•  Summary 
  •  
  •  Actions 
  •  
  •  Committee Votes 
  •  
  •  Floor Votes 
  •  
  •  Memo 
  •  
  •  Text 
  •  
  •  LFIN 
  •  
  •  Chamber Video/Transcript 

A09585 Summary:

BILL NOA09585
 
SAME ASNo Same As
 
SPONSORWeinstein
 
COSPNSR
 
MLTSPNSR
 
Amd §§5-501, 5-511, 5-513, 5-517 & 5-524, Gen Ob L; amd §§14-a, 340 & 351, Bank L; amd §§190.40 & 190.42, Pen L; amd §508, Pers Prop L
 
Provides interest rate limitations for financing arrangements and the extension of consumer credit; relates to the definitions of criminal usery in the first and second degrees; relates to the functions of the attorney general regarding rental purchase agreements.
Go to top    

A09585 Actions:

BILL NOA09585
 
03/21/2024referred to banks
Go to top

A09585 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A9585
 
SPONSOR: Weinstein
  TITLE OF BILL: An act to amend the general obligations law and the banking law, in relation to limitations of rates of interest for financing arrangements and the extension of consumer credit; to amend the penal law, in relation to criminal usury; and to amend the personal property law, in relation to certain functions of the attorney general   PURPOSE: To close current and potential loopholes in New York's usury laws, by extending New York's usury laws to all financing arrangements and clear- ly defining all amounts payable in connection with a financing arrange- ment as interest.   SUMMARY OF PROVISIONS: OF BILL: The End Loan Sharking Act (ELSA) amends the general obligations law (GOL) to extend New York's usury laws from "loans" and "forbearances" to all "financing arrangements." The bill also amends the GOL and the bank- ing law to clarify that "interest" includes all finance charges, such as "fees," "service charges," and "tips." The bill further amends the bank- ing law to require individuals and entities that engage in the business of providing finance arrangements to be licensed by the Department of Financial Services, and explicitly bars licensees from violating New York's criminal usury law. The bill further amends the GOL to empower the attorney general to promulgate rules and issue guidance interpreting financing arrangements.   JUSTIFICATION: Predatory lenders are continually masterminding new ways to evade New York's usury laws to trap low-income people and people of color in long cycles of debt with high-interest loans. New York's usury laws on their face apply to "loans." To evade these laws, predatory lenders have either aggressively lobbied for explicit carve-outs from New York's usury laws or cunningly designed credit products that they deceptively claim are technically not "loans." This bill would close current and potential loopholes in New York's usury laws, by ensuring that any loan, advance, or other "financing arrangement" is subject to those laws, regardless of industries' shrewd attempts to market their credit products as something other than high-cost, predatory loans. In New York, it is a felony to charge more than 25% interest on a loan, effectively making it unlawful to engage in predatory lending in New York. Thanks to our strong usury laws, for example, New York has successfully cracked down on predatory payday lenders making illegal online payday loans to low-income New Yorkers and New Yorkers of color. Nevertheless, some predatory lenders, such as rent-to-own and merchant cash advance companies, have succeeded over the years in securing carve- outs for their loans - which typically carry exorbitant, triple-digit interest rates - from our strong usury laws. These predatory lenders target New York's communities of color in particular, taking advantage of the near-complete absence of traditional financial institutions in redlined neighborhoods. A newer breed of predatory lenders, which call themselves "financial technology companies" or "fintechs" and often operate through apps, increasingly seek to circumvent New York's usury laws by misrepresenting their credit products as something other than loans. For example, so-called "Earned Wage Access" companies claim that their paycheck advances are not "loans" by masking their fees as "tips," even though their fees amount to triple-digit interest rates far exceeding New York's 25% criminal usury cap. Similarly, litigation funding compa- nies have gotten away with claiming that their advances on lawsuit settlements - which carry upwards of 124% interest - are technically not "loans." By eliminating these carve-outs from New York's usury laws and prevent- ing future evasions, this bill would set a new bar nationally for state protections against predatory lending.   LEGISLATIVE HISTORY: New bill.   FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS: None.   EFFECTIVE DATE: This act shall take effect immediately after it shall have become law.
Go to top

