Bill Text: NY A10878 | 2019-2020 | General Assembly | Introduced


Bill Title: Relates to regulating commercial finance licensing and making conforming technical changes relating thereto.

Spectrum: Partisan Bill (Democrat 1-0)

Status: (Introduced - Dead) 2020-07-24 - referred to banks [A10878 Detail]

Download: New_York-2019-A10878-Introduced.html



                STATE OF NEW YORK
        ________________________________________________________________________

                                          10878

                   IN ASSEMBLY

                                      July 24, 2020
                                       ___________

        Introduced by COMMITTEE ON RULES -- (at request of M. of A. Jean-Pierre)
          -- read once and referred to the Committee on Banks

        AN  ACT to amend the banking law and the administrative code of the city
          of New York, in relation to regulating  commercial  finance  licensing
          and making conforming technical changes relating thereto

          The  People of the State of New York, represented in Senate and Assem-
        bly, do enact as follows:

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

     3                                ARTICLE IX-A
     4                        COMMERCIAL FINANCE LICENSING

     5  Section 363.   Doing business without license prohibited.
     6          363-a. Definitions.
     7          363-b. Exemptions.
     8          363-c. Application for license.
     9          363-d. Conditions for issuance of a license.
    10          363-e. Locations; change of address.
    11          363-f. Changes in control.
    12          363-g. Grounds for suspension or revocation.
    13          363-h. Examinations.
    14          363-i. Books and records.
    15          363-j. Advertising.
    16          363-k. Prohibited practices of licensees.
    17          363-l. Penalties.
    18          363-m. Regulations.
    19          363-n. Severability.
    20    §  363.  Doing  business  without  license prohibited. 1. No person or
    21  other entity shall engage  in  the  business  of  making  or  soliciting
    22  commercial  financing  products  to businesses located in New York state
    23  except as authorized by this  article  and  without  first  obtaining  a
    24  license from the superintendent.

         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD13542-01-9

        A. 10878                            2

     1    2.  For  the  purposes  of  this  article, a person or entity shall be
     2  considered as engaging in the business of  making  commercial  financing
     3  products  to  businesses  located  in  New  York state if it solicits or
     4  consummates commercial financing products to any business or  commercial
     5  enterprise located in New York state.
     6    § 363-a. Definitions. For purposes of this article:
     7    1.  "commercial  financing  product"  means  any advance of funds to a
     8  commercial or business enterprise made for the purpose of assisting  the
     9  business with its capital needs, including but not limited to:
    10    (a)  loans  or lines of credit made to a business or commercial enter-
    11  prise in a principal amount of five hundred thousand  dollars  or  less,
    12  whether secured or unsecured;
    13    (b)  purchase transactions where an entity purchases accounts, receiv-
    14  ables, intangibles, revenue or other actual or perceived assets  of  the
    15  business  if any single payment or advance of the purchase price for the
    16  purchased accounts, receivables, intangibles, revenue or other actual or
    17  perceived assets of the business is in the amount of five hundred  thou-
    18  sand dollars or less; or
    19    (c)  any leasing transaction where any funds are provided to the busi-
    20  ness or commercial enterprise by the leasing business or  any  affiliate
    21  of  the  leasing business in the amount of five hundred thousand dollars
    22  or less; and
    23    2. "making or soliciting" means  (a)  providing  commercial  financing
    24  products   to  small  businesses;  (b)  marketing  commercial  financing
    25  products for providers of commercial financing products;  (c)  receiving
    26  any  compensation from a provider of commercial financing products based
    27  on the value of the commercial financing product  provided  in  exchange
    28  for  a  referral of small business or its owner; and (d) any entity that
    29  partners with federal or state banking organization in which the federal
    30  or state banking organization originates the commercial financing  prod-
    31  uct  and the entity acquires a participation or syndication interest, in
    32  part or whole, of the commercial financing product and  the  (i)  entity
    33  receives  compensation  for  marketing or servicing the transaction from
    34  the federal or state banking organization, or collects any payments  due
    35  under  the  commercial financing product; or (ii) provides any indemnity
    36  or loss protection to the federal  or  state  banking  organization  for
    37  losses  the  federal or state banking organization may incur as a result
    38  of performance of the commercial financing product.
    39    § 363-b. Exemptions. The following shall be exempt from the provisions
    40  of this article:
    41    1. any person who makes or solicits five or fewer commercial financing
    42  products within any twelve month period;
    43    2. any banking organization,  as  defined  in  subdivision  eleven  of
    44  section two of this chapter;
    45    3. any federal credit union;
    46    4. any insurance company;
    47    5.  any  person if and to the extent that such person is lending money
    48  and licensed in accordance with, and as authorized by, any other  appli-
    49  cable  law  of  the state of New York; provided, however, such exemption
    50  shall apply only to those transactions  subject  to  requirements  under
    51  article  nine-B  of  this  chapter and such exemption shall not apply to
    52  transactions subject to the provisions of  this  article  that  are  not
    53  expressly regulated by article nine-B of this chapter; or
    54    6. any transaction that is intended to be a purchase of the ownership,
    55  in whole or part, of a business or commercial enterprise.

