Bill Text: NY S00898 | 2021-2022 | General Assembly | Introduced
Bill Title: Exempts certain commercial financing transactions from certain disclosure requirements.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Passed) 2021-02-16 - SIGNED CHAP.61 [S00898 Detail]
Download: New_York-2021-S00898-Introduced.html
STATE OF NEW YORK ________________________________________________________________________ 898 2021-2022 Regular Sessions IN SENATE (Prefiled) January 6, 2021 ___________ Introduced by Sen. THOMAS -- read twice and ordered printed, and when printed to be committed to the Committee on Rules 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; EXPLANATION--Matter in italics (underscored) is new; matter in brackets [] is old law to be omitted. LBD07200-01-1S. 898 2 1 (c) a lender regulated under the federal Farm Credit Act (12 U.S.C. 2 Sec. 2001 et seq.); 3 (d) a commercial financing transaction secured by real property; 4 (e) a lease as defined in section 2-A-103 of the uniform commercial 5 code; 6 (f) any person or provider who makes no more than five commercial 7 financing transactions in this state in a twelve-month period; [or] 8 (g) an individual commercial financing transaction in an amount over 9 two million five hundred thousand dollars[.]; or 10 (h) a commercial financing transaction in which the recipient is a 11 dealer as defined in section four hundred fifteen of the vehicle and 12 traffic law, or an affiliate of such a dealer, or a rental vehicle 13 company as defined in section three hundred ninety-six-z of the general 14 business law, or an affiliate of such a company pursuant to a commercial 15 financing agreement or commercial open-end credit plan of at least fifty 16 thousand dollars, including any commercial loan made pursuant to such a 17 commercial financing transaction. 18 § 803. Sales-based financing disclosure requirements. A provider 19 subject to this article shall provide the following disclosures to a 20 recipient at the time of extending a specific offer of sales-based 21 financing according to formatting prescribed by the superintendent: 22 (a) The total amount of the commercial financing, and the disbursement 23 amount, if different from the financing amount, after any fees deducted 24 or withheld at disbursement. 25 (b) The finance charge. 26 (c) The estimated annual percentage rate, using the words annual 27 percentage rate or the abbreviation "APR", expressed as a yearly rate, 28 inclusive of any fees and finance charges, and calculated in accordance 29 with the federal Truth in Lending Act, Regulation Z, 12 C.F.R. § 30 1026.22, based on the estimated term of repayment and the projected 31 periodic payment amounts, regardless of whether such act or such regu- 32 lation would require such a calculation. The estimated term of repayment 33 and the projected periodic payment amounts shall be calculated based on 34 the projection of the recipient's sales, called the projected sales 35 volume. The projected sales volume may be calculated using the histor- 36 ical method or the opt-in method. The provider shall provide notice to 37 the superintendent on which method they intend to use across all 38 instances of sales-based financing offered in calculating estimated 39 annual percentage rate pursuant to this section. 40 (i) The provider using the historical method shall use an average 41 historical volume of sales or revenue by which the financing's payment 42 amounts are based and the estimated annual percentage rate is calcu- 43 lated. The provider shall fix the historical time period used to calcu- 44 late the average historical volume and use such period for all disclo- 45 sure purposes for all sales-based financing products offered. The fixed 46 historical time period shall either be the preceding time period from 47 the specific offer or, alternatively, the provider may use average sales 48 for the same number of months with the highest sales volume within the 49 past twelve months. The fixed historical time period shall be no less 50 than one month and not exceed twelve months. 51 (ii) The provider using the opt-in method shall determine the esti- 52 mated annual percentage rate, the estimated term, and the projected 53 payments, using a projected sales volume that the provider elects for 54 each disclosure, provided, that they participate in a review process 55 prescribed by the superintendent. A provider shall, on an annual basis, 56 report data to the superintendent of estimated annual percentage ratesS. 