Bill Text: NY S01726 | 2025-2026 | General Assembly | Introduced
Bill Title: Provides interest rate limitations for financing arrangements and the extension of consumer credit; relates to the definitions of criminal usury in the first and second degrees; relates to the functions of the attorney general regarding rental purchase agreements.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced) 2025-01-13 - REFERRED TO JUDICIARY [S01726 Detail]
Download: New_York-2025-S01726-Introduced.html
STATE OF NEW YORK ________________________________________________________________________ 1726 2025-2026 Regular Sessions IN SENATE January 13, 2025 ___________ 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: 1 Section 1. Subdivisions 1, 2, 4, 4-a, 6 and 7 of section 5-501 of the 2 general obligations law, subdivisions 1, 2 and 4 as amended by chapter 3 883 of the laws of 1980, subdivision 2 as further amended by section 104 4 of part A of chapter 62 of the laws of 2011, subdivision 4-a as added by 5 chapter 721 of the laws of 1976, subdivision 6 as amended by chapter 369 6 of the laws of 1980 and subdivision 7 as added by chapter 296 of the 7 laws of 1983, are amended and two new subdivisions 1-a and 8 are added 8 to read as follows: 9 1. The rate of interest, as computed pursuant to this title, [upon the10loan or forbearance of any money, goods, or things in action] in 11 connection with any financing arrangement, except as provided in subdi- 12 visions five and six of this section [or as otherwise provided by law], 13 shall be six per centum per annum unless a different rate is prescribed 14 in section fourteen-a of the banking law. 15 1-a. Financing arrangement is defined to include loans, forbearance of 16 any money, goods or things in action, and all other transactions that 17 involve the lending or advancing of money, goods or things in action for 18 an amount charged, taken or received, and all transactions that operate 19 as substitutes for such products, including but not limited to retail 20 installment contracts, merchant cash advances, invoice financing, reven- 21 ue-based financing, earned wage access or similar wage advance trans- 22 actions, lease- or rent-to-own arrangements, rental-purchase agreements EXPLANATION--Matter in italics (underscored) is new; matter in brackets [] is old law to be omitted. LBD03633-01-5S. 1726 2 1 as defined in subdivision six of section five hundred of the personal 2 property law, buy-now pay-later transactions, financing for litigation 3 or legal settlements, income-sharing agreements and financing for educa- 4 tion. 5 2. [No] Notwithstanding any other New York statute, regulation or 6 rule, no person or corporation shall, directly or indirectly, charge, 7 take or receive any money, goods or things in action as interest [on the8loan or forbearance of any money, goods or things in action] in 9 connection with a financing arrangement at a rate exceeding the rate 10 above prescribed. The amount charged, taken or received as interest 11 shall include any and all amounts paid or payable, directly or indirect- 12 ly, voluntary or otherwise, by any person, to or for the account of the 13 lender, including any discount applied to any amounts advanced, in 14 [consideration for making the loan or forbearance] connection with the 15 financing arrangement as defined by the superintendent of financial 16 services pursuant to subdivision three of section fourteen-a of the 17 banking law, including fees, charges, tips, renewal charges, credit 18 insurance premiums, debt suspension or similar products, any ancillary 19 product sold with any extension of consumer credit, and any other amount 20 paid or payable, except such fee as may be fixed by the commissioner of 21 taxation and finance as the cost of servicing loans made by the property 22 and liability insurance security fund. 23 4. Except as otherwise provided by law, interest shall not be charged, 24 taken or received on any [loan or forbearance] financing arrangement at 25 a rate exceeding such rate of interest as may be authorized by law at 26 the time the [loan or forbearance] financing arrangement is made, wheth- 27 er or not the [loan or forbearance] financing arrangement is made pursu- 28 ant to a prior contract or commitment providing for a greater rate of 29 interest, provided, however, that no change in the rate of interest 30 prescribed in section fourteen-a of the banking law shall affect (a) the 31 validity of a [loan or forbearance] financing arrangement made before 32 the date such rate becomes effective, or (b) the enforceability of such 33 [loan or forbearance] financing arrangement in accordance with its 34 terms, except that if any [loan or forbearance] financing arrangement 35 provides for an increase in the rate of interest during the term of such 36 [loan or forbearance] financing arrangement, the increased rate shall 37 not exceed such rate of interest as may have been authorized by law at 38 the time such [loan or forbearance] financing arrangement was made. 39 4-a. Notwithstanding the provisions of subdivision four of this 40 section, a [loan or forbearance] financing arrangement repayable