NY State Senate Bill 2019-S8538

Senate Bill S8538

2019-2020 Legislative Session

Relates to providing financial consumer protections for small businesses

download bill text pdf

Archive: Last Bill Status - In Senate Committee Rules Committee

Introduced
- In Committee Assembly
- In Committee Senate
- On Floor Calendar Assembly
- On Floor Calendar Senate
- Passed Assembly
- Passed Senate
Delivered to Governor
Signed By Governor

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	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jun 09, 2020	referred to rules

2019-S8538 (ACTIVE) - Details

Current Committee:: Senate Rules
Law Section:: General Obligations Law
Laws Affected:: Add §§5-522 & 5-702-a, Gen Ob L; amd §§173 & 380-e, Bank L

2019-S8538 (ACTIVE) - Summary

Relates to providing financial consumer protections for small businesses.

2019-S8538 (ACTIVE) - Sponsor Memo

                                
 
BILL NUMBER: S8538

SPONSOR: KAPLAN
 
TITLE OF BILL:

An act to amend the general obligations law and the banking law, in
relation to providing financial consumer protections for small busi-
nesses

 
PURPOSE:

 
SUMMARY OF PROVISIONS:

Section 1 adds a new section to the general obligation law to apply
rights and privileges under this this title to also apply to small busi-
ness as defined. (In the State, independently owned and operated, not
dominant in its field, and less than 100 employees).

Section 2 amends the general obligation law to create a requirement for
use of plain languages in small business loans. Specifically requires
every written loan agreement to be written in a clear and coherent

manner, and to be appropriately divided and captioned by its various
sections.  Any creditor who fails to comply shall be liable for actual
damages plus a $50 penalty. The total class action against a creditor
shall not exceed $10,000 in any class action or series of class actions.
Specifically states that this subdivision shall not apply to loans in
excess of $250,000.

Section 3 Amends the banking law to grant all rights and privileges
given to persons shall also be extended to apply rights and privileges
under this this title to also apply to small business as defined. (In
the State, independently owned and operated, not dominant in its field,
and less than 100 employees).

Section 4: Amends the banking law to grant all rights and privileges
given to persons shall also be extended to apply rights and privileges
under this this title to also apply to small business as defined. (In
the State, independently owned and operated, not dominant in its field,
and less than 100 employees).

Section 5 is the effective date.

 
JUSTIFICATION:

Current law provides that certain terms of loans to individuals be
provided in clear and plainly written language. This requirement is
incredibly helpful in assisting individuals to understand and comprehend
the requirements being extended to them.  This legislation seeks to take
that same plain language requirement and extend that to small business
loans under $250,000.

Small business is the backbone of our economy as well as our communi-
ties. These small business are locally owned and operated by individuals
living the American dream. These individuals if they were taking out a
personal loan would have provided to them the information in plain
language. However, should this same individual apply for an eligible
small business loan, there is no such requirement. This legislation
seeks to make this plain language requirement the same for individuals
and small business.
 
LEGISLATIVE HISTORY:

None.

 
FISCAL IMPLICATIONS:

None.

 
EFFECTIVE DATE:
This act shall take effect immediately.

2019-S8538 (ACTIVE) - Bill Text download pdf

                            
 
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   8538
 
                             I N  S E N A T E
 
                               June 9, 2020
                                ___________
 
 Introduced  by  Sen.  KAPLAN -- read twice and ordered printed, and when
   printed to be committed to the Committee on Rules
 
 AN ACT to amend the general obligations law  and  the  banking  law,  in
   relation  to  providing financial consumer protections for small busi-
   nesses
 
   THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
 BLY, DO ENACT AS FOLLOWS:

   Section  1.  The  general  obligations  law is amended by adding a new
 section 5-522 to read as follows:
   § 5-522. APPLICATION TO SMALL BUSINESSES. ALL  RIGHTS  AND  PRIVILEGES
 GRANTED  UNDER  THIS  TITLE  TO  PERSONS SHALL ALSO APPLY TO SMALL BUSI-
 NESSES. FOR PURPOSES OF THIS SECTION, A SMALL BUSINESS SHALL  BE  DEEMED
 TO BE ONE WHICH IS RESIDENT IN THIS STATE, INDEPENDENTLY OWNED AND OPER-
 ATED, NOT DOMINANT IN ITS FIELD AND EMPLOYS ONE HUNDRED OR LESS PERSONS.
   §  2.  The  general obligations law is amended by adding a new section
 5-702-a to read as follows:
   § 5-702-A. REQUIREMENTS FOR USE OF PLAIN LANGUAGE  IN  SMALL  BUSINESS
 LOANS.    A.  FOR THE PURPOSES OF THIS SECTION THE TERM "SMALL BUSINESS"
 SHALL MEAN A BUSINESS IN THIS STATE  WITH  NOT  MORE  THAN  ONE  HUNDRED
 EMPLOYEES  THAT  IS  A SOLE PROPRIETORSHIP, LIMITED LIABILITY COMPANY OR
 CLOSELY HELD CORPORATION ACTING WITHOUT THE ASSISTANCE OF COUNSEL.
   B. EVERY WRITTEN AGREEMENT FOR A LOAN BETWEEN A CREDITOR AND A BORROW-
 ER WHO IS A SMALL BUSINESS MUST BE:
   1. WRITTEN IN A CLEAR AND COHERENT MANNER USING WORDS WITH COMMON  AND
 EVERY DAY MEANINGS; AND
   2. APPROPRIATELY DIVIDED AND CAPTIONED BY ITS VARIOUS SECTIONS.
   ANY CREDITOR WHO FAILS TO COMPLY WITH THIS SUBDIVISION SHALL BE LIABLE
 TO  A  SMALL  BUSINESS WHO IS A PARTY TO A WRITTEN AGREEMENT GOVERNED BY
 THIS SUBDIVISION IN AN AMOUNT EQUAL TO ANY ACTUAL DAMAGES SUSTAINED PLUS
 A PENALTY OF FIFTY DOLLARS. THE TOTAL CLASS ACTION PENALTY  AGAINST  ANY
 SUCH  CREDITOR SHALL NOT EXCEED TEN THOUSAND DOLLARS IN ANY CLASS ACTION
 OR SERIES OF CLASS ACTIONS ARISING OUT OF THE USE BY A  CREDITOR  OF  AN
 AGREEMENT  WHICH  FAILS TO COMPLY WITH THIS SUBDIVISION. NO ACTION UNDER
 THIS SUBDIVISION MAY BE BROUGHT AFTER BOTH PARTIES TO THE AGREEMENT HAVE
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets

