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

A00979 Summary:

BILL NOA00979
 
SAME ASSAME AS S00898
 
SPONSORZebrowski
 
COSPNSR
 
MLTSPNSR
 
Amd §§802, 803, 804, 805, 806, 807 & 812, Fin Serv L; amd §2, Chap of 2020 (as proposed in S.5470-B & A.10118-A)
 
Exempts certain commercial financing transactions from certain disclosure requirements.
Go to top

A00979 Memo:

NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
 
BILL NUMBER: A979
 
SPONSOR: Zebrowski
  TITLE OF BILL: An act to amend the financial services law, in relation to exempting certain commercial financing transactions from certain disclosure requirements; and to amend a chapter of the laws of 2020 amending the financial services law relating to requiring certain providers that extend specific terms of commercial financing to a recipient to disclose certain information about the offer to the recipient, as proposed in legislative bills numbers S.5470-B and A.10118-A, in relation to the effectiveness thereof   PURPOSE: The purpose of this bill is to amend chapter 264 of the laws of 2020.   SUMMARY OF PROVISIONS: This bill would: *clarify that the requirement to disclose the annual percentage rate, which is defined in the bill as calculated in accordance with the feder- al Truth in Lending Act and Regulation Z, applies throughout this bill regardless of whether such act or regulation would require such a calcu- lation; *clarify that a commercial financing transaction in which the recipi- ent is a dealer as defined in the Vehicle and Traffic Law, or an affil- iate of such a dealer, or a rental car company as defined in the General Business Law, or an affiliate of such company pursuant to a commercial financing agreement or commercial open-end credit plan of at least $50,000, including any commercial loan made pursuant to such a commer- cial financing transaction, is exempt from coverage under this bill; *provide that the superintendent may order restitution upon a finding that a provider has knowingly violated this article; *provide that nothing in this act shall authorize transactions in this state which are otherwise illegal or allow an entity or individual to operate in this state without a license where a license would other- wise be required; and, *provide that this act would take effect on January 15t, 2022, but effective immediately, the addition, amendment and/or repeal of any rule or regulation necessary for the implementation of this act on its effec- tive date are authorized to be made and completed by the superintendent of financial services on or before such effective date.   JUSTIFICATION: Currently, commercial financing providers are not required to disclose key financing terms in any standard format. This bill would require providers to disclose critical information regarding the cost of financ- ing and other terms to borrowers prior to accepting the financing. It is imperative that business owners are afforded as much transparency as possible on how a commercial financing product will impact their busi- ness. This comprehensive disclosure will provide business owners with the necessary information to make an informed, financially responsible decision. It will also allow borrowers to compare the pricing and costs of a commercial financing across several providers; ensuring that they are able to choose the best product.   LEGISLATIVE HISTORY: New bill.   FISCAL IMPLICATIONS: None.   EFFECTIVE DATE: Immediately; provided, however, that the amendments to sections 802, 803, 804, 805, 806, 807 and 812 of the financial services law made by section 1 of this act shall take effect on the same date and in the same manner as a chapter of the laws of 2020 amending the financial services law relating to requiring certain providers that extend specific terms of commercial financing to a recipient to disclose certain information about the offer to the recipient, as proposed in legislative bills numbers S.5470-B and A.10118-A.
Go to top

A00979 Text:



 
                STATE OF NEW YORK
        ________________________________________________________________________
 
                                           979
 
                               2021-2022 Regular Sessions
 
                   IN ASSEMBLY
 
                                     January 6, 2021
                                       ___________
 
        Introduced  by  M.  of  A.  ZEBROWSKI  --  read once and referred to the
          Committee on Banks
 
        AN ACT to amend the financial services law,  in  relation  to  exempting
          certain  commercial  financing  transactions  from  certain disclosure
          requirements; and to amend a chapter of the laws of 2020 amending  the
          financial  services  law  relating to requiring certain providers that
          extend specific terms  of  commercial  financing  to  a  recipient  to
          disclose  certain  information  about  the  offer to the recipient, as
          proposed in legislative  bills  numbers  S.5470-B  and  A.10118-A,  in
          relation to the effectiveness thereof
 
          The  People of the State of New York, represented in Senate and Assem-
        bly, do enact as follows:
 