A09585 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                          9585
 
                   IN ASSEMBLY
 
                                     March 21, 2024
                                       ___________
 
        Introduced  by  M.  of  A.  WEINSTEIN  --  read once and referred to the
          Committee on Banks
 
        AN ACT to amend the general obligations law  and  the  banking  law,  in
          relation  to  limitations  of rates of interest for financing arrange-
          ments and the extension of consumer credit; to amend the penal law, in
          relation to criminal usury; and to amend the personal property law, in
          relation to certain functions of the attorney general
 
          The People of the State of New York, represented in Senate and  Assem-
        bly, do enact as follows:
 
     1    Section  1. Subdivisions 1, 2, 4, 4-a, 6 and 7 of section 5-501 of the
     2  general obligations law, subdivisions 1, 2 and 4 as amended  by  chapter
     3  883 of the laws of 1980, subdivision 2 as further amended by section 104
     4  of part A of chapter 62 of the laws of 2011, subdivision 4-a as added by
     5  chapter 721 of the laws of 1976, subdivision 6 as amended by chapter 369
     6  of  the  laws  of  1980 and subdivision 7 as added by chapter 296 of the
     7  laws of 1983, are amended and two new subdivisions 1-a and 8  are  added
     8  to read as follows:
     9    1. The rate of interest, as computed pursuant to this title, [upon the
    10  loan  or  forbearance  of  any  money,  goods,  or  things in action] in
    11  connection with any financing arrangement, except as provided in  subdi-
    12  visions  five and six of this section [or as otherwise provided by law],
    13  shall be six per centum per annum unless a different rate is  prescribed
    14  in section fourteen-a of the banking law.
    15    1-a. Financing arrangement is defined to include loans, forbearance of
    16  any  money,  goods  or things in action, and all other transactions that
    17  involve the lending or advancing of money, goods or things in action for
    18  an amount charged, taken or received, and all transactions that  operate
    19  as  substitutes  for  such products, including but not limited to retail
    20  installment contracts, merchant cash advances, invoice financing, reven-
    21  ue-based financing, earned wage access or similar  wage  advance  trans-
    22  actions,  lease- or rent-to-own arrangements, rental-purchase agreements
    23  as defined in subdivision six of section five hundred  of  the  personal
    24  property  law,  buy-now pay-later transactions, financing for litigation
 