        A. 10878                            3

     1    §  363-c.  Application  for  license.  1. An application for a license
     2  shall be in writing, under oath, and  in  the  form  prescribed  by  the
     3  superintendent  and shall contain such information as the superintendent
     4  may require by regulation. The application shall set forth  all  of  the
     5  locations  at  which the applicant seeks to conduct business pursuant to
     6  this article. At the time of making the application for a  license,  the
     7  applicant  shall  pay to the superintendent a fee as prescribed by regu-
     8  lation for each proposed location for investigating the application.
     9    2. In connection with an application  for  a  license,  the  applicant
    10  shall  submit an affidavit of financial solvency noting such capitaliza-
    11  tion requirements and access to such credit as may be prescribed by  the
    12  regulations promulgated by the superintendent.
    13    3.  The applicant shall also prove, in form satisfactory to the super-
    14  intendent, that the applicant has available for the  operation  of  such
    15  business  at  the  location  or  locations  specified in the application
    16  liquid assets of at least fifty thousand dollars. This amount  shall  be
    17  maintained for the period within which the licensee is licensed.
    18    4.  If  a  person  or  entity  holding a license seeks to open another
    19  location for the conduct of activities licensable  under  this  article,
    20  the licensee shall first submit written notification of this fact to the
    21  superintendent.  The  notification  shall contain the address of the new
    22  location and the license number. An investigation fee as  prescribed  in
    23  regulations  shall  be paid for each additional location. The additional
    24  location shall be authorized upon written approval by the superintendent
    25  or after ninety days have passed since the notification was provided and
    26  investigation fee was paid unless the superintendent denies the  request
    27  for  an  additional location prior to the expiration of the ninety days.
    28  The superintendent may deny a request for an additional location if  the
    29  new  location  by  the  licensee is not in the public interest, in which
    30  case, the superintendent shall send a written denial to the licensee.
    31    § 363-d. Conditions for issuance of a license. Upon the filing of such
    32  application and the payment of such fees, if  the  superintendent  shall
    33  find  that  the  financial  responsibility,  experience,  character, and
    34  general fitness of the applicant, and of  the  members  thereof  if  the
    35  applicant  be  a  partnership  or  association,  and of the officers and
    36  directors thereof if the applicant be a  corporation,  are  such  as  to
    37  command  the  confidence of the community and to warrant belief that the
    38  business will be operated honestly, fairly, and efficiently  within  the
    39  purposes  of this article, and if the superintendent shall find that the
    40  applicant has available for the operation of such business at each spec-
    41  ified location liquid assets of at least  fifty  thousand  dollars,  the
    42  superintendent  shall  thereupon  execute  a  license at the location or
    43  locations specified in the said application.  The  superintendent  shall
    44  transmit  one copy of such license or licenses to the applicant and file
    45  the same in the office of the department. Each such license shall remain
    46  in full force and effect until it is  surrendered  by  the  licensee  or
    47  revoked  or  suspended  as  hereinafter  provided; if the superintendent
    48  shall not so find, a license shall not be issued and the  superintendent
    49  shall notify the applicant of the denial. If an application is denied or
    50  withdrawn  the superintendent shall return to the applicant the sum paid
    51  by the applicant as a license fee, retaining the  investigation  fee  to
    52  cover  the  costs  of investigating such application. The superintendent
    53  shall approve or deny every application for a master license under  this
    54  article  within  ninety days from the filing thereof with the applicable
    55  fees.

