senate Bill S1613

2011-2012 Legislative Session

Relates to refund anticipation loans

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Archive: Last Bill Status - In Committee


  • Introduced
  • In Committee
  • On Floor Calendar
    • Passed Senate
    • Passed Assembly
  • Delivered to Governor
  • Signed/Vetoed by Governor

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Assembly Actions - Lowercase
Senate Actions - UPPERCASE
Jan 04, 2012 referred to banks
Jan 10, 2011 referred to banks

S1613 - Bill Details

See Assembly Version of this Bill:
A4710
Current Committee:
Law Section:
Banking Law
Laws Affected:
Add §46, Bank L
Versions Introduced in 2009-2010 Legislative Session:
S4222, A5967

S1613 - Bill Texts

view summary

Relates to refund anticipation loans; requires that at the time a borrower applies for a refund anticipation loan, a facilitator shall disclose to such borrower certain information; defines terms.

view sponsor memo
BILL NUMBER:S1613

TITLE OF BILL:

An act
to amend the banking law, in relation to refund anticipation loans

PURPOSE OR GENERAL IDEA OF BILL:

This bill protects New York consumers by regulating the offering of
refund anticipation loans, including disclosures and reasonable
limits on the amount of interest that can be charged for such loans.

SUMMARY OF PROVISIONS:

Bill § 1 adds a new §46 to the Banking Law entitled "Refund
anticipation loans." The section includes definitions of the
following terms:
"borrower", "facilitator" (which means a person who makes or otherwise
acts deals with the public to arrange a refund anticipation loan, but
does not include banking institutions, licensed lenders or
intermediaries), "refund anticipation loan", "refund anticipation
loan fee", and "annual percentage rate".

At the time of an RAL application, §46 requires disclosures of:

* the estimated fee for preparing and electronically filing an income
tax return;

* the RAL fee schedule;

* the annual percentage rate (APR) for the loan;

* the estimated total cost to the borrower of the RAL;

* the estimated number of days within which the loan proceeds will be
paid to the borrower if the loan is approved;

* the borrower's responsibility for repayment of the loan and related
fees in the event the income tax refund is not paid or not paid in
full;
and

* the availability of electronic tax return filing and the average time
within which the borrower can expect to receive a refund with
electronic filing if the borrower does not obtain an RAL.

Under §46, no RAL shall be made at any location other than a location
in which the principal business is tax preparation. All disclosure
documents shall be available in English, Spanish and in any other
language spoken by more than 5% of the population in the vicinity of
the facilitator's location. The provisions of the Banking Law and the
General Obligations Law on interest rates are made inapplicable to
RALs.


Instead, the maximum interest rate on RALs is set at 60% per annum for
the first 21 days of the loan period and 20% per annum for any time
period thereafter.

Violators are subject to a civil penalty of not more than $500 per
violation, to be assessed by the Superintendent of Banks as provided
in Banking Law §44. In addition, any facilitator who violates §46 can
be held liable to any aggrieved borrower for three times the amount
of the refund anticipation loan fee, plus reasonable attorney's fees,
in a civil action brought by the aggrieved borrower or by the
Attorney General on behalf of the aggrieved borrower. The
Superintendent may prescribe regulations to carry out the purposes of
§46.

The bill clarifies that it is not intended to impair or limit the
validity of additional local laws or regulations, not inconsistent
with the provisions of §46, applicable to the making of RALs. The
provisions of §46 are also meant to be severable.

EFFECTS OF PRESENT LAW WHICH THIS BILL WOULD ALTER:

No current statutory provisions address the marketing, disclosure and
offering of RAL products. Some local governments, such as New York
City, have enacted local laws addressing disclosure requirements -
this bill would allow local regulation of RALs provided it is not
inconsistent with the bill's provisions.

JUSTIFICATION:

In recent years there has been a substantial increase in the marketing
of so-called "rapid refund" loans and similar products that promise
instant access to the anticipated proceeds of a tax refund. These
heavily advertised "refund anticipation loans" are actually high-cost
short term loans, similar to payday loans. Recent reports provide
evidence that these products are being targeted towards lower-income
taxpayers, and especially to those who qualify for an Earned Income
Tax Credit.
These are people who can least afford to pay the exorbitant fees
charged for RALs.

This bill will outlaw the use of predatory practices by those who facil-
itate the making of RALs in New York by requiring disclosure of the
true costs of the loan and by placing reasonable limits on the amount
of fees that can be charged for such facilitated loans. This approach
is modeled on legislation that has already been enacted by the State
of Connecticut. RAL fees would be capped at 60% over the first 21
days of the loan and 20% thereafter. This would allow facilitators to
recover their reasonable costs and operate profitably, but would be
far less than the unconscionable 175%-700% APRs that New Yorkers are
being charged today.