                       [ ] is old law to be omitted.
                                                            LBD03232-05-0

 S. 8538                             2
 
 FULLY PERFORMED THEIR OBLIGATION UNDER SUCH  AGREEMENT,  NOR  SHALL  ANY
 CREDITOR  WHO  ATTEMPTS IN GOOD FAITH TO COMPLY WITH THIS SUBDIVISION BE
 LIABLE FOR SUCH PENALTIES. THIS SUBDIVISION SHALL  NOT  APPLY  TO  LOANS
 INVOLVING  AMOUNTS  IN  EXCESS OF TWO HUNDRED FIFTY THOUSAND DOLLARS NOR
 PROHIBIT THE USE OF WORDS OR PHRASES OR FORMS OF AGREEMENT  REQUIRED  BY
 STATE OR FEDERAL LAW, RULE OR REGULATION OR BY A GOVERNMENTAL INSTRUMEN-
 TALITY.
   C.  A  VIOLATION  OF  THE  PROVISIONS OF SUBDIVISION B OF THIS SECTION
 SHALL NOT RENDER ANY SUCH  AGREEMENT  VOID  OR  VOIDABLE  NOR  SHALL  IT
 CONSTITUTE:
   1. A DEFENSE TO ANY ACTION OR PROCEEDING TO ENFORCE SUCH AGREEMENT; OR
   2. A DEFENSE TO ANY ACTION OR PROCEEDING FOR BREACH OF SUCH AGREEMENT.
   D.  IN  ADDITION  TO ANY OTHER PROVISION OF THIS SECTION, WHENEVER THE
 ATTORNEY GENERAL FINDS THAT THERE HAS BEEN A VIOLATION OF THIS  SECTION,
 HE  OR  SHE  MAY  PROCEED  AS  PROVIDED IN SUBDIVISION TWELVE OF SECTION
 SIXTY-THREE OF THE EXECUTIVE LAW.
   § 3. Section 173 of the banking law is amended by adding a new  subdi-
 vision 4 to read as follows:
   4.  ALL  RIGHTS  AND  PRIVILEGES GRANTED UNDER THIS SECTION TO PERSONS
 SHALL ALSO APPLY TO SMALL BUSINESSES. FOR PURPOSES OF THIS  SUBDIVISION,
 A  SMALL  BUSINESS  SHALL  BE DEEMED TO BE ONE WHICH IS RESIDENT IN THIS
 STATE, INDEPENDENTLY OWNED AND OPERATED, NOT DOMINANT IN ITS  FIELD  AND
 EMPLOYS ONE HUNDRED OR LESS PERSONS.
   §  4. Section 380-e of the banking law, as separately amended by chap-
 ters 349 and 1072 of the laws of 1968, is amended to read as follows:
   § 380-e. Effect of usury. The knowingly taking, receiving,  reserving,
 or  charging  by a savings and loan association of interest, as computed
 pursuant to this article, at a rate greater than such rate  of  interest
 as  may  be authorized by law shall be held and adjudged a forfeiture of
 the entire interest which the note or other  evidence  of  debt  carries
 with  it,  or  which has been agreed to be paid thereon. If such greater
 rate of interest has been paid, the person paying the same or his  legal
 representatives  may recover from the savings and loan association twice
 the entire amount of the interest thus paid.  Nothing  in  this  section
 shall be deemed to affect the powers of any savings and loan association
 with  respect  to  loans  or  investments it is authorized to make.  THE
 RIGHTS AND PRIVILEGES GRANTED UNDER THIS SECTION  SHALL  ALSO  APPLY  TO
 SMALL  BUSINESSES.  FOR PURPOSES OF THIS SECTION, A SMALL BUSINESS SHALL
 BE DEEMED TO BE ONE WHICH IS RESIDENT IN THIS STATE, INDEPENDENTLY OWNED
 AND OPERATED, NOT DOMINANT IN ITS FIELD AND EMPLOYS ONE HUNDRED OR  LESS
 PERSONS.
   § 5. This act shall take effect immediately.

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