S T A T E O F N E W Y O R K
________________________________________________________________________
1915
2009-2010 Regular Sessions
I N S E N A T E
February 9, 2009
___________
Introduced by Sens. MORAHAN, DIAZ -- read twice and ordered printed, and
when printed to be committed to the Committee on Consumer Protection
AN ACT to amend the general business law, the banking law and the
personal property law, in relation to prohibiting unsolicited mailing
of credit card applications
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
1 Section 1. The opening paragraph and subdivision 9 of section 520 of
2 the general business law, the opening paragraph as added by chapter 200
3 of the laws of 1987 and subdivision 9 as added by chapter 485 of the
4 laws of 1996, are amended and three new subdivisions 10, 11 and 12 are
5 added to read as follows:
6 Any application form [or preapproved written solicitation] to enter
7 into a credit card agreement for personal, family, or household purposes
8 which is mailed to an individual residing in this state on or after
9 January first, nineteen hundred eighty-eight, by or on behalf of [a] AN
10 issuer, whether or not the issuer is located in this state, other than
11 an application form or solicitation included in a magazine, newspaper,
12 or other publication distributed by someone other than the issuer, and,
13 any application primarily for a credit card to be used for personal,
14 family or household purposes which is distributed or made available in
15 this state to a resident of this state on or after January first, nine-
16 teen hundred eighty-eight in an office or other place of business owned
17 or operated by the issuer, shall contain the following disclosures in
18 chart form and shall put chart headings in bold face type of at least
19 ten point in size and material inside the chart of at least eight point
20 type in size. Such chart shall use substantially the same format and
21 terminology shown below. In completing the chart with the information
22 required for each category, the guidelines hereinafter contained in the
23 corresponding subdivisions numbered one through four shall be utilized:
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD06991-01-9
S. 1915 2
1 _________________________________________________________________________
2 | | | | |Cash Advance |
3 | | Variable | | |Fee, Trans- |
4 | Annual | Rate Index | Annualized | Grace | action Fee, |
5 | Percentage | and | Membership | Period for |Late Fee, and|
6 | Rate (1) | Spread (1a) | Fee (2) |Purchases (3)| Over-the- |
7 | | | | |Limit Fees(4)|
8 | | | | | |
9 _________________________________________________________________________
10 | | | | | |
11 | | | | | |
12 | | | | | |
13 | | | | | |
14 | | | | | |
15 | | | | | |
16 | | | | | |
17 _________________________________________________________________________
18 (9) Any application form [or preapproved written solicitation] to
19 enter into a retail installment credit agreement in which the retail
20 seller or financing agency may take or retain a purchase money security
21 interest, as set forth in paragraph (c) of subdivision twelve of section
22 four hundred thirteen of the personal property law, which is mailed or
23 otherwise made available to an individual residing in this state on or
24 after the effective date of this subdivision, by or on behalf of an
25 issuer, whether or not the issuer is located in this state, other than
26 an application form or solicitation included in a magazine, newspaper,
27 or other publication distributed by someone other than the issuer, shall
28 contain a clear and conspicuous written notice or disclosure to the
29 buyer that the retail seller or financing agency has or may retain a
30 security interest in merchandise covered under paragraph (c) of subdivi-
31 sion twelve of section four hundred thirteen of the personal property
32 law until the full payment price of said merchandise is paid. Further
33 provided, however, in all instances, said written notice must be
34 provided to any buyer prior to the first transaction made under any such
35 retail installment credit agreement in which a security interest has
36 been or may be taken or retained.