898 3 1 disclosed to the recipient and actual retrospective annual percentage 2 rates of completed transactions. The report shall contain such informa- 3 tion as the superintendent, by rule or regulation, may prescribe as 4 necessary or appropriate for the purpose of making a determination of 5 whether the deviation between the estimated annual percentage rate and 6 actual retrospective annual percentage rates of completed transactions 7 was reasonable. The superintendent shall establish the method of report- 8 ing and may, upon a finding that the use of projected sales volume by 9 the provider has resulted in an unacceptable deviation between estimated 10 and actual annual percentage rate, require the provider to use the 11 historical method. The superintendent may consider unusual and extraor- 12 dinary circumstances impacting the provider's deviation between esti- 13 mated and actual annual percentage rate in the determination of such 14 finding. 15 (d) The total repayment amount, which is the disbursement amount plus 16 the finance charge. 17 (e) The estimated term is the period of time required for the periodic 18 payments, based on the projected sales volume, to equal the total amount 19 required to be repaid. 20 (f) The payment amounts, based on the projected sales volume: 21 (i) for payment amounts that are fixed, the payment amounts and 22 frequency (e.g., daily, weekly, monthly), and, if the payment frequency 23 is other than monthly, the amount of the average projected payments per 24 month; or 25 (ii) for payment amounts that are variable, a payment schedule or a 26 description of the method used to calculate the amounts and frequency of 27 payments, and the amount of the average projected payments per month. 28 (g) A description of all other potential fees and charges not included 29 in the finance charge, including, but not limited to, draw fees, late 30 payment fees, and returned payment fees. 31 (h) Were the recipient to elect to pay off or refinance the commercial 32 financing prior to full repayment, the provider must 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 § 804. Closed-end commercial financing 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 44 closed-end financing according to formatting prescribed by the super- 45 intendent: 46 (a) The total amount of the commercial financing, and the disbursement 47 amount, if different from the financing amount, after any fees deducted 48 or withheld at disbursement. 49 (b) The finance charge. 50 (c) The annual percentage rate, using only the words annual percentage 51 rate or the abbreviation "APR", expressed as a yearly rate, inclusive of 52 any fees and finance charges that cannot be avoided by a recipient, and 53 calculated in accordance with the federal Truth in Lending Act, Regu- 54 lation Z, 12 C.F.R. § 1026.22, regardless of whether such act or such 55 regulation would require such a calculation.S. 898 4 1 (d) The total repayment amount, which is the disbursement amount plus 2 the finance charge. 3 (e) The term of the financing. 4 (f) The payment amounts: 5 (i) for payment amounts that are fixed, the payment amounts and 6 frequency (e.g., daily, weekly, monthly), and, if the term is longer 7 than one month, the average monthly payment amount; or 8 (ii) for payment amounts that are variable, a full payment schedule or 9 a description of the method used to calculate the amounts and frequency 10 of payments, and, if the term is longer than one month, the estimated 11 average monthly payment amount. 12 (g) A description of all other potential fees and charges that can be 13 avoided by the recipient, including, but not limited to, late payment 14 fees and returned payment fees. 15 (h) Were the recipient to elect to pay off or refinance the commercial 16 financing prior to full repayment, the provider must disclose: 17 (i) whether the recipient would be required to pay any finance charges 18 other than interest accrued since their last payment. If so, disclosure 19 of the percentage of any unpaid portion of the finance charge and maxi- 20 mum dollar amount the recipient could be required to pay; and 21 (ii) whether the recipient would be required to pay any additional 22 fees not already included in the finance charge. 23 (i) A description of collateral requirements or security interests, if 24 any. 25 § 805. Open-end commercial financing disclosure requirements. A 26 provider, subject to this article, shall provide the following disclo- 27 sures to a recipient at the time of extending a specific offer for open- 28 end financing according to formatting prescribed by the superintendent: 29 (a) The maximum amount of credit available to the recipient (e.g., the 30 credit line amount), and the amount scheduled to be drawn by the recipi- 31 ent at the time the offer is extended, if any, less any fees deducted or 32 withheld at disbursement. 