S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                    979
 
                        2021-2022 Regular Sessions
 
                           I N  A S S E M B L Y
 
                              January 6, 2021
                                ___________
 
 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  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:
 
   Section 1. Sections 802, 803, 804, 805, 806, 807 and 812 of the finan-
 cial services law, as added by 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, are amended to read as
 follows:
   §  802.  Exemptions.  This  article  shall not apply to, and shall not
 place any additional  requirements  or  obligations  upon,  any  of  the
 following:
   (a) a financial institution;
   (b) a person acting in its capacity as a technology services provider,
 such  as licensing software and providing support services, to an entity
 exempt under this section for use as part of the exempt entity's commer-
 cial financing  program,  provided  such  person  has  no  interest,  or
 arrangement  or  agreement  to  purchase  any interest in the commercial
 financing extended by the exempt entity in connection with such program;
   (c) a lender regulated under the federal Farm Credit  Act  (12  U.S.C.
 Sec. 2001 et seq.);

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

                                                            LBD07200-01-1

 A. 979                              2
 
   (d) a commercial financing transaction secured by real property;
   (e)  a  lease  as defined in section 2-A-103 of the uniform commercial
 code;
   (f) any person or provider who makes  no  more  than  five  commercial
 financing transactions in this state in a twelve-month period; [or]
   (g)  an  individual commercial financing transaction in an amount over
 TWO MILLION five hundred thousand dollars[.]; OR
   (H) A COMMERCIAL FINANCING TRANSACTION IN WHICH  THE  RECIPIENT  IS  A
 DEALER  AS  DEFINED  IN  SECTION FOUR HUNDRED FIFTEEN OF THE VEHICLE AND
 TRAFFIC LAW, OR AN AFFILIATE OF SUCH  A  DEALER,  OR  A  RENTAL  VEHICLE
 COMPANY  AS DEFINED IN SECTION THREE HUNDRED NINETY-SIX-Z OF THE GENERAL
 BUSINESS LAW, OR AN AFFILIATE OF SUCH A COMPANY PURSUANT TO A COMMERCIAL
 FINANCING AGREEMENT OR COMMERCIAL OPEN-END CREDIT PLAN OF AT LEAST FIFTY
 THOUSAND DOLLARS, INCLUDING ANY COMMERCIAL LOAN MADE PURSUANT TO SUCH  A
 COMMERCIAL FINANCING TRANSACTION.
   §  803.  Sales-based  financing  disclosure  requirements.  A provider
 subject to this article shall provide the  following  disclosures  to  a
 recipient  at  the  time  of  extending  a specific offer of sales-based
 financing according to formatting prescribed by the superintendent:
   (a) The total amount of the commercial financing, and the disbursement
 amount, if different from the financing amount, after any fees  deducted
 or withheld at disbursement.
   (b) The finance charge.
   (c)  The  estimated  annual  percentage  rate,  using the words annual
 percentage rate or the abbreviation "APR", expressed as a  yearly  rate,
 inclusive  of any fees and finance charges, and calculated in accordance
 with the federal Truth  in  Lending  Act,  Regulation  Z,  12  C.F.R.  §
 1026.22,  based  on  the  estimated  term of repayment and the projected
 periodic payment amounts, REGARDLESS OF WHETHER SUCH ACT OR  SUCH  REGU-
 LATION WOULD REQUIRE SUCH A CALCULATION. The estimated term of repayment
 and  the projected periodic payment amounts shall be calculated based on
 the projection of the recipient's  sales,  called  the  projected  sales
 volume.  The  projected sales volume may be calculated using the histor-
 ical method or the opt-in method. The provider shall provide  notice  to
 the  superintendent  on  which  method  they  intend  to  use across all
 instances of sales-based  financing  offered  in  calculating  estimated
 annual percentage rate pursuant to this section.
   (i)  The  provider  using  the  historical method shall use an average
 historical volume of sales or revenue by which the  financing's  payment
 amounts  are  based  and  the estimated annual percentage rate is calcu-
 lated. The provider shall fix the historical time period used to  calcu-
 late  the  average historical volume and use such period for all disclo-
 sure purposes for all sales-based financing products offered.  The fixed
 historical time period shall either be the preceding  time  period  from
 the specific offer or, alternatively, the provider may use average sales
 for  the  same number of months with the highest sales volume within the
 past twelve months. The fixed historical time period shall  be  no  less
 than one month and not exceed twelve months.
   (ii)  The  provider  using the opt-in method shall determine the esti-
 mated annual percentage rate, the  estimated  term,  and  the  projected
 payments,  using  a  projected sales volume that the provider elects for
 each disclosure, provided, that they participate  in  a  review  process
 prescribed  by the superintendent. A provider shall, on an annual basis,
 report data to the superintendent of estimated annual  percentage  rates
 disclosed  to  the  recipient and actual retrospective annual percentage
 rates of completed transactions. The report shall contain such  informa-