     1    Section 1. Sections 802, 803, 804, 805, 806, 807 and 812 of the finan-
     2  cial services law, as added by a chapter of the laws  of  2020  amending
     3  the  financial services law relating to requiring certain providers that
     4  extend specific terms of commercial financing to a recipient to disclose
     5  certain information about the offer to the  recipient,  as  proposed  in
     6  legislative bills numbers S.5470-B and A.10118-A, are amended to read as
     7  follows:
     8    §  802.  Exemptions.  This  article  shall not apply to, and shall not
     9  place any additional  requirements  or  obligations  upon,  any  of  the
    10  following:
    11    (a) a financial institution;
    12    (b) a person acting in its capacity as a technology services provider,
    13  such  as licensing software and providing support services, to an entity
    14  exempt under this section for use as part of the exempt entity's commer-
    15  cial financing  program,  provided  such  person  has  no  interest,  or
    16  arrangement  or  agreement  to  purchase  any interest in the commercial
    17  financing extended by the exempt entity in connection with such program;
    18    (c) a lender regulated under the federal Farm Credit  Act  (12  U.S.C.
    19  Sec. 2001 et seq.);

         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD07200-01-1

        A. 979                              2
 
     1    (d) a commercial financing transaction secured by real property;
     2    (e)  a  lease  as defined in section 2-A-103 of the uniform commercial
     3  code;
     4    (f) any person or provider who makes  no  more  than  five  commercial
     5  financing transactions in this state in a twelve-month period; [or]
     6    (g)  an  individual commercial financing transaction in an amount over
     7  two million five hundred thousand dollars[.]; or
     8    (h) a commercial financing transaction in which  the  recipient  is  a
     9  dealer  as  defined  in  section four hundred fifteen of the vehicle and
    10  traffic law, or an affiliate of such  a  dealer,  or  a  rental  vehicle
    11  company  as defined in section three hundred ninety-six-z of the general
    12  business law, or an affiliate of such a company pursuant to a commercial
    13  financing agreement or commercial open-end credit plan of at least fifty
    14  thousand dollars, including any commercial loan made pursuant to such  a
    15  commercial financing transaction.
    16    §  803.  Sales-based  financing  disclosure  requirements.  A provider
    17  subject to this article shall provide the  following  disclosures  to  a
    18  recipient  at  the  time  of  extending  a specific offer of sales-based
    19  financing according to formatting prescribed by the superintendent:
    20    (a) The total amount of the commercial financing, and the disbursement
    21  amount, if different from the financing amount, after any fees  deducted
    22  or withheld at disbursement.
    23    (b) The finance charge.
    24    (c)  The  estimated  annual  percentage  rate,  using the words annual
    25  percentage rate or the abbreviation "APR", expressed as a  yearly  rate,
    26  inclusive  of any fees and finance charges, and calculated in accordance
    27  with the federal Truth  in  Lending  Act,  Regulation  Z,  12  C.F.R.  §
    28  1026.22,  based  on  the  estimated  term of repayment and the projected
    29  periodic payment amounts, regardless of whether such act or  such  regu-
    30  lation would require such a calculation. The estimated term of repayment
    31  and  the projected periodic payment amounts shall be calculated based on
    32  the projection of the recipient's  sales,  called  the  projected  sales
    33  volume.  The  projected sales volume may be calculated using the histor-
    34  ical method or the opt-in method. The provider shall provide  notice  to
    35  the  superintendent  on  which  method  they  intend  to  use across all
    36  instances of sales-based  financing  offered  in  calculating  estimated
    37  annual percentage rate pursuant to this section.
    38    (i)  The  provider  using  the  historical method shall use an average
    39  historical volume of sales or revenue by which the  financing's  payment
    40  amounts  are  based  and  the estimated annual percentage rate is calcu-
    41  lated. The provider shall fix the historical time period used to  calcu-
    42  late  the  average historical volume and use such period for all disclo-
    43  sure purposes for all sales-based financing products offered.  The fixed
    44  historical time period shall either be the preceding  time  period  from
    45  the specific offer or, alternatively, the provider may use average sales
    46  for  the  same number of months with the highest sales volume within the
    47  past twelve months. The fixed historical time period shall  be  no  less
    48  than one month and not exceed twelve months.
    49    (ii)  The  provider  using the opt-in method shall determine the esti-
    50  mated annual percentage rate, the  estimated  term,  and  the  projected
    51  payments,  using  a  projected sales volume that the provider elects for
    52  each disclosure, provided, that they participate  in  a  review  process
    53  prescribed  by the superintendent. A provider shall, on an annual basis,
    54  report data to the superintendent of estimated annual  percentage  rates
    55  disclosed  to  the  recipient and actual retrospective annual percentage
    56  rates of completed transactions. The report shall contain such  informa-