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD13528-02-3

        A. 9585                             2
 
     1  or legal settlements, income-sharing agreements and financing for educa-
     2  tion.
     3    2.  [No]  Notwithstanding  any  other  New York statute, regulation or
     4  rule, no person or corporation shall, directly  or  indirectly,  charge,
     5  take or receive any money, goods or things in action as interest [on the
     6  loan  or  forbearance  of  any  money,  goods  or  things  in action] in
     7  connection with a financing arrangement at a  rate  exceeding  the  rate
     8  above  prescribed.  The  amount  charged,  taken or received as interest
     9  shall include any and all amounts paid or payable, directly or indirect-
    10  ly, voluntary or otherwise, by any person, to or for the account of  the
    11  lender,  including  any  discount  applied  to  any amounts advanced, in
    12  [consideration for making the loan or forbearance] connection  with  the
    13  financing  arrangement  as  defined  by  the superintendent of financial
    14  services pursuant to subdivision three  of  section  fourteen-a  of  the
    15  banking  law,  including  fees,  charges,  tips, renewal charges, credit
    16  insurance premiums, debt suspension or similar products,  any  ancillary
    17  product sold with any extension of consumer credit, and any other amount
    18  paid  or payable, except such fee as may be fixed by the commissioner of
    19  taxation and finance as the cost of servicing loans made by the property
    20  and liability insurance security fund.
    21    4. Except as otherwise provided by law, interest shall not be charged,
    22  taken or received on any [loan or forbearance] financing arrangement  at
    23  a  rate  exceeding  such rate of interest as may be authorized by law at
    24  the time the [loan or forbearance] financing arrangement is made, wheth-
    25  er or not the [loan or forbearance] financing arrangement is made pursu-
    26  ant to a prior contract or commitment providing for a  greater  rate  of
    27  interest,  provided,  however,  that  no  change in the rate of interest
    28  prescribed in section fourteen-a of the banking law shall affect (a) the
    29  validity of a [loan or forbearance] financing  arrangement  made  before
    30  the  date such rate becomes effective, or (b) the enforceability of such
    31  [loan or forbearance]  financing  arrangement  in  accordance  with  its
    32  terms,  except  that  if any [loan or forbearance] financing arrangement
    33  provides for an increase in the rate of interest during the term of such
    34  [loan or forbearance] financing arrangement, the  increased  rate  shall
    35  not  exceed  such rate of interest as may have been authorized by law at
    36  the time such [loan or forbearance] financing arrangement was made.
    37    4-a. Notwithstanding  the  provisions  of  subdivision  four  of  this
    38  section,  a  [loan  or  forbearance]  financing arrangement repayable on
    39  demand may provide for changes, reflecting variations in lending  rates,
    40  from  time  to  time  in  the  rate of interest payable on such [loan or
    41  forbearance] financing arrangement up to the rate of interest authorized
    42  by law at the time of such change and in such case the rate of  interest
    43  may  be  so changed in accordance with the terms of the contract or loan
    44  commitment relating thereto; provided, however, that the rate of  inter-
    45  est charged, taken or received on such a [loan or forbearance] financing
    46  arrangement  shall  not exceed the rate of interest authorized by law as
    47  it may subsequently be reduced from time to time; and further  provided,
    48  however,  that in no event shall such a [loan or forbearance by] financ-
    49  ing arrangement be subject to an authorized rate of interest  less  than
    50  that  applicable  at  the  time  such  [loan  or  forbearance] financing
    51  arrangement was made. The provisions of  this  subdivision  shall  apply
    52  only  to  a  [loan  or  forbearance]  financing arrangement repayable on
    53  demand which has an initial principal of more than five thousand dollars
    54  and which the borrower has the right to repay at any time in whole or in
    55  part, together with accrued interest on the principal so repaid, without
    56  any penalty. With respect to a [loan or forbearance] financing  arrange-

