Require Commercial Lender Licenses

Section 1. Article 9-A of the banking law is renumbered article 9-B and a new article 9-A is added to read as follows:

ARTICLE IX-A

COMMERCIAL FINANCE LICENSING

Section 363. Doing business without license prohibited.

363-a. Definitions.

363-b. Exemptions.

363-c. Application for license.

363-d. Conditions for issuance of a license.

363-e. Locations; change of address.

363-f. Changes in control.

363-g. Grounds for suspension or revocation.

363-h. Examinations.

363-i. Books and records.

363-j. Advertising.

363-k. Prohibited practices of licensees.

363-l. Penalties.

363-m. Regulations.

363-n. Severability.

§ 363. Doing business without license prohibited. 1. No person or other entity shall engage in the business of making or soliciting commercial financing products to businesses located in New York state

EXPLANATION--Matter in italics (underscored) is new; matter in brackets

[ ] is old law to be omitted.

LBD13542-01-9

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except as authorized by this article and without first obtaining a license from the superintendent.

2. For the purposes of this article, a person or entity shall be considered as engaging in the business of making commercial financing products to businesses located in New York state if it solicits or consummates commercial financing products to any business or commercial enterprise located in New York state.

§ 363-a. Definitions. For purposes of this article:

1. "commercial financing product" means any advance of funds to a commercial or business enterprise made for the purpose of assisting the business with its capital needs, including but not limited to:

(a) loans or lines of credit made to a business or commercial enterprise in a principal amount of five hundred thousand dollars or less, whether secured or unsecured;

(b) purchase transactions where an entity purchases accounts, receivables, intangibles, revenue or other actual or perceived assets of the business if any single payment or advance of the purchase price for the purchased accounts, receivables, intangibles, revenue or other actual or perceived assets of the business is in the amount of five hundred thousand dollars or less; or

(c) any leasing transaction where any funds are provided to the business or commercial enterprise by the leasing business or any affiliate of the leasing business in the amount of five hundred thousand dollars or less; and

2. "making or soliciting" means (a) providing commercial financing products to small businesses; (b) marketing commercial financing products for providers of commercial financing products; (c) receiving any compensation from a provider of commercial financing products based on the value of the commercial financing product provided in exchange for a referral of small business or its owner; and (d) any entity that partners with federal or state banking organization in which the federal or state banking organization originates the commercial financing product and the entity acquires a participation or syndication interest, in part or whole, of the commercial financing product and the (i) entity receives compensation for marketing or servicing the transaction from the federal or state banking organization, or collects any payments due under the commercial financing product; or (ii) provides any indemnity or loss protection to the federal or state banking organization for losses the federal or state banking organization may incur as a result of performance of the commercial financing product.

§ 363-b. Exemptions. The following shall be exempt from the provisions of this article:

1. any person who makes or solicits five or fewer commercial financing products within any twelve month period;

2. any banking organization, as defined in subdivision eleven of section two of this chapter;

3. any federal credit union;

4. any insurance company;

5. any person if and to the extent that such person is lending money and licensed in accordance with, and as authorized by, any other applicable law of the state of New York; provided, however, such exemption shall apply only to those transactions subject to requirements under article nine-B of this chapter and such exemption shall not apply to transactions subject to the provisions of this article that are not expressly regulated by article nine-B of this chapter; or

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6. any transaction that is intended to be a purchase of the ownership, in whole or part, of a business or commercial enterprise.

§ 363-c. Application for license. 1. An application for a license shall be in writing, under oath, and in the form prescribed by the superintendent and shall contain such information as the superintendent may require by regulation. The application shall set forth all of the locations at which the applicant seeks to conduct business pursuant to this article. At the time of making the application for a license, the applicant shall pay to the superintendent a fee as prescribed by regulation for each proposed location for investigating the application.

2. In connection with an application for a license, the applicant shall submit an affidavit of financial solvency noting such capitalization requirements and access to such credit as may be prescribed by the regulations promulgated by the superintendent.

3. The applicant shall also prove, in form satisfactory to the superintendent, that the applicant has available for the operation of such business at the location or locations specified in the application liquid assets of at least fifty thousand dollars. This amount shall be maintained for the period within which the licensee is licensed.

4. If a person or entity holding a license seeks to open another location for the conduct of activities licensable under this article, the licensee shall first submit written notification of this fact to the superintendent. The notification shall contain the address of the new location and the license number. An investigation fee as prescribed in regulations shall be paid for each additional location. The additional location shall be authorized upon written approval by the superintendent or after ninety days have passed since the notification was provided and investigation fee was paid unless the superintendent denies the request for an additional location prior to the expiration of the ninety days. The superintendent may deny a request for an additional location if the new location by the licensee is not in the public interest, in which case, the superintendent shall send a written denial to the licensee.