        A. 10878                            4

     1    § 363-e. Locations; change of address. 1. A license  shall  state  the
     2  address  at  which the business is to be conducted and shall state fully
     3  the name of the licensee, and if the licensee is a partnership or  asso-
     4  ciation,  the  names  of  the members thereof, and if a corporation, the
     5  date and place of its incorporation. No license shall be transferable or
     6  assignable.
     7    2.  Every  location  used  by the licensee to conduct business must be
     8  identified in the application and approved by the superintendent.  After
     9  a  license  has  been issued, any application for a change in address or
    10  new location must be submitted within forty-five days of  such  proposed
    11  change  or addition.  The licensee shall pay to the superintendent a fee
    12  as prescribed by regulation  for  each  change  or  addition  and  shall
    13  provide  any  information  which  may  be  required  regarding  such new
    14  location. If the superintendent is not satisfied  that  such  change  or
    15  addition  is in accordance with the purposes of this article, the super-
    16  intendent shall refuse such change of location  or  additional  location
    17  and notify the licensee of such determination.
    18    §  363-f.  Changes in control. 1. It shall be unlawful except with the
    19  prior approval of the superintendent for any action to  be  taken  which
    20  results  in  a change of control of the business of a licensee. Prior to
    21  any change of control, the person desirous of acquiring control  of  the
    22  business of a licensee shall make written application to the superinten-
    23  dent  and  pay  an  investigation  fee  as prescribed by regulation. The
    24  application shall contain such information  as  the  superintendent,  by
    25  rule  or  regulation,  may prescribe as necessary or appropriate for the
    26  purpose of making the determination required by subdivision two of  this
    27  section.
    28    2.  The superintendent shall approve or disapprove the proposed change
    29  of control of a licensee in accordance with the provisions  of  sections
    30  three  hundred  sixty-three-c  and  three  hundred sixty-three-d of this
    31  article. The superintendent shall approve or disapprove the  application
    32  in  writing  within  ninety days after the date the application is filed
    33  with the superintendent.
    34    3. For a period of six months from the date of  qualification  thereof
    35  and  for  such  additional  period  of  time  as  the superintendent may
    36  prescribe, in writing, the provisions of subdivisions  one  and  two  of
    37  this  section  shall  not apply to a transfer of control by operation of
    38  law to the legal representative, as defined in subdivision four of  this
    39  section,  of  one  who has control of a licensee. Thereafter, such legal
    40  representative shall comply with the provisions of subdivisions one  and
    41  two of this section.
    42    4.  The term "legal representative", for the purposes of this section,
    43  shall mean one duly appointed by a court of  competent  jurisdiction  to
    44  act  as  executor,  administrator,  trustee,  committee,  conservator or
    45  receiver, including one who succeeds  a  legal  representative  and  one
    46  acting   in  an  ancillary  capacity  thereto  in  accordance  with  the
    47  provisions of such court appointment.
    48    5. As used in this section: (a) the term "person" includes an individ-
    49  ual, partnership, corporation, association or  any  other  organization;
    50  and (b) the term "control" means the possession, directly or indirectly,
    51  of  the  power  to  direct  or cause the direction of the management and
    52  policies of a licensee, whether through the ownership of voting stock of
    53  such licensee, the  ownership  of  voting  stock  of  any  person  which
    54  possesses such power or otherwise. Control shall be presumed to exist if
    55  any  person,  directly or indirectly, owns, controls or holds with power
    56  to vote ten per centum or more of the voting stock of any licensee or of