on 41 demand may provide for changes, reflecting variations in lending rates, 42 from time to time in the rate of interest payable on such [loan or43forbearance] financing arrangement up to the rate of interest authorized 44 by law at the time of such change and in such case the rate of interest 45 may be so changed in accordance with the terms of the contract or loan 46 commitment relating thereto; provided, however, that the rate of inter- 47 est charged, taken or received on such a [loan or forbearance] financing 48 arrangement shall not exceed the rate of interest authorized by law as 49 it may subsequently be reduced from time to time; and further provided, 50 however, that in no event shall such a [loan or forbearance by] financ- 51 ing arrangement be subject to an authorized rate of interest less than 52 that applicable at the time such [loan or forbearance] financing 53 arrangement was made. The provisions of this subdivision shall apply 54 only to a [loan or forbearance] financing arrangement repayable on 55 demand which has an initial principal of more than five thousand dollars 56 and which the borrower has the right to repay at any time in whole or inS. 1726 3 1 part, together with accrued interest on the principal so repaid, without 2 any penalty. With respect to a [loan or forbearance] financing arrange- 3 ment covered by this subdivision, the lender shall disclose to the 4 borrower in writing not less often than annually the amount of interest 5 accrued or payable as of the date of such disclosure and the manner by 6 which such amount was computed. 7 6. a. No law regulating the maximum rate of interest which may be 8 charged, taken or received, except section 190.40 and section 190.42 of 9 the penal law, shall apply to any [loan or forbearance] financing 10 arrangement in the amount of two hundred fifty thousand dollars or more, 11 other than a [loan or a forbearance] financing arrangement secured 12 primarily by an interest in real property improved by a one or two fami- 13 ly residence. A [loan] financing arrangement of two hundred fifty thou- 14 sand dollars or more which is to be advanced in installments pursuant to 15 a written agreement by a lender shall be deemed to be a single [loan] 16 financing arrangement for the total amount which the lender has agreed 17 to advance pursuant to such agreement on the terms and conditions 18 provided therein. 19 b. No law regulating the maximum rate of interest which may be 20 charged, taken or received, including section 190.40 and section 190.42 21 of the penal law, shall apply to any [loan or forbearance] financing 22 arrangement in the amount of two million five hundred thousand dollars 23 or more. [Loans or forbearances] Financing arrangements aggregating two 24 million five hundred thousand dollars or more which are to be made or 25 advanced to any one borrower in one or more installments pursuant to a 26 written agreement by one or more lenders shall be deemed to be a single 27 [loan or forbearance] financing arrangement for the total amount which 28 the lender or lenders have agreed to advance or make pursuant to such 29 agreement on the terms and conditions provided therein. 30 7. Except as otherwise expressly provided by law, in the event of 31 prepayment in full of a [loan] financing arrangement, any refund of 32 unearned interest to which the borrower may be entitled may not be 33 computed by a sum of the balances or similar method but must be deter- 34 mined according to a generally accepted actuarial method. 35 8. The attorney general is hereby empowered to adopt, promulgate, 36 amend, and repeal rules, as such term is defined in paragraph (a) of 37 subdivision two of section one hundred two of the state administrative 38 procedure act, and issue guidance as may be necessary to interpret 39 financing arrangements as such term is defined in subdivision one-a of 40 this section and to effectuate and enforce that provision. 41 § 2. Subdivision 1 of section 5-511 of the general obligations law, 42 as amended by chapter 1072 of the laws of 1968, is amended to read as 43 follows: 44 1. All bonds, bills, notes, assurances, conveyances, all other 45 contracts or securities whatsoever, except bottomry and respondentia 46 bonds and contracts, and all deposits of goods or other things whatsoev- 47 er, whereupon or whereby there shall be reserved or taken, or secured or 48 agreed to be reserved or taken, any greater sum, or greater value, for 49 the [loan or forbearance of any money, goods or other things in action] 50 financing arrangement, than is prescribed in section 5-501 of this 51 title, shall be void, except that the knowingly taking, receiving, 52 reserving or charging such a greater sum or greater value by a savings 53 bank, a savings and loan association or a federal savings and loan asso- 54 ciation shall only be held and adjudged a forfeiture of the entire 55 interest which the [loan or obligation] financing arrangement carries 56 with it or which has been agreed to be paid thereon. If a greater sum orS. 1726 4 1 greater value has been paid, the person paying the same or [his] their 2 legal representative may recover from the savings bank, the savings and 3 loan association or the federal savings and loan association twice the 4 entire amount of the interest thus paid. 5 § 3. Section 5-513 of the general obligations law, as amended by chap- 6 ter 1072 of the laws of 1968, is amended to read as follows: 7 § 5-513. Recovery of excess. Every person who, for any such [loan or8forbearance] financing arrangement, shall pay or deliver any greater sum 9 or value than is allowed to be received pursuant to section 5-501 of 10 this title, and [his] their personal representatives, may recover in an 11 action against the person who shall have taken or received the same, and 12 [his] their personal representatives, the amount of the money so paid or 13 value delivered, above the rate aforesaid. 