33 (b) The finance charge. 34 (c) The annual percentage rate, using only the words annual percentage 35 rate or the abbreviation "APR", expressed as a nominal yearly rate, 36 inclusive of any fees and finance charges that cannot be avoided by a 37 recipient, and calculated in accordance with the federal Truth in Lend- 38 ing Act, Regulation Z, 12 C.F.R. § 1026.22 and based on the maximum 39 amount of credit available to the recipient and the term resulting from 40 making the minimum required payments term as disclosed, regardless of 41 whether such act or such regulation would require such a calculation. 42 (d) The total repayment amount, which is the draw amount, less any 43 fees deducted or withheld at disbursement, plus the finance charge. The 44 total repayment amount shall assume a draw amount equal to the maximum 45 amount of credit available to the recipient if drawn and held for the 46 duration of the term or draw period. 47 (e) The term of the plan, if applicable, or the period over which a 48 draw is amortized. 49 (f) The payment frequency and amounts, based on the assumptions used 50 in the calculation of the annual percentage rate, including a 51 description of payment amount requirements such as a minimum payment 52 amount, and if the payment frequency is other than monthly, the amount 53 of the average projected payments per month. For payment amounts that 54 are variable, the provider should include a payment schedule, or a 55 description of the method used to calculate the amounts and frequency of 56 payments, and the estimated average monthly payment amount.S. 898 5 1 (g) A description of all other potential fees and charges that can be 2 avoided by the recipient, including, but not limited to, draw fees, late 3 payment fees, and returned payment fees. 4 (h) Were the recipient to elect to pay off or refinance the commercial 5 financing prior to full repayment, the provider must disclose: 6 (i) whether the recipient would be required to pay any finance charges 7 other than interest accrued since their last payment. If so, disclosure 8 of the percentage of any unpaid portion of the finance charge and maxi- 9 mum dollar amount the recipient could be required to pay; and 10 (ii) whether the recipient would be required to pay any additional 11 fees not already included in the finance charge. 12 (i) A description of collateral requirements or security interests, if 13 any. 14 § 806. Factoring transaction disclosure requirements. A provider, 15 subject to this article, shall provide the following disclosures to a 16 recipient at the time of extending a specific offer for a factoring 17 transaction according to formatting prescribed by the superintendent: 18 (a) The amount of the receivables purchase price paid to the recipient 19 and, if different from the purchase price, the amount disbursed to the 20 recipient after any fees deducted or withheld at disbursement. 21 (b) The finance charge. 22 (c) The estimated annual percentage rate, using that term, calculated 23 according to the federal Truth in Lending Act, Regulation Z, 12 C.F.R. § 24 1026 Appendix J, as a "single advance, single payment transaction", 25 regardless of whether such act or such regulation would require such a 26 calculation. To calculate the estimated annual percentage rate, the 27 purchase amount is considered the financing amount, the purchase amount 28 minus the finance charge is considered the payment amount, and the term 29 is established by the payment due date of the receivables. As an alter- 30 nate method of establishing the term, the provider may estimate the term 31 for a factoring transaction as the average payment period, its histor- 32 ical data over a period not to exceed the previous twelve months, 33 concerning payment invoices paid by the party owing the accounts receiv- 34 able in question. 35 (d) The total payment amount, which is the purchase amount plus the 36 finance charge. 37 (e) A description of all other potential fees and charges that can be 38 avoided by the recipient. 39 (f) A description of the receivables purchased and any additional 40 collateral requirements or security interests. 