        A. 979                              3
 
     1  tion  as  the  superintendent,  by  rule or regulation, may prescribe as
     2  necessary or appropriate for the purpose of making  a  determination  of
     3  whether  the  deviation between the estimated annual percentage rate and
     4  actual  retrospective  annual percentage rates of completed transactions
     5  was reasonable. The superintendent shall establish the method of report-
     6  ing and may, upon a finding that the use of projected  sales  volume  by
     7  the provider has resulted in an unacceptable deviation between estimated
     8  and  actual  annual  percentage  rate,  require  the provider to use the
     9  historical method.  The superintendent may consider unusual and extraor-
    10  dinary circumstances impacting the provider's  deviation  between  esti-
    11  mated  and  actual  annual  percentage rate in the determination of such
    12  finding.
    13    (d) The total repayment amount, which is the disbursement amount  plus
    14  the finance charge.
    15    (e) The estimated term is the period of time required for the periodic
    16  payments, based on the projected sales volume, to equal the total amount
    17  required to be repaid.
    18    (f) The payment amounts, based on the projected sales volume:
    19    (i)  for  payment  amounts  that  are  fixed,  the payment amounts and
    20  frequency (e.g., daily, weekly, monthly), and, if the payment  frequency
    21  is  other than monthly, the amount of the average projected payments per
    22  month; or
    23    (ii) for payment amounts that are variable, a payment  schedule  or  a
    24  description of the method used to calculate the amounts and frequency of
    25  payments, and the amount of the average projected payments per month.
    26    (g) A description of all other potential fees and charges not included
    27  in  the  finance  charge, including, but not limited to, draw fees, late
    28  payment fees, and returned payment fees.
    29    (h) Were the recipient to elect to pay off or refinance the commercial
    30  financing prior to full repayment, the provider must disclose:
    31    (i) whether the recipient would be required to pay any finance charges
    32  other than interest accrued since their last payment. If so,  disclosure
    33  of  the percentage of any unpaid portion of the finance charge and maxi-
    34  mum dollar amount the recipient could be required to pay; and
    35    (ii) whether the recipient would be required  to  pay  any  additional
    36  fees not already included in the finance charge.
    37    (i) A description of collateral requirements or security interests, if
    38  any.
    39    §  804.  Closed-end  commercial financing disclosure requirements.   A
    40  provider, subject to this article, shall provide the  following  disclo-
    41  sures  to  a  recipient  at  the  time of extending a specific offer for
    42  closed-end financing according to formatting prescribed  by  the  super-
    43  intendent:
    44    (a) The total amount of the commercial financing, and the disbursement
    45  amount,  if different from the financing amount, after any fees deducted
    46  or withheld at disbursement.
    47    (b) The finance charge.
    48    (c) The annual percentage rate, using only the words annual percentage
    49  rate or the abbreviation "APR", expressed as a yearly rate, inclusive of
    50  any fees and finance charges that cannot be avoided by a recipient,  and
    51  calculated  in  accordance  with the federal Truth in Lending Act, Regu-
    52  lation Z, 12 C.F.R. § 1026.22, regardless of whether such  act  or  such
    53  regulation would require such a calculation.
    54    (d)  The total repayment amount, which is the disbursement amount plus
    55  the finance charge.
    56    (e) The term of the financing.

