Bill Text: NY A10118 | 2019-2020 | General Assembly | Introduced
NOTE: There are more recent revisions of this legislation. Read Latest Draft
Bill Title: Requires certain providers that extend specific terms of commercial financing to a recipient to disclose certain information about the offer to the recipient, including information concerning the financing amount, finance charges, the annual percentage rate, the total repayment amount, the term, payment amounts, other potential fees, any prepayment costs and a description of any collateral requirements.
Spectrum: Partisan Bill (Democrat 30-0)
Status: (Passed) 2020-12-23 - APPROVAL MEMO.65 [A10118 Detail]
Download: New_York-2019-A10118-Introduced.html
Bill Title: Requires certain providers that extend specific terms of commercial financing to a recipient to disclose certain information about the offer to the recipient, including information concerning the financing amount, finance charges, the annual percentage rate, the total repayment amount, the term, payment amounts, other potential fees, any prepayment costs and a description of any collateral requirements.
Spectrum: Partisan Bill (Democrat 30-0)
Status: (Passed) 2020-12-23 - APPROVAL MEMO.65 [A10118 Detail]
Download: New_York-2019-A10118-Introduced.html
STATE OF NEW YORK ________________________________________________________________________ 10118 IN ASSEMBLY March 12, 2020 ___________ 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 requiring certain providers that extend specific terms of commercial financing to a recipient to disclose certain information about the offer to the recipient The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. The financial services law is amended by adding a new arti- 2 cle 7 to read as follows: 3 ARTICLE 7 4 COMMERCIAL FINANCING 5 Section 701. Definitions. 6 702. Exemptions. 7 703. Sales-based financing disclosure requirements. 8 704. Closed-end commercial financing disclosure requirements. 9 705. Open-end commercial financing disclosure requirements. 10 706. Accounts receivable transaction disclosure requirements. 11 707. Other forms of financing disclosure requirements. 12 708. Disclosure requirements for renewal financing. 13 709. Required signature. 14 710. Additional information. 15 711. Rules and regulations. 16 712. Penalties. 17 § 701. Definitions. For the purposes of this article: 18 (a) "Accounts receivable transaction" means an accounts receivable 19 purchase transaction, including factoring transactions, that includes an 20 agreement to purchase, transfer, or sell a legally enforceable claim for 21 payment held by a recipient for goods the recipient has supplied or 22 services the recipient has rendered that have been ordered but for which 23 payment has not yet been made. 24 (b) "Commercial financing" means a commercial line of credit, closed- 25 end credit, sales-based financing, accounts receivable transaction, or 26 other form of financing, the proceeds of which the recipient does not EXPLANATION--Matter in italics (underscored) is new; matter in brackets [] is old law to be omitted. LBD15642-02-0A. 10118 2 1 intend to use primarily for personal, family or household purposes. For 2 purposes of determining whether a financing is a commercial financing, 3 the provider may rely on any statement of intended purposes by the 4 recipient. The statement may be a separate statement signed by the 5 recipient; may be contained in the financing application, financing 6 agreement, or other document signed or consented to by the recipient; or 7 may be provided orally by the recipient so long as it is documented in 8 the recipient's application file by the provider. Electronic signatures 9 and consents are valid for purposes of the foregoing sentence. The 10 provider shall not be required to ascertain that the proceeds of a 11 commercial financing are used in accordance with the recipient's state- 12 ment of intended purposes. 13 (c) "Commercial line of credit" means an agreement for one or more 14 extensions of open-end credit, secured or unsecured, the proceeds of 15 which the recipient does not intend to use primarily for personal, fami- 16 ly or household purposes. A "commercial line of credit" includes credit 17 extended by a creditor under a plan in which: (i) the creditor reason- 18 ably contemplates repeated transactions; (ii) the creditor may impose a 19 finance charge from time to time on an outstanding unpaid balance; and 20 (iii) the amount of credit that may be extended to the recipient during 21 the term of the plan (up to any limit set by the creditor) is generally 22 made available to the extent that any outstanding balance is repaid. 