        A. 10878                            5

     1  any person which owns, controls or holds with  power  to  vote  ten  per
     2  centum  or more of the voting stock of any licensee, but no person shall
     3  be deemed to control a licensee solely by reason of being an officer  or
     4  director  of  such  licensee  or person.   The superintendent may in his
     5  discretion, upon the application  of  a  licensee  or  any  person  who,
     6  directly  or  indirectly,  owns, controls or holds with power to vote or
     7  seeks to own, control or hold with power to vote  any  voting  stock  of
     8  such  licensee, determine whether or not the ownership, control or hold-
     9  ing of such voting stock constitutes or would constitute control of such
    10  licensee for purposes of this section.
    11    § 363-g. Grounds for suspension or revocation. 1.  The  superintendent
    12  may  suspend  or  revoke  any  license  issued under this article if the
    13  superintendent shall find that:
    14    (a) the licensee has failed to pay any sum of money lawfully  demanded
    15  by  the superintendent or to comply with any demand, ruling, or require-
    16  ment of the superintendent within a reasonable period of time;
    17    (b) the licensee has violated any provisions of this article; or
    18    (c) any fact or condition exists which, if it had existed at the  time
    19  of  the  original  application  for  such  license,  clearly  would have
    20  warranted the  superintendent  in  refusing  originally  to  issue  such
    21  license.
    22    2. The superintendent may on good cause shown, without notice or hear-
    23  ing, suspend any license for a period not exceeding thirty days, pending
    24  investigation.
    25    3.  Any licensee may surrender any license by delivering to the super-
    26  intendent written notice  that  the  licensee  thereby  surrenders  such
    27  license,  but  such  surrender shall not affect such licensee's civil or
    28  criminal liability for acts committed prior to such surrender.
    29    4. No revocation or suspension  or  surrender  of  any  license  shall
    30  impair  or  affect  the  obligation  of any pre-existing lawful contract
    31  between the licensee and any borrower.
    32    5. Every license issued pursuant to this article shall remain in force
    33  and effect until it shall have been surrendered, revoked,  or  suspended
    34  in  accordance  with the provisions of this article, but the superinten-
    35  dent shall have authority to reinstate suspended licenses  or  to  issue
    36  new  licenses  to  a  licensee whose license or licenses shall have been
    37  revoked if no fact or condition then exists  which  clearly  would  have
    38  warranted  the  superintendent  in  refusing  originally  to  issue such
    39  license under this article.
    40    6. Whenever the superintendent  shall  revoke  or  suspend  a  license
    41  issued  pursuant  to  this  article,  the superintendent shall execute a
    42  written order to that effect. The superintendent shall file one copy  of
    43  such  order  in  the  office of the department and serve a copy upon the
    44  licensee, such order may be reviewed in the manner provided  by  article
    45  seventy-eight of the civil practice law and rules. Such special proceed-
    46  ing  for  review  as authorized by this section must be commenced within
    47  thirty days from the date of such order of suspension or revocation.
    48    § 363-h. Examinations. For the purpose of  discovering  violations  of
    49  this  article or securing information lawfully required under this arti-
    50  cle, the superintendent may at any time, and as often as may  be  deter-
    51  mined,  either  personally  or by a person duly designated by the super-
    52  intendent, investigate the business and  examine  the  books,  accounts,
    53  records, and files used therein of every licensee in connection with the
    54  activity covered under this article. For that purpose the superintendent
    55  and  duly  designated  representatives  shall  have  free  access to the
    56  offices and place of business, books, accounts, papers, records,  files,

