Bill Text: NY A06506 | 2019-2020 | General Assembly | Introduced


Bill Title: Enacts the "credit creation pilot program act of New York"; directs the superintendent of financial services to create and implement such act; defines terms; provides that a program licensee may not offer or make a program loan or impose any charges or fees without prior approval from the superintendent of financial services to participate in the program; provides for disclosures, statements and receipts, referral partners, permitted services and prohibited activities.

Spectrum: Partisan Bill (Democrat 5-0)

Status: (Introduced) 2019-03-08 - referred to banks [A06506 Detail]

Download: New_York-2019-A06506-Introduced.html


                STATE OF NEW YORK
        ________________________________________________________________________
                                          6506
                               2019-2020 Regular Sessions
                   IN ASSEMBLY
                                      March 8, 2019
                                       ___________
        Introduced  by M. of A. ROMEO, SAYEGH, D'URSO, ARROYO -- Multi-Sponsored
          by -- M. of A.  SIMON -- read once and referred to  the  Committee  on
          Banks
        AN  ACT  to  amend  the banking law, in relation to enacting the "credit
          creation pilot program act of New York"; and providing for the  repeal
          of such provisions upon expiration thereof
          The  People of the State of New York, represented in Senate and Assem-
        bly, do enact as follows:
     1    Section 1. Short title. This act shall be known and may  be  cited  as
     2  the "credit creation pilot program act of New York".
     3    §  2.  The  legislature  finds  and  declares that consumer demand for
     4  responsible installment loans in principal amounts  of  at  least  three
     5  hundred  dollars  and  no  more  than  five thousand dollars exceeds the
     6  supply of these loans. The legislature has identified  several  improve-
     7  ments that could be made to the banking laws, which would allow more New
     8  Yorkers  to  access  responsible  installment  loans  of  at least three
     9  hundred dollars and no more  than  five  thousand  dollars.  The  credit
    10  creation  pilot  program act of New York is intended to assist consumers
    11  in building their credit and has  additional  consumer  protections  for
    12  these loans which exceed current protections under existing law.
    13    § 3. The banking law is amended by adding a new article 8-B to read as
    14  follows:
    15                                 ARTICLE 8-B
    16                CREDIT CREATION PILOT PROGRAM ACT OF NEW YORK
    17  Section 339-a. Creation of pilot program and definitions.
    18          339-b. Approval   required;  program  application  requirements;
    19                   fees.
    20          339-c. Requirements for program loans.
    21          339-d. Underwriting  requirements;  credit   reporting;   credit
    22                   education;  prohibition  on  refinance;  prohibition on
    23                   credit insurance; and additional consumer protections.
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD08405-01-9

        A. 6506                             2
     1          339-e. Disclosures, statements and receipts.
     2          339-f. Referral  partners; permitted services; prohibited activ-
     3                   ities; compensation.
     4          339-g. Examinations and grounds for disciplinary action.
     5          339-h. Program reporting.
     6    § 339-a. Creation of pilot program and definitions. 1. The superinten-
     7  dent shall create  and  implement  within  the  department,  the  credit
     8  creation pilot program act of New York.
     9    2. For purposes of this article:
    10    (a)  "Consumer  reporting  agency"  has the same meaning as in section
    11  603(p) of the Fair Credit Reporting Act, 15 U.S.C. section 1681a(p).
    12    (b) "Credit score" has the same meaning as in section 609(f)(2)(A)  of
    13  the Fair Credit Reporting Act, 15 U.S.C. section 1681g(f)(2)(A).
    14    (c)  "Data  furnisher" has the same meaning as the term "furnisher" in
    15  12 C.F.R. section 1022.41(c).
    16    (d) "Pilot program" or  "program"  means  the  credit  creation  pilot
    17  program act of New York.
    18    (e)  "Pilot  program licensee" or "program licensee" means a person or
    19  entity that is licensed to make and collect  program  loans  under  this
    20  article  and who is approved by the superintendent to participate in the
    21  program.
    22    (f) "Pilot program master license" or "program master license" means a
    23  program master license issued by the superintendent under  this  article
    24  authorizing a program licensee to make and collect program loans.
    25    (g)  "Program  branch  office  license" means the license granted to a
    26  program licensee with a program master license for  additional  licensed
    27  program  locations, excluding a program licensee's or referral partner's
    28  principal place of business, at  which  program  loans  are  originated,
    29  negotiated, funded, or serviced by a program licensee.
    30    (h)  "Program loan" means a consumer installment loan with a principal
    31  amount of at least three hundred dollars and no more than five  thousand
    32  dollars.
    33    (i) "Referral partner" means an entity that, at the referral partner's
    34  physical  location  for business or through other means, performs one or
    35  more of the permitted services specified in section three hundred  thir-
    36  ty-nine-f  of  this  article on behalf of a program licensee. A referral
    37  partner shall not mean a loan broker as defined in section 5-531 of  the
    38  general obligations law.
    39    (j) "Superintendent" means the superintendent of financial services.
    40    § 339-b. Approval required; program application requirements; fees. 1.
    41  A  program  licensee may not offer or make a program loan, or impose any
    42  charges or fees pursuant to this article, without  prior  approval  from
    43  the superintendent to participate in the program.
    44    2. In order to participate in the program, a person or entity must:
    45    (a) Be licensed as a lender pursuant to article nine of this chapter;
    46    (b) Not be the subject of any insolvency proceedings;
    47    (c)  Be in good standing with the superintendent and not be subject to
    48  any outstanding enforcement or other disciplinary actions taken  against
    49  it by any of New York's financial regulators or by a financial regulator
    50  of  another  state, the District of Columbia or any agency of the United
    51  States;
    52    (d) Pay an application fee of three thousand  dollars  to  the  super-
    53  intendent at the time of making the application;
    54    (e)  File  with the superintendent an application in a form and manner
    55  prescribed by the superintendent which contains the  following  informa-