23 (d) "Closed-end credit" means a closed-end extension of credit, 24 secured or unsecured, including equipment financing that does not meet 25 the definition of a lease under section 2-A-103 of the uniform commer- 26 cial code, the proceeds of which the recipient does not intend to use 27 primarily for personal, family or household purposes. "Closed-end cred- 28 it" includes financing with an established principal amount and dura- 29 tion. 30 (e) "Creditor" means the person to which the financing obligation 31 under a commercial line of credit or closed-end credit is initially 32 owed. For purposes of this article, a creditor may also be a provider. 33 (f) "Financial institution" means any of the following: (i) a bank, 34 trust company, or industrial loan company doing business under the 35 authority of, or in accordance with, a license, certificate or charter 36 issued by the United States, this state or any other state, district, 37 territory, or commonwealth of the United States that is authorized to 38 transact business in this state; (ii) a federally chartered savings and 39 loan association, federal savings bank or federal credit union that is 40 authorized to transact business in this state; or (iii) a savings and 41 loan association, savings bank or credit union organized under the laws 42 of this or any other state that is authorized to transact business in 43 this state. 44 (g) "Person" means an individual, corporation, partnership, limited 45 liability company, joint venture, association, joint stock company, 46 trust or unincorporated organization including, but not limited to, a 47 sole proprietorship. 48 (h) "Provider" means a person who extends a specific offer of commer- 49 cial financing to a recipient. A provider may include a creditor or 50 purchaser. Unless otherwise exempt, "provider" also includes a person 51 that is not a creditor or purchaser but who solicits and presents 52 specific offers of commercial financing on behalf of a third party. For 53 the avoidance of doubt, the extension of a specific offer or provision 54 of disclosures for a commercial financing, in and of itself, shall not 55 be construed to mean that a provider is originating, making, funding or 56 providing commercial financing.A. 10118 3 1 (i) "Purchaser" means the person that initially acquires the right to 2 receive payments on receivables from the seller in an accounts receiv- 3 able purchase. For purposes of this article, a purchaser may also be a 4 provider. 5 (j) "Recipient" means a person who is presented an offer of commercial 6 financing by a provider. A recipient may be a borrower or seller or the 7 authorized representative of a buyer or seller. 8 (k) "Sales-based financing" means a transaction where there is an 9 extension of financing to a recipient that is repaid by the recipient to 10 the provider, over time, as a percentage of sales or revenue, in which 11 the payment amount may increase or decrease according to the volume of 12 sales made or revenue received by the recipient. 13 (l) "Specific offer" means the specific terms of commercial financing, 14 including price or amount, that is quoted to a recipient, based on 15 information obtained from, or about the recipient, which, if accepted by 16 a recipient, shall be binding on the provider, as applicable, subject to 17 any specific requirements stated in such terms. 18 § 702. Exemptions. This article shall not apply to, and shall not 19 place any additional requirements or obligations upon, any of the 20 following: 21 (a) a financial institution; 22 (b) a person acting in its capacity as a technology services provider, 23 such as licensing software and providing support services, to an entity 24 exempt under this section for use as part of the exempt entity's commer- 25 cial financing program, provided such person has no interest, or 26 arrangement or agreement to purchase any interest in the commercial 27 financing extended by the exempt entity in connection with such program; 28 (c) a lender regulated under the federal Farm Credit Act (12 U.S.C. 29 Sec. 2001 et seq.); 30 (d) a commercial financing transaction secured by real property; 31 (e) a lease as defined in section 2-A-103 of the uniform commercial 32 code; or 33 (f) any person or provider who: 34 (i) makes no more than five commercial financing transactions in this 35 state in a twelve-month period; 36 (ii) makes commercial financing transactions in this state that are 37 incidental to the business of the person relying upon the exemption; or 38 (iii) makes specific offers exclusively on behalf of persons described 39 in paragraphs (i) and (ii) of this subsection. 40 § 703. Sales-based financing disclosure requirements. A provider 41 subject to this article shall provide the following disclosures to a 42 recipient at the time of extending a specific offer of sales-based 43 financing according to formatting prescribed by the superintendent: 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 total cost of the financing, expressed as a dollar cost, 48 including any and all fees, expenses and charges that are to be paid by 49 the recipient and that cannot be avoided by the recipient. 