STATE OF NEW YORK ________________________________________________________________________ 2520 2019-2020 Regular Sessions IN SENATE January 25, 2019 ___________ Introduced by Sen. HARCKHAM -- read twice and ordered printed, and when printed to be committed to the Committee on Banks AN ACT establishing the federal shutdown affected employees loan program The People of the State of New York, represented in Senate and Assem- bly, do enact as follows: 1 Section 1. Definitions. As used in this act, the following terms shall 2 have the following meanings: 3 (a) "Affected employee" means a federal employee who, during the shut- 4 down, is (i) a resident of this state, and (ii) required to work as a 5 federal employee without pay or furloughed as a federal employee without 6 pay; 7 (b) "Bank" means a bank as such term is defined in subdivision 1 of 8 section 2 of the banking law; 9 (c) "Credit union" means a credit union as such term is defined in 10 subdivision 9 of section 2 of the banking law; 11 (d) "Department" means the department of financial services; 12 (e) "Eligible financial institution" means a bank or credit union that 13 has a physical presence in this state and is in good standing; 14 (f) "Grace period" means the ninety-day period after an affected 15 employee's federal agency is funded; and 16 (g) "Shutdown" means the federal fiscal year 2019 partial government 17 shutdown that began on December 22, 2018. 18 § 2. Federal shutdown affected employee loan program. (a) The depart- 19 ment shall administer a federal shutdown affected employee loan program 20 to guarantee the repayment of loans made by an eligible financial insti- 21 tution to an eligible affected employee pursuant to this act. Subject 22 to the cessation of new claim approvals under subdivision (d) of section 23 five of this act, the department shall submit all approved claims to the 24 comptroller, who shall pay from the general fund any and all claims 25 submitted by the department. 26 (b) Any bank or credit union may apply to the department to partic- 27 ipate in the loan guarantee program. Not later than one business day 28 after receiving the application, the department shall determine whether 29 the financial institution is an eligible financial institution and imme- EXPLANATION--Matter in italics (underscored) is new; matter in brackets [] is old law to be omitted. LBD08858-02-9S. 2520 2 1 diately notify the bank or credit union of such determination. Any 2 eligible financial institution may make loans to affected employees in 3 accordance with this act. 4 (c) Each eligible financial institution that makes a loan pursuant to 5 this act, shall notify the department in writing not later than one 6 business day after making the loan, specifying such information about 7 the borrower as the department may request. 8 § 3. Loan eligibility. An eligible financial institution may make a 9 loan to an affected employee, provided: 10 (a) The affected employee has provided to the eligible financial 11 institution (i) proof of the employee's status, income and residence in 12 this state, and (ii) the amount of unemployment compensation benefits 13 the employee has received and has been deemed eligible to receive during 14 the shutdown. Such proof may include a paystub or bank statement, a 15 federal employee identification card, the federal tax identification 16 number of the employee's employer and a sworn affidavit from such 17 employee indicating that such employee (A) is currently a federal 18 employee residing in this state, (B) may be eligible to receive back-pay 19 when the shutdown ends, and (C) is not receiving a loan from any other 20 financial institution pursuant to this act. 21 (b) The amount of the loan shall not exceed (i) the lesser of (A) five 22 thousand dollars, or (B) the affected employee's most recent monthly 23 after-tax pay, (ii) less four times the amount, if any, the affected 24 employee has reported to the eligible financial institution under subdi- 25 vision (a) of this section related to any weekly unemployment compen- 26 sation benefits the employee has received or has been deemed eligible to 27 receive during the shutdown. 28 (c) The loan is made in accordance with the eligible financial insti- 29 tution's underwriting policy and standards, provided further that the 30 affected employee's creditworthiness shall not be a factor used for the 31 purposes of determining eligibility. 32 (d) The loan agreement shall not (i) require repayment during the 33 grace period, or (ii) charge interest on the principal amount before or 34 during the grace period or for one hundred eighty days after the grace 35 period, provided after such one hundred eighty-day period, the eligible 36 financial institution may charge interest or fees in accordance with 37 such financial institution's lending policy and the terms of the under- 38 lying loan agreement. 