        A. 6506                             3
     1  tion with respect to the program applicant and such other information as
     2  the superintendent may require by regulation:
     3    (i)  The legal business name and any other name the applicant operates
     4  under other than the legal business name;
     5    (ii) The address of the principal place of business;
     6    (iii) The telephone number and e-mail address;
     7    (iv) The address of any program branch office;
     8    (v) The name and address of the applicant and if the  applicant  is  a
     9  partnership or limited liability company, the names and addresses of the
    10  members,  or  if the applicant is a corporation, the names and addresses
    11  of the shareholders owning ten percent or more of  the  shares  of  such
    12  corporation;
    13    (vi)  The contact person's name, title, address, telephone number, and
    14  e-mail address;
    15    (vii) The license number, if licensed under article nine of this chap-
    16  ter;
    17    (viii) A statement as to whether the  applicant  intends  to  use  the
    18  services  of  one  or more referral partners under section three hundred
    19  thirty-nine-f of this article;
    20    (ix) A statement that the  applicant  has  been  accepted  as  a  data
    21  furnisher  by  a consumer reporting agency and will report to a consumer
    22  reporting agency the payment performance of each borrower on  all  loans
    23  made under the program; and
    24    (x)  The  signature  and  certification of an authorized person of the
    25  applicant.
    26    3. A program licensee who desires to participate in  the  program  but
    27  who is not licensed to make loans pursuant to article nine of this chap-
    28  ter  must  submit  concurrently  the  following  two applications to the
    29  superintendent, in a form and manner specified in this section:
    30    (a) An application and a fee for a master license pursuant to  article
    31  nine of this chapter; and
    32    (b)  An  application and a fee for admission to the program in accord-
    33  ance with paragraphs (d) and (e) of subdivision two of this section.
    34    4. Except as otherwise provided in this article, a program licensee is
    35  subject to all the laws and rules governing consumer loans under article
    36  nine of this chapter.
    37    5. All program licensees shall be  assessed  an  annual  nonrefundable
    38  license fee of one thousand dollars.
    39    6.  Only  one pilot program master license is required for a person or
    40  entity to make program loans under this article, regardless  of  whether
    41  the  program  licensee  offers program loans to prospective borrowers at
    42  its own physical business locations, through referral partners,  or  via
    43  an  electronic  access  point  through  which a prospective borrower may
    44  directly access the website of the program licensee.
    45    7. Each branch office of a program licensee  must  be  licensed  under
    46  this section.
    47    8.  This superintendent shall issue a program branch office license to
    48  a program licensee after the superintendent determines that the  program
    49  licensee  has  submitted  a  completed  application for a program branch
    50  office license in a form prescribed by the superintendent and payment of
    51  an initial nonrefundable program  branch  office  license  fee  of  five
    52  hundred  dollars for each branch office as prescribed by the superinten-
    53  dent. Application fees may not be prorated for partial years  of  licen-
    54  sure.  The  program branch office license shall be issued in the name of
    55  the program licensee that maintains the branch office.  The  application

        A. 6506                             4
     1  for a program branch office license shall contain the following informa-
     2  tion with respect to the applicant:
     3    (a)  The legal business name and any other name the applicant operates
     4  under other than the legal business name;
     5    (b) The address of the principal place of business;
     6    (c) The telephone number and e-mail address;
     7    (d) The address of each program branch office;
     8    (e) The contact person's name, title, address, telephone  number,  and
     9  e-mail address;
    10    (f) The program master license number, if licensed under this article;
    11  and
    12    (g)  The  signature  and  certification of an authorized person of the
    13  applicant.
    14    § 339-c. Requirements for program loans. 1. A program  licensee  shall
    15  comply with each of the following requirements in making program loans:
    16    (a) A program loan shall be unsecured;
    17    (b)  A  program loan shall have a minimum principal amount upon origi-
    18  nation of three hundred dollars and  a  maximum  principal  amount  upon
    19  origination  of five thousand dollars excluding the amount of the origi-
    20  nation fee permitted under subdivision three of this section;
    21    (c) A program loan shall have a term of  not  less  than  two  hundred
    22  forty days;
    23    (d)  A program loan must be repayable by the borrower in substantially
    24  equal weekly, biweekly, semimonthly, or monthly installments; and
    25    (e) A program loan must include a  borrower's  right  to  rescind  the
    26  program  loan by notifying the program licensee of the borrower's intent
    27  to rescind the program loan and return the principal advanced by the end
    28  of the business day after the day the program loan is consummated.
    29    2. As an alternative to the charges authorized by section 5-501 of the
    30  general obligations law or section fourteen-a of this chapter, a program
    31  licensee may contract for and receive charges for a  program  loan  made
    32  pursuant to this section at an annual simple interest rate not to exceed
    33  thirty  percent.  The  interest  rate  calculated as of the date of loan
    34  origination shall be fixed for the life of the loan and shall accrue  on
    35  a  simple-interest  basis,  through  the application of a daily periodic
    36  rate to the actual unpaid principal balance each day.
    37    3. Notwithstanding section 5-501 of the  general  obligations  law  or
    38  section  fourteen-a of this chapter, a program licensee may contract for
    39  and receive a nonrefundable origination fee from the borrower,  provided
    40  that  the  borrower has not rescinded the program loan pursuant to para-
    41  graph (e) of subdivision one of this section. The origination fee  shall
    42  be  fully  earned immediately upon making the program loan, in an amount
    43  not to exceed five percent of the principal  amount,  exclusive  of  the
    44  origination  fee,  or  seventy-five  dollars,  whichever is less, on the
    45  program loan made to that borrower.   An origination fee  charged  by  a
    46  program licensee shall be subject to all of the following:
    47    (a)  Only one origination fee may be contracted for or received from a
    48  borrower until the program loan has been repaid in full;
    49    (b) A program licensee shall not charge the same  borrower  an  origi-
    50  nation fee more than twice in any twelve-month period; and
    51    (c)  The  program  licensee may either deduct the origination fee from
    52  the principal amount of the program loan disbursed to  the  borrower  or
    53  capitalize the origination fee into the principal balance of the program
    54  loan.
    55    4.  Notwithstanding section three hundred fifty-one of this chapter, a
    56  program licensee may:

