NY State Senate Bill 2023-S6742

Senate Bill S6742

2023-2024 Legislative Session

Grants the department of financial services jurisdiction over the financing of motor vehicles

download bill text pdf

Current Bill Status - In Senate Committee Banks 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
Jan 03, 2024	referred to banks
May 08, 2023	referred to banks

2023-S6742 (ACTIVE) - Details

Current Committee:: Senate Banks
Law Section:: Financial Services Law
Laws Affected:: Amd §§104, 205 & 301, Fin Serv L; add §§419-b, 419-c & 419-d, amd §415, V & T L; amd §302, Pers Prop L
Versions Introduced in Other Legislative Sessions:: 2015-2016: S5489
2017-2018: S5278
2019-2020: S1956
2021-2022: S239

2023-S6742 (ACTIVE) - Summary

Grants the department of financial services jurisdiction over the financing of motor vehicles; requires motor vehicle dealer finance managers to be licensed by the department of financial services.

2023-S6742 (ACTIVE) - Sponsor Memo

                                 
BILL NUMBER: S6742

SPONSOR: THOMAS
 
TITLE OF BILL:

An act to amend the financial services law, in relation to the jurisdic-
tion of the department of financial services over the financing of motor
vehicles; to amend the vehicle and traffic law, in relation to the
licensing of motor vehicle dealer finance managers and requiring certain
mandatory disclosures by motor vehicle dealers; and to amend the
personal property law, in relation to the right of cancellation

 
PURPOSE:

To give the Department of Financial Services jurisdiction over auto
financing and to provide greater transparency to the consumer regarding
the pricing and financing of motor vehicles.

 
SUMMARY OF PROVISIONS:

Section 1 amends subparagraph (B) of paragraph 2 of subsection (a) of
section 104 of the financial services law to provide that all motor

vehicle sales financing transactions, whether said financing is origi-
nated at an auto dealership or a lending institution, shall fall under
the jurisdiction of the Department of Financial Services as a "financial
product or service."

Section 2 amends the opening paragraph of section 205 of the financial
services law to add a subsection (b) which authorizes the Superintendent
of the Department of Financial Services to establish a motor vehicle
financing bureau, and to promulgate all rules and regulations necessary
to regulate motor vehicle financing transactions and motor vehicle
financing departments.

Section 3 adds four new paragraphs to subsection (c) of section 301 of
the financial services law which will allow the Department of Financial
services to (1) promulgate rules and regulations for motor vehicle deal-
er finance departments and finance managers, (2) establish educational
materials and/or mandated instructional course(s) for motor vehicle
dealer finance managers who must also apply for licensing, (3) impose a
licensing and course fee for motor vehicle dealer finance manager appli-
cants, not to exceed $200 and 16 hours of instruction per every two
years, and establish and impose penalties, including license suspensions
and revocations for violations of Department of Financial Services regu-
lations by motor vehicle dealers and motor vehicle finance managers.

Section 4 amends subdivision 3 of section 415 of the vehicle and traffic
law to require that any auto dealer who sells motor vehicles which are
financed, or who facilitates in any way the financing of motor vehicles,
must act as or employ a finance manager licensed by the Department of
Financial Services. Every finance manager must complete the licensing
course mandated by the Department of Financial Services.

Section 5 adds a new section 419-b to vehicle and traffic law to require
mandatory disclosures by dealers to purchasers regarding pricing. Every
dealer must post the total sales price and the total sales price of any
add-on product offered for sale. Violators of this section are subject
to a civil penalty of $500 dollars for the first violation, $750 dollars
for the second violation, and $1000 for the third violation.
Section 6 adds a new section 419-c to vehicle and traffic law to require
mandatory disclosures by dealers to consumers regarding financing. This
section forbids dealers or officers thereof from representing that
social security income and social security disability income as a sole
source of income is sufficient to securing motor vehicle financing.
Also, dealers must disclose to each prospective purchaser all financing
offers received by the dealer, including any mark up in the cost of such
motor vehicle.

Section 7 adds a new section 419-d to vehicle and traffic law to require
mandatory disclosures by motor vehicle dealers to the department of
financial services. The disclosure must be made annually to DFS disclos-
ing how many vehicle purchasers obtained financing from the dealer and
how many obtained a loan from a financial institution. Dealers must also
disclose certain borrower and vehicle information including borrower
credit score, monthly payment, and make, model, and value of the vehicle
purchased, amongst other information.