        A. 10878                            6

     1  safes  and  vaults  of all such licensees. The superintendent shall have
     2  authority to require the attendance of and to  examine  under  oath  all
     3  persons whose testimony may be required relative to such business.
     4    §  363-i. Books and records. 1. The licensee shall keep and use in its
     5  business such books, accounts, and records as  will  enable  the  super-
     6  intendent  to  determine  whether  such  licensee  is complying with the
     7  provisions of this article and with the rules and  regulations  lawfully
     8  made  by  the  superintendent  pursuant  to this article. Every licensee
     9  shall preserve such books, accounts, and records for at least two  years
    10  after  the  last  payment  on any account was made or two years after an
    11  account is written off as a loss. Preservation of  photographic  reprod-
    12  uction  thereof  or  records  in photographic form, including an optical
    13  disk storage system and the use of electronic data processing  equipment
    14  that  provides  comparable records to those otherwise required and which
    15  are available for examination upon request shall  constitute  compliance
    16  with the requirements of this section.
    17    2.  Each  licensee  shall annually on or before the first day of April
    18  file a report with the superintendent giving  such  information  as  the
    19  superintendent may require concerning the business and operations during
    20  the preceding calendar year of each licensed place of business conducted
    21  by  such licensee within the state under authority of this article. Such
    22  report shall be subscribed and affirmed as true by  the  licensee  under
    23  the  penalties  of  perjury  and  shall be in the form prescribed by the
    24  superintendent who shall make and publish annually a consolidated state-
    25  ment of condition showing the combined assets  and  liabilities  of  all
    26  licensed  lenders.  Such  consolidated  statement  of condition shall be
    27  based upon the information contained in such  reports.  In  addition  to
    28  annual  reports,  the superintendent may require such additional regular
    29  or special reports as may be deemed necessary to the proper  supervision
    30  of licensees under this article. Such additional reports shall be in the
    31  form  prescribed  by  the  superintendent  and  shall  be subscribed and
    32  affirmed as true under the penalties of perjury.
    33    § 363-j. Advertising. 1. No licensee shall advertise, print,  display,
    34  publish,  distribute,  or broadcast or cause or permit to be advertised,
    35  printed, displayed,  published,  distributed,  or  broadcasted,  in  any
    36  manner  whatsoever  any  statement  or representation with regard to the
    37  rates, terms, costs or conditions for  a  commercial  financing  product
    38  which is false, misleading or deceptive.
    39    2.  No licensee shall make, directly or indirectly, orally or in writ-
    40  ing, by any method, practice or device, any representation  that  it  is
    41  licensed  under this article, except a representation that such licensee
    42  is licensed as a licensed commercial financing provider by  the  depart-
    43  ment.
    44    3.  No  licensee  shall  transact any business subject to this article
    45  under any other name or at any other place of business than  that  named
    46  in the license, except as may be authorized by the superintendent.
    47    §  363-k. Prohibited practices of licensees. 1. No licensee shall take
    48  any confession of judgment or any power of attorney running  to  himself
    49  or to any third person to confess judgment or to appear for the borrower
    50  in a judicial proceeding.
    51    2.  No  licensee shall take any instrument in which blanks are left to
    52  be filled in after execution.
    53    § 363-l. Penalties. 1. Any commercial  financing  product  made  by  a
    54  person not licensed under this article, and not exempt, to a business or
    55  commercial  enterprise  located  in  this  state  shall be void, and the
    56  provider shall have no right to collect or receive any principal, inter-

        A. 10878                            7

     1  est, fees or charges whatsoever. No action to enforce a transaction made
     2  in violation of this subdivision may be maintained.
     3    2.  Any  person  or  other  entity  including the officers, directors,
     4  agents, and employees thereof, which shall violate or participate in the
     5  violation of any of the provisions of section three hundred  sixty-three
     6  of this article shall be guilty of a misdemeanor.
     7    §  363-m.  Regulations.  The  superintendent  is hereby authorized and
     8  empowered to make such general rules and regulations, and such  specific
     9  rulings,  demands,  and  findings  as  may  be  necessary for the proper
    10  conduct of the business  authorized  and  licensed  under  and  for  the
    11  enforcement  of  this  article,  in addition hereto and not inconsistent
    12  herewith.
    13    § 363-n. Severability. If any provision of this article or the  appli-
    14  cation  thereof  to  any  person or circumstances is held to be invalid,
    15  such invalidity shall not affect other  provisions  or  applications  of
    16  this  article which can be given effect without the invalid provision or
    17  application, and to this end the provisions of this article are  severa-
    18  ble.
    19    § 2. Paragraph 5 of subdivision a of section 10-136 of the administra-
    20  tive  code  of  the city of New York, as added by local law number 80 of
    21  the city of New York for the year 1996, is amended to read as follows:
    22    (5) "Check cashing business" shall mean any person  duly  licensed  by
    23  the superintendent of banks to engage in the business of cashing checks,
    24  drafts  or  money orders for consideration pursuant to the provisions of
    25  article [9-A] 9-B of the banking law.
    26    § 3. Subdivision (a) of section 22 of the banking law, as  amended  by
    27  chapter 553 of the laws of 2007, is amended to read as follows:
    28    (a)  Notwithstanding any other provision of law, every applicant for a
    29  license, authorization or  registration  under  articles  nine,  nine-A,
    30  nine-B,  eleven-B, twelve-B, twelve-C, twelve-D, twelve-E and thirteen-B
    31  of this chapter and every applicant filing  an  application  to  acquire
    32  control  of  any  licensee or registrant, as the case may be, under such
    33  articles shall submit simultaneously with an  application,  his  or  her
    34  fingerprints  in  such form and in such manner as specified by the divi-
    35  sion of criminal justice services, but in any event, no  less  than  two
    36  digit imprints. The superintendent shall submit such fingerprints to the
    37  division  of  criminal  justice services for the purpose of conducting a
    38  criminal history search and returning a  report  thereon  in  accordance
    39  with  the procedures and requirements established by the division pursu-
    40  ant to the provisions of article thirty-five of the executive law, which
    41  shall include the payment of the prescribed processing fees. The  super-
    42  intendent  shall  request  that the division submit such fingerprints to
    43  the federal bureau of investigation, together with the  processing  fees
    44  prescribed  by  such  bureau,  for  the purpose of conducting a criminal
    45  history search and returning a report thereon. An applicant shall not be
    46  required to submit his or her fingerprints as required by this  subdivi-
    47  sion  if  such  applicant  (i)  is  already subject to regulation by the
    48  department and the applicant has  submitted  such  fingerprints  to  the
    49  department,  such  fingerprints  have  been submitted to the division of
    50  criminal justice services for  the  purpose  of  conducting  a  criminal
    51  history  search,  and  a  report of such search has been received by the
    52  department from such division; or (ii) is subject  to  regulation  by  a
    53  federal  bank  regulatory  agency and has submitted such fingerprints to
    54  such agency which has had a criminal history search  conducted  of  such
    55  individual  and has shared such information or its determination result-
    56  ing from such search with the department; or  (iii)  is  an  officer  or