        A. 6506                             5
     1    (a) Require payment from  a  borrower  of  no  more  than  twenty-five
     2  dollars  for  insufficient  funds fees incurred by that program licensee
     3  due to actions of the borrower; and
     4    (b)  Contract  for and receive a delinquency fee of no more than four-
     5  teen dollars for each payment in default for at least seven days if  the
     6  charge is agreed upon in writing between the parties before imposing the
     7  charge.  A  delinquency  fee imposed by a program licensee is subject to
     8  all of the following:
     9    (i) No more than one delinquency fee may  be  imposed  per  delinquent
    10  payment;
    11    (ii) No more than two delinquency fees may be imposed during any peri-
    12  od of thirty consecutive days; and
    13    (iii)  No  delinquency  fee  may  be  imposed on a borrower who is one
    14  hundred eighty days or more past due if that fee would result in the sum
    15  of the borrower's remaining unpaid principal balance, accrued  interest,
    16  and  delinquency  fees  exceeding  one  hundred  eighty  percent  of the
    17  original principal amount of the borrower's loan.
    18    § 339-d. Underwriting requirements; credit  reporting;  credit  educa-
    19  tion;  prohibition  on  refinance;  prohibition on credit insurance; and
    20  additional consumer protections. 1.  The  following  shall  apply  to  a
    21  program loan made by a program licensee pursuant to this article:
    22    (a)  The program licensee shall underwrite each program loan to deter-
    23  mine a borrower's ability and willingness  to  repay  the  program  loan
    24  pursuant to the program loan terms, and shall not make a program loan if
    25  it  determines  that the borrower's total monthly debt service payments,
    26  at the time of origination, including the program  loan  for  which  the
    27  borrower  is  being  considered and all outstanding forms of credit that
    28  can be independently verified by the program  licensee,  exceed  thirty-
    29  five percent of the borrower's gross monthly income.
    30    (i)  (A) The program licensee shall seek information and documentation
    31  pertaining to all of a borrower's outstanding  debt  obligations  during
    32  the  program  loan application and underwriting process, including loans
    33  that are self-reported by the borrower but not available  through  inde-
    34  pendent verification. The program licensee shall verify that information
    35  using  a  credit report from at least one consumer reporting agency that
    36  compiles and maintains files on  consumers  on  a  nationwide  basis  or
    37  through  other  available  electronic  debt  verification  services that
    38  provide reliable evidence of a borrower's outstanding debt obligations.
    39    (B) The program licensee  shall  not  be  required  to  consider,  for
    40  purposes of debt-to-income ratio evaluation, loans from friends or fami-
    41  ly.
    42    (ii) The program licensee shall also verify the borrower's income that
    43  the  program  licensee relies on to determine the borrower's debt-to-in-
    44  come ratio using information from either of the following:
    45    (A) Electronic means or services that provide reliable evidence of the
    46  borrower's actual income; or
    47    (B) Internal Revenue Service Form W-2, tax returns, payroll  receipts,
    48  bank  statements, or other third-party documents that provide reasonably
    49  reliable evidence of the borrower's actual income.
    50    (b) The program licensee shall report each borrower's payment perform-
    51  ance to at least one consumer reporting agency that compiles  and  main-
    52  tains  files  on  consumers  on a nationwide basis. For purposes of this
    53  section, a consumer reporting agency that compiles and  maintains  files
    54  on  consumers  on a nationwide basis is one that meets the definition in
    55  section 60-3(p) of the federal Fair Credit Reporting Act (15 U.S.C. Sec.
    56  1681a(p)).

