S T A T E O F N E W Y O R K
________________________________________________________________________
9275
I N S E N A T E
May 8, 2024
___________
Introduced by Sen. BROUK -- read twice and ordered printed, and when
printed to be committed to the Committee on Judiciary
AN ACT to amend the general obligations law and the banking law, in
relation to limitations of rates of interest for financing arrange-
ments and the extension of consumer credit; to amend the penal law, in
relation to criminal usury; and to amend the personal property law, in
relation to certain functions of the attorney general
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. Subdivisions 1, 2, 4, 4-a, 6 and 7 of section 5-501 of the
general obligations law, subdivisions 1, 2 and 4 as amended by chapter
883 of the laws of 1980, subdivision 2 as further amended by section 104
of part A of chapter 62 of the laws of 2011, subdivision 4-a as added by
chapter 721 of the laws of 1976, subdivision 6 as amended by chapter 369
of the laws of 1980 and subdivision 7 as added by chapter 296 of the
laws of 1983, are amended and two new subdivisions 1-a and 8 are added
to read as follows:
1. The rate of interest, as computed pursuant to this title, [upon the
loan or forbearance of any money, goods, or things in action] IN
CONNECTION WITH ANY FINANCING ARRANGEMENT, except as provided in subdi-
visions five and six of this section [or as otherwise provided by law],
shall be six per centum per annum unless a different rate is prescribed
in section fourteen-a of the banking law.
1-A. FINANCING ARRANGEMENT IS DEFINED TO INCLUDE LOANS, FORBEARANCE OF
ANY MONEY, GOODS OR THINGS IN ACTION, AND ALL OTHER TRANSACTIONS THAT
INVOLVE THE LENDING OR ADVANCING OF MONEY, GOODS OR THINGS IN ACTION FOR
AN AMOUNT CHARGED, TAKEN OR RECEIVED, AND ALL TRANSACTIONS THAT OPERATE
AS SUBSTITUTES FOR SUCH PRODUCTS, INCLUDING BUT NOT LIMITED TO RETAIL
INSTALLMENT CONTRACTS, MERCHANT CASH ADVANCES, INVOICE FINANCING, REVEN-
UE-BASED FINANCING, EARNED WAGE ACCESS OR SIMILAR WAGE ADVANCE TRANS-
ACTIONS, LEASE- OR RENT-TO-OWN ARRANGEMENTS, RENTAL-PURCHASE AGREEMENTS
AS DEFINED IN SUBDIVISION SIX OF SECTION FIVE HUNDRED OF THE PERSONAL
PROPERTY LAW, BUY-NOW PAY-LATER TRANSACTIONS, FINANCING FOR LITIGATION
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD13528-02-3
S. 9275 2
OR LEGAL SETTLEMENTS, INCOME-SHARING AGREEMENTS AND FINANCING FOR EDUCA-
TION.
2. [No] NOTWITHSTANDING ANY OTHER NEW YORK STATUTE, REGULATION OR
RULE, NO person or corporation shall, directly or indirectly, charge,
take or receive any money, goods or things in action as interest [on the
loan or forbearance of any money, goods or things in action] IN
CONNECTION WITH A FINANCING ARRANGEMENT at a rate exceeding the rate
above prescribed. The amount charged, taken or received as interest
shall include any and all amounts paid or payable, directly or indirect-
ly, VOLUNTARY OR OTHERWISE, by any person, to or for the account of the
lender, INCLUDING ANY DISCOUNT APPLIED TO ANY AMOUNTS ADVANCED, in
[consideration for making the loan or forbearance] CONNECTION WITH THE
FINANCING ARRANGEMENT as defined by the superintendent of financial
services pursuant to subdivision three of section fourteen-a of the
banking law, INCLUDING FEES, CHARGES, TIPS, RENEWAL CHARGES, CREDIT
INSURANCE PREMIUMS, DEBT SUSPENSION OR SIMILAR PRODUCTS, ANY ANCILLARY
PRODUCT SOLD WITH ANY EXTENSION OF CONSUMER CREDIT, AND ANY OTHER AMOUNT
PAID OR PAYABLE, except such fee as may be fixed by the commissioner of
taxation and finance as the cost of servicing loans made by the property
and liability insurance security fund.