        A. 9585                             3
 
     1  ment  covered  by  this  subdivision,  the  lender shall disclose to the
     2  borrower in writing not less often than annually the amount of  interest
     3  accrued  or  payable as of the date of such disclosure and the manner by
     4  which such amount was computed.
     5    6.  a.  No  law  regulating  the maximum rate of interest which may be
     6  charged, taken or received, except section 190.40 and section 190.42  of
     7  the  penal  law,  shall  apply  to  any  [loan or forbearance] financing
     8  arrangement in the amount of two hundred fifty thousand dollars or more,
     9  other than a [loan  or  a  forbearance]  financing  arrangement  secured
    10  primarily by an interest in real property improved by a one or two fami-
    11  ly  residence. A [loan] financing arrangement of two hundred fifty thou-
    12  sand dollars or more which is to be advanced in installments pursuant to
    13  a written agreement by a lender shall be deemed to be  a  single  [loan]
    14  financing  arrangement  for the total amount which the lender has agreed
    15  to advance pursuant to  such  agreement  on  the  terms  and  conditions
    16  provided therein.
    17    b.  No  law  regulating  the  maximum  rate  of  interest which may be
    18  charged, taken or received, including section 190.40 and section  190.42
    19  of  the  penal  law,  shall apply to any [loan or forbearance] financing
    20  arrangement in the amount of two million five hundred  thousand  dollars
    21  or  more. [Loans or forbearances] Financing arrangements aggregating two
    22  million five hundred thousand dollars or more which are to  be  made  or
    23  advanced  to  any one borrower in one or more installments pursuant to a
    24  written agreement by one or more lenders shall be deemed to be a  single
    25  [loan  or  forbearance] financing arrangement for the total amount which
    26  the lender or lenders have agreed to advance or make  pursuant  to  such
    27  agreement on the terms and conditions provided therein.
    28    7.  Except  as  otherwise  expressly  provided by law, in the event of
    29  prepayment in full of a [loan]  financing  arrangement,  any  refund  of
    30  unearned  interest  to  which  the  borrower  may be entitled may not be
    31  computed by a sum of the balances or similar method but must  be  deter-
    32  mined according to a generally accepted actuarial method.
    33    8.  The  attorney  general is   hereby empowered to adopt, promulgate,
    34  amend, and repeal rules, as such term is defined  in  paragraph  (a)  of
    35  subdivision  two  of section one hundred two of the state administrative
    36  procedure act, and issue guidance  as  may  be  necessary  to  interpret
    37  financing  arrangements  as such term is defined in subdivision one-a of
    38  this section and to effectuate and enforce that provision.
    39    § 2.  Subdivision 1 of section 5-511 of the general  obligations  law,
    40  as  amended  by  chapter 1072 of the laws of 1968, is amended to read as
    41  follows:
    42    1.  All  bonds,  bills,  notes,  assurances,  conveyances,  all  other
    43  contracts  or  securities  whatsoever,  except bottomry and respondentia
    44  bonds and contracts, and all deposits of goods or other things whatsoev-
    45  er, whereupon or whereby there shall be reserved or taken, or secured or
    46  agreed to be reserved or taken, any greater sum, or greater  value,  for
    47  the  [loan or forbearance of any money, goods or other things in action]
    48  financing arrangement, than is prescribed in  section  5-501,  shall  be
    49  void, except that the knowingly taking, receiving, reserving or charging
    50  such  a  greater  sum  or greater value by a savings bank, a savings and
    51  loan association or a federal savings and loan association shall only be
    52  held and adjudged a forfeiture of the entire interest which the [loan or
    53  obligation] financing arrangement carries with  it  or  which  has  been
    54  agreed  to  be  paid thereon. If a greater sum or greater value has been
    55  paid, the person paying the same or his legal representative may recover
    56  from the savings bank, the savings and loan association or  the  federal

        A. 9585                             4
 
     1  savings  and  loan  association  twice the entire amount of the interest
     2  thus paid.
     3    § 3. Section 5-513 of the general obligations law, as amended by chap-
     4  ter 1072 of the laws of 1968, is amended to read as follows:
     5    § 5-513. Recovery  of  excess. Every person who, for any such [loan or
     6  forbearance] financing arrangement, shall pay or deliver any greater sum
     7  or value than is allowed to be received pursuant to section  5-501,  and
     8  his  personal  representatives,  may  recover  in  an action against the
     9  person who shall have taken or  received  the  same,  and  his  personal
    10  representatives,  the  amount  of  the money so paid or value delivered,
    11  above the rate aforesaid.
    12    § 4. Section 5-517 of the general obligations law is amended  to  read
    13  as follows:
    14    § 5-517. Transfer  of  cause of action for usury. A cause of action to
    15  cancel, or otherwise affect, an instrument executed, or an act done,  as
    16  security for a usurious [loan or forbearance] financing arrangement, can
    17  be  transferred,  where  the instrument or act creates a specific charge
    18  upon property, which is also transferred in disaffirmance  thereof,  and
    19  not otherwise; but, in that case, the transferee does not succeed to the
    20  right,  conferred by statute upon the borrower, to procure relief, with-
    21  out paying, or offering to pay, any part of the sum or thing loaned.
    22    § 5. Section 5-524 of the general obligations law, as amended by chap-
    23  ter 349 of the laws of 1968 and as further amended  by  section  104  of
    24  part A of chapter 62 of the laws of 2011, is amended as follows:
    25    § 5-524. Taking  security  upon  certain property for usurious [loans]
    26  financing arrangements. A person who takes security, upon any  household
    27  furniture,  sewing machines, plate or silverware in actual use, tools or
    28  implements of trade, wearing apparel or jewelry, for a [loan or forbear-
    29  ance of money] financing arrangement, or for the  use  or  sale  of  his
    30  personal credit, conditioned upon the payment of a greater rate than the
    31  rate  prescribed by the superintendent of financial services pursuant to
    32  section fourteen-a of the banking law,  or,  if  no  rate  has  been  so
    33  prescribed, six per centum per annum, or who as security for such [loan]
    34  financing  arrangement,  use  or  sale  of personal credit as aforesaid,
    35  makes a pretended purchase of such property from any  person,  upon  the
    36  like condition, and permits the pledgor to retain the possession thereof
    37  is guilty of a misdemeanor.
    38    §  6.  Subdivision 2 of section 14-a of the banking law, as amended by
    39  chapter 155 of the laws of 2012, is amended and a new subdivision 2-a is
    40  added to read as follows:
    41    2. The rate of interest as so  prescribed  under  this  section  shall
    42  include  as  interest  any  and all amounts paid or payable, directly or
    43  indirectly, voluntary or otherwise, by any person, to or for the account
    44  of the lender, including any discount applied to any  amounts  advanced,
    45  in  [consideration  for  the making of a loan or forbearance] connection
    46  with a financing arrangement as defined by the  superintendent  pursuant
    47  to  subdivision  three of this section, including fees, service charges,
    48  credit service charges, tips, renewal charges, credit  insurance  premi-
    49  ums,  debt  suspension  or  similar products, any ancillary product sold
    50  with any extension of consumer credit, and  any  other  amount  paid  or
    51  payable.
    52    2-a.  The  rate  of  interest  for  any financing arrangement shall be
    53  calculated as described in section 600.3 of title  twenty-three  of  the
    54  New  York codes, rules and regulations; provided, however, that the rate
    55  of interest will include as finance charges  all  amounts  described  in
    56  subdivision two of this section.