50 (c) The estimated annual percentage rate, using the words annual 51 percentage rate or the abbreviation "APR", expressed as a yearly rate, 52 inclusive of any fees and finance charges, and calculated in accordance 53 with the federal Truth in Lending Act, Regulation Z, 12 C.F.R. § 54 1026.22, based on the estimated term of repayment and the projected 55 periodic payment amounts. The estimated term of repayment and the 56 projected periodic payment amounts shall be calculated based on theA. 10118 4 1 projection of the recipient's sales, called the projected sales volume. 2 The projected sales volume may be calculated using the historical method 3 or the opt-in method. The provider shall provide notice to the super- 4 intendent on which method they intend to use in calculating estimated 5 annual percentage rate pursuant to this section. 6 (i) The provider using the historical method shall use an average 7 historical volume of sales or revenue by which the financing's payment 8 amounts are based and the estimated annual percentage rate is calcu- 9 lated. The provider shall fix the historical time period used to calcu- 10 late the average historical volume and use such period for all disclo- 11 sure purposes for all sales-based financing products offered. The 12 average historical volume shall be no less than one month and not exceed 13 twelve months. 14 (ii) The provider using the opt-in method shall determine the esti- 15 mated annual percentage rate, the estimated term, and the projected 16 payments, using a projected sales volume that the provider elects for 17 each disclosure, provided, that they participate in a review process 18 prescribed by the superintendent. A provider shall, on an annual basis, 19 disclose data to the superintendent of estimated annual percentage rates 20 disclosed to the recipient and actual retrospective annual percentage 21 rates of completed transactions. The report shall contain such informa- 22 tion as the superintendent, by rule or regulation, may prescribe as 23 necessary or appropriate for the purpose of making a determination of 24 whether the deviation between the estimated annual percentage rate and 25 actual retrospective annual percentage rates of completed transactions 26 was reasonable. The superintendent shall establish the method of disclo- 27 sure and may, upon a finding that the use of projected sales volume by 28 the provider has resulted in an unacceptable deviation between estimated 29 and actual annual percentage rate, require the provider to use the 30 historical method. 31 (d) The total repayment amount, which is the disbursement amount plus 32 the total cost of the financing. 33 (e) The estimated term is the period of time required for the periodic 34 payments, based on the projected sales volume, to equal the total amount 35 required to be repaid. 36 (f) The payment amounts, based on the projected sales volume: 37 (i) for payment amounts that are fixed, the payment amounts and 38 frequency (e.g., daily, weekly, monthly), and, if the payment frequency 39 is other than monthly, the amount of the average projected payments per 40 month; or 41 (ii) for payment amounts that are variable, a payment schedule or a 42 description of the method used to calculate the amounts and frequency of 43 payments, and the amount of the average projected payments per month. 44 (g) A description of all other potential fees and charges that can be 45 avoided by the recipient, including, but not limited to, draw fees, late 46 payment fees, and returned payment fees. 47 (h) In the event that a recipient elects to pay off or refinance the 48 commercial financing prior to full repayment, the provider must 49 disclose: 50 (i) whether the recipient would be required to pay any finance charges 51 other than interest accrued since their last payment. If so, disclosure 52 of the percentage of any unpaid portion of the finance charge and maxi- 53 mum dollar amount the recipient could be required to pay; and 54 (ii) whether the recipient would be required to pay any additional 55 fees not already included in the finance charge.A. 10118 5 1 (i) A description of collateral requirements or security interests, if 2 any. 3 § 704. Closed-end commercial financing disclosure requirements. A 4 provider, subject to this article, shall provide the following disclo- 5 sures to a recipient at the time of extending a specific offer for 6 closed-end credit according to formatting prescribed by the superinten- 7 dent: 8 (a) The total amount of the commercial financing, and the disbursement 9 amount, if different from the financing amount, after any fees deducted 10 or withheld at disbursement. 11 (b) The total cost of the financing, expressed as a dollar cost, 12 including any and all fees, expenses and charges that are to be paid by 13 the recipient and that cannot be avoided by the recipient. The total 14 cost of financing shall assume the recipient repays the total repayment 15 amount, according to the original agreed upon payment schedule. 