2022 New York Laws
BNK - Banking
Article 9 - Licensed Lenders
351 - Restrictions on Loans Subject to the Provisions of This Article; Interest; Other Charges.

Universal Citation: NY Banking L § 351 (2022)
§ 351.  Restrictions  on  loans  subject  to  the  provisions  of this
article; interest; other charges. 1. Every licensee hereunder  may  loan
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. Such interest may either (a) be calculated on
the  actual  unpaid  principal  balances of the loan or in the case of a
loan commitment 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.
  2. On any loan with a variable rate of interest made pursuant to  this
subdivision,  the  rate  shall be determined at regular intervals as set
forth in the evidence  of  indebtedness  and  in  accordance  with  such
regulations  as the superintendent of financial services shall prescribe
but said rate shall not vary more often than once  in  any  three  month
period  and  shall  be  based  on  a published index that is (a) readily
available, (b) independently verifiable, (c) beyond the control  of  the
licensee, and (d) approved by the superintendent.
  The  superintendent  of  financial  services  shall adopt regulations,
including but not limited  to:  (i)  providing  for  disclosure  to  the
borrower  by  the licensee of the circumstances under which the rate may
increase, any limitations on the increase, the effect of an increase and
an example of the payment terms that would result from an increase; (ii)
providing for disclosure to the borrower by the licensee of a history of
the fluctuations of the index over a  reasonable  period  of  time;  and
(iii)  providing  for  notice to the borrower from the licensee prior to
any rate increase or change in the terms of payment.
  3. Loans may be granted under an open end or closed end loan agreement
providing for a fixed or variable rate.
  4. Interest, consideration, or charges for the use of money shall  not
be  deducted  or  received  in  advance  and shall be computed on unpaid
principal balances. Such interest, consideration, or charges  shall  not
be  compounded; provided that, if part or all of the principal amount of
any loan contract is the unpaid principal balance of a prior  loan,  the
unpaid  interest,  consideration or charges for the use of money on such
prior loan which have accrued within sixty days  before  the  making  of
such  loan contract may be incorporated as interest bearing principal in
the principal amount of such loan contract, and for the purposes of this
subdivision  any  such  new  loan  shall  be  deemed  a  separate   loan
transaction.
  5.   When   a   closed-end   loan   agreement  requires  repayment  in
substantially equal and consecutive monthly  installments  of  principal
and  interest  combined,  the  interest may be precomputed at the agreed
rate on scheduled unpaid principal balances according to  the  terms  of
the  agreement  and  added  to  the  principal amount of the loan. Every
payment  may  be  applied  to  the  combined  total  of  principal   and
precomputed  interest  until  the  loan  agreement is fully paid and the
acceptance or payment of interest on loans made under the provisions  of
this subdivision shall not be deemed to constitute payment, deduction or
receipt  thereof  in  advance  nor compounding under subdivision four of
this  section.  Such  precomputed  interest  shall  be  subject  to  the
following adjustments:

(a) If the loan agreement is prepaid in full by cash, a new loan, refinancing or otherwise before the final installment date, the borrower shall receive a refund of (i) the unearned portion of the interest the amount of which portion shall be determined according to a generally accepted actuarial method; provided, however, that if the amount of precomputed interest (A) is less than ten dollars, no refund shall be required; or (B) exceeds the sum of ten dollars and the earned interest is less than that amount, the licensee may retain such an additional amount as will bring the earned interest to ten dollars and refund the remainder, and provided further, that unless the loan is refinanced, no refund shall be required if it amounts to less than one dollar; and (ii) if a charge was made to the borrower for credit related insurance for insuring the borrower the excess of the charge to the borrower therefor over the insurance charges paid or payable by the licensee, if such insurance charges were paid or payable by the licensee periodically, or the refund for such insurance charges received or receivable by the licensee, if such premium was paid or payable in a lump sum by the licensee, provided that no such refund shall be required if it amounts to less than one dollar. In the event (i) the maturity of the loan is accelerated due to the default of the borrower or otherwise and judgment is obtained, or (ii) repayment is made pursuant to any credit related insurance policy for which a charge was made to the borrower for the premium thereon, the borrower or legal representative, as the case may be, shall be entitled to the same refund of interest and insurance charges as if the loan had been prepaid in full on the date of acceleration or repayment.