        A. 9585                             5
 
     1    §  7.  Section 340 of the banking law, as amended by chapter 22 of the
     2  laws of 1990, is amended to read as follows:
     3    § 340.  Doing  business  without  license  prohibited. 1. No person or
     4  other entity shall engage in the business  of  [making  loans]  entering
     5  into  financing  arrangements as defined in subdivision one-a of section
     6  5-501 of the general obligations law in the principal amount of  twenty-
     7  five thousand dollars or less for any [loan] financing arrangement to an
     8  individual  for  personal, family, household, or investment purposes and
     9  in a principal amount of fifty thousand dollars or less for business and
    10  commercial [loans] financing arrangements, and charge, contract for,  or
    11  receive  a  greater  rate  of interest than the [lender] person or other
    12  entity would be permitted by law to charge if [he] it were not a  licen-
    13  see  hereunder  except  as  authorized by this article and without first
    14  obtaining a license from the superintendent.
    15    2. For the purposes of this section,  a  person  or  entity  shall  be
    16  considered  as  engaging in the business of [making loans] entering into
    17  financing arrangements in New York, and subject  to  the  licensing  and
    18  other  requirements  of  this  article, if it solicits [loans] financing
    19  arrangements in the amounts prescribed by this section within this state
    20  and, in connection with such solicitation, [makes loans to] enters  into
    21  financing  arrangements  with  individuals  then resident in this state,
    22  except that no person or entity shall be considered as engaging  in  the
    23  business  of [making loans] entering into financing arrangements in this
    24  state on the basis of isolated, incidental  or  occasional  transactions
    25  which otherwise meet the requirements of this section.
    26    3.  Nothing  in  this  article shall apply to licensed collateral loan
    27  brokers.
    28    § 8. Subdivision 1 of section 351 of the banking law,  as  amended  by
    29  chapter 22 of the laws of 1990, is amended to read as follows:
    30    1.  Every  licensee hereunder may [loan] enter into financing arrange-
    31  ments as defined in subdivision one-a of section 5-501  of  the  general
    32  obligations law for any sum of money not exceeding the maximum principal
    33  amounts  prescribed  in section three hundred forty of this article, and
    34  may charge, contract for, and receive thereon interest at  the  rate  or
    35  rates  agreed  to  by the licensee and the borrower, subject to sections
    36  190.40 and 190.42 of the penal law. Such interest may either be (a) [be]
    37  calculated on the actual unpaid principal balances of the [loan] financ-
    38  ing arrangement or in the case of a [loan] financing arrangement commit-
    39  ment from the date of  each  advance  thereunder  for  the  actual  time
    40  outstanding,  according  to  a  generally accepted actuarial method at a
    41  fixed or variable rate and in accordance  with  the  provisions  of  the
    42  evidence  of  the indebtedness or (b) precomputed under subdivision five
    43  of this section.
    44    § 9. Section 190.40 of the penal law, as amended by chapter 424 of the
    45  laws of 1976, is amended to read as follows:
    46  § 190.40 Criminal usury in the second degree.
    47    A person is guilty of criminal usury in the second  degree  when,  not
    48  being  authorized  or  permitted  by law to do so, he knowingly charges,
    49  takes or receives any money or other property as interest [on  the  loan
    50  or  forebearance of any money or other property], whether paid voluntar-
    51  ily or otherwise, in connection with a financing arrangement as  defined
    52  in subdivision one-a of section 5-501 of the general obligations law, at
    53  a rate exceeding twenty-five per centum per annum or the equivalent rate
    54  for  a  longer  or shorter period.  The rate of interest shall be calcu-
    55  lated as provided in section fourteen-a of the banking law, as amended.
    56    Criminal usury in the second degree is a class E felony.