16 (c) The annual percentage rate, using only the words annual percentage 17 rate or the abbreviation "APR", expressed as a yearly rate, inclusive of 18 any fees and finance charges that cannot be avoided by a recipient, and 19 calculated in accordance with the federal Truth in Lending Act, Regu- 20 lation Z, 12 C.F.R. § 1026.22. 21 (d) The total repayment amount, which is the disbursement amount plus 22 the total cost of the financing. 23 (e) The term of the financing. 24 (f) The payment amounts: 25 (i) for payment amounts that are fixed, the payment amounts and 26 frequency (e.g., daily, weekly, monthly), and, if the term is longer 27 than one month, the average monthly payment amount; or 28 (ii) for payment amounts that are variable, a full payment schedule or 29 a description of the method used to calculate the amounts and frequency 30 of payments, and, if the term is longer than one month, the estimated 31 average monthly payment amount. 32 (g) A description of all other potential fees and charges that can be 33 avoided by the recipient, including, but not limited to, late payment 34 fees and returned payment fees. 35 (h) In the event that a recipient elects to pay off or refinance the 36 commercial financing prior to full repayment, the provider must 37 disclose: 38 (i) whether the recipient would be required to pay any finance charges 39 other than interest accrued since their last payment. If so, disclosure 40 of the percentage of any unpaid portion of the finance charge and maxi- 41 mum dollar amount the recipient could be required to pay; and 42 (ii) whether the recipient would be required to pay any additional 43 fees not already included in the finance charge. 44 (i) A description of collateral requirements or security interests, if 45 any. 46 § 705. Open-end commercial financing disclosure requirements. A 47 provider, subject to this article, shall provide the following disclo- 48 sures to a recipient at the time of extending a specific offer for a 49 commercial line of credit according to formatting prescribed by the 50 superintendent: 51 (a) The maximum amount of credit available to the recipient (e.g., the 52 credit line amount), and the amount scheduled to be drawn by the recipi- 53 ent at the time the offer is extended, if any, less any fees deducted or 54 withheld at disbursement. 55 (b) The total cost of the financing, expressed as a dollar cost, 56 including all required periodic and non-periodic fees and charges thatA. 10118 6 1 cannot be avoided by the recipient, including any interest expense. The 2 total cost of financing shall assume the maximum amount of credit avail- 3 able to the recipient, in each case, is drawn and held for the duration 4 of the term or draw period. 5 (c) The annual percentage rate, using only the words annual percentage 6 rate or the abbreviation "APR", expressed as a nominal yearly rate, 7 inclusive of any fees and finance charges that cannot be avoided by a 8 recipient, and calculated in accordance with the federal Truth in Lend- 9 ing Act, Regulation Z, 12 C.F.R. § 1026.22 and based on the maximum 10 amount of credit available to the recipient and the term resulting from 11 making the minimum required payments term as disclosed. 12 (d) The total repayment amount, which is the draw amount, less any 13 fees deducted or withheld at disbursement, plus the total cost of the 14 financing. The total repayment amount shall assume a draw amount equal 15 to the maximum amount of credit available to the recipient if drawn and 16 held for the duration of the term or draw period. 17 (e) The term of the plan, if applicable, or the period over which a 18 draw is amortized. 19 (f) The payment frequency and amounts, based on the assumptions used 20 in the calculation of the annual percentage rate, including a 21 description of payment amount requirements such as a minimum payment 22 amount, and if the payment frequency is other than monthly, the amount 23 of the average projected payments per month. For payment amounts that 24 are variable, the provider should include a payment schedule, or a 25 description of the method used to calculate the amounts and frequency of 26 payments, and the estimated average monthly payment amount. 27 (g) A description of all other potential fees and charges that can be 28 avoided by the recipient, including, but not limited to, draw fees, late 29 payment fees, and returned payment fees. 30 (h) In the event that a recipient elects to pay off or refinance the 31 commercial financing prior to full repayment, the provider must 32 disclose: 33 (i) whether the recipient would be required to pay any finance charges 34 other than interest accrued since their last payment. If so, disclosure 35 of the percentage of any unpaid portion of the finance charge and maxi- 36 mum dollar amount the recipient could be required to pay; and 37 (ii) whether the recipient would be required to pay any additional 38 fees not already included in the finance charge. 