        A. 6506                             6
     1    (c) The program licensee shall provide each borrower with the name  of
     2  the  consumer  reporting  agency or agencies to which it will report the
     3  borrower's payment history.
     4    (d) The program licensee shall notify each borrower, at least two days
     5  prior  to  each  payment  due date, informing the borrower of the amount
     6  due, and the payment due date. Notification may be provided by any means
     7  mutually acceptable to the borrower and the program licensee. A borrower
     8  shall have the right to opt out of this notification at any  time,  upon
     9  electronic  or  written  request  to  the  program licensee. The program
    10  licensee shall notify each borrower of this right  prior  to  disbursing
    11  program loan proceeds.
    12    (e) Before disbursing program loan proceeds to a borrower, the program
    13  licensee shall either:
    14    (i)  offer  a credit education program or seminar to the borrower that
    15  has been previously reviewed and approved by the superintendent for  use
    16  in complying with this section; or
    17    (ii)  invite  the  borrower  to  a credit education program or seminar
    18  offered by an independent third party that has been previously  reviewed
    19  and  approved  by  the  superintendent  for  use  in complying with this
    20  section. The borrower shall not be required to participate in either  of
    21  these  education  programs  or  seminars.  A credit education program or
    22  seminar offered pursuant to this paragraph shall be provided at no  cost
    23  to the borrower.
    24    (f)  A  program licensee shall not refinance a program loan. Refinance
    25  means the replacement or revision of an existing program  loan  contract
    26  with  a  borrower  in exchange for an advance of additional principal to
    27  that borrower. A program  licensee  may  extend,  defer,  or  rewrite  a
    28  program loan.
    29    2. (a) Notwithstanding section three hundred fifty-seven of this chap-
    30  ter,  no program licensee, referral partner or any other person or enti-
    31  ty, in connection with, or incidental to, the making of any program loan
    32  made pursuant to this article, may offer, sell, or require the  borrower
    33  to  contract for "credit insurance" of the type specified in subdivision
    34  three of section three hundred fifty-seven of this chapter or  insurance
    35  on  tangible personal or real property of the type specified in subdivi-
    36  sion one of section three hundred fifty-seven of this chapter.
    37    (b) Notwithstanding section three hundred fifty-seven of this chapter,
    38  no program licensee, referral partner, or any other person that  partic-
    39  ipates  in  the  origination  of a program loan under this article shall
    40  refer a borrower to any other person for the purchase of "credit  insur-
    41  ance"  of  the  type  specified  in  subdivision  three of section three
    42  hundred fifty-seven of this chapter or insurance on tangible personal or
    43  real property of the type specified in subdivision one of section  three
    44  hundred fifty-seven of this chapter.
    45    3.  (a) No program licensee shall require, as a condition of providing
    46  the program loan, that the borrower waive any  right,  penalty,  remedy,
    47  forum,  or  procedure  provided for in any law applicable to the program
    48  loan, including the right to file and pursue a civil action  or  file  a
    49  complaint  with  or otherwise communicate with the superintendent or any
    50  court or other public entity, or that  the  borrower  agree  to  resolve
    51  disputes  in a jurisdiction outside of New York or to the application of
    52  laws other than those of New York, as provided by law.  Any waiver  that
    53  is  required  as a condition of doing business with the program licensee
    54  shall be presumed involuntary, unconscionable,  against  public  policy,
    55  and unenforceable.

        A. 6506                             7
     1    (b)  No program licensee shall refuse to do business with or discrimi-
     2  nate against a borrower or applicant on the basis that the  borrower  or
     3  applicant  refuses to waive any right, penalty, remedy, forum, or proce-
     4  dure, including the right to file and pursue a civil action or complaint
     5  with,  or  otherwise  notify,  the  superintendent or any court or other
     6  public entity. The exercise of a person's right to refuse to  waive  any
     7  right,  penalty, remedy, forum, or procedure, including a rejection of a
     8  contract requiring a waiver, shall not affect any otherwise legal  terms
     9  of a contract or an agreement.
    10    (c)  This  subdivision  shall  not apply to any agreement to waive any
    11  right, penalty, remedy, forum, or procedure, including any agreement  to
    12  arbitrate  a  claim  or  dispute,  after  a claim or dispute has arisen.
    13  Nothing in this subdivision shall affect the enforceability or  validity
    14  of any other provision of the contract.
    15    4.  The  program  licensee or any of its wholly owned subsidiaries may
    16  not sell or assign an unpaid debt to  an  independent  third  party  for
    17  collection  purposes  unless  the  debt has been delinquent for at least
    18  thirty days.
    19    5. The program licensee  shall  develop  and  implement  policies  and
    20  procedures  designed  to  respond  to questions raised by applicants and
    21  borrowers regarding  their  program  loans,  including  those  involving
    22  referral partners, and to address customer complaints as soon as reason-
    23  ably practicable.
    24    §  339-e.  Disclosures, statements and receipts. 1. (a) In addition to
    25  the disclosure requirements of article nine of this chapter,  a  program
    26  licensee  shall  disclose the following to the consumer in writing, in a
    27  typeface no smaller than twelve-point type, at the time of application:
    28    (i) The amount borrowed; the total dollar cost of the program loan  to
    29  the consumer if the program loan is paid back on time, including the sum
    30  of   the  origination  fee,  principal  amount  borrowed,  and  interest
    31  payments;  the  corresponding  annual  percentage  rate,  calculated  in
    32  accordance  with Federal Reserve Board Regulation Z (12 C.F.R. 226); the
    33  periodic payment amount; the delinquency fee schedule; and the following
    34  statement: "Repaying your loan early will lower your borrowing costs  by
    35  reducing  the  amount of interest you will pay. This loan has no prepay-
    36  ment penalty."
    37    (ii) A statement that the  consumer  has  the  right  to  rescind  the
    38  program  loan by notifying the program licensee of the consumer's intent
    39  to rescind the program loan and returning the principal advanced by  the
    40  end  of  the business day following the date the program loan is consum-
    41  mated.
    42    (b) A program licensee may provide the borrower with  the  disclosures
    43  required by paragraph (a) of this subdivision in a mobile or other elec-
    44  tronic  application, on which the size of the typeface of the disclosure
    45  can be manually modified by a prospective borrower, if  the  prospective
    46  borrower is given the option to print the disclosure in a typeface of at
    47  least  twelve-point  size  or is provided by the program licensee with a
    48  hardcopy of the disclosure in a typeface of at least  twelve-point  size
    49  before the program loan is consummated.
    50    (c)  The  program loan contract and all written disclosures and state-
    51  ments may be provided in  English  or  another  language  in  which  the
    52  program loan is negotiated.
    53    2. At the time a referral partner receives or processes an application
    54  for  a  program  loan pursuant to section three hundred thirty-nine-f of
    55  this article, the referral partner shall provide the following statement
    56  to the applicant, on behalf of the program licensee, in no smaller  than