41 § 807. Other forms of financing disclosure requirements. The super- 42 intendent may require disclosure by a provider extending a specific 43 offer of commercial financing which is not open-end financing, closed- 44 end financing, sales-based financing, or factoring transaction but 45 otherwise meets the definition of commercial financing as provided in 46 this article. Subject to such rules and regulations by the superinten- 47 dent, a provider subject to this article shall provide the following 48 disclosures to a recipient at the time of extending a specific offer of 49 other forms of financing according to formatting prescribed by the 50 superintendent: 51 (a) The total amount of the commercial financing, and the disbursement 52 amount, if different from the financing amount, after any fees deducted 53 or withheld at disbursement. 54 (b) The finance charge. 55 (c) The annual percentage rate, using only the words annual percentage 56 rate or the abbreviation "APR", expressed as a yearly rate, inclusive ofS. 898 6 1 any fees and finance charges, and calculated in accordance with the 2 relevant sections of the federal Truth in Lending Act, Regulation Z or 3 this article, regardless of whether such act or such regulation would 4 require such a calculation. 5 (d) The total repayment amount which is the disbursement amount plus 6 the finance charge. 7 (e) The term of the financing. 8 (f) The payment amounts: 9 (i) for payment amounts that are fixed, the payment amounts and 10 frequency (e.g., daily, weekly, monthly), and the average monthly 11 payment amount; or 12 (ii) for payment amounts that are variable, a payment schedule or a 13 description of the method used to calculate the amounts and frequency of 14 payments, and the estimated average monthly payment amount. 15 (g) A description of all other potential fees and charges that can be 16 avoided by the recipient, including, but not limited to, late payment 17 fees and returned payment fees. 18 (h) Were the recipient to elect to pay off or refinance the commercial 19 financing prior to full repayment, the provider must disclose: 20 (i) whether the recipient would be required to pay any finance charges 21 other than interest accrued since their last payment. If so, disclosure 22 of the percentage of any unpaid portion of the finance charge and maxi- 23 mum dollar amount the recipient could be required to pay; and 24 (ii) whether the recipient would be required to pay any additional 25 fees not already included in the finance charge. 26 (i) A description of collateral requirements or security interests, if 27 any. 28 § 812. Penalties. (a) Upon a finding by the superintendent that a 29 provider has violated the provisions of this article or the rules or 30 regulations promulgated hereunder, the provider shall be ordered to pay 31 to the people of this state a civil penalty for each violation of this 32 article or any regulation or policy promulgated hereunder a sum not to 33 exceed two thousand dollars for each violation or where such violation 34 is willful ten thousand dollars for each violation. 35 (b) In addition to any penalty imposed pursuant to subdivision (a) of 36 this section, upon a finding by the superintendent that a provider has 37 knowingly violated this article, the superintendent may order additional 38 relief, including, but not limited to, restitution or a permanent or 39 preliminary injunction on behalf of any recipient affected by the 40 violation. 41 § 2. Section 2 of a chapter of the laws of 2020, amending the finan- 42 cial services law relating to requiring certain providers that extend 43 specific terms of commercial financing to a recipient to disclose 44 certain information about the offer to the recipient, as proposed in 45 legislative bills numbers S.5470-B and A.10118-A, is amended to read as 46 follows: 47 § 2. Nothing in this act shall authorize transactions in this state 48 which are otherwise illegal or allow an entity or individual to operate 49 in this state without a license where a license would otherwise be 50 required. 51 § 3. This act shall take effect [on the one hundred eightieth day52after it shall have become a law] January 1, 2022. Effective immediate- 53 ly, the addition, amendment and/or repeal of any rule or regulation, 54 necessary for the implementation of this act on its effective date are 55 authorized to be made and completed by the superintendent of financial 56 services on or before such effective date.S. 898 7 1 § 3. This act shall take effect immediately; provided, however, that 2 the amendments to sections 802, 803, 804, 805, 806, 807 and 812 of the 3 financial services law made by section 1 of this act shall take effect 4 on the same date and in the same manner as a chapter of the laws of 2020 5 amending the financial services law relating to requiring certain 6 providers that extend specific terms of commercial financing to a recip- 7 ient to disclose certain information about the offer to the recipient, 8 as proposed in legislative bills numbers S.5470-B and A.10118-A.