39 (i) A description of collateral requirements or security interests, if 40 any. 41 § 706. Accounts receivable transaction disclosure requirements. A 42 provider, subject to this article, shall provide the following disclo- 43 sures to a recipient at the time of extending a specific offer for an 44 accounts receivable transaction according to formatting prescribed by 45 the superintendent: 46 (a) The amount of the receivables purchase price paid to the recipient 47 and, if different from the purchase price, the amount disbursed to the 48 recipient after any fees deducted or withheld at disbursement. 49 (b) The total cost of financing, expressed as a dollar cost, which is 50 the difference between the value of the purchased receivables and the 51 purchase price paid to the recipient. 52 (c) The estimated annual percentage rate, using that term, calculated 53 according to the federal Truth in Lending Act, Regulation Z, 12 C.F.R. § 54 1026 Appendix J, as a "single advance, single payment transaction". To 55 calculate the estimated annual percentage rate, the purchase amount is 56 considered the financing amount, the purchase amount minus the totalA. 10118 7 1 cost of financing is considered the payment amount, and the term is 2 established by the payment due date of the receivables. As an alternate 3 method of establishing the term, the provider may estimate the term for 4 an account receivable transaction as the average payment period, its 5 historical data over a period not to exceed the previous twelve months, 6 concerning payment invoices paid by the party owing the accounts receiv- 7 able in question. 8 (d) The total repayment amount, which is the purchase amount plus the 9 total cost of the financing. 10 (e) A description of all other potential fees and charges that can be 11 avoided by the recipient. 12 (f) A description of the receivables purchased and any additional 13 collateral requirements or security interests. 14 § 707. Other forms of financing disclosure requirements. The super- 15 intendent may require disclosure by a provider extending a specific 16 offer of commercial financing which is not a commercial line of credit, 17 closed-end credit, sales-based financing, or accounts receivable trans- 18 action but otherwise meets the definition of commercial financing as 19 provided in this article. Subject to such rules and regulations by the 20 superintendent, a provider subject to this article shall provide the 21 following disclosures to a recipient at the time of extending a specific 22 offer of other forms of financing according to formatting prescribed by 23 the superintendent: 24 (a) The total amount of the commercial financing, and the disbursement 25 amount, if different from the financing amount, after any fees deducted 26 or withheld at disbursement. 27 (b) The total cost of the financing, expressed as a dollar cost, 28 including any and all fees, expenses and charges that are to be paid by 29 the recipient and that cannot be avoided by the recipient, including any 30 interest expense. The total cost of financing shall assume the recipient 31 repays the commercial financing in its entirety according to the agreed 32 upon original payment schedule. 33 (c) The annual percentage rate, using only the words annual percentage 34 rate or the abbreviation "APR", expressed as a yearly rate, inclusive of 35 any fees and finance charges, and calculated in accordance with the 36 relevant sections of the federal Truth in Lending Act, Regulation Z or 37 this article. 38 (d) The total repayment amount, which is the disbursement amount plus 39 the total cost of the financing. 40 (e) The term of the financing. 41 (f) The payment amounts: 42 (i) for payment amounts that are fixed, the payment amounts and 43 frequency (e.g., daily, weekly, monthly), and the average monthly 44 payment amount; or 45 (ii) for payment amounts that are variable, a payment schedule or a 46 description of the method used to calculate the amounts and frequency of 47 payments, and the estimated average monthly payment amount. 48 (g) A description of all other potential fees and charges that can be 49 avoided by the recipient, including, but not limited to, late payment 50 fees and returned payment fees. 51 (h) In the event that a recipient elects to pay off or refinance the 52 commercial financing prior to full repayment, the provider must 53 disclose: 54 (i) whether the recipient would be required to pay any finance charges 55 other than interest accrued since their last payment. If so, disclosureA. 10118 8 1 of the percentage of any unpaid portion of the finance charge and maxi- 2 mum dollar amount the recipient could be required to pay; and 3 (ii) whether the recipient would be required to pay any additional 4 fees not already included in the finance charge. 