        A. 979                              4
 
     1    (f) The payment amounts:
     2    (i)  for  payment  amounts  that  are  fixed,  the payment amounts and
     3  frequency (e.g., daily, weekly, monthly), and, if  the  term  is  longer
     4  than one month, the average monthly payment amount; or
     5    (ii) for payment amounts that are variable, a full payment schedule or
     6  a  description of the method used to calculate the amounts and frequency
     7  of payments, and, if the term is longer than one  month,  the  estimated
     8  average monthly payment amount.
     9    (g)  A description of all other potential fees and charges that can be
    10  avoided by the recipient, including, but not limited  to,  late  payment
    11  fees and returned payment fees.
    12    (h) Were the recipient to elect to pay off or refinance the commercial
    13  financing prior to full repayment, the provider must disclose:
    14    (i) whether the recipient would be required to pay any finance charges
    15  other  than interest accrued since their last payment. If so, disclosure
    16  of the percentage of any unpaid portion of the finance charge and  maxi-
    17  mum dollar amount the recipient could be required to pay; and
    18    (ii)  whether  the  recipient  would be required to pay any additional
    19  fees not already included in the finance charge.
    20    (i) A description of collateral requirements or security interests, if
    21  any.
    22    §  805.  Open-end  commercial  financing  disclosure  requirements.  A
    23  provider,  subject  to this article, shall provide the following disclo-
    24  sures to a recipient at the time of extending a specific offer for open-
    25  end financing according to formatting prescribed by the superintendent:
    26    (a) The maximum amount of credit available to the recipient (e.g., the
    27  credit line amount), and the amount scheduled to be drawn by the recipi-
    28  ent at the time the offer is extended, if any, less any fees deducted or
    29  withheld at disbursement.
    30    (b) The finance charge.
    31    (c) The annual percentage rate, using only the words annual percentage
    32  rate or the abbreviation "APR", expressed  as  a  nominal  yearly  rate,
    33  inclusive  of  any  fees and finance charges that cannot be avoided by a
    34  recipient, and calculated in accordance with the federal Truth in  Lend-
    35  ing  Act,  Regulation  Z,  12  C.F.R. § 1026.22 and based on the maximum
    36  amount of credit available to the recipient and the term resulting  from
    37  making  the  minimum  required payments term as disclosed, regardless of
    38  whether such act or such regulation would require such a calculation.
    39    (d) The total repayment amount, which is the  draw  amount,  less  any
    40  fees deducted or withheld at disbursement, plus the finance charge.  The
    41  total  repayment  amount shall assume a draw amount equal to the maximum
    42  amount of credit available to the recipient if drawn and  held  for  the
    43  duration of the term or draw period.
    44    (e)  The  term  of the plan, if applicable, or the period over which a
    45  draw is amortized.
    46    (f) The payment frequency and amounts, based on the  assumptions  used
    47  in   the   calculation  of  the  annual  percentage  rate,  including  a
    48  description of payment amount requirements such  as  a  minimum  payment
    49  amount,  and  if the payment frequency is other than monthly, the amount
    50  of the average projected payments per month.  For payment  amounts  that
    51  are  variable,  the  provider  should  include  a payment schedule, or a
    52  description of the method used to calculate the amounts and frequency of
    53  payments, and the estimated average monthly payment amount.
    54    (g) A description of all other potential fees and charges that can  be
    55  avoided by the recipient, including, but not limited to, draw fees, late
    56  payment fees, and returned payment fees.

        A. 979                              5
 
     1    (h) Were the recipient to elect to pay off or refinance the commercial
     2  financing prior to full repayment, the provider must disclose:
     3    (i) whether the recipient would be required to pay any finance charges
     4  other  than interest accrued since their last payment. If so, disclosure
     5  of the percentage of any unpaid portion of the finance charge and  maxi-
     6  mum dollar amount the recipient could be required to pay; and
     7    (ii)  whether  the  recipient  would be required to pay any additional
     8  fees not already included in the finance charge.
     9    (i) A description of collateral requirements or security interests, if
    10  any.
    11    § 806. Factoring transaction disclosure  requirements.    A  provider,
    12  subject  to  this  article, shall provide the following disclosures to a
    13  recipient at the time of extending a  specific  offer  for  a  factoring
    14  transaction according to formatting prescribed by the superintendent:
    15    (a) The amount of the receivables purchase price paid to the recipient
    16  and,  if  different from the purchase price, the amount disbursed to the
    17  recipient after any fees deducted or withheld at disbursement.
    18    (b) The finance charge.
    19    (c) The estimated annual percentage rate, using that term,  calculated
    20  according to the federal Truth in Lending Act, Regulation Z, 12 C.F.R. §
    21  1026  Appendix  J,  as  a  "single advance, single payment transaction",
    22  regardless of whether such act or such regulation would require  such  a
    23  calculation.  To  calculate  the  estimated  annual percentage rate, the
    24  purchase amount is considered the financing amount, the purchase  amount
    25  minus  the finance charge is considered the payment amount, and the term
    26  is established by the payment due date of the receivables. As an  alter-
    27  nate method of establishing the term, the provider may estimate the term
    28  for  a  factoring transaction as the average payment period, its histor-
    29  ical data over a period  not  to  exceed  the  previous  twelve  months,
    30  concerning payment invoices paid by the party owing the accounts receiv-
    31  able in question.
    32    (d)  The  total  payment amount, which is the purchase amount plus the
    33  finance charge.
    34    (e) A description of all other potential fees and charges that can  be
    35  avoided by the recipient.
    36    (f)  A  description  of  the  receivables purchased and any additional
    37  collateral requirements or security interests.
    38    § 807. Other forms of financing disclosure  requirements.  The  super-
    39  intendent  may  require  disclosure  by  a provider extending a specific
    40  offer of commercial financing which is not open-end  financing,  closed-
    41  end  financing,  sales-based  financing,  or  factoring  transaction but
    42  otherwise meets the definition of commercial financing  as  provided  in
    43  this  article.  Subject to such rules and regulations by the superinten-
    44  dent, a provider subject to this article  shall  provide  the  following
    45  disclosures  to a recipient at the time of extending a specific offer of
    46  other forms of financing  according  to  formatting  prescribed  by  the
    47  superintendent:
    48    (a) The total amount of the commercial financing, and the disbursement
    49  amount,  if different from the financing amount, after any fees deducted
    50  or withheld at disbursement.
    51    (b) The finance charge.
    52    (c) The annual percentage rate, using only the words annual percentage
    53  rate or the abbreviation "APR", expressed as a yearly rate, inclusive of
    54  any fees and finance charges, and  calculated  in  accordance  with  the
    55  relevant  sections  of the federal Truth in Lending Act, Regulation Z or

