What's happening
This bill gives the Department of Financial Services jurisdiction over motor vehicle financing, mandates licensing and regulation of dealer finance managers, and establishes related rules and penalties.
Why it matters
Expands consumer protections for car buyers. by making all auto financing transactions subject to oversight from the Department of Financial Services (DFS), potentially reducing predatory practices and increasing transparency in loan terms.
Creates professional standards for dealer finance managers. , requiring them to be licensed, complete up to 16 hours of mandated instruction every two years, and follow new rules set by DFS, which could lead to more ethical and informed handling of consumer finances at dealerships.
Empowers DFS to take disciplinary action. , including license suspension and revocation, and to impose penalties for violations by both dealers and their finance managers, thus holding individuals and businesses more accountable for misconduct.
Establishes new fees and administrative processes. for licensing and education of finance managers, which could affect the cost structure of dealerships and potentially be passed on to consumers.
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Who cares
Headline styles
Regulate Car Loan Practices
Plain English, a few words. Used as the page title.
Sponsors
1 Co-sponsor
History
- Referred to consumer protection
- Committee discharged and committed to consumer protection
- Referred to banks
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Regulate Car Loan Practices
In Assembly Committee · Banks · Sponsor Michael Blake
Full text
2 pagesUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
1956
2019-2020 Regular Sessions
IN SENATE
January 18, 2019
Introduced by Sen. THOMAS -- read twice and ordered printed, and when printed to be committed to the Committee on Banks
AN ACT to amend the financial services law, in relation to the jurisdiction of the department of financial services over the financing of motor vehicles; and to amend the vehicle and traffic law, in relation to the licensing of motor vehicle dealer finance managers
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Subparagraph (B) of paragraph 2 of subsection (a) of section 104 of the financial services law is amended to read as follows:
(B) "Financial product or service" shall also not include the following, when offered or provided by a provider of consumer goods or services: (i) the extension of credit directly to a consumer exclusively for the purpose of enabling that consumer to purchase such consumer good or service directly from the seller, (ii) the collection of debt arising from such credit, or (iii) the sale or conveyance of such debt that is delinquent or otherwise in default. Provided, however, that the provisions of this subparagraph shall not apply to the sale of motor vehicles. Every sale of a motor vehicle that involves financing, whether originated at a motor vehicle dealer or at a lending institution, shall be deemed to be a "financial product or service" within the jurisdiction of the department.
§ 2. The opening paragraph of section 205 of the financial services law is designated subsection (a) and a new subsection (b) is added to read as follows:
(b) The superintendent may, in his or her discretion, establish a motor vehicle financing bureau, and to promulgate any and all rules and regulations necessary to regulate motor vehicle financing transactions and motor vehicle dealer financing departments.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD05528-01-9
S. 1956 2
§ 3. Paragraphs 6 and 7 of subsection (c) of section 301 of the financial services law are amended and four new paragraphs 8, 9, 10 and 11 are added to read as follows:
(6) providing technical assistance to local governments and not-forprofits in the development of consumer protection measures with respect to financial products and services; [and]
(7) continuing and expanding the detection, investigation and prevention of insurance fraud[.];
(8) promulgating rules and regulations for motor vehicle dealer finance departments and finance managers;
(9) establishing educational materials and/or mandated instruction for motor vehicle dealer finance managers applying for licensing pursuant to paragraph d of subdivision three of section four hundred fifteen of the vehicle and traffic law. No such mandate instruction shall exceed sixteen hours during any biennial licensing period;
(10) imposing a licensing and course fee for motor vehicle dealer finance manager applicants pursuant to paragraph d of subdivision three of section four hundred fifteen of the vehicle and traffic law; provided that such fee shall not exceed two hundred dollars for each biennial licensing period; and
(11) establishing and imposing penalties, and license suspensions and revocations for violations by motor vehicle dealers and motor vehicle dealer finance managers.
§ 4. Subdivision 3 of section 415 of the vehicle and traffic law is amended by adding a new paragraph d to read as follows:
d. (i) Every dealer which sells motor vehicles that are financed, or which facilitates in any manner the financing of the purchase of any motor vehicle, shall act as or employ an individual to act as the finance manager for such dealer, and every such manager shall be licensed by the department of financial services.
(ii) Every licensed finance manager shall have completed such course of instruction as shall be established by the department of financial services.
§ 5. This act shall take effect on the two hundred seventieth day after it shall have become a law.
