senate Bill S556

2011-2012 Legislative Session

Regulates the provision of refund anticipation loans by persons and entities other than banking institutions

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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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Actions

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Assembly Actions - Lowercase
Senate Actions - UPPERCASE
Jan 04, 2012 referred to banks
Mar 30, 2011 defeated in banks
Feb 22, 2011 notice of committee consideration - requested
Jan 05, 2011 referred to banks

Votes

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Mar 30, 2011 - Banks committee Vote

S556
8
11
committee
8
Aye
11
Nay
0
Aye with Reservations
0
Absent
0
Excused
0
Abstained
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S556 - Bill Details

See Assembly Version of this Bill:
A5266
Current Committee:
Law Section:
Banking Law
Laws Affected:
Add ยง46, Bank L
Versions Introduced in 2009-2010 Legislative Session:
S5584, A10331

S556 - Bill Texts

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Regulates the provision of refund anticipation loans by person and entities other than banking institutions; requires that at the time a borrower applies for a refund anticipation loan, a facilitator shall disclose to such borrower certain information relating to fees and interest rates; defines terms.

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BILL NUMBER:S556

TITLE OF BILL:
An act
to amend the banking law, in relation to refund anticipation loans

PURPOSE OR GENERAL IDEA OF BILL:
To protect 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:
Section 1. Amends the Banking Law by adding a new section 46, "Refund
anticipation loans." Defines 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".

Requires disclosures at the time of the RAL application, for: 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.

Provides that no RAL shall be made at any location other than a
location in which the principal business is tax preparation. Requires
all disclosure documents to 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. Establishes the maximum
interest rate on RALs at 60% per annum for the first 21 days of the
loan period and 20% per annum for any time period thereafter.

Prohibits facilitators from engaging in any of the following
activities: (i) requiring a client to enter into a loan arrangement
in order to complete a tax return; (ii) misrepresenting a material
factor or condition of a refund anticipation loan; (iii) failing to
process the application for a refund anticipation loan promptly after
the client applies for the loan; and (iv) engaging in any
transaction, practice, or course of business that operates a fraud
upon any person in connection with a refund anticipation loan.

Establishes a civil penalty of not more than $500 per violation, to be
assessed by the Superintendent of Banks as provided in Banking Law
section 44. Provides that any facilitator who violates section 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.


Authorizes the Superintendent to promulgate regulations necessary to
carry out the purposes of section 46.

Section 2. Clarifies that it is not intended to impair or limit the
validity of additional local laws or regulations, not inconsistent
with the provisions of section 46, applicable to the making of RALs.

Section 3. Severability

Section 4. Effective Date

EXISTING LAW:
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
facilitate 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. Certain fraudulent
practices associated with RAL facilitators are also proscribed. These
practices have already been outlawed in the State of California.

PRIOR LEGISLATIVE HISTORY:
2009-10: S.5584 - Referred to Banks/A.10331 - Referred to Banks/
A.8161 Enacting Clause Stricken
2009: A.1663 - Enacting Clause Stricken
2007-08: S.3250 Referred to Banks/A.1794 - Referred to Banks

FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:
None.

EFFECTIVE DATE:
The first day of November 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
________________________________________________________________________

                                   556

                       2011-2012 Regular Sessions

                            I N  S E N A T E

                               (PREFILED)

                             January 5, 2011
                               ___________

Introduced  by  Sen.  DIAZ  --  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

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD03239-01-1

S. 556                              2

NOT  LIMITED  TO,  FEES  FOR  TAX RETURN PREPARATION SERVICES OR FOR THE
ELECTRONIC FILING OF INCOME TAX RETURNS; AND
  (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 THIS CHAPTER OR THE GENERAL
OBLIGATIONS LAW, THE INTEREST RATE FOR A REFUND ANTICIPATION LOAN  SHALL
NOT  EXCEED  (A) SIXTY PERCENT PER ANNUM FOR THE INITIAL TWENTY-ONE DAYS
OF SUCH LOAN, AND (B) TWENTY PERCENT PER ANNUM FOR THE PERIOD COMMENCING
ON THE TWENTY-SECOND DAY OF SUCH LOAN AND ENDING ON THE DATE OF PAYMENT.
  5. IN OFFERING TO FACILITATE OR  FACILITATING  A  REFUND  ANTICIPATION
LOAN, NO FACILITATOR SHALL ENGAGE IN ANY OF THE FOLLOWING ACTIVITIES:
  (A)  REQUIRING  A  CLIENT TO ENTER INTO A LOAN ARRANGEMENT IN ORDER TO
COMPLETE A TAX RETURN;
  (B) MISREPRESENTING A MATERIAL FACTOR OR CONDITION OF A REFUND  ANTIC-
IPATION LOAN;
  (C)  FAILING TO PROCESS THE APPLICATION FOR A REFUND ANTICIPATION LOAN
PROMPTLY AFTER THE CLIENT APPLIES FOR THE LOAN; OR
  (D) ENGAGING IN ANY TRANSACTION, PRACTICE, OR COURSE OF BUSINESS  THAT
OPERATES  A  FRAUD  UPON  ANY  PERSON IN CONNECTION WITH A REFUND ANTIC-
IPATION LOAN.
  6. 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.
  7.  THE  SUPERINTENDENT  MAY  PRESCRIBE  REGULATIONS  TO CARRY OUT THE
PROVISIONS AND PURPOSES OF THIS SECTION.

S. 556                              3

  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 thereof
but shall be applied in its operation to  the  clause,  sentence,  para-
graph,  section  or part thereof directly involved in the controversy in
which such judgment shall have been rendered.
  S 4. This act shall take effect on the first of November next succeed-
ing the date on which it shall have become  a  law;  provided,  however,
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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