senate Bill S5531

Signed By Governor
2011-2012 Legislative Session

Extends the effectiveness of open end loans

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Archive: Last Bill Status Via A8102 - Signed by Governor


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

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Actions

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Assembly Actions - Lowercase
Senate Actions - UPPERCASE
Jul 12, 2011 signed chap.114
Jun 30, 2011 delivered to governor
Jun 15, 2011 returned to assembly
passed senate
3rd reading cal.1061
substituted for s5531
Jun 15, 2011 substituted by a8102
Jun 14, 2011 advanced to third reading
Jun 13, 2011 2nd report cal.
Jun 07, 2011 1st report cal.1061
May 31, 2011 referred to banks

Votes

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S5531 - Bill Details

See Assembly Version of this Bill:
A8102
Law Section:
Banks
Laws Affected:
Amd ยง3, Chap 223 of 1996
Versions Introduced in 2009-2010 Legislative Session:
A8382

S5531 - Bill Texts

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Extends the effectiveness of open end loans.

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BILL NUMBER:S5531

TITLE OF BILL:
An act
to amend chapter 223 of the laws of 1996, amending the banking law
relating to permissible fees in connection with open end loans, in
relation to extending the effectiveness thereof

PURPOSE:
To continue, for another two years, the existing statutory authority
of licensed lenders to charge annual fees on open-end personal loans.

SUMMARY OF PROVISIONS:
This bill amends the effective date of Chapter 223 of the Laws of 1996
to extend, for an additional two years (to June 30, 2013), the
authority of licensed lenders to charge annual fees on open-end
personal loans.

EXISTING LAW:
Since 1996, Section 351 of the Banking Law has authorized licensed
lenders to charge annual fees on open-end loans.

JUSTIFICATION:
In 1996, legislation was enacted to authorize licensed lenders to
charge annual fees on open-end loans. The law further provided that
any such fee may not exceed the lesser of 1% of the loan amount or
$50. This 1996 law contained a sunset date of June 30, 2000. Since
that time, several laws have been passed to continue the provisions
of the 1996 law. The provisions of the 1996 law are currently scheduled
to expire on June 30, 2013.

The 1996 law recognized that annual fees are a commonly used feature
in the pricing of open-end loan products, such as credit cards, home
equity loans and personal loans. This type of fee reflects the fact
that additional costs are incurred in the administration of revolving
loans, such as the preparation and mailing of monthly billing
statements, the processing of transactions, and increased monitoring
costs.

Annual fees provide financial institutions with greater flexibility in
pricing their loan products. Without this type of fee, lenders would
have to rely solely on the interest rate to cover all of their costs.
This would have the effect of elevating the interest rate. For
example, many accounts, especially passive or low-balance accounts,
may not generate sufficient interest income to offset the expenses
incurred. To help recover such costs, a lender can either charge an
annual fee to each customer, or they can increase the interest rate
for all customers. The problem with the latter approach is that the
impact of such rate increases falls disproportionately on persons who
carry a high balance. In contrast, the ability to charge an annual
fee enables lenders to better apportion their costs between account
holders to reflect the actual costs incurred.

For these reasons, banking institutions have long had the ability to
charge annual fees on open-end loans products. Licensed lenders have
also had the ability to charge annual fees on certain open-end


products, such as credit cards and home equity loans. However, prior
to 1996, they did not have the authority to charge annual fees on
open-end personal loans. Chapter 223 of 1996 gave licensed lenders
the same pricing flexibility as banking institutions in regard to
charging annual fees on open-end personal loans. Licensed lenders
should continue to have this flexibility in pricing their loan
products. Therefore, this bill would extend the provisions of the
1996 law for another two years.

LEGISLATIVE HISTORY:
New bill.

FISCAL IMPLICATIONS:
None.

LOCAL FISCAL IMPLICATIONS:
None.

EFFECTIVE DATE:
Immediately.

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

                                  5531

                       2011-2012 Regular Sessions

                            I N  S E N A T E

                              May 31, 2011
                               ___________

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

AN ACT to amend chapter 223 of the laws of 1996,  amending  the  banking
  law relating to permissible fees in connection with open end loans, in
  relation to extending the effectiveness thereof

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

  Section 1. Section 3 of chapter 223 of the laws of 1996, amending  the
banking  law  relating  to  permissible fees in connection with open end
loans, as amended by chapter 166 of the laws of 2009, is amended to read
as follows:
  S 3. This act shall take effect immediately, and remain in full  force
and  effect until June 30, [2011] 2013, when, upon such date, the amend-
ments made by this act shall expire and  be  deemed  repealed,  and  the
provisions  of law amended by this act shall revert to their text and be
read as they were immediately prior to the effective date of this act.
  S 2. This act shall take effect immediately.





 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD10121-01-1

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