        A. 9585                             6
 
     1    § 10. Section 190.42 of the penal law, as added by chapter 424 of  the
     2  laws of 1976, is amended to read as follows:
     3  § 190.42 Criminal usury in the first degree.
     4    A  person  is  guilty  of criminal usury in the first degree when, not
     5  being authorized or permitted by law to do  so,  he  knowingly  charges,
     6  takes  or  receives any money or other property as interest [on the loan
     7  or forbearance of any money or other property], whether paid voluntarily
     8  or otherwise, in connection with a financing arrangement as  defined  in
     9  subdivision  one-a of section 5-501 of the general obligations law, at a
    10  rate exceeding twenty-five per centum per annum or the  equivalent  rate
    11  for  a longer or shorter period and either the actor had previously been
    12  convicted of the crime of criminal usury or of  the  attempt  to  commit
    13  such  crime,  or the actor's conduct was part of a scheme or business of
    14  making or collecting usurious [loans] financing arrangements.  The  rate
    15  of interest shall be calculated as provided in section fourteen-a of the
    16  banking law, as amended.
    17    Criminal usury in the first degree is a class C felony.
    18    §  11.  Section  508 of the personal property law, as added by chapter
    19  309 of the laws of 2010, is amended to read as follows:
    20    § 508. Administration by the attorney general.  The  attorney  general
    21  may  make rules and regulations necessary for the administration of this
    22  article[; provided, however, that such rules and regulations  shall  not
    23  attempt  to  regulate  or  characterize  rental-purchase agreements as a
    24  security interest, credit sale,  retail  installment  sale,  conditional
    25  sale  or any other form of consumer credit that imputes to a rental-pur-
    26  chase agreement the creation of a debt or extension of credit, nor shall
    27  such rules and regulations require the disclosure of a  percentage  rate
    28  calculation,  including  a time-price differential, an annual percentage
    29  rate, or an effective annual percentage rate].
    30    § 12. Severability.  If  any  clause,   sentence, paragraph,  subdivi-
    31  sion,  section  or  part  of  this act shall be adjudged by any court of
    32  competent jurisdiction to be invalid, such  judgment shall  not  affect,
    33  impair,  or  invalidate  the remainder thereof, but shall be confined in
    34  its operation to the clause, sentence, paragraph,  subdivision,  section
    35  or  part thereof  directly involved  in   the   controversy   in   which
    36  such  judgment shall have been rendered. It is hereby declared to be the
    37  intent of the legislature that this act would have been enacted even  if
    38  such invalid provisions had not been included herein.
    39    § 13. This act shall take effect immediately.
Go to top