 A. 979                              3
 
 tion  as  the  superintendent,  by  rule or regulation, may prescribe as
 necessary or appropriate for the purpose of making  a  determination  of
 whether  the  deviation between the estimated annual percentage rate and
 actual  retrospective  annual percentage rates of completed transactions
 was reasonable. The superintendent shall establish the method of report-
 ing and may, upon a finding that the use of projected  sales  volume  by
 the provider has resulted in an unacceptable deviation between estimated
 and  actual  annual  percentage  rate,  require  the provider to use the
 historical method.  The superintendent may consider unusual and extraor-
 dinary circumstances impacting the provider's  deviation  between  esti-
 mated  and  actual  annual  percentage rate in the determination of such
 finding.
   (d) The total repayment amount, which is the disbursement amount  plus
 the finance charge.
   (e) The estimated term is the period of time required for the periodic
 payments, based on the projected sales volume, to equal the total amount
 required to be repaid.
   (f) The payment amounts, based on the projected sales volume:
   (i)  for  payment  amounts  that  are  fixed,  the payment amounts and
 frequency (e.g., daily, weekly, monthly), and, if the payment  frequency
 is  other than monthly, the amount of the average projected payments per
 month; or
   (ii) for payment amounts that are variable, a payment  schedule  or  a
 description of the method used to calculate the amounts and frequency of
 payments, and the amount of the average projected payments per month.
   (g) A description of all other potential fees and charges not included
 in  the  finance  charge, including, but not limited to, draw fees, late
 payment fees, and returned payment fees.
   (h) Were the recipient to elect to pay off or refinance the commercial
 financing prior to full repayment, the provider must disclose:
   (i) whether the recipient would be required to pay any finance charges
 other than interest accrued since their last payment. If so,  disclosure
 of  the percentage of any unpaid portion of the finance charge and maxi-
 mum dollar amount the recipient could be required to pay; and
   (ii) whether the recipient would be required  to  pay  any  additional
 fees not already included in the finance charge.
   (i) A description of collateral requirements or security interests, if
 any.
   §  804.  Closed-end  commercial financing disclosure requirements.   A
 provider, subject to this article, shall provide the  following  disclo-
 sures  to  a  recipient  at  the  time of extending a specific offer for
 closed-end financing according to formatting prescribed  by  the  super-
 intendent:
   (a) The total amount of the commercial financing, and the disbursement
 amount,  if different from the financing amount, after any fees deducted
 or withheld at disbursement.
   (b) The finance charge.
   (c) The annual percentage rate, using only the words annual percentage
 rate or the abbreviation "APR", expressed as a yearly rate, inclusive of
 any fees and finance charges that cannot be avoided by a recipient,  and
 calculated  in  accordance  with the federal Truth in Lending Act, Regu-
 lation Z, 12 C.F.R. § 1026.22, REGARDLESS OF WHETHER SUCH  ACT  OR  SUCH
 REGULATION WOULD REQUIRE SUCH A CALCULATION.
   (d)  The total repayment amount, which is the disbursement amount plus
 the finance charge.
   (e) The term of the financing.