Section 8 amends subdivision 3 of section 302 of the personal property
law to provide buyer with an option to cancel the a contract for the
purchase of an automobile within 48 hours of signing or until they
receive a copy of the signed contract, whichever is longer to cancel.

Section 9 states that this act shall take effect a year after it shall
have become a law.

 
EXISTING LAW:

Under current law, auto dealers are not subject to the regulatory
authority of the Department of Financial Services. Dealer financing
departments are generally unregulated and have little oversight with few
universal regulations that apply to auto dealer financing transactions.

 
JUSTIFICATION:

Abuses in auto lending (typically originated at dealerships) are ramp-
ant. Scams targeting consumers involve fraudulent loan applications,
inflated vehicle sale prices, inflated application income levels, false
employment information, and addition of add-ons like (sometimes nonex-
istent) warranties and insurances, etc. In addition, misleading adver-
tising and marketing campaigns make false promises to target the most
vulnerable New Yorkers, such as those who have poor credit, the disa-
bled, the elderly, or, those that rely on public benefits as their sole
source of income. These financing scams are very lucrative for car deal-
erships; but often leave consumers thousands of dollars in debt, saddled
with vehicles they can never have been reasonably expected to afford,
and with few avenues of recovery. What's worse, in some cases, finance
managers have moved from dealer to dealer perpetrating the same fraudu-
lent activities with no licensing requirements, state oversight, or a
licensing registry to prevent them from doing so.

Currently, there are few universal regulations in the financial divi-
sions of car dealerships. Despite these regulations, dealerships often
behave like lenders and many times are lenders (even though they sell
loans to larger banks and lenders almost immediately after a sale takes
place.) Regulating dealerships' finance departments could help bring
them in line with consumer protection regulations in the banking indus-
try and standardize practices to protect consumers.
The Department of Financial Services currently does not have jurisdic-
tion over lenders who are also sellers of goods (the auto dealerships,
in this case). Giving the Department of Financial Services jurisdiction
over dealership finance managers and their financing activities, requir-
ing auto dealers to designate a finance manager, and requiring mandatory
disclosures will help to deter deceptive, fraudulent, and criminal
activity that takes place in dealer financing departments. Authorizing
the Department of Financial Services to establish a licensing course
and/or educational materials for finance managers will help auto dealer-
ships in better understanding the regulations in the financing industry
and ensure that they are complying with all laws, rules, and regulations
necessary to protect consumers.

 
LEGISLATIVE HISTORY:

2021-22: S.239 (Thomas)- Reported and committed to Rules.

2019-20: S.1956 (Thomas) / A.4928 (Blake) - Reported and committed to
Consumer Protection.

 
FISCAL IMPLICATIONS:

None.

 
LOCAL FISCAL IMPLICATIONS:

None.

 
EFFECTIVE DATE:
This act shall take effect one year after it shall have become a law.

2023-S6742 (ACTIVE) - Bill Text download pdf

                             
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
     S. 6742                                                  A. 6869
 
                        2023-2024 Regular Sessions
 
                       S E N A T E - A S S E M B L Y
 
                                May 8, 2023
                                ___________
 
 IN  SENATE -- Introduced by Sen. THOMAS -- read twice and ordered print-
   ed, and when printed to be committed to the Committee on Banks
 
 IN ASSEMBLY -- 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 the jurisdic-
   tion  of  the  department  of financial services over the financing of
   motor vehicles; to amend the vehicle and traffic law, in  relation  to
   the  licensing  of motor vehicle dealer finance managers and requiring
   certain mandatory disclosures by motor vehicle dealers; and  to  amend
   the personal property law, in relation to the right of cancellation
 
   THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
 BLY, DO ENACT AS FOLLOWS:
 
   Section 1. Subparagraph (B)  of  paragraph  2  of  subsection  (a)  of
 section 104 of the financial services law is amended to read as follows:
   (B)  "Financial product or service" shall also not include the follow-
 ing, when offered or  provided  by  a  provider  of  consumer  goods  or
 services:  (i) the extension of credit directly to a consumer exclusive-
 ly  for  the purpose of enabling that consumer to purchase such consumer
 good or service directly from the seller, (ii) the  collection  of  debt
 arising  from  such credit, or (iii) the sale or conveyance of such debt
 that is delinquent or otherwise in default.  PROVIDED, HOWEVER, THAT THE
 PROVISIONS OF THIS SUBPARAGRAPH SHALL NOT APPLY TO  THE  SALE  OF  MOTOR
 VEHICLES. EVERY SALE OF A MOTOR VEHICLE THAT INVOLVES FINANCING, WHETHER
 ORIGINATED  AT A MOTOR VEHICLE DEALER OR AT A LENDING INSTITUTION, SHALL
 BE DEEMED TO BE A "FINANCIAL PRODUCT OR SERVICE" WITHIN THE JURISDICTION
 OF THE DEPARTMENT.
   § 2. The opening paragraph of section 205 of  the  financial  services
 law  is  designated  subsection (a) and a new subsection (b) is added to
 read as follows:

