks" and instead uses "financial services provider" - to mean a person duly licensed by DFS to engage in business pursuant to this article. *"Licensee" shall mean a person licensed to provide financial services under this article. *Deletes "mobile unit" and uses "limited station" as any vehicle or movable means from which the business of providing financial services under this article is conducted. *Defines "person" as any individual or other legal entity including any corporation, partnership, association or limited liability company. *Defines "conduit services as activity permitted under this article to customers in collaboration with state or federal chartered bank or credit union subject to approval of DFS and no services provided shall exceed the state usury rate: **business or commercial loans by licensees licensed under Article 9 of the Banking Law, provided licensee if required to offer and process a loan from a collaborating lender that may provide a more favorable rate and/or terms. **account access services; **bill payment services; **assistance in preparation and submission of forms to be processed by collaborating bank or credit union *Defines "financial services" as offering or providing: **cashing of checks, drafts or money orders; **money transmission services; **bill payment services; **sale of pre-paid debit cards; *conduit services as defined in this article.

*Defines "master license" as an original license issued by DFS that authorizes a person to engage in the business of cashing checks and related financial services. *Defines "supplemental license" as allowing a person having a master license to engage in business at branch locations.

§ 5 - amends section 367 of the banking law - requiring limited liability corporations to provide information for licensing under this act , requires DFS to set regulations for master license and sets fee for each proposed location under master license.

§ 6 - Amends section 369 of the banking law - adding limited liability companies, changes references of "mobile unit" to "limited station" and adds master license. Makes provisions for change of control of a location or a business pending the issuance of a new license.

§ 7 - amends section 370 of the banking law - making conforming references to limited station, financial service provider and master license as defined in § 4 allows for DFS to approve additional licenses or locations to existing licensee in good standing within statutory liquidity and community need requirements.

§ 8 - amends section 370-a of banking law to make provision for change of control of the business of a licensee - if not a current master licensee cannot change control without application to DFS for license and if master licensee DFS shall streamline to process.

§ 9 - amends section 371 of the banking law - adds gender neutral language

§ 10 - amends section 372 of the banking law - requiring licensee to pay customers for entire face amount of check, draft or money order less any allowable fees set by DFS upon presentation. Requires limited stations to post any signage required by DFS, requires licensee maintain all information related to financial services according to provision of § 36-b of the banking law.

§ 11 - amends section 372-a of the banking law - deleting reference to "cashing of checks" and replacing with "business practices of a licensee rendering financial services".

§ 12 -amends subdivisions 1 and 2 of section 373 of the banking law - allows a financial services provider may engage in the business of making business and commercial loans pursuant to this article provided the licensee:

*has first obtained a license from the superintendent pursuant to article nine of this chapter; provided, however, no licensee shall make any loans to individuals for personal, family, household or investment purposes. *Sole proprietors and partnerships seeking loans under this section must provide notarized documentation that the loans shall only be used for the business and that documentation is provided that it is a bona fide business. *In order to assure that the business and commercial loans authorized under articles 9 and 9-a of this chapter are properly and solely made for commercial and business purposes, the superintendent shall develop and promulgate rules and regulations requiring such applicants to submit the underwriting criteria and processes and information verification methodology the licensee will utilize to evaluate the ability of borrowers to repay the business or commercial loans and, additionally the procedures such licensee will undertake to assure that sole proprietorships or partnerships business or commercial loans cannot be diverted by the borrower for personal, household, family or investment purposes.

§ 13 -Adds new section 373-a to the banking law requiring annual reports to DFS of lending activity for those licensed under section 373 of the banking law of this article to include:

*the number of loans issued the previous year; *the default rate, if any, with respect to such loans; *the average cost of such loans, including fees and interest rates charged; and *such other information as the superintendent deems relevant.

§ 14 - amends subdivision 10 of section 36 of the banking law to delete "casher of checks" and insert "financial services provider"

§ 15 - amends subdivisions 3 and 5 of section 37 of the banking law to delete "casher of checks" and insert "financial services provider"

§ 16 - amends subdivisions 1,2,3 and 5 of section 39 of the banking law to delete "casher of checks" and insert "financial services provider"

§ 17 - amends subdivisions 1,2,3,4,5 and 6 of section 42 of the banking law to delete "casher of checks" and insert "financial services provider"

§ 18 - amends Paragraph (a) of subdivision 1 of section 44 of the banking law to delete "casher of checks" and insert "financial services provider"

§ 19 - provides for an effective date of 180 days, but any rules or regulations necessary to implement this law may be acted upon immediately. Additionally, the bill provides a 5 year sunset for banking law sections 373 and 373-a, until June 30, 2021. These two sections (12 and 13 of the bill) pertain to business/commercial loans and reporting of these loans and loan information to DFS, provided however that any contract, instrument, argument or other written obligation entered into by a financial service provider authorized under section 373 of the banking law prior to June 30, 2021 shall be deemed valid and enforceable after such date.

Existing law

The enabling law authorizing, licensing and overseeing the delivery of services by check cashing establishments has not comprehensively been updated since its inception in 1944. Currently, unregulated lenders within and without the State, are engaging in predatory lending practices which victimize hard working New Yorkers.

Justification

The New York check cashing industry has matured in scope and breadth by offering more services than merely cashing negotiable instruments in communities and neighborhoods that are unserved or underserved by the banking/credit union industry. The enabling law authorizing, licensing and overseeing the delivery of services by check cashing establishments has not comprehensively been updated since its inception in 1944. Regulated check cashing enterprises continue to set the standard for the financial service industry in the fight against money laundering, terrorist financing and other financial crimes, and provide a critical entry point for suspect transactions to be detected on the regulatory radar screen. The industry within this State generates the following economic activity:

*Financial services at 560 licensed locations *Serving more than 1 million New Yorkers *Cashing nearly 30 million checks having an aggregate value of $11-12 billion *Processing 10 million customer bill payments having a total value of $1B *Selling more than 6 million money orders having a face value of nearly $1B *Processing more than 3 million money transfer transactions *Employing approximately 4,000 people and more than eighty percent (80%) of the employees are minorities, principally from the Black and Latino communities Currently, unregulated lenders within and without the State, are engaging in predatory lending practices which victimize hard working New Yorkers. Furthermore, many small businesses are unable to obtain business loans that will permit them to pursue and expand business opportunities. Regrettably, the current law governing the licensed check cashing industry prohibits these licensed operators to provide any credit products. Small businesses and consumers are, therefore denied the ability to access credit in their communities from check cashers, who are licensed, regulated financial service providers.

This bill would allow for regulated and accountable entities to provide a credit product to New Yorkers and prevent them from entering into unfair loan agreements with rogue lenders.

This bill will also update, modernize and improve the regulatory framework between these small business operators and the Department of Financial Services. It will authorize and expand electronic filing by licensees with the Department, and reduce waste in the application process.

Legislative history

New Legislation

Fiscal implications

To be determined.

Effective date

This act will take effect on the one hundred eightieth day after it shall have become a law; provided however, that effective immediately, any rules and regulations necessary to implement the provisions of this act on its effective date shall be added, amended and/or repealed on or before such date