39 (e) The loan agreement shall require that the affected employee repay 40 the loan in full not later than one hundred eighty days after the end of 41 the grace period by making at least three, and no more than six, equal 42 installment payments. The loan agreement shall not contain a fee or 43 penalty for the prepayment or early payment of the loan. 44 (f) The eligible financial institution shall offer credit counseling 45 services or refer such employee to nonprofit credit counselors. 46 § 4. Additional loans. An affected employee who has received a loan 47 pursuant to this act may apply to the same eligible financial institu- 48 tion for an additional loan for each thirty-day period such employee 49 remains an affected employee, provided no affected employee may receive 50 more than three loans under the program, and each such employee shall be 51 required to update the eligible financial institution as to the amount 52 of unemployment compensation benefits the employee has received and has 53 been deemed eligible to receive during the shutdown. Each additional 54 loan shall be made in accordance with section three of this act. 55 § 5. Collection of loans. (a) On and after one hundred eighty days 56 from the end of the grace period, an eligible financial institution thatS. 2520 3 1 has made a good-faith effort to collect the outstanding principal from a 2 loan issued pursuant to this act may make a claim to the department for 3 recovery of an amount equal to the outstanding principal for such loan. 4 Prior to the department's approving and submitting a claim to the comp- 5 troller, such eligible financial institution shall demonstrate to the 6 satisfaction of the department that the eligible financial institution 7 has made a good-faith effort to collect the outstanding principal from 8 the eligible employee in accordance with such financial institution's 9 loan servicing and collection policies. Upon payment of a claim, the 10 loan shall be assigned to the state, and the department shall have the 11 right to continue collection efforts on the loan. 12 (b) The department shall maintain records in the regular course of 13 administration of the loan guarantee program, including a record of 14 loans issued and of payments made to honor loan guarantees issued under 15 this section. The department shall regularly review such records to 16 determine total loans issued and identify duplicative applications. The 17 department shall report to the department of labor the names of the 18 affected employees who have received a loan under the program, and the 19 department of labor shall provide to the department information concern- 20 ing such employees' unemployment compensation benefits. If the depart- 21 ment determines that an affected employee misrepresented unemployment 22 compensation benefits, the affected employee may be deemed ineligible 23 for additional loans under this act. 24 (c) The department may terminate any loan guarantee if the eligible 25 financial institution misrepresents any information pertaining to the 26 guarantee or fails to comply with any requirements of this section in 27 connection with the guarantee of the underlying loan. 28 (d) If the amounts expended to honor loan guarantees under the program 29 exceed ten percent of total loans issued, the department shall imme- 30 diately cease to approve claims and shall notify the comptroller and 31 each eligible financial institution of the total amount of payments made 32 and that the department has ceased honoring loan guarantees. 33 (e) Any interest deferred or not charged related to a loan issued 34 pursuant to this act shall be exempt from all state taxes that may be 35 applicable to such interest amounts as they relate to an affected 36 employee. Eligible financial institutions shall disclose to affected 37 employee borrowers in the signed affidavit or loan documents that there 38 may be federal tax consequences to the program loans. 39 (f) No new loan applications shall be submitted under the program 40 after the shutdown ends. The program shall expire upon the repayment of 41 all loans made under the program and, for all loans in default, the 42 repayment of claims made under the program, or the cessation of new 43 claim approvals under subdivision (d) of this section. 44 § 6. Unemployment benefits. Upon the passage of federal legislation or 45 the issuance of federal guidance from the United States department of 46 labor or another federal agency which allows an affected employee to 47 receive benefits, such affected employee may be eligible for unemploy- 48 ment benefits pursuant to such federal legislation or guidance during 49 the period of the shutdown. If the shutdown ends and an affected employ- 50 ee is paid by the federal government for any period of time the affected 51 employee worked without pay during the shutdown, the affected employee 52 shall reimburse the unemployment insurance fund in an amount equal to 53 the unemployment benefits the affected employee received for the period 54 of the shutdown. 55 § 7. This act shall take effect immediately.