        A. 979                              6
 
     1  this article, regardless of whether such act or  such  regulation  would
     2  require such a calculation.
     3    (d)  The  total repayment amount which is the disbursement amount plus
     4  the finance charge.
     5    (e) The term of the financing.
     6    (f) The payment amounts:
     7    (i) for payment amounts  that  are  fixed,  the  payment  amounts  and
     8  frequency  (e.g.,  daily,  weekly,  monthly),  and  the  average monthly
     9  payment amount; or
    10    (ii) for payment amounts that are variable, a payment  schedule  or  a
    11  description of the method used to calculate the amounts and frequency of
    12  payments, and the estimated average monthly payment amount.
    13    (g)  A description of all other potential fees and charges that can be
    14  avoided by the recipient, including, but not limited  to,  late  payment
    15  fees and returned payment fees.
    16    (h) Were the recipient to elect to pay off or refinance the commercial
    17  financing prior to full repayment, the provider must disclose:
    18    (i) whether the recipient would be required to pay any finance charges
    19  other  than interest accrued since their last payment. If so, disclosure
    20  of the percentage of any unpaid portion of the finance charge and  maxi-
    21  mum dollar amount the recipient could be required to pay; and
    22    (ii)  whether  the  recipient  would be required to pay any additional
    23  fees not already included in the finance charge.
    24    (i) A description of collateral requirements or security interests, if
    25  any.
    26    § 812. Penalties. (a) Upon a finding  by  the  superintendent  that  a
    27  provider  has  violated  the  provisions of this article or the rules or
    28  regulations promulgated hereunder, the provider shall be ordered to  pay
    29  to  the  people of this state a civil penalty for each violation of this
    30  article or any regulation or policy promulgated hereunder a sum  not  to
    31  exceed  two  thousand dollars for each violation or where such violation
    32  is willful ten thousand dollars for each violation.
    33    (b) In addition to any penalty imposed pursuant to subdivision (a)  of
    34  this  section,  upon a finding by the superintendent that a provider has
    35  knowingly violated this article, the superintendent may order additional
    36  relief, including, but not limited to, restitution  or  a  permanent  or
    37  preliminary  injunction  on  behalf  of  any  recipient  affected by the
    38  violation.
    39    § 2. Section 2 of a chapter of the laws of 2020, amending  the  finan-
    40  cial  services  law  relating to requiring certain providers that extend
    41  specific terms of  commercial  financing  to  a  recipient  to  disclose
    42  certain  information  about  the  offer to the recipient, as proposed in
    43  legislative bills numbers S.5470-B and A.10118-A, is amended to read  as
    44  follows:
    45    §  2.  Nothing  in this act shall authorize transactions in this state
    46  which are otherwise illegal or allow an entity or individual to  operate
    47  in  this  state  without  a  license  where a license would otherwise be
    48  required.
    49    § 3. This act shall take effect [on  the  one  hundred  eightieth  day
    50  after  it shall have become a law] January 1, 2022. Effective immediate-
    51  ly, the addition, amendment and/or repeal of  any  rule  or  regulation,
    52  necessary  for  the implementation of this act on its effective date are
    53  authorized to be made and completed by the superintendent  of  financial
    54  services on or before such effective date.
    55    §  3.  This act shall take effect immediately; provided, however, that
    56  the amendments to sections 802, 803, 804, 805, 806, 807 and 812  of  the

        A. 979                              7
 
     1  financial  services  law made by section 1 of this act shall take effect
     2  on the same date and in the same manner as a chapter of the laws of 2020
     3  amending the  financial  services  law  relating  to  requiring  certain
     4  providers that extend specific terms of commercial financing to a recip-
     5  ient  to  disclose certain information about the offer to the recipient,
     6  as proposed in legislative bills numbers S.5470-B and A.10118-A.
Go to top