PRIOR LEGISLATIVE HISTORY:
2009-10: S.4222

FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
None.


EFFECTIVE DATE:
The first day of October after becoming law -- the Superintendent of
Banks is authorized to promulgate any rules and regulations and take
any other actions necessary for implementation in advance of such date.

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                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  1613

                       2011-2012 Regular Sessions

                            I N  S E N A T E

                            January 10, 2011
                               ___________

Introduced  by  Sen.  SAVINO -- read twice and ordered printed, and when
  printed to be committed to the Committee on Banks

AN ACT to amend the banking law,  in  relation  to  refund  anticipation
  loans

  THE  PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section 1. The banking law is amended by adding a new  section  46  to
read as follows:
  S 46. REFUND ANTICIPATION LOANS. 1. AS USED IN THIS SECTION:
  (A)  "BORROWER"  MEANS  A PERSON WHO RECEIVES THE PROCEEDS OF A REFUND
ANTICIPATION LOAN;
  (B) "FACILITATOR" MEANS A PERSON WHO, INDIVIDUALLY, OR IN  CONJUNCTION
OR  COOPERATION  WITH  ANOTHER PERSON, MAKES A REFUND ANTICIPATION LOAN,
PROCESSES, RECEIVES OR ACCEPTS FOR DELIVERY AN APPLICATION FOR A  REFUND
ANTICIPATION LOAN, ISSUES A CHECK IN PAYMENT OF REFUND ANTICIPATION LOAN
PROCEEDS,  OR  IN  ANY OTHER MANNER ACTS TO ALLOW THE MAKING OF A REFUND
ANTICIPATION LOAN. THE TERM DOES NOT  INCLUDE  A  BANK,  TRUST  COMPANY,
SAVINGS  BANK,  SAVINGS  AND LOAN ASSOCIATION, CREDIT UNION OR PERSON OR
ENTITY ISSUED A LICENSE UNDER THE PROVISIONS OF  ARTICLE  NINE  OF  THIS
CHAPTER, OPERATING UNDER THE LAWS OF THE UNITED STATES OR THIS STATE, OR
ANY PERSON WHO ACTS SOLELY AS AN INTERMEDIARY AND DOES NOT DEAL WITH THE
PUBLIC IN THE MAKING OF A REFUND ANTICIPATION LOAN;
  (C)  "REFUND  ANTICIPATION  LOAN"  MEANS  A  LOAN  ARRANGED TO BE PAID
DIRECTLY FROM THE PROCEEDS OF A BORROWER'S INCOME TAX REFUND;
  (D) "REFUND ANTICIPATION LOAN FEE" MEANS ANY CHARGES,  FEES  OR  OTHER
CONSIDERATION CHARGED OR IMPOSED FOR THE MAKING OF A REFUND ANTICIPATION
LOAN. THE TERM DOES NOT INCLUDE ANY CHARGES, FEES OR OTHER CONSIDERATION
CHARGED  OR  IMPOSED IN THE ORDINARY COURSE OF BUSINESS BY A FACILITATOR
FOR SERVICES THAT DO NOT RESULT IN THE MAKING OF A LOAN  INCLUDING,  BUT
NOT  LIMITED  TO,  FEES  FOR  TAX RETURN PREPARATION SERVICES OR FOR THE
ELECTRONIC FILING OF INCOME TAX RETURNS; AND