5 (i) A description of collateral requirements or security interests, if 6 any. 7 § 708. Disclosure requirements for renewal financing. If, as a condi- 8 tion of obtaining the commercial financing, the provider requires the 9 recipient to pay off the balance of an existing commercial financing 10 from the same provider, the provider must disclose: 11 (a) The amount of the new commercial financing that is used to pay off 12 the portion of the existing commercial financing that consists of 13 prepayment charges required to be paid and any unpaid interest expense 14 that was not forgiven at the time of renewal. For financing for which 15 the total repayment amount is calculated as a fixed amount, the prepay- 16 ment charge is equal to the original finance charge multiplied by the 17 amount of the renewal used to pay off existing financing as a percentage 18 of the total repayment amount, minus any portion of the total repayment 19 amount forgiven by the provider at the time of prepayment. If the amount 20 is more than zero, such amount shall be the answer to the following 21 question: 22 "Does the renewal financing include any amount that is used to pay 23 unpaid finance charge or fees, also known as double dipping? Yes, {enter 24 amount}. If the amount is zero, the answer would be No." 25 (b) If the disbursement amount will be reduced to pay down any unpaid 26 portion of the outstanding balance, the actual dollar amount by which 27 such disbursement amount will be reduced. 28 § 709. Required signature. The provider shall obtain the recipient's 29 signature, which may be fulfilled by an electronic signature, on all 30 disclosures required to be presented to the recipient by this article 31 before authorizing the recipient to proceed further with the commercial 32 financing transaction application. 33 § 710. Additional information. Nothing in this article shall prevent a 34 provider from providing or disclosing additional information on a 35 commercial financing being offered to a recipient, provided however, 36 that such additional information shall not be disclosed as part of the 37 disclosure required by this article. If other metrics of financing cost 38 are disclosed or used in the application process of a commercial financ- 39 ing, these metrics shall not be presented as a "rate" if they are not 40 the annual interest rate or the annual percentage rate. The term "inter- 41 est", when used to describe a percentage rate, shall only be used to 42 describe annualized percentage rates, such as the annual interest rate. 43 When a provider states a rate of finance charge or a financing amount to 44 a recipient during an application process for commercial financing, the 45 provider shall also state the rate as an "annual percentage rate", using 46 that term or the abbreviation "APR". 47 § 711. Rules and regulations. The superintendent is hereby authorized 48 and empowered to promulgate such rules and regulations as may in the 49 judgment of the superintendent be consistent with the purposes of this 50 article, or appropriate for the effective administration of this arti- 51 cle, including, but not limited to: 52 (a) Such rules and regulations in connection with the calculation or 53 determination of any metric required to be disclosed to a recipient. 54 (b) Such rules and regulations as necessary to develop and prescribe 55 disclosure formatting to be used by providers that allows for recipients 56 to easily compare financing options in a clear and conspicuous manner.A. 10118 9 1 Such rules and regulations shall include the designation and method for 2 disclosing the information required in this article, or approving 3 adequate forms and methods already used by providers. 4 (c) Such rules and regulations as may define the terms used in this 5 article and as may be necessary and appropriate to interpret and imple- 6 ment the provisions of this article. 7 (d) Such rules and regulations as may be necessary for the enforcement 8 of this article. 9 § 712. Penalties. (a) Upon a finding by the superintendent that a 10 provider has violated the provisions of this article or the rules or 11 regulations promulgated hereunder, the provider shall be ordered to pay 12 to the people of this state a civil penalty for each violation of this 13 article or any regulation or policy promulgated hereunder a sum not to 14 exceed two thousand dollars for each violation or where such violation 15 is willful ten thousand dollars for each violation. 16 (b) In addition to any penalty imposed pursuant to subsection (a) of 17 this section, upon a finding by the superintendent that a provider has 18 knowingly violated this article, the superintendent may order additional 19 relief, including, but not limited to, a permanent or preliminary 20 injunction on behalf of any recipient affected by the violation. 21 § 2. This act shall take effect on the one hundred eightieth day after 22 it shall have become a law.