(b) (i) In the event of default of more than ten days in the payment of any scheduled installment, the licensee may charge and collect a default charge not exceeding five percent of the installment in default. This charge may not be collected more than once for the same default and may be collected at the time of such default or at any time thereafter.

(ii) After the final due date or upon acceleration of maturity for default, the licensee may charge interest at the original agreed rate on actual unpaid balances if the loan agreement so provides.

(c) If payment of all unpaid installments on which no default charge has been charged and collected is deferred one or more full months, and if the loan agreement so provides, the licensee may charge and collect an amount which shall be equal to the difference between the refund that would be required for prepayment in full as of the scheduled due date of the first deferred installment and the amount which would be required for prepayment in full as of one month prior to said date, multiplied by the number of months in the deferment period. The deferment period is that period in which no scheduled payment has been made and in which no payment is required by reason of the deferment. Such charge may be collected at the time of deferment or may be collected at any time thereafter. If a refund of precomputed interest is required during a deferment period the borrower shall also receive a refund of the deferment charge for the number of months remaining in said period, for which purpose a portion of a month exceeding fifteen days shall be deemed a month.

(d) If two or more installments or parts thereof are in default for five days or more, the licensee may, if the loan agreement so provides, elect to convert the loan from a precomputed one to one in which interest is paid on actual unpaid balances. In this event, the licensee shall make the same refund of interest as if the loan were prepaid in full on the scheduled payment due date preceding the date of conversion and thereafter may charge interest at the agreed rate, by the actuarial method, on actual unpaid balances for the time actually outstanding. 6. * (a) In addition to the interest, consideration, or charges above specified, no further or other charge or amount whatsoever for any examination, service, brokerage, commission, expense, fee, or bonus or other thing or otherwise shall be directly or indirectly charged, contracted for, or received, except the premium or identifiable charge for insurance authorized by section three hundred fifty-seven of this article; the lawful fees, if any, actually and necessarily paid out by the licensee to any public officer for filing, recording, or releasing in any public office any instrument securing the loan, which fees may be collected when the loan is made or at any time thereafter or non-filing insurance premiums not in excess of seven dollars in lieu of filing, recording or releasing any such instrument; an annual fee on open end loans authorized by the superintendent and made pursuant to subdivision three of this section, provided, however, that no such fee shall exceed an amount equal to one percent of the amount of the loan or fifty dollars, whichever is less; and a fee, not to exceed the amount set forth in section 5-328 of the general obligations law, for return by a depository institution of a dishonored check, negotiable order of withdrawal, or share draft. * NB Effective until June 30, 2025 * (a) In addition to the interest, consideration, or charges above specified, no further or other charge or amount whatsoever for any examination, service, brokerage, commission, expense, fee, or bonus or other thing or otherwise shall be directly or indirectly charged, contracted for, or received, except the premium or identifiable charge for insurance authorized by section three hundred fifty-seven of this article; the lawful fees, if any, actually and necessarily paid out by the licensee to any public officer for filing, recording, or releasing in any public office any instrument securing the loan, which fees may be collected when the loan is made or at any time thereafter or non-filing insurance premiums not in excess of seven dollars in lieu of filing, recording or releasing any such instrument; and a fee, not to exceed the amount set forth in section 5-328 of the general obligations law, for return by a depository institution of a dishonored check, negotiable order of withdrawal, or share draft. * NB Effective June 30, 2025

(b) Any licensee which knowingly receives, reserves or charges a greater rate of interest than that authorized by this section shall forfeit the entire interest which the note, or other evidence of debt carries with it, or which has been agreed to be paid thereon, and if a greater rate of interest has been paid, the person paying the same or his legal representative may recover from the licensee twice the entire amount of interest thus paid. * (c) In addition to other such information as the superintendent may require, any licensee which charges an annual fee on open end loan accounts shall annually report, in a manner and form prescribed by the superintendent, information to the department on open end loan borrowers, which shall include: average annual income of borrowers at the time of the loan, average amount of loans outstanding at the end of each calendar year, average interest charged, average amount of annual fees, and geographic distribution of loans made by the licensee. * NB Repealed June 30, 2025

Disclaimer: These codes may not be the most recent version. New York may have more current or accurate information. We make no warranties or guarantees about the accuracy, completeness, or adequacy of the information contained on this site or the information linked to on the state site. Please check official sources.
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.