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the financial services law, in relation to the jurisdic- tion of the department of financial services over the financing of motor vehicles; and to amend the vehicle and traffic law, in relation to the licensing of motor vehicle dealer finance managers
Purpose
This bill gives the Department of Financial Services jurisdiction over auto financing, and places auto financing transactions under the defi- nition of a "financial product or service." It also authorizes the Department of Financial Services (DFS) to establish a motor vehicle financing bureau, and gives DFS regulatory authority over financing transactions and financing departments at auto dealerships. It also requires auto dealerships to designate a finance manager and to license said financing manager with the Department of Financial Services. The Department of Financial Services may establish a licensing course and charge a nominal licensing fee for financing managers not to exceed $200 during any 2-year period.
Summary of provisions
Section 1: Amends Subparagraph (B) of paragraph 2 of subsection (a) of section 104 of the financial services law to provide that all motor vehicle sales financing transactions, whether said financing is origi- nated at an auto dealership or a lending institution, shall fall under the jurisdiction of the Department of Financial Services as a "financial product or service."
Read the full memo (885 words)
Section 2: Amends the opening paragraph of section 205 of the financial services law to add a subsection (b) which authorizes the Superintendent of the Department of Financial Services to establish a "motor vehicle financing bureau," and to promulgate any and all rules and regulations necessary to regulate motor vehicle financing transactions and motor vehicle financing departments.
Section 3: Amends paragraphs 6 and 7 of subsection (c) of section 301 of the financial services law to add four new paragraphs which will allow the Department of Financial services to (1) promulgate rules and regu- lations for motor vehicle dealer finance departments and finance manag- ers, (2) establish educational materials and/or mandated instructional course(s) for motor vehicle dealer finance managers who must also apply for licensing, (3) impose a licensing and course fee for motor vehicle dealer finance manager applicants, not to exceed $200 and 16 hours of instruction per every 2 years, and establish and impose penalties, including license suspensions and revocations for violations of Depart- ment of Financial Services regulations by motor vehicle dealers and motor vehicle finance managers.
Section 4: Amends subdivision 3 of section 415 of the vehicle and traf- fic law to require that any auto dealer who sells motor vehicles which are financed, or who facilitates in any way the financing of motor vehi- cles, must act as or employ a finance manager licensed by the Department of Financial Services. Every finance manager must complete the licensing course mandated by the Department of Financial Services. Section 5: This act shall take effect on the two hundred seventieth day after it shall have become a law.
Existing law
Under current law, auto dealers are not subject to the regulatory authority of the Department of Financial Services. Dealer financing departments are largely unregulated and have little oversight; there are few universal regulations that apply to auto dealer financing trans- actions.
Justification
Abuses in auto lending (typically originated at dealerships) are ramp- ant. Scams targeting consumers involve fraudulent loan applications, inflated vehicle sale prices, inflated application income levels and false employment information, and addition of add-ons like (sometimes nonexistent) warranties and insurances, etc. These financing scams are very lucrative for car dealerships, but often leave consumers thousands of dollars in debt, saddled with vehicles they can never have been reasonably expected to afford, and with few avenues of recovery. What's worse, in some cases, finance managers have moved from dealer to dealer perpetrating the same fraudulent activities with no licensing require- ments, state oversight, or a licensing registry to prevent them from doing so.
Currently, there are few universal regulations in the financial divi- sions of car dealerships, despite that these dealerships behave like lenders and many times are in fact lenders even though they sell loans to larger banks and lenders almost immediately after a sale takes place. Regulating dealerships' finance departments could help bring them in line with consumer protection regulations in the banking industry and standardize practices to protect consumers. The Department of Financial Services currently does not have jurisdiction over lenders who are also sellers of goods (the auto dealerships, in this case).
Giving the Department of Financial Services jurisdiction over dealership finance managers and their financing activities, and requiring auto dealers to designate a finance manager, will help to deter dishonest, deceptive, fraudulent, and criminal activities that take place in dealer financing departments. Authorizing the Department of Financial Services to establish a licensing course and/or educational materials for finance managers will help auto dealerships to better understand the regulations in the financing industry and ensure that they are complying with all laws, rules, and regulations necessary to protect consumers.
Legislative history
S.5489 of 2015- Referred to Banks S.5489 of 2016- Reported from Banks and Committed to Rules S.5278 of 2017- Referred to Banks S.5278 of 2018- Referred to Banks
Fiscal implications
None.
Local fiscal implications
None.
Effective date
This act shall take effect on the two hundred seventieth day after it shall have become a law.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.