4. Except as otherwise provided by law, interest shall not be charged,
taken or received on any [loan or forbearance] FINANCING ARRANGEMENT at
a rate exceeding such rate of interest as may be authorized by law at
the time the [loan or forbearance] FINANCING ARRANGEMENT is made, wheth-
er or not the [loan or forbearance] FINANCING ARRANGEMENT is made pursu-
ant to a prior contract or commitment providing for a greater rate of
interest, provided, however, that no change in the rate of interest
prescribed in section fourteen-a of the banking law shall affect (a) the
validity of a [loan or forbearance] FINANCING ARRANGEMENT made before
the date such rate becomes effective, or (b) the enforceability of such
[loan or forbearance] FINANCING ARRANGEMENT in accordance with its
terms, except that if any [loan or forbearance] FINANCING ARRANGEMENT
provides for an increase in the rate of interest during the term of such
[loan or forbearance] FINANCING ARRANGEMENT, the increased rate shall
not exceed such rate of interest as may have been authorized by law at
the time such [loan or forbearance] FINANCING ARRANGEMENT was made.
4-a. Notwithstanding the provisions of subdivision four of this
section, a [loan or forbearance] FINANCING ARRANGEMENT repayable on
demand may provide for changes, reflecting variations in lending rates,
from time to time in the rate of interest payable on such [loan or
forbearance] FINANCING ARRANGEMENT up to the rate of interest authorized
by law at the time of such change and in such case the rate of interest
may be so changed in accordance with the terms of the contract or loan
commitment relating thereto; provided, however, that the rate of inter-
est charged, taken or received on such a [loan or forbearance] FINANCING
ARRANGEMENT shall not exceed the rate of interest authorized by law as
it may subsequently be reduced from time to time; and further provided,
however, that in no event shall such a [loan or forbearance by] FINANC-
ING ARRANGEMENT BE subject to an authorized rate of interest less than
that applicable at the time such [loan or forbearance] FINANCING
ARRANGEMENT was made. The provisions of this subdivision shall apply
only to a [loan or forbearance] FINANCING ARRANGEMENT repayable on
demand which has an initial principal of more than five thousand dollars
and which the borrower has the right to repay at any time in whole or in
part, together with accrued interest on the principal so repaid, without
any penalty. With respect to a [loan or forbearance] FINANCING ARRANGE-
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MENT covered by this subdivision, the lender shall disclose to the
borrower in writing not less often than annually the amount of interest
accrued or payable as of the date of such disclosure and the manner by
which such amount was computed.
6. a. No law regulating the maximum rate of interest which may be
charged, taken or received, except section 190.40 and section 190.42 of
the penal law, shall apply to any [loan or forbearance] FINANCING
ARRANGEMENT in the amount of two hundred fifty thousand dollars or more,
other than a [loan or a forbearance] FINANCING ARRANGEMENT secured
primarily by an interest in real property improved by a one or two fami-
ly residence. A [loan] FINANCING ARRANGEMENT of two hundred fifty thou-
sand dollars or more which is to be advanced in installments pursuant to
a written agreement by a lender shall be deemed to be a single [loan]
FINANCING ARRANGEMENT for the total amount which the lender has agreed
to advance pursuant to such agreement on the terms and conditions
provided therein.
b. No law regulating the maximum rate of interest which may be
charged, taken or received, including section 190.40 and section 190.42
of the penal law, shall apply to any [loan or forbearance] FINANCING
ARRANGEMENT in the amount of two million five hundred thousand dollars
or more. [Loans or forbearances] FINANCING ARRANGEMENTS aggregating two
million five hundred thousand dollars or more which are to be made or
advanced to any one borrower in one or more installments pursuant to a
written agreement by one or more lenders shall be deemed to be a single
[loan or forbearance] FINANCING ARRANGEMENT for the total amount which
the lender or lenders have agreed to advance or make pursuant to such
agreement on the terms and conditions provided therein.