        A. 6506                             8
     1  ten-point  type, and must request that the applicant acknowledge receipt
     2  of the statement in writing:
     3    "Your  loan  application  has been referred to us by (name of referral
     4  partner). We may pay a  fee  to  (name  of  referral  partner)  for  the
     5  successful  referral  of  your loan application. If you are approved for
     6  the loan, (name of program licensee) will become  your  lender.  If  you
     7  have  any  questions  about  your loan, now or in the future, you should
     8  direct those questions to (name of program licensee) by (insert at least
     9  two different ways in which a borrower may contact  the  program  licen-
    10  see).    If you wish to report a complaint about (name of referral part-
    11  ner) or (name if program licensee) regarding this loan transaction,  you
    12  may contact the Department of Financial Services and file your complaint
    13  online at http://www.dfs.ny.gov."
    14    3.  A  referral  partner  that  disburses  loan proceeds to a borrower
    15  pursuant to paragraph (j) of subdivision three of section three  hundred
    16  thirty-nine-f  of this article shall deliver or cause to be delivered to
    17  the borrower at the  time  loan  proceeds  are  disbursed  a  plain  and
    18  complete receipt showing all of the following:
    19    (a) The date of disbursement;
    20    (b) The total amount disbursed:
    21    (c) The corresponding loan account identification; and
    22    (d)  The  following  statement,  prominently  displayed in a type size
    23  equal to or greater than the type size used to display the  other  items
    24  on  the  receipt:  "If you have any questions about your loan, now or in
    25  the future, you should direct those questions to (name of program licen-
    26  see) by (insert at least two different ways  in  which  a  borrower  may
    27  contact the program licensee)."
    28    4.  In  addition  to  the receipt requirements in article nine of this
    29  chapter, a program licensee or its approved referral partner, if  appli-
    30  cable,  must  make  available  to the borrower by electronic or physical
    31  means, at the time that a payment is made by the borrower, a  plain  and
    32  complete receipt of payment. For audit purposes, a program licensee must
    33  maintain  an  electronic  record  for  each  receipt made available to a
    34  borrower, which must include a copy of the receipt and the date and time
    35  that the receipt was generated. Each receipt of payment must show all of
    36  the following:
    37    (a) The name of the borrower;
    38    (b) The name of the referral partner, if applicable;
    39    (c) The total payment amount received;
    40    (d) The date of payment;
    41    (e) The program loan balance  before  and  after  application  of  the
    42  payment;
    43    (f) The amount of the payment that was applied to principal, interest,
    44  and fees;
    45    (g) The type of payment made by the borrower; and
    46    (h)  The  following  statement,  prominently  displayed in a type size
    47  equal to or greater than the type size used to display the  other  items
    48  on the receipt: "If you have any questions about your loan now or in the
    49  future, you should direct those questions to
... (name of program licen-
    50  see)  ...    by ... (at least two different ways in which a borrower may
    51  contact the program licensee) ...."
    52    § 339-f. Referral partners; permitted services; prohibited activities;
    53  compensation. 1.  A licensee who is approved by  the  superintendent  to
    54  participate  in the program may use the services of one or more referral
    55  partners as provided in this article.

        A. 6506                             9
     1    2. All arrangements between a program licensee and a referral  partner
     2  must  be  specified  in a written referral partner agreement between the
     3  parties. The agreement must contain a provision that the referral  part-
     4  ner  agrees to comply with this section and all rules adopted under this
     5  section  regarding  the  activities  of  referral partners, and that the
     6  superintendent has access to the referral partner's  books  and  records
     7  pertaining to the referral partner's operations under the agreement with
     8  the program licensee in accordance with subdivision one of section three
     9  hundred thirty-nine-g of this article.
    10    3.  A  referral  partner  may  perform  one  or  more of the following
    11  services for a program licensee:
    12    (a) Distributing, circulating, using, or publishing printed brochures,
    13  flyers, factsheets, or other written materials relating to program loans
    14  that the program licensee may make or negotiate. The  written  materials
    15  must  be reviewed and approved in writing by the program licensee before
    16  being distributed, circulated, or published;
    17    (b) Providing written factual information about  program  loan  terms,
    18  conditions,  or  qualification  requirements  to  a prospective borrower
    19  which have been either prepared by the program licensee or reviewed  and
    20  approved  in  writing  by  the  program licensee. A referral partner may
    21  discuss the information with a prospective borrower in general terms;
    22    (c) Notifying a prospective borrower  of  the  information  needed  in
    23  order to complete a program loan application;
    24    (d)  Entering  information  provided  by the prospective borrower on a
    25  preprinted or electronic application form or onto a preformatted comput-
    26  er database;
    27    (e) Assembling credit applications and other materials obtained in the
    28  course of a credit application transaction for submission to the program
    29  licensee;
    30    (f) Contacting the program licensee  to  determine  the  status  of  a
    31  program loan application;
    32    (g)   Communicating  a  response  that  is  returned  by  the  program
    33  licensee's automated underwriting system to a borrower or a  prospective
    34  borrower;
    35    (h)  Obtaining  a  borrower's  signature  on documents prepared by the
    36  program licensee and delivering final copies of  the  documents  to  the
    37  borrower;
    38    (i)  Operating  an electronic access point through which a prospective
    39  borrower may directly access the website  of  the  program  licensee  to
    40  apply for a program loan;
    41    (j)  Disbursing  loan  proceeds  to  a  borrower,  if  this  method of
    42  disbursement is acceptable to the borrower subject to  the  requirements
    43  of subdivision four of section three hundred thirty-nine-e of this arti-
    44  cle.  A loan disbursement made by a referral partner under this subdivi-
    45  sion is deemed to be made by the program licensee on the date the  funds
    46  are disbursed or otherwise made available by the referral partner to the
    47  borrower; or
    48    (k)  Receiving a program loan payment from the borrower if this method
    49  of payment is acceptable to the borrower, subject to the requirements of
    50  subdivision five of section three hundred thirty-nine-e of this article.
    51    4. (a) A program loan payment made by a borrower to a referral partner
    52  under this section must be applied to the borrower's  program  loan  and
    53  deemed  received  by  the program licensee as of the date the payment is
    54  received by the referral partner.
    55    (b) A referral partner that receives program loan payments under  this
    56  section  shall  deliver  or cause to be delivered to the borrower at the

