Senate Bill S8538

                            
 
                     S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                   8538
 
                             I N  S E N A T E
 
                               June 9, 2020
                                ___________
 
 Introduced  by  Sen.  KAPLAN -- read twice and ordered printed, and when
   printed to be committed to the Committee on Rules
 
 AN ACT to amend the general obligations law  and  the  banking  law,  in
   relation  to  providing financial consumer protections for small busi-
   nesses
 
   THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
 BLY, DO ENACT AS FOLLOWS:

   Section  1.  The  general  obligations  law is amended by adding a new
 section 5-522 to read as follows:
   § 5-522. APPLICATION TO SMALL BUSINESSES. ALL  RIGHTS  AND  PRIVILEGES
 GRANTED  UNDER  THIS  TITLE  TO  PERSONS SHALL ALSO APPLY TO SMALL BUSI-
 NESSES. FOR PURPOSES OF THIS SECTION, A SMALL BUSINESS SHALL  BE  DEEMED
 TO BE ONE WHICH IS RESIDENT IN THIS STATE, INDEPENDENTLY OWNED AND OPER-
 ATED, NOT DOMINANT IN ITS FIELD AND EMPLOYS ONE HUNDRED OR LESS PERSONS.
   §  2.  The  general obligations law is amended by adding a new section
 5-702-a to read as follows:
   § 5-702-A. REQUIREMENTS FOR USE OF PLAIN LANGUAGE  IN  SMALL  BUSINESS
 LOANS.    A.  FOR THE PURPOSES OF THIS SECTION THE TERM "SMALL BUSINESS"
 SHALL MEAN A BUSINESS IN THIS STATE  WITH  NOT  MORE  THAN  ONE  HUNDRED
 EMPLOYEES  THAT  IS  A SOLE PROPRIETORSHIP, LIMITED LIABILITY COMPANY OR
 CLOSELY HELD CORPORATION ACTING WITHOUT THE ASSISTANCE OF COUNSEL.
   B. EVERY WRITTEN AGREEMENT FOR A LOAN BETWEEN A CREDITOR AND A BORROW-
 ER WHO IS A SMALL BUSINESS MUST BE:
   1. WRITTEN IN A CLEAR AND COHERENT MANNER USING WORDS WITH COMMON  AND
 EVERY DAY MEANINGS; AND
   2. APPROPRIATELY DIVIDED AND CAPTIONED BY ITS VARIOUS SECTIONS.
   ANY CREDITOR WHO FAILS TO COMPLY WITH THIS SUBDIVISION SHALL BE LIABLE
 TO  A  SMALL  BUSINESS WHO IS A PARTY TO A WRITTEN AGREEMENT GOVERNED BY
 