  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                       [ ] is old law to be omitted.
                                                            LBD02286-01-3
 S. 6742                             2                            A. 6869

 
   (B) THE SUPERINTENDENT MAY, IN HIS  OR  HER  DISCRETION,  ESTABLISH  A
 MOTOR  VEHICLE FINANCING BUREAU, AND TO PROMULGATE ANY AND ALL RULES AND
 REGULATIONS NECESSARY TO REGULATE MOTOR VEHICLE  FINANCING  TRANSACTIONS
 AND MOTOR VEHICLE DEALER FINANCING DEPARTMENTS.
   § 3. Paragraphs 6 and 7 of subsection (c) of section 301 of the finan-
 cial  services  law  are amended and four new paragraphs 8, 9, 10 and 11
 are added to read as follows:
   (6) providing technical assistance to local governments  and  not-for-
 profits  in the development of consumer protection measures with respect
 to financial products and services; [and]
   (7)  continuing  and  expanding  the  detection,   investigation   and
 prevention of insurance fraud[.];
   (8)  PROMULGATING  RULES  AND  REGULATIONS  FOR  MOTOR  VEHICLE DEALER
 FINANCE DEPARTMENTS AND FINANCE MANAGERS;
   (9) ESTABLISHING EDUCATIONAL MATERIALS AND/OR MANDATED INSTRUCTION FOR
 MOTOR VEHICLE DEALER FINANCE MANAGERS APPLYING FOR LICENSING PURSUANT TO
 PARAGRAPH D OF SUBDIVISION THREE OF SECTION FOUR HUNDRED FIFTEEN OF  THE
 VEHICLE  AND  TRAFFIC  LAW.  NO  SUCH  MANDATE  INSTRUCTION SHALL EXCEED
 SIXTEEN HOURS DURING ANY BIENNIAL LICENSING PERIOD;
   (10) IMPOSING A LICENSING AND COURSE  FEE  FOR  MOTOR  VEHICLE  DEALER
 FINANCE  MANAGER APPLICANTS PURSUANT TO PARAGRAPH D OF SUBDIVISION THREE
 OF SECTION FOUR HUNDRED FIFTEEN OF THE VEHICLE AND TRAFFIC LAW; PROVIDED
 THAT SUCH FEE SHALL NOT EXCEED TWO HUNDRED  DOLLARS  FOR  EACH  BIENNIAL
 LICENSING PERIOD; AND
   (11)  ESTABLISHING AND IMPOSING PENALTIES, AND LICENSE SUSPENSIONS AND
 REVOCATIONS FOR VIOLATIONS BY MOTOR VEHICLE DEALERS  AND  MOTOR  VEHICLE
 DEALER FINANCE MANAGERS.
   §  4.  Subdivision  3 of section 415 of the vehicle and traffic law is
 amended by adding a new paragraph d to read as follows:
   D. (I) EVERY DEALER WHICH SELLS MOTOR VEHICLES THAT ARE  FINANCED,  OR
 WHICH  FACILITATES  IN  ANY  MANNER THE FINANCING OF THE PURCHASE OF ANY
 MOTOR VEHICLE, SHALL ACT AS OR  EMPLOY  AN  INDIVIDUAL  TO  ACT  AS  THE
 FINANCE  MANAGER  FOR  SUCH  DEALER,  AND  EVERY  SUCH  MANAGER SHALL BE
 LICENSED BY THE DEPARTMENT OF FINANCIAL SERVICES.
   (II) EVERY LICENSED FINANCE MANAGER SHALL HAVE COMPLETED  SUCH  COURSE
 OF  INSTRUCTION  AS  SHALL BE ESTABLISHED BY THE DEPARTMENT OF FINANCIAL
 SERVICES.
   § 5. The vehicle and traffic law is amended by adding  a  new  section
 419-b to read as follows:
   §  419-B.  MANDATORY  DISCLOSURES  BY  DEALERS TO PURCHASERS REGARDING
 PRICING. 1. EVERY DEALER SHALL CLEARLY AND CONSPICUOUSLY POST:
   A. THE TOTAL SALES PRICE,  WHICH  SHALL  INCLUDE  ANY  ADMINISTRATIVE,
 SERVICE  OR OTHER FEES CHARGED BY THE DEALER, EXCLUSIVE OF ALL TAXES AND
 FEES FOR SECURING A REGISTRATION OR CERTIFICATE OF TITLE, OF EACH  MOTOR
 VEHICLE OFFERED FOR SALE AT THE PLACE OF BUSINESS, BY MEANS OF A SIGN ON
 THE  DASHBOARD  OF EACH MOTOR VEHICLE OR BY MEANS OF A SIGN AT THE POINT
 OF DISPLAY OF EACH MOTOR VEHICLE; AND
   B. THE TOTAL SALES PRICE OF ANY ADD-ON PRODUCT  OFFERED  FOR  SALE  BY
 MEANS  OF A SIGN AT THE POINT OF DISPLAY OF EACH MOTOR VEHICLE FOR WHICH
 SUCH PRODUCT IS AVAILABLE FOR PURCHASE, OR AT EACH LOCATION  WITHIN  THE
 DEALER'S  PLACE  OF BUSINESS WHERE ANY SUCH PRODUCT IS OFFERED FOR SALE.
 SUCH SIGN SHALL INFORM CONSUMERS THAT THE PURCHASE OF ANY ADD-ON PRODUCT
 IS OPTIONAL AND THAT THE PURCHASE OF AN ADD-ON PRODUCT IS  NOT  REQUIRED
 TO OBTAIN FINANCING.
 S. 6742                             3                            A. 6869
 