7. Except as otherwise expressly provided by law, in the event of
prepayment in full of a [loan] FINANCING ARRANGEMENT, any refund of
unearned interest to which the borrower may be entitled may not be
computed by a sum of the balances or similar method but must be deter-
mined according to a generally accepted actuarial method.
8. THE ATTORNEY GENERAL IS HEREBY EMPOWERED TO ADOPT, PROMULGATE,
AMEND, AND REPEAL RULES, AS SUCH TERM IS DEFINED IN PARAGRAPH (A) OF
SUBDIVISION TWO OF SECTION ONE HUNDRED TWO OF THE STATE ADMINISTRATIVE
PROCEDURE ACT, AND ISSUE GUIDANCE AS MAY BE NECESSARY TO INTERPRET
FINANCING ARRANGEMENTS AS SUCH TERM IS DEFINED IN SUBDIVISION ONE-A OF
THIS SECTION AND TO EFFECTUATE AND ENFORCE THAT PROVISION.
§ 2. Subdivision 1 of section 5-511 of the general obligations law,
as amended by chapter 1072 of the laws of 1968, is amended to read as
follows:
1. All bonds, bills, notes, assurances, conveyances, all other
contracts or securities whatsoever, except bottomry and respondentia
bonds and contracts, and all deposits of goods or other things whatsoev-
er, whereupon or whereby there shall be reserved or taken, or secured or
agreed to be reserved or taken, any greater sum, or greater value, for
the [loan or forbearance of any money, goods or other things in action]
FINANCING ARRANGEMENT, than is prescribed in section 5-501, shall be
void, except that the knowingly taking, receiving, reserving or charging
such a greater sum or greater value by a savings bank, a savings and
loan association or a federal savings and loan association shall only be
held and adjudged a forfeiture of the entire interest which the [loan or
obligation] FINANCING ARRANGEMENT carries with it or which has been
agreed to be paid thereon. If a greater sum or greater value has been
paid, the person paying the same or his legal representative may recover
from the savings bank, the savings and loan association or the federal
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savings and loan association twice the entire amount of the interest
thus paid.
§ 3. Section 5-513 of the general obligations law, as amended by chap-
ter 1072 of the laws of 1968, is amended to read as follows:
§ 5-513. Recovery of excess. Every person who, for any such [loan or
forbearance] FINANCING ARRANGEMENT, shall pay or deliver any greater sum
or value than is allowed to be received pursuant to section 5-501, and
his personal representatives, may recover in an action against the
person who shall have taken or received the same, and his personal
representatives, the amount of the money so paid or value delivered,
above the rate aforesaid.
§ 4. Section 5-517 of the general obligations law is amended to read
as follows:
§ 5-517. Transfer of cause of action for usury. A cause of action to
cancel, or otherwise affect, an instrument executed, or an act done, as
security for a usurious [loan or forbearance] FINANCING ARRANGEMENT, can
be transferred, where the instrument or act creates a specific charge
upon property, which is also transferred in disaffirmance thereof, and
not otherwise; but, in that case, the transferee does not succeed to the
right, conferred by statute upon the borrower, to procure relief, with-
out paying, or offering to pay, any part of the sum or thing loaned.
§ 5. Section 5-524 of the general obligations law, as amended by chap-
ter 349 of the laws of 1968 and as further amended by section 104 of
part A of chapter 62 of the laws of 2011, is amended as follows:
§ 5-524. Taking security upon certain property for usurious [loans]
FINANCING ARRANGEMENTS. A person who takes security, upon any household
furniture, sewing machines, plate or silverware in actual use, tools or
implements of trade, wearing apparel or jewelry, for a [loan or forbear-
ance of money] FINANCING ARRANGEMENT, or for the use or sale of his
personal credit, conditioned upon the payment of a greater rate than the
rate prescribed by the superintendent of financial services pursuant to
section fourteen-a of the banking law, or, if no rate has been so
prescribed, six per centum per annum, or who as security for such [loan]
FINANCING ARRANGEMENT, use or sale of personal credit as aforesaid,
makes a pretended purchase of such property from any person, upon the
like condition, and permits the pledgor to retain the possession thereof
is guilty of a misdemeanor.