§ 363-d. Conditions for issuance of a license. Upon the filing of such application and the payment of such fees, if the superintendent shall find that the financial responsibility, experience, character, and general fitness of the applicant, and of the members thereof if the applicant be a partnership or association, and of the officers and directors thereof if the applicant be a corporation, are such as to command the confidence of the community and to warrant belief that the business will be operated honestly, fairly, and efficiently within the purposes of this article, and if the superintendent shall find that the applicant has available for the operation of such business at each specified location liquid assets of at least fifty thousand dollars, the superintendent shall thereupon execute a license at the location or locations specified in the said application. The superintendent shall transmit one copy of such license or licenses to the applicant and file the same in the office of the department. Each such license shall remain in full force and effect until it is surrendered by the licensee or revoked or suspended as hereinafter provided; if the superintendent shall not so find, a license shall not be issued and the superintendent shall notify the applicant of the denial. If an application is denied or withdrawn the superintendent shall return to the applicant the sum paid by the applicant as a license fee, retaining the investigation fee to cover the costs of investigating such application. The superintendent shall approve or deny every application for a master license under this

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article within ninety days from the filing thereof with the applicable fees.

§ 363-e. Locations; change of address. 1. A license shall state the address at which the business is to be conducted and shall state fully the name of the licensee, and if the licensee is a partnership or association, the names of the members thereof, and if a corporation, the date and place of its incorporation. No license shall be transferable or assignable.

2. Every location used by the licensee to conduct business must be identified in the application and approved by the superintendent. After a license has been issued, any application for a change in address or new location must be submitted within forty-five days of such proposed change or addition. The licensee shall pay to the superintendent a fee as prescribed by regulation for each change or addition and shall provide any information which may be required regarding such new location. If the superintendent is not satisfied that such change or addition is in accordance with the purposes of this article, the superintendent shall refuse such change of location or additional location and notify the licensee of such determination.

§ 363-f. Changes in control. 1. It shall be unlawful except with the prior approval of the superintendent for any action to be taken which results in a change of control of the business of a licensee. Prior to any change of control, the person desirous of acquiring control of the business of a licensee shall make written application to the superintendent and pay an investigation fee as prescribed by regulation. The application shall contain such information as the superintendent, by rule or regulation, may prescribe as necessary or appropriate for the purpose of making the determination required by subdivision two of this section.

2. The superintendent shall approve or disapprove the proposed change of control of a licensee in accordance with the provisions of sections three hundred sixty-three-c and three hundred sixty-three-d of this article. The superintendent shall approve or disapprove the application in writing within ninety days after the date the application is filed with the superintendent.

3. For a period of six months from the date of qualification thereof and for such additional period of time as the superintendent may prescribe, in writing, the provisions of subdivisions one and two of this section shall not apply to a transfer of control by operation of law to the legal representative, as defined in subdivision four of this section, of one who has control of a licensee. Thereafter, such legal representative shall comply with the provisions of subdivisions one and two of this section.

4. The term "legal representative", for the purposes of this section, shall mean one duly appointed by a court of competent jurisdiction to act as executor, administrator, trustee, committee, conservator or receiver, including one who succeeds a legal representative and one acting in an ancillary capacity thereto in accordance with the provisions of such court appointment.

5. As used in this section: (a) the term "person" includes an individual, partnership, corporation, association or any other organization; and (b) the term "control" means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a licensee, whether through the ownership of voting stock of such licensee, the ownership of voting stock of any person which possesses such power or otherwise. Control shall be presumed to exist if

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any person, directly or indirectly, owns, controls or holds with power to vote ten per centum or more of the voting stock of any licensee or of any person which owns, controls or holds with power to vote ten per centum or more of the voting stock of any licensee, but no person shall be deemed to control a licensee solely by reason of being an officer or director of such licensee or person. The superintendent may in his discretion, upon the application of a licensee or any person who, directly or indirectly, owns, controls or holds with power to vote or seeks to own, control or hold with power to vote any voting stock of such licensee, determine whether or not the ownership, control or holding of such voting stock constitutes or would constitute control of such licensee for purposes of this section.

§ 363-g. Grounds for suspension or revocation. 1. The superintendent may suspend or revoke any license issued under this article if the superintendent shall find that:

(a) the licensee has failed to pay any sum of money lawfully demanded by the superintendent or to comply with any demand, ruling, or requirement of the superintendent within a reasonable period of time;

(b) the licensee has violated any provisions of this article; or

(c) any fact or condition exists which, if it had existed at the time of the original application for such license, clearly would have warranted the superintendent in refusing originally to issue such license.