        A. 6506                            10
     1  time that the payment is made by the  borrower,  a  plain  and  complete
     2  receipt  showing all of the information specified in subdivision five of
     3  section three hundred thirty-nine-e of this article.
     4    5. A borrower who submits a program loan payment to a referral partner
     5  under  this  section shall not be liable for any failure or delay by the
     6  referral partner in transmitting the payment to the program licensee.
     7    6. A referral partner that disburses or receives loan payments  pursu-
     8  ant  to  subdivision three of this section shall maintain records of all
     9  disbursements made and loan payments received for a period of  at  least
    10  two  years or until one month following the completion of an examination
    11  of the program licensee by the superintendent, whichever is later.
    12    7. Providing any notice or disclosure required to be provided  to  the
    13  borrower  by  the program licensee, other than the notice required to be
    14  provided by the program licensee to the borrower pursuant to subdivision
    15  three of section three hundred thirty-nine-e of this article. A  program
    16  licensee  that uses a referral partner to provide notices or disclosures
    17  to borrowers shall maintain a record of which  notices  and  disclosures
    18  each  referral  partner  provides  to  borrowers  on its behalf, for the
    19  purpose of facilitating the commissioner's examination  of  the  program
    20  licensee.
    21    8. A referral partner shall not engage in any of the following prohib-
    22  ited activities:
    23    (a)  Providing  counseling  or  advice  to  a  borrower or prospective
    24  borrower with respect to any loan term;
    25    (b) Providing loan-related marketing material that has not  previously
    26  been  approved  by  the  program licensee to a borrower or a prospective
    27  borrower;
    28    (c) Negotiating a loan term between a program licensee and a  prospec-
    29  tive borrower;
    30    (d)  Offering  information pertaining to a single prospective borrower
    31  to more than one program licensee, except  if  a  program  licensee  has
    32  declined  to  offer  a program loan to a prospective borrower and has so
    33  notified that prospective borrower in writing, the referral partner  may
    34  then  offer  information  pertaining to a single prospective borrower to
    35  another program licensee with which it has a referral  partner's  agree-
    36  ment; and
    37    (e)  Requiring  a  borrower to pay any fees or charges to the referral
    38  partner or to any other person in connection with a program  loan  other
    39  than those permitted under this article.
    40    9.  A  referral  partner  shall comply with all laws applicable to the
    41  program licensee that impose requirements upon the program licensee  for
    42  safeguards for information security.
    43    10.  If  the  loan applicant has questions about the program loan that
    44  the referral partner is not permitted to answer,  the  referral  partner
    45  shall  make a good faith effort to assist the applicant in making direct
    46  contact with the program licensee before the  program  loan  is  consum-
    47  mated.
    48    11. The program licensee may compensate a referral partner pursuant to
    49  the  written agreement between the licensee and the referral partner and
    50  a compensation schedule that is mutually agreed to by the program licen-
    51  see and the referral partner, subject to the requirements in subdivision
    52  twelve of this section.
    53    12. The compensation of a referral partner by a program licensee shall
    54  be subject to all of the following requirements:
    55    (a) Compensation may not be paid to a referral partner  in  connection
    56  with a loan application unless that program loan is consummated;