§ 6. Subdivision 2 of section 14-a of the banking law, as amended by
chapter 155 of the laws of 2012, is amended and a new subdivision 2-a is
added to read as follows:
2. The rate of interest as so prescribed under this section shall
include as interest any and all amounts paid or payable, directly or
indirectly, VOLUNTARY OR OTHERWISE, by any person, to or for the account
of the lender, INCLUDING ANY DISCOUNT APPLIED TO ANY AMOUNTS ADVANCED,
in [consideration for the making of a loan or forbearance] CONNECTION
WITH A FINANCING ARRANGEMENT as defined by the superintendent pursuant
to subdivision three of this section, INCLUDING FEES, SERVICE CHARGES,
CREDIT SERVICE CHARGES, TIPS, RENEWAL CHARGES, CREDIT INSURANCE PREMI-
UMS, DEBT SUSPENSION OR SIMILAR PRODUCTS, ANY ANCILLARY PRODUCT SOLD
WITH ANY EXTENSION OF CONSUMER CREDIT, AND ANY OTHER AMOUNT PAID OR
PAYABLE.
2-A. THE RATE OF INTEREST FOR ANY FINANCING ARRANGEMENT SHALL BE
CALCULATED AS DESCRIBED IN SECTION 600.3 OF TITLE TWENTY-THREE OF THE
NEW YORK CODES, RULES AND REGULATIONS; PROVIDED, HOWEVER, THAT THE RATE
OF INTEREST WILL INCLUDE AS FINANCE CHARGES ALL AMOUNTS DESCRIBED IN
SUBDIVISION TWO OF THIS SECTION.
S. 9275 5
§ 7. Section 340 of the banking law, as amended by chapter 22 of the
laws of 1990, is amended to read as follows:
§ 340. Doing business without license prohibited. 1. No person or
other entity shall engage in the business of [making loans] ENTERING
INTO FINANCING ARRANGEMENTS AS DEFINED IN SUBDIVISION ONE-A OF SECTION
5-501 OF THE GENERAL OBLIGATIONS LAW in the principal amount of twenty-
five thousand dollars or less for any [loan] FINANCING ARRANGEMENT to an
individual for personal, family, household, or investment purposes and
in a principal amount of fifty thousand dollars or less for business and
commercial [loans] FINANCING ARRANGEMENTS, and charge, contract for, or
receive a greater rate of interest than the [lender] PERSON OR OTHER
ENTITY would be permitted by law to charge if [he] IT were not a licen-
see hereunder except as authorized by this article and without first
obtaining a license from the superintendent.
2. For the purposes of this section, a person or entity shall be
considered as engaging in the business of [making loans] ENTERING INTO
FINANCING ARRANGEMENTS in New York, and subject to the licensing and
other requirements of this article, if it solicits [loans] FINANCING
ARRANGEMENTS in the amounts prescribed by this section within this state
and, in connection with such solicitation, [makes loans to] ENTERS INTO
FINANCING ARRANGEMENTS WITH individuals then resident in this state,
except that no person or entity shall be considered as engaging in the
business of [making loans] ENTERING INTO FINANCING ARRANGEMENTS in this
state on the basis of isolated, incidental or occasional transactions
which otherwise meet the requirements of this section.
3. Nothing in this article shall apply to licensed collateral loan
brokers.
