New York Senate Bill Looks to Add New Regulations to Online Lenders
New York State Senator Elaine Phillips has proposed new legislation in the New York Senate that would authorize the Department of Financial Services to create a limited state charter for “Internet Lending Services Corporations”. The bill, S8340, would apply to businesses making loans over an internet or electronic platform.
In addition to creating new regulatory hurdles for online lending businesses, the bill would also limit State chartered lending companies to loans of $25,000 or less to individuals for personal, family, household, or investment purposes, and $50,000 or less for business and commercial loans. Businesses would be required to demonstrate fiscal solvency and maintain a minimum capital requirement of at least $250,000, which is five times higher than that of brick and mortar based licensed lenders.
To apply for a limited state charter under the new Article 3-C of the Banking Law, companies must establish a business corporation pursuant to the business corporation law, specifying in the Articles of Incorporation that the business will operate as an Internet Lending Services Corporation in accordance with the article. The corporation must also have a home office within the state.
If the legislation is passed and signed into law, companies that do not comply with the terms of the article could see fines or have their license suspended or revoked.
Some have speculated that if the bill becomes law, Fintech lenders may be less inclined to operate in the State of New York or would have to adjust their cost of services.
The legislation has been referred to the New York State Senate Banks Committee. It is unclear whether it will see further legislative action.