14 § 4. Section 5-517 of the general obligations law is amended to read 15 as follows: 16 § 5-517. Transfer of cause of action for usury. A cause of action to 17 cancel, or otherwise affect, an instrument executed, or an act done, as 18 security for a usurious [loan or forbearance] financing arrangement, can 19 be transferred, where the instrument or act creates a specific charge 20 upon property, which is also transferred in disaffirmance thereof, and 21 not otherwise; but, in that case, the transferee does not succeed to the 22 right, conferred by statute upon the borrower, to procure relief, with- 23 out paying, or offering to pay, any part of the sum or thing loaned. 24 § 5. Section 5-524 of the general obligations law, as amended by chap- 25 ter 349 of the laws of 1968 and as further amended by section 104 of 26 part A of chapter 62 of the laws of 2011, is amended to read as follows: 27 § 5-524. Taking security upon certain property for usurious [loans] 28 financing arrangements. A person who takes security, upon any household 29 furniture, sewing machines, plate or silverware in actual use, tools or 30 implements of trade, wearing apparel or jewelry, for a [loan or forbear-31ance of money] financing arrangement, or for the use or sale of [his] 32 their personal credit, conditioned upon the payment of a greater rate 33 than the rate prescribed by the superintendent of financial services 34 pursuant to section fourteen-a of the banking law, or, if no rate has 35 been so prescribed, six per centum per annum, or who as security for 36 such [loan] financing arrangement, use or sale of personal credit as 37 aforesaid, makes a pretended purchase of such property from any person, 38 upon the like condition, and permits the pledgor to retain the 39 possession thereof is guilty of a misdemeanor. 40 § 6. Subdivision 2 of section 14-a of the banking law, as amended by 41 chapter 155 of the laws of 2012, is amended and a new subdivision 2-a is 42 added to read as follows: 43 2. The rate of interest as so prescribed under this section shall 44 include as interest any and all amounts paid or payable, directly or 45 indirectly, voluntary or otherwise, by any person, to or for the account 46 of the lender, including any discount applied to any amounts advanced, 47 in [consideration for the making of a loan or forbearance] connection 48 with a financing arrangement as defined by the superintendent pursuant 49 to subdivision three of this section, including fees, service charges, 50 credit service charges, tips, renewal charges, credit insurance premi- 51 ums, debt suspension or similar products, any ancillary product sold 52 with any extension of consumer credit, and any other amount paid or 53 payable. 54 2-a. The rate of interest for any financing arrangement shall be 55 calculated as described in section 600.3 of title twenty-three of the 56 New York codes, rules and regulations; provided, however, that the rateS. 1726 5 1 of interest will include as finance charges all amounts described in 2 subdivision two of this section. 3 § 7. Section 340 of the banking law, as amended by chapter 22 of the 4 laws of 1990, is amended to read as follows: 5 § 340. Doing business without license prohibited. 1. No person or 6 other entity shall engage in the business of [making loans] entering 7 into financing arrangements as defined in subdivision one-a of section 8 5-501 of the general obligations law in the principal amount of twenty- 9 five thousand dollars or less for any [loan] financing arrangement to an 10 individual for personal, family, household, or investment purposes and 11 in a principal amount of fifty thousand dollars or less for business and 12 commercial [loans] financing arrangements, and charge, contract for, or 13 receive a greater rate of interest than the [lender] person or other 14 entity would be permitted by law to charge if [he] it were not a licen- 15 see hereunder except as authorized by this article and without first 16 obtaining a license from the superintendent. 