        A. 6506                            11
     1    (b)  Compensation may not be paid to a referral partner based upon the
     2  principal amount of the program loan;
     3    (c)  Compensation  may  not  be  directly or indirectly passed on to a
     4  borrower through a fee or other compensation, or a portion of a  fee  or
     5  other compensation charged to a borrower; and
     6    (d)  Subject  to  the limitations set forth in paragraphs (a), (b) and
     7  (c) of this subdivision, the total compensation paid by a program licen-
     8  see to a referral partner for  the  services  specified  in  subdivision
     9  three of this section shall not exceed the sum of the following:
    10    (i)  Sixty  dollars  per  program loan, on average, assessed annually,
    11  whether paid at the time of consummation of the  program  loan,  through
    12  installments, or in a manner otherwise agreed upon by the program licen-
    13  see and the referral partner; and
    14    (ii)  Two  dollars  per  payment  received  by the referral partner on
    15  behalf of the program licensee for the duration of the program loan,  if
    16  the  referral  partner  receives  borrower  loan payments on the program
    17  licensee's behalf in accordance with subdivision three of this section.
    18    (e) Neither the program licensee nor any referral partner may pass  on
    19  to  a  borrower,  whether directly or indirectly, any additional cost or
    20  other charge for compensation paid to  a  referral  partner  under  this
    21  program.
    22    13.  A program licensee that utilizes the services of a referral part-
    23  ner must notify the superintendent, in a form and manner  prescribed  by
    24  the  superintendent,  within fifteen days after entering into a contract
    25  with a referral partner regarding all of the following:
    26    (a) The name, business address, and licensing details of the  referral
    27  partner  and  all  locations  at which the referral partner will perform
    28  services under this section;
    29    (b) The name and contact information of an employee  of  the  referral
    30  partner  who  is  knowledgeable about, and has the authority to execute,
    31  the referral partner agreement;
    32    (c) The name and contact information of an employee  of  the  referral
    33  partner  who is responsible for that referral partner's referring activ-
    34  ities on behalf of the program licensee; and
    35    (d) A statement by the program licensee  that  it  has  conducted  due
    36  diligence  with  respect  to the referral partner and has confirmed that
    37  none of the following applies:
    38    (i) The filing of a petition under the United States  Bankruptcy  Code
    39  for bankruptcy or reorganization by the referral partner;
    40    (ii)  The  commencement  of  an  administrative  or a judicial license
    41  suspension or revocation proceeding, or the denial of a license  request
    42  or  renewal,  by  any state, the District of Columbia, any United States
    43  territory, or any foreign country in which the  referral  partner  oper-
    44  ates, plans to operate, or is licensed to operate;
    45    (iii)  A felony indictment involving the referral partner or an affil-
    46  iated party. As used in this subparagraph, the term  "affiliated  party"
    47  means  a  director,  an officer, a responsible person, an employee, or a
    48  foreign affiliate of a referral partner; or a person who has a  control-
    49  ling interest in a referral partner;
    50    (iv)  The  felony conviction, guilty plea, or plea of nolo contendere,
    51  regardless of adjudication, of the referral  partner  or  an  affiliated
    52  party;
    53    (v)  Any  suspected  criminal  act  committed in this state or any act
    54  committed in another state  or  the  District  of  Columbia  that  would
    55  constitute a criminal act if committed in the state of New York relating
    56  to activities regulated under this chapter by a referral partner;

        A. 6506                            12
     1    (vi)  Notification  by  a law enforcement or prosecutorial agency that
     2  the referral partner is under criminal investigation including, but  not
     3  limited  to,  subpoenas  to  produce  records  or testimony and warrants
     4  issued by a court of competent jurisdiction which authorize  the  search
     5  and  seizure  of  any  records relating to a business activity regulated
     6  under this chapter; and
     7    (vii) Any other information requested by the superintendent.
     8    14. A referral partner must provide the program licensee with a  writ-
     9  ten  notice sent by registered mail within thirty days of any changes to
    10  the information specified in paragraphs (a) through (c)  of  subdivision
    11  thirteen  of  this  section or the occurrence or knowledge of, whichever
    12  time period is greater, any of the events specified in paragraph (d)  of
    13  subdivision thirteen of this section.
    14    15.  A  program  licensee  is  responsible for any act of its referral
    15  partner if the program licensee should have known  of  the  act  or  had
    16  actual  knowledge  that such act is a violation of this section, and the
    17  program licensee allowed the act to  continue.  Such  responsibility  is
    18  limited  to  conduct  engaged in by the referral partner pursuant to the
    19  authority granted to it by  the  program  licensee  under  the  contract
    20  between the referral partner and the program licensee.
    21    16.  The program licensee shall pay to the superintendent, at the time
    22  it files a referral partner notice with the superintendent,  a  one-time
    23  nonrefundable  fee  of  thirty  dollars  for  each  referral  partner as
    24  prescribed by the superintendent.
    25    § 339-g. Examinations and grounds for  disciplinary  action.  1.    To
    26  ensure  that  the  activities  of the program licensee are in compliance
    27  with this article, the superintendent must examine each program licensee
    28  at least once every twenty-four months. The superintendent  may  examine
    29  each program licensee more frequently in accordance with and pursuant to
    30  article  nine  of  this chapter. The superintendent may also examine the
    31  operations of each referral partner to ensure that the activities of the
    32  program licensee and the referral partner are in  compliance  with  this
    33  article.
    34    2.  The  program licensee shall pay for the costs of any such examina-
    35  tion in the amount determined by the superintendent.
    36    3. Notwithstanding subdivision one of this section, the superintendent
    37  shall have the authority to waive one  or  more  program  branch  office
    38  examinations, if the superintendent deems that the program branch office
    39  examinations  are not necessary for the protection of the public, due to
    40  the centralized operations of the  program  licensee  or  other  factors
    41  acceptable to the superintendent.
    42    4.  A  program  licensee who violates any applicable provision of this
    43  article is subject to disciplinary action pursuant to  article  nine  of
    44  this  chapter.  Subject  to subdivision fifteen of section three hundred
    45  thirty-nine-f of this article, a program licensee  is  also  subject  to
    46  disciplinary  action for a violation of this article committed by any of
    47  its referral partners.
    48    5. The superintendent may take any of the following actions against  a
    49  referral partner who violates the provisions of this section:
    50    (a)  Disqualify  the  referral  partner from performing services under
    51  this article;
    52    (b) Bar the referral partner from performing services at one  or  more
    53  specific locations of that referral partner;
    54    (c)  Terminate  a  written  agreement between a referral partner and a
    55  program licensee;