§ 8. Subdivision 1 of section 351 of the banking law, as amended by
chapter 22 of the laws of 1990, is amended to read as follows:
1. Every licensee hereunder may [loan] ENTER INTO FINANCING ARRANGE-
MENTS AS DEFINED IN SUBDIVISION ONE-A OF SECTION 5-501 OF THE GENERAL
OBLIGATIONS LAW FOR any sum of money not exceeding the maximum principal
amounts prescribed in section three hundred forty of this article, and
may charge, contract for, and receive thereon interest at the rate or
rates agreed to by the licensee and the borrower, SUBJECT TO SECTIONS
190.40 AND 190.42 OF THE PENAL LAW. Such interest may either BE (a) [be]
calculated on the actual unpaid principal balances of the [loan] FINANC-
ING ARRANGEMENT or in the case of a [loan] FINANCING ARRANGEMENT commit-
ment from the date of each advance thereunder for the actual time
outstanding, according to a generally accepted actuarial method at a
fixed or variable rate and in accordance with the provisions of the
evidence of the indebtedness or (b) precomputed under subdivision five
of this section.
§ 9. Section 190.40 of the penal law, as amended by chapter 424 of the
laws of 1976, is amended to read as follows:
§ 190.40 Criminal usury in the second degree.
A person is guilty of criminal usury in the second degree when, not
being authorized or permitted by law to do so, he knowingly charges,
takes or receives any money or other property as interest [on the loan
or forebearance of any money or other property], WHETHER PAID VOLUNTAR-
ILY OR OTHERWISE, IN CONNECTION WITH A FINANCING ARRANGEMENT AS DEFINED
IN SUBDIVISION ONE-A OF SECTION 5-501 OF THE GENERAL OBLIGATIONS LAW, at
a rate exceeding twenty-five per centum per annum or the equivalent rate
for a longer or shorter period. THE RATE OF INTEREST SHALL BE CALCU-
LATED AS PROVIDED IN SECTION FOURTEEN-A OF THE BANKING LAW, AS AMENDED.
Criminal usury in the second degree is a class E felony.
S. 9275 6
§ 10. Section 190.42 of the penal law, as added by chapter 424 of the
laws of 1976, is amended to read as follows:
§ 190.42 Criminal usury in the first degree.
A person is guilty of criminal usury in the first degree when, not
being authorized or permitted by law to do so, he knowingly charges,
takes or receives any money or other property as interest [on the loan
or forbearance of any money or other property], WHETHER PAID VOLUNTARILY
OR OTHERWISE, IN CONNECTION WITH A FINANCING ARRANGEMENT AS DEFINED IN
SUBDIVISION ONE-A OF SECTION 5-501 OF THE GENERAL OBLIGATIONS LAW, at a
rate exceeding twenty-five per centum per annum or the equivalent rate
for a longer or shorter period and either the actor had previously been
convicted of the crime of criminal usury or of the attempt to commit
such crime, or the actor's conduct was part of a scheme or business of
making or collecting usurious [loans] FINANCING ARRANGEMENTS. THE RATE
OF INTEREST SHALL BE CALCULATED AS PROVIDED IN SECTION FOURTEEN-A OF THE
BANKING LAW, AS AMENDED.
Criminal usury in the first degree is a class C felony.
§ 11. Section 508 of the personal property law, as added by chapter
309 of the laws of 2010, is amended to read as follows:
§ 508. Administration by the attorney general. The attorney general
may make rules and regulations necessary for the administration of this
article[; provided, however, that such rules and regulations shall not
attempt to regulate or characterize rental-purchase agreements as a
security interest, credit sale, retail installment sale, conditional
sale or any other form of consumer credit that imputes to a rental-pur-
chase agreement the creation of a debt or extension of credit, nor shall
such rules and regulations require the disclosure of a percentage rate
calculation, including a time-price differential, an annual percentage
rate, or an effective annual percentage rate].
§ 12. Severability. If any clause, sentence, paragraph, subdivi-
sion, section or part of this act shall be adjudged by any court of
competent jurisdiction to be invalid, such judgment shall not affect,
impair, or invalidate the remainder thereof, but shall be confined in
its operation to the clause, sentence, paragraph, subdivision, section
or part thereof directly involved in the controversy in which
such judgment shall have been rendered. It is hereby declared to be the
intent of the legislature that this act would have been enacted even if
such invalid provisions had not been included herein.
§ 13. This act shall take effect immediately.