17 2. For the purposes of this section, a person or entity shall be 18 considered as engaging in the business of [making loans] entering into 19 financing arrangements in New York, and subject to the licensing and 20 other requirements of this article, if it solicits [loans] financing 21 arrangements in the amounts prescribed by this section within this state 22 and, in connection with such solicitation, [makes loans to] enters into 23 financing arrangements with individuals then resident in this state, 24 except that no person or entity shall be considered as engaging in the 25 business of [making loans] entering into financing arrangements in this 26 state on the basis of isolated, incidental or occasional transactions 27 which otherwise meet the requirements of this section. 28 3. Nothing in this article shall apply to licensed collateral loan 29 brokers. 30 § 8. Subdivision 1 of section 351 of the banking law, as amended by 31 chapter 22 of the laws of 1990, is amended to read as follows: 32 1. Every licensee hereunder may [loan] enter into financing arrange- 33 ments as defined in subdivision one-a of section 5-501 of the general 34 obligations law for any sum of money not exceeding the maximum principal 35 amounts prescribed in section three hundred forty of this article, and 36 may charge, contract for, and receive thereon interest at the rate or 37 rates agreed to by the licensee and the borrower, subject to sections 38 190.40 and 190.42 of the penal law. Such interest may either be (a) [be] 39 calculated on the actual unpaid principal balances of the [loan] financ- 40 ing arrangement or in the case of a [loan] financing arrangement commit- 41 ment from the date of each advance thereunder for the actual time 42 outstanding, according to a generally accepted actuarial method at a 43 fixed or variable rate and in accordance with the provisions of the 44 evidence of the indebtedness or (b) precomputed under subdivision five 45 of this section. 46 § 9. Section 190.40 of the penal law, as amended by chapter 424 of the 47 laws of 1976, is amended to read as follows: 48 § 190.40 Criminal usury in the second degree. 49 A person is guilty of criminal usury in the second degree when, not 50 being authorized or permitted by law to do so, [he] such person knowing- 51 ly charges, takes or receives any money or other property as interest 52 [on the loan or forebearance of any money or other property], whether 53 paid voluntarily or otherwise, in connection with a financing arrange- 54 ment as defined in subdivision one-a of section 5-501 of the general 55 obligations law, at a rate exceeding twenty-five per centum per annum or 56 the equivalent rate for a longer or shorter period. The rate of inter-S. 1726 6 1 est shall be calculated as provided in section fourteen-a of the banking 2 law, as amended. 3 Criminal usury in the second degree is a class E felony. 4 § 10. Section 190.42 of the penal law, as added by chapter 424 of the 5 laws of 1976, is amended to read as follows: 6 § 190.42 Criminal usury in the first degree. 7 A person is guilty of criminal usury in the first degree when, not 8 being authorized or permitted by law to do so, [he] such person knowing- 9 ly charges, takes or receives any money or other property as interest 10 [on the loan or forbearance of any money or other property], whether 11 paid voluntarily or otherwise, in connection with a financing arrange- 12 ment as defined in subdivision one-a of section 5-501 of the general 13 obligations law, at a rate exceeding twenty-five per centum per annum or 14 the equivalent rate for a longer or shorter period and either the actor 15 had previously been convicted of the crime of criminal usury or of the 16 attempt to commit such crime, or the actor's conduct was part of a 17 scheme or business of making or collecting usurious [loans] financing 18 arrangements. The rate of interest shall be calculated as provided in 19 section fourteen-a of the banking law, as amended. 20 Criminal usury in the first degree is a class C felony. 21 § 11. Section 508 of the personal property law, as added by chapter 22 309 of the laws of 2010, is amended to read as follows: 23 § 508. Administration by the attorney general. The attorney general 24 may make rules and regulations necessary for the administration of this 25 article[; provided, however, that such rules and regulations shall not26attempt to regulate or characterize rental-purchase agreements as a27security interest, credit sale, retail installment sale, conditional28sale or any other form of consumer credit that imputes to a rental-pur-29chase agreement the creation of a debt or extension of credit, nor shall30such rules and regulations require the disclosure of a percentage rate31calculation, including a time-price differential, an annual percentage32rate, or an effective annual percentage rate]. 33 § 12. Severability. If any clause, sentence, paragraph, subdivi- 34 sion, section or part of this act shall be adjudged by any court of 35 competent jurisdiction to be invalid, such judgment shall not affect, 36 impair, or invalidate the remainder thereof, but shall be confined in 37 its operation to the clause, sentence, paragraph, subdivision, section 38 or part thereof directly involved in the controversy in which 39 such judgment shall have been rendered. It is hereby declared to be the 40 intent of the legislature that this act would have been enacted even if 41 such invalid provisions had not been included herein. 42 § 13. This act shall take effect immediately.