   IF MULTIPLE ADD-ON PRODUCTS ARE GROUPED TOGETHER ON THE SAME SIGN EACH
 ADD-ON  PRODUCT  MUST  BE  LISTED  SEPARATELY    TO  THE  RIGHT  OF  THE
 DESCRIPTION.
   2. NOTHING IN THIS SECTION SHALL PREVENT A DEALER FROM SELLING A MOTOR
 VEHICLE OR AN ADD-ON PRODUCT AT A LOWER SALES PRICE THAN THE PRICE POST-
 ED PURSUANT TO SUBDIVISION ONE OF THIS SECTION.
   3.  ANY  PERSON  WHO  VIOLATES  SUBDIVISION ONE OF THIS SECTION OR ANY
 OTHER APPLICABLE RULE OR REGULATION SHALL BE SUBJECT TO A CIVIL  PENALTY
 OF NOT MORE THAN THE FOLLOWING:
   A. FIVE HUNDRED DOLLARS FOR THE FIRST VIOLATION;
   B. SEVEN HUNDRED FIFTY DOLLARS FOR A SECOND VIOLATION COMMITTED WITHIN
 ONE YEAR OF THE FIRST VIOLATION; AND
   C.  ONE  THOUSAND  DOLLARS  FOR  A  THIRD  OR ANY SUBSEQUENT VIOLATION
 COMMITTED WITHIN ONE YEAR OF THE FIRST VIOLATION.
   4. FOR THE PURPOSES OF  ASSESSING  A  CIVIL  PENALTY,  ALL  VIOLATIONS
 COMMITTED  BY  THE  SAME  DEALER  ON  THE  SAME  DAY  SHALL COUNT AS ONE
 VIOLATION.
   § 6. The vehicle and traffic law is amended by adding  a  new  section
 419-c to read as follows:
   §  419-C.  MANDATORY  DISCLOSURES  BY  DEALERS  TO CONSUMERS REGARDING
 FINANCING. 1. EVERY DEALER SHALL DISCLOSE TO EACH PROSPECTIVE  PURCHASER
 OF  A  MOTOR  VEHICLE  THAT SUCH PURCHASER MAY OBTAIN FINANCING FROM THE
 DEALER OR MAY OBTAIN A LOAN FROM A FINANCIAL INSTITUTION.
   2. EVERY DEALER SHALL VERIFY THE INCOME AND EMPLOYMENT INFORMATION  OF
 EACH  PROSPECTIVE  PURCHASER SEEKING FINANCING FROM THE DEALER. A DEALER
 SHALL NOT REPRESENT THAT  BENEFITS  RECEIVED  AS  SUPPLEMENTAL  SECURITY
 INCOME  OR  SOCIAL SECURITY DISABILITY INCOME SHALL BE A SOLE SUFFICIENT
 SOURCE OF INCOME FOR THE PURPOSE  OF  SECURING  CONSUMER  MOTOR  VEHICLE
 FINANCING.
   3.  EVERY  DEALER  SHALL  DISCLOSE  TO  EACH PROSPECTIVE PURCHASER ALL
 FINANCING OFFERS RECEIVED BY THE DEALER, INCLUDING ANY MARK  UP  IN  THE
 COST  OF SUCH MOTOR VEHICLE.  FOR THE PURPOSE OF THIS SECTION, "MARK UP"
 SHALL MEAN THE WHOLESALE ANNUAL PERCENTAGE RATE  (APR)  OVER  WHICH  THE
 DEALER  MAKES  A  PROFIT  WHEN  IT NEGOTIATES A RETAIL APR WITH A CREDIT
 PURCHASER.  NO DEALER MARK UP SHALL EXCEED TWO PERCENT  FOR  LOANS  WITH
 TERMS OF SIXTY MONTHS OR LESS OR ONE AND ONE-HALF PERCENT FOR LOANS WITH
 A TERM OVER SIXTY MONTHS.
   4.  DEALERS  SHALL  DISCLOSE  TO EACH PROSPECTIVE PURCHASER WHENEVER A
