New York Finance Licensing Bill Introduced
New York Senate Bill 1450 in over 3,500 words outlines requirements for persons or entities engaging in the business of making or soliciting commercial financing to obtain a license. It also establishes the minority- and women-owned business protection program, and makes conforming technical changes. It was introduced by Senate Banking Committee Chair Sen. James Sanders (D-NYC-South Ozone Park) and referred to his committee. Also sponsoring is the Senate Committee on Corporations, Authorities and Commissions Chair Sen. Leroy Comrie (D- St. Albans). A Commercial Financing Product is defined in part under § 363-A 1 (c) as “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.”Current Law - Important Background
Among other things, this bill would overlap and is somewhat at odds with existing New York Banking Law and should be reconciled in light of the 16% interest rate (25% for LLCs and Corps) currently required for licensure. Under the current law, most ELFA members should realize they likely need to be licensed in New York if they do capital leases under $50K at interest rates > 16%/25% (depending on the entity type):- The New York Licensed Lender Law, N.Y. Banking Law §§ 340, 14-a, (the current “Law”) requires licensure of a person making loans in amounts of $25,000 or less to an individual for personal, family, household or investment purposes and loans in a principal amount of $50,000 or less for business and commercial loans, and contracting for charges and interest greater than the interest rate permitted by the general usury statute (which is 16% or 25% per annum for commercial loans depending on the entity type).
- Without the interest rate language, the new bill would require more onerous licensure for commercial loans than consumer loans, which would make New York the only state in the nation with a more stringent licensure law for commercial transactions as compared to consumer transactions.
New York Finance Disclosure Update
ELFA has learned from the New York Department of Financial Services (NY DFS) that the NY Disclosure bill is expected to become effective Aug. 1, 2023 (California came online Dec. 9, 2022).Significant Victories Achieved by ELFA
ELFA fought for and achieved major changes to the NY DFS draft regulations. Those included having bank subsidiaries and affiliates exempted, the important issue of nexus narrowed to only New York and, lastly, a six-month stay in implementation.Subsidiaries Exempt – The Actual Language
Financial institution. . . includes any corporation, limited liability company, partnership, joint venture, trust or other entity of which a majority of the voting power of the voting equity securities or equity interest is owned, directly or indirectly, by a financial institution.
DISCLOSURE LEGISLATION PENDING IN OTHER STATES
Enhanced Exemptions – Missouri and Mississippi File Disclosure Bills
Missouri
Missouri disclosure legislation has been filed again this year and, as with the bills last year, it mimics the legislation passed in Utah last year.
Like Utah, these bills as written will exempt transactions over $500K; all UCC 2a and nine covered transactions; captive transactions; and bank subsidiaries. Not requiring annual percentage rate (APR), these bills are in stark contrast to the first two bills passed in California and New York, which require APR calculations and do not provide the extended complement of exemptions ELFA has fought for.
Missouri House Bill 584 Missouri Commercial Financing Disclosure introduced by State Rep. Bill Owen (R-Greene County) is similar to Commercial Financing Disclosure introduced by Sen. Justin Brown in Missouri Senate Bill 187 but is not a word-for-word companion bill.
Mississippi
In Mississippi two Commercial Financing Disclosure Laws, Mississippi Senate Bill 2619 and Mississippi House Bill 1271, have been introduced and, as in Missouri, have slightly differing text that will be sorted out in the process. Senate Bill 2619 offers ELFA members exemptions equivalent to the Utah and Missouri (see above) bills while House Bill 1271 goes further with broader exemptions intended for other financial interests. ELFA has worked very closely with the parties pushing this legislation to obtain all our needed exemptions. Your assessment sent to Scott Riehl, [email protected], will better prepare the association for upcoming legislative deliberations.