        A. 10878                            8

     1  stockholder  of  a corporation whose common or preferred stock is regis-
     2  tered on a national securities  exchange,  as  provided  in  an  act  of
     3  congress  of  the United States entitled the "Securities Exchange Act of
     4  1934", approved June sixth, nineteen hundred thirty-four, as amended, or
     5  such other exchange or market system as the superintendent shall approve
     6  by  regulation,  and has submitted such fingerprints to such exchange or
     7  market system which has had a criminal history search conducted of  such
     8  individual  and has shared such information or its determination result-
     9  ing from such search with the department; provided,  however,  that  the
    10  superintendent  may subsequently require such applicant to submit his or
    11  her fingerprints if the superintendent has a reasonable basis for updat-
    12  ing the information or determination resulting from the  report  of  the
    13  criminal history search conducted at the request of such federal banking
    14  agency, exchange or market system.
    15    §  4.  Subdivision  2 of section 635 of the banking law, as amended by
    16  chapter 146 of the laws of 2003, is amended to read as follows:
    17    2. "License" when used in this article means any license  duly  issued
    18  by  the  superintendent  pursuant  to  the  provisions  of article nine,
    19  nine-A, nine-B, eleven-B, twelve-B, twelve-C, twelve-D or thirteen-B  of
    20  this  chapter  or any registration certificate issued by the superinten-
    21  dent pursuant to the provisions of article twelve-D of this chapter.
    22    § 5. Subdivision 1 of section 652-b of the banking law,  as  added  by
    23  chapter 374 of the laws of 1979, is amended to read as follows:
    24    1.  It shall be unlawful for any transmitter of money or its officers,
    25  affiliates or subsidiaries to enter into an agreement with a check cash-
    26  er, licensed pursuant to the provisions of article  [nine-A]  nine-B  of
    27  this chapter, whereby credit is extended to the check casher at the same
    28  time as, and on the condition that, the transmitter of money enters into
    29  an  agreement  with  the  check casher whereby the check casher will (1)
    30  sell only the New York instruments or New York traveler's checks of  the
    31  transmitter  of  money  or  (2) agree to the exclusive use of any of the
    32  other services of the transmitter of money.    This  section  shall  not
    33  apply  to  the  issuance by a transmitter of money of a guarantee of any
    34  indebtedness of a check casher licensed pursuant to  the  provisions  of
    35  article [nine-A] nine-B of this chapter.
    36    § 6. This act shall take effect on the one hundred eightieth day after
    37  it  shall have become a law.  Effective immediately, any rules and regu-
    38  lations necessary to implement the provisions of this act on its  effec-
    39  tive  date  are authorized to be amended, promulgated and/or repealed on
    40  or before such date.
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