 A. 979                              4
 
   (f) The payment amounts:
   (i)  for  payment  amounts  that  are  fixed,  the payment amounts and
 frequency (e.g., daily, weekly, monthly), and, if  the  term  is  longer
 than one month, the average monthly payment amount; or
   (ii) for payment amounts that are variable, a full payment schedule or
 a  description of the method used to calculate the amounts and frequency
 of payments, and, if the term is longer than one  month,  the  estimated
 average monthly payment amount.
   (g)  A description of all other potential fees and charges that can be
 avoided by the recipient, including, but not limited  to,  late  payment
 fees and returned payment fees.
   (h) Were the recipient to elect to pay off or refinance the commercial
 financing prior to full repayment, the provider must disclose:
   (i) whether the recipient would be required to pay any finance charges
 other  than interest accrued since their last payment. If so, disclosure
 of the percentage of any unpaid portion of the finance charge and  maxi-
 mum dollar amount the recipient could be required to pay; and
   (ii)  whether  the  recipient  would be required to pay any additional
 fees not already included in the finance charge.
   (i) A description of collateral requirements or security interests, if
 any.
   §  805.  Open-end  commercial  financing  disclosure  requirements.  A
 provider,  subject  to this article, shall provide the following disclo-
 sures to a recipient at the time of extending a specific offer for open-
 end financing according to formatting prescribed by the superintendent:
   (a) The maximum amount of credit available to the recipient (e.g., the
 credit line amount), and the amount scheduled to be drawn by the recipi-
 ent at the time the offer is extended, if any, less any fees deducted or
 withheld at disbursement.
   (b) The finance charge.
   (c) The annual percentage rate, using only the words annual percentage
 rate or the abbreviation "APR", expressed  as  a  nominal  yearly  rate,
 inclusive  of  any  fees and finance charges that cannot be avoided by a
 recipient, and calculated in accordance with the federal Truth in  Lend-
 ing  Act,  Regulation  Z,  12  C.F.R. § 1026.22 and based on the maximum
 amount of credit available to the recipient and the term resulting  from
 making  the  minimum  required payments term as disclosed, REGARDLESS OF
 WHETHER SUCH ACT OR SUCH REGULATION WOULD REQUIRE SUCH A CALCULATION.
   (d) The total repayment amount, which is the  draw  amount,  less  any
 fees deducted or withheld at disbursement, plus the finance charge.  The
 total  repayment  amount shall assume a draw amount equal to the maximum
 amount of credit available to the recipient if drawn and  held  for  the
 duration of the term or draw period.
   (e)  The  term  of the plan, if applicable, or the period over which a
 draw is amortized.
   (f) The payment frequency and amounts, based on the  assumptions  used
 in   the   calculation  of  the  annual  percentage  rate,  including  a
 description of payment amount requirements such  as  a  minimum  payment
 amount,  and  if the payment frequency is other than monthly, the amount
 of the average projected payments per month.  For payment  amounts  that
 are  variable,  the  provider  should  include  a payment schedule, or a
 description of the method used to calculate the amounts and frequency of
 payments, and the estimated average monthly payment amount.
   (g) A description of all other potential fees and charges that can  be
 avoided by the recipient, including, but not limited to, draw fees, late
 payment fees, and returned payment fees.

 A. 979                              5
 
   (h) Were the recipient to elect to pay off or refinance the commercial
 financing prior to full repayment, the provider must disclose:
   (i) whether the recipient would be required to pay any finance charges
 other  than interest accrued since their last payment. If so, disclosure
 of the percentage of any unpaid portion of the finance charge and  maxi-
 mum dollar amount the recipient could be required to pay; and
   (ii)  whether  the  recipient  would be required to pay any additional
 fees not already included in the finance charge.
   (i) A description of collateral requirements or security interests, if
 any.
   § 806. Factoring transaction disclosure  requirements.    A  provider,
 subject  to  this  article, shall provide the following disclosures to a
 recipient at the time of extending a  specific  offer  for  a  factoring
 transaction according to formatting prescribed by the superintendent:
   (a) The amount of the receivables purchase price paid to the recipient
 and,  if  different from the purchase price, the amount disbursed to the
 recipient after any fees deducted or withheld at disbursement.
   (b) The finance charge.
   (c) The estimated annual percentage rate, using that term,  calculated
 according to the federal Truth in Lending Act, Regulation Z, 12 C.F.R. §
 1026  Appendix  J,  as  a  "single advance, single payment transaction",
 REGARDLESS OF WHETHER SUCH ACT OR SUCH REGULATION WOULD REQUIRE  SUCH  A
 CALCULATION.  To  calculate  the  estimated  annual percentage rate, the
 purchase amount is considered the financing amount, the purchase  amount
 minus  the finance charge is considered the payment amount, and the term
 is established by the payment due date of the receivables. As an  alter-
 nate method of establishing the term, the provider may estimate the term
 for  a  factoring transaction as the average payment period, its histor-
 ical data over a period  not  to  exceed  the  previous  twelve  months,
 concerning payment invoices paid by the party owing the accounts receiv-
 able in question.
   (d)  The  total  payment amount, which is the purchase amount plus the
 finance charge.
   (e) A description of all other potential fees and charges that can  be
 avoided by the recipient.
   (f)  A  description  of  the  receivables purchased and any additional
 collateral requirements or security interests.
   § 807. Other forms of financing disclosure  requirements.  The  super-
 intendent  may  require  disclosure  by  a provider extending a specific
 offer of commercial financing which is not open-end  financing,  closed-
 end  financing,  sales-based  financing,  or  factoring  transaction but
 otherwise meets the definition of commercial financing  as  provided  in
 this  article.  Subject to such rules and regulations by the superinten-
 dent, a provider subject to this article  shall  provide  the  following
 disclosures  to a recipient at the time of extending a specific offer of
 other forms of financing  according  to  formatting  prescribed  by  the
 superintendent:
   (a) The total amount of the commercial financing, and the disbursement
 amount,  if different from the financing amount, after any fees deducted
 or withheld at disbursement.
   (b) The finance charge.
   (c) The annual percentage rate, using only the words annual percentage
 rate or the abbreviation "APR", expressed as a yearly rate, inclusive of
 any fees and finance charges, and  calculated  in  accordance  with  the
 relevant  sections  of the federal Truth in Lending Act, Regulation Z or

