Senate Bill S4998

                                 BILL NUMBER:  S4998

 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 OR GENERAL IDEA OF BILL :

The purpose of this bill is to continue for two years the existing
statutory authority for licensed lenders to charge annual fees on
open-end personal loans.

 SUMMARY OF SPECIFIC PROVISIONS :

Section 1: Amends the effective date of Chapter 223 of the Laws of
1996 to extend, for two years (to June 3o, 2019), the authority of
licensed lenders to charge annual fees on open-end personal 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 3o, 2000.
Legislation was enacted in 2000 to extend this authority for another
              

five years, and legislation was enacted in 2005, 2007, 2009, 201, 2013
and 2015 to extend this authority for an additional two years.  The
provisions of 1996 law are currently scheduled to expire on June 3o,
2017.

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.

For these reasons, banking institutions have long had the ability to
charge annual fees in open-end loan 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 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.

 PRIOR LEGISLATIVE HISTORY :

New bill

 FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS :

None

 EFFECTIVE DATE :
Immediate