        A. 6506                            13
     1    (d) Impose an administrative fine not to exceed one  thousand  dollars
     2  for each act of the referral partner; and
     3    (e)  If  the  superintendent deems that action in the public interest,
     4  prohibit the use of that  referral  partner  by  all  program  licensees
     5  accepted to participate in the program.
     6    §  339-h. Program reporting. 1. On or before April first of each year,
     7  a program licensee shall file a report with the superintendent  contain-
     8  ing  aggregated  or anonymized data, without reference to any borrower's
     9  nonpublic personal information or any proprietary or trade secret infor-
    10  mation of the program licensee, on each of the items specified in subdi-
    11  vision four of this section.
    12    2. On or before January first, two thousand twenty-three,  and  again,
    13  on or before January first, two thousand twenty-five, the superintendent
    14  must  post  a  report  on its website summarizing the use of the program
    15  based upon the information contained in the report filed by each program
    16  licensee under subdivision one of this section.
    17    3. The report must state the information in aggregate  so  as  not  to
    18  identify data by specific program licensee or referral partner.
    19    4.  The  superintendent's  report must specify the period to which the
    20  report corresponds and must include, but shall not be  limited  to,  the
    21  following for that period:
    22    (a) The number of entities that applied to participate in the program.
    23    (b) The number of entities accepted to participate in the program.
    24    (c)  The  reasons  for  rejecting  applications  for participation, if
    25  applicable. This information must be provided in a manner that does  not
    26  identify the entity or entities rejected.
    27    (d) The number of program loan applications received by program licen-
    28  sees  participating  in  the  program,  the number of program loans made
    29  pursuant to the program, the total amount loaned,  the  distribution  of
    30  loan  lengths  upon  origination, and the distribution of interest rates
    31  and principal amounts upon origination among those program loans.
    32    (e) The number of borrowers who obtained more than  one  program  loan
    33  and the distribution of the number of program loans per borrower.
    34    (f) The average credit score increase between successive program loans
    35  for borrowers (i) with no credit score and (ii) with a credit score.  In
    36  each  case the licensee must specify the methodology used to measure the
    37  increase based on information from at least one major credit bureau.
    38    (g) The income distribution of  borrowers  upon  program  loan  origi-
    39  nation,  including  the  number  of  borrowers who obtained at least one
    40  program loan and who resided in a low-income or  moderate-income  census
    41  tract at the time of their loan applications.
    42    (h) The number of borrowers who obtained program loans for the follow-
    43  ing  purposes,  based  on  borrower  responses at the time of their loan
    44  applications indicating the primary purpose for which the  program  loan
    45  was obtained:
    46    (i) Pay medical expenses;
    47    (ii) Pay for vehicle repair or a vehicle purchase;
    48    (iii) Pay bills;
    49    (iv) Consolidate debt;
    50    (v) Build or repair credit history; and
    51    (vi) Pay other expenses.
    52    (i)  The  number  of  borrowers  who  self-report that they had a bank
    53  account at the time of their loan application and the number of  borrow-
    54  ers who self-report that they did not have a bank account at the time of
    55  their loan application.

        A. 6506                            14
     1    (j)  The  number  and type of referral partners used by program licen-
     2  sees.
     3    (k)  The  number  and percentage of borrowers who obtained one or more
     4  program loans on which delinquency  charges  were  assessed,  the  total
     5  amount  of  delinquency  charges  assessed,  and the average delinquency
     6  charge assessed by dollar amount and as a percentage  of  the  principal
     7  amount loaned.
     8    (l) The performance of program loans under the program as reflected by
     9  all of the following:
    10    (i)  The  number  and percentage of borrowers who experienced at least
    11  one delinquency lasting between  seven  and  twenty-nine  days  and  the
    12  distribution of principal loan amounts corresponding to those delinquen-
    13  cies;
    14    (ii)  The  number and percentage of borrowers who experienced at least
    15  one delinquency lasting between  thirty  and  fifty-nine  days  and  the
    16  distribution of principal loan amounts corresponding to those delinquen-
    17  cies; and
    18    (iii)  The number and percentage of borrowers who experienced at least
    19  one delinquency lasting sixty days or more and the distribution of prin-
    20  cipal loan amounts corresponding to those delinquencies.
    21    (m) The number and types of violations of  this  article  by  referral
    22  partners which were documented by the superintendent.
    23    (n)  The  number  and  types  of violations of this article by program
    24  licensees which were documented by the superintendent.
    25    (o) The number of times that the superintendent disqualified a  refer-
    26  ral  partner  from  performing  services, barred a referral partner from
    27  performing services at one or more specific locations  of  the  referral
    28  partner, terminated a written agreement between a referral partner and a
    29  program licensee, or imposed an administrative penalty.
    30    (p)  The  number  of complaints received by the superintendent about a
    31  program  licensee  or  a  referral  partner  and  the  nature  of  those
    32  complaints.
    33    § 4. This act shall take effect on the one hundred eightieth day after
    34  it  shall have become a law and shall expire and be deemed repealed five
    35  years after such date. Effective immediately,  the  addition,  amendment
    36  and/or repeal of any rule or regulation necessary for the implementation
    37  of this act on its effective date are authorized to be made or completed
    38  on or before such effective date.
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