37 (10) EXCEPT AS PROVIDED IN SUBDIVISION TWELVE OF THIS SECTION, IT
38 SHALL BE UNLAWFUL FOR ANY FINANCIAL INSTITUTION, RETAIL MERCHANT OR
39 OTHER PERSON TO MAIL OR OTHERWISE DELIVER ANY CREDIT CARD APPLICATION OR
40 CREDIT CARD IN THIS STATE.
41 (11) UPON CONVICTION OF A VIOLATION OF THIS SECTION, A FINE OF NO MORE
42 THAN ONE THOUSAND DOLLARS PER OCCURRENCE SHALL BE IMPOSED.
43 (12) THIS SECTION SHALL NOT APPLY TO ANY CREDIT CARD APPLICATION OR
44 CREDIT CARD WHEN MAILED OR OTHERWISE DELIVERED EITHER:
45 (A) IN RESPONSE TO A REQUEST OR APPLICATION FOR A CREDIT CARD; OR
46 (B) AS A REPLACEMENT FOR A CREDIT CARD PREVIOUSLY ISSUED TO THE PERSON
47 TO WHOM THE CREDIT CARD IS SHIPPED OR MAILED.
48 S 2. The third undesignated paragraph of paragraph (b) of subdivision
49 5 of section 108 of the banking law, as added by chapter 1 of the laws
50 of 1994, is amended to read as follows:
51 A written agreement, whether it provides for a fixed or variable
52 interest rate, may provide for an introductory rate of interest at
53 either a fixed or a variable rate, provided that the terms of such
54 introductory rate, including, if applicable, the date on which the
55 introductory rate shall terminate, are disclosed to the borrower. Such
S. 1915 3
1 disclosure shall be contained on an application form [or pre-approved
2 written solicitation] as specified pursuant to subdivisions one and
3 one-a of section five hundred twenty of the general business law. A
4 change in the interest rate upon expiration of an introductory rate
5 shall not be considered a variable rate or a change in terms. The inter-
6 est rate in effect after expiration of an introductory rate may apply to
7 all amounts due under the agreement regardless of when incurred and
8 disclosure of the same shall be provided to the borrower in the written
9 agreement.
10 S 3. Paragraph (a) of subdivision 3 of section 413 of the personal
11 property law, as amended by chapter 1 of the laws of 1994, is amended to
12 read as follows:
13 (a) A seller may, in a retail [instalment] INSTALLMENT credit agree-
14 ment, contract for and, if so contracted for, the seller or holder ther-
15 eof may charge, receive and collect the service charge authorized by
16 this article, which service charge shall not exceed the rate or rates
17 agreed upon by the seller and the buyer, including, in accordance with
18 the provisions of the credit agreement, rates that may vary, from time
19 to time computed, for the purposes of this section, on the outstanding
20 indebtedness from month to month, or if the service charge so computed
21 is less than seventy cents for any month, seventy cents. If the credit
22 agreement provides for a variable rate of service charge, such rate
23 shall be determined at regular intervals as set forth in the credit
24 agreement and in accordance with such regulations as the banking board
25 shall prescribe but said rate shall not vary more often than once in any
26 three month period and shall be based on a published index that is (a)
27 readily available, (b) independently verifiable, (c) beyond the control
28 of the seller and (d) approved by the superintendent, (e) such charges
29 in credit agreements shall be based on the index values, or the index
30 numbers plus or minus additional percentage points provided, however,
31 that variations in the charge must correspond directly to the movements
32 of the index values plus or minus additional percentage points only.
33 Once such charge is established no lending institution may add any
34 factors to increase the charge other than variations in the established
35 index without the prior approval of the banking board.
36 The banking board shall adopt regulations with respect to credit
37 agreements that provide for a variable rate of service charge, including
38 but not limited to: (a) providing for disclosure to the buyer by the
39 seller of the circumstances under which the rate may increase, any limi-
40 tations on the increase, the effect of an increase and an example of the
41 payment terms that would result from an increase; (b) providing for
42 disclosure to the buyer by the seller of a history of the fluctuations
43 of the index over a reasonable period of time; and (c) providing for
44 notice to the buyer by the seller prior to any rate increase or change
45 in the terms of payment. The regulations shall allow a seller, holder or
46 financing agency after choosing an approved index to choose a spread and
47 a minimum and maximum rate of service charge at its discretion. A retail
48 [instalment] INSTALLMENT credit agreement, whether it provides for a
49 fixed or variable service charge, may provide for an introductory rate
50 of service charge at either a fixed or variable rate, provided that the
51 terms of such introductory rate, including, if applicable, the date on
52 which the introductory rate shall terminate, are disclosed to the buyer.
53 Such disclosure shall be contained on an application form [or pre-ap-
54 proved written solicitation] as specified pursuant to subdivisions one
55 and one-a of section five hundred twenty of the general business law. A
56 change in the service charge rate upon expiration of an introductory
S. 1915 4
1 rate shall not be considered a variable rate or a change in terms. The
2 service charge rate in effect after expiration of an introductory rate
3 may apply to all amounts due under the credit agreement regardless of
4 when incurred, and disclosure of the same shall be provided to the buyer
5 in the written agreement.
6 S 4. This act shall take effect on the one hundred eightieth day after
7 it shall have become a law.