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD05683-01-1

S. 1613                             2

  (E) "ANNUAL PERCENTAGE RATE" SHALL HAVE THE SAME MEANING  AS  PROVIDED
IN PARAGRAPH (B) OF SUBDIVISION ONE OF SECTION SIX-L OF THIS CHAPTER.
  2.  AT  THE  TIME A BORROWER APPLIES FOR A REFUND ANTICIPATION LOAN, A
FACILITATOR SHALL DISCLOSE TO SUCH BORROWER ON A DOCUMENT THAT IS  SEPA-
RATE FROM THE LOAN APPLICATION:
  (A)  THE  ESTIMATED  FEE  FOR  PREPARING  AND ELECTRONICALLY FILING AN
INCOME TAX RETURN;
  (B) THE REFUND ANTICIPATION LOAN FEE SCHEDULE;
  (C) THE ANNUAL PERCENTAGE RATE FOR THE LOAN;
  (D) THE ESTIMATED TOTAL COST TO THE BORROWER FOR  UTILIZING  A  REFUND
ANTICIPATION LOAN;
  (E)  THE ESTIMATED NUMBER OF DAYS WITHIN WHICH THE LOAN PROCEEDS SHALL
BE PAID TO THE BORROWER IF THE LOAN IS APPROVED;
  (F) THE BORROWER IS RESPONSIBLE FOR REPAYMENT OF THE LOAN AND  RELATED
FEES IN THE EVENT THE INCOME TAX REFUND IS NOT PAID OR NOT PAID IN FULL;
AND
  (G)  THE AVAILABILITY OF ELECTRONIC FILING OF THE INCOME TAX RETURN OF
THE BORROWER AND THE AVERAGE TIME  ANNOUNCED  BY  THE  INTERNAL  REVENUE
SERVICE  WITHIN WHICH THE BORROWER CAN EXPECT TO RECEIVE A REFUND IF THE
BORROWER'S RETURN IS ELECTRONICALLY FILED  AND  THE  BORROWER  DOES  NOT
OBTAIN A REFUND ANTICIPATION LOAN.
  3.  NO  REFUND  ANTICIPATION  LOAN SHALL BE MADE AT ANY LOCATION OTHER
THAN A LOCATION IN WHICH THE PRINCIPAL BUSINESS IS TAX PREPARATION.  ALL
DISCLOSURE  DOCUMENTS  REQUIRED BY SUBDIVISION TWO OF THIS SECTION SHALL
BE AVAILABLE IN ENGLISH, SPANISH AND IN ANY  OTHER  LANGUAGE  SPOKEN  BY
MORE  THAN  FIVE  PERCENT  OF  THE  POPULATION  IN  THE  VICINITY OF THE
FACILITATOR'S LOCATION.
  4. NOTWITHSTANDING ANY OTHER PROVISION  OF  THE  BANKING  LAW  OR  THE
GENERAL  OBLIGATIONS  LAW,  THE  INTEREST RATE FOR A REFUND ANTICIPATION
LOAN SHALL NOT EXCEED (A) SIXTY PERCENT PER ANNUM FOR THE INITIAL  TWEN-
TY-ONE DAYS OF SUCH LOAN, AND (B) TWENTY PERCENT PER ANNUM FOR THE PERI-
OD  COMMENCING  ON  THE TWENTY-SECOND DAY OF SUCH LOAN AND ENDING ON THE
DATE OF PAYMENT.
  5. ANY FACILITATOR WHO VIOLATES ANY PROVISION OF THIS SECTION SHALL BE
SUBJECT TO A CIVIL PENALTY OF NOT MORE THAN  FIVE  HUNDRED  DOLLARS  FOR
EACH  SUCH  VIOLATION. SUCH PENALTY SHALL BE ASSESSED BY THE SUPERINTEN-
DENT AS PROVIDED IN SECTION FORTY-FOUR OF THIS ARTICLE. IN ADDITION, ANY
FACILITATOR WHO VIOLATES ANY PROVISION OF THIS SECTION SHALL  BE  LIABLE
TO  ANY  AGGRIEVED BORROWER IN AN AMOUNT EQUAL TO THREE TIMES THE AMOUNT
OF THE REFUND ANTICIPATION LOAN FEE, PLUS REASONABLE ATTORNEY'S FEES, IN
A CIVIL ACTION BROUGHT BY THE AGGRIEVED  BORROWER  OR  BY  THE  ATTORNEY
GENERAL ON BEHALF OF THE AGGRIEVED BORROWER.
  6.  THE  SUPERINTENDENT  MAY  PRESCRIBE  REGULATIONS  TO CARRY OUT THE
PROVISIONS AND PURPOSES OF THIS SECTION.
  S 2. Nothing in this act shall be construed to  impair  or  limit  the
validity  of  any additional local laws or regulations, not inconsistent
with the provisions of this act, applicable  to  the  making  of  refund
anticipation loans.
  S  3.  If any clause, sentence, paragraph, section or part of this act
be adjudged by any court of competent jurisdiction to be  invalid,  such
judgment shall not affect, impair or invalidate the remainder hereof but
shall  be  applied  in its operation to the clause, sentence, paragraph,
section or part hereof directly involved in  the  controversy  in  which
such judgment shall have been rendered.
  S  4. This act shall take effect on the first of October next succeed-
ing the date on which it shall have become  a  law;  provided,  however,

S. 1613                             3

that effective immediately, the addition, amendment and/or repeal of any
rule  or  regulation necessary for the implementation of this act on its
effective date are authorized and directed to be made and  completed  on
or before such effective date.

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