 LOAN HAS AN APR THAT IS HIGHER THAN THE AVERAGE PRIME OFFER RATE.
   5. THE SUPERINTENDENT OF FINANCIAL SERVICES SHALL CREATE  A  STANDARD-
 IZED FORM FOR FINANCING DISCLOSURES.
   6. FAILURE BY A DEALER TO COMPLY WITH THIS SECTION MAY RESULT IN REVO-
 CATION OR SUSPENSION OF THE DEALER'S LICENSE.
   §  7.  The  vehicle and traffic law is amended by adding a new section
 419-d to read as follows:
   § 419-D. MANDATORY DISCLOSURES BY DEALERS TO THE DEPARTMENT OF  FINAN-
 CIAL SERVICES. EVERY DEALER SHALL MAKE ANNUAL DISCLOSURES TO THE DEPART-
 MENT  OF FINANCIAL SERVICES DISCLOSING HOW MANY MOTOR VEHICLE PURCHASERS
 OBTAINED FINANCING FROM THE DEALER AND HOW MANY MOTOR VEHICLE PURCHASERS
 OBTAINED A LOAN FROM A FINANCIAL INSTITUTION. FOR EACH LOAN FINANCED  BY
 THE  DEALER,  THE  DEALER  SHALL DISCLOSE TO THE DEPARTMENT OF FINANCIAL
 SERVICES THE BORROWER'S CREDIT SCORE,  MOTOR  VEHICLE  MONTHLY  PAYMENT,
 ESTIMATED INCOME LEVEL, EMPLOYMENT STATUS, MAKE, MODEL, AND VALUE OF THE
 MOTOR VEHICLE PURCHASED, LOAN AMOUNT, AND WHETHER THERE WAS A CO-BORROW-
 ER.
 S. 6742                             4                            A. 6869
 
   §  8.  Subdivision  3  of section 302 of the personal property law, as
 added by chapter 633 of the laws of 1956, is amended to read as follows:
   3. The seller shall deliver to the buyer, or mail to him OR HER at his
 OR  HER  address shown on the contract, a copy of the contract signed by
 the seller.  [Until the seller does so, a] A buyer who has not  received
 delivery  of  the  motor  vehicle  shall  have an unconditional right to
 cancel the contract and to receive immediate refund of all payments made
 and redelivery of all goods traded-in to the seller on account of or  in
 contemplation  of  the  contract  WITHIN  FORTY-EIGHT  HOURS SIGNING THE
 CONTRACT OR RECEIVING A COPY OF  THE  CONTRACT  SIGNED  BY  THE  SELLER,
 WHICHEVER  IS  LONGER.  Any acknowledgment by the buyer of delivery of a
 copy of the contract shall be printed or written in a size equal  to  at
 least  ten point bold type and, if contained in the contract, shall also
 appear directly above the legend required above the buyer's signature by
 PARAGRAPH (A) OF [sub-division] SUBDIVISION two [(a)] of this section.
   § 9. This act shall take effect one year after it shall have become  a
 law.

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