 A. 979                              6
 
 this article, REGARDLESS OF WHETHER SUCH ACT OR  SUCH  REGULATION  WOULD
 REQUIRE SUCH A CALCULATION.
   (d)  The  total repayment amount which is the disbursement amount plus
 the finance charge.
   (e) The term of the financing.
   (f) The payment amounts:
   (i) for payment amounts  that  are  fixed,  the  payment  amounts  and
 frequency  (e.g.,  daily,  weekly,  monthly),  and  the  average monthly
 payment amount; or
   (ii) for payment amounts that are variable, a payment  schedule  or  a
 description of the method used to calculate the amounts and frequency of
 payments, and the estimated average monthly payment amount.
   (g)  A description of all other potential fees and charges that can be
 avoided by the recipient, including, but not limited  to,  late  payment
 fees and returned payment fees.
   (h) Were the recipient to elect to pay off or refinance the commercial
 financing prior to full repayment, the provider must disclose:
   (i) whether the recipient would be required to pay any finance charges
 other  than interest accrued since their last payment. If so, disclosure
 of the percentage of any unpaid portion of the finance charge and  maxi-
 mum dollar amount the recipient could be required to pay; and
   (ii)  whether  the  recipient  would be required to pay any additional
 fees not already included in the finance charge.
   (i) A description of collateral requirements or security interests, if
 any.
   § 812. Penalties. (a) Upon a finding  by  the  superintendent  that  a
 provider  has  violated  the  provisions of this article or the rules or
 regulations promulgated hereunder, the provider shall be ordered to  pay
 to  the  people of this state a civil penalty for each violation of this
 article or any regulation or policy promulgated hereunder a sum  not  to
 exceed  two  thousand dollars for each violation or where such violation
 is willful ten thousand dollars for each violation.
   (b) In addition to any penalty imposed pursuant to subdivision (a)  of
 this  section,  upon a finding by the superintendent that a provider has
 knowingly violated this article, the superintendent may order additional
 relief, including, but not limited to, RESTITUTION  OR  a  permanent  or
 preliminary  injunction  on  behalf  of  any  recipient  affected by the
 violation.
   § 2. Section 2 of a chapter of the laws of 2020, amending  the  finan-
 cial  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, is amended to read  as
 follows:
   §  2.  NOTHING  IN THIS ACT SHALL AUTHORIZE TRANSACTIONS IN THIS STATE
 WHICH ARE OTHERWISE ILLEGAL OR ALLOW AN ENTITY OR INDIVIDUAL TO  OPERATE
 IN  THIS  STATE  WITHOUT  A  LICENSE  WHERE A LICENSE WOULD OTHERWISE BE
 REQUIRED.
   § 3. This act shall take effect [on  the  one  hundred  eightieth  day
 after  it shall have become a law] JANUARY 1, 2022. EFFECTIVE IMMEDIATE-
 LY, THE ADDITION, AMENDMENT AND/OR REPEAL OF  ANY  RULE  OR  REGULATION,
 NECESSARY  FOR  THE IMPLEMENTATION OF THIS ACT ON ITS EFFECTIVE DATE ARE
 AUTHORIZED TO BE MADE AND COMPLETED BY THE SUPERINTENDENT  OF  FINANCIAL
 SERVICES ON OR BEFORE SUCH EFFECTIVE DATE.
   §  3.  This act shall take effect immediately; provided, however, that
 the amendments to sections 802, 803, 804, 805, 806, 807 and 812  of  the

 A. 979                              7
 
 financial  services  law made by section 1 of this act shall take effect
 on the same date and in the same manner as 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 recip-
 ient  to  disclose certain information about the offer to the recipient,
 as proposed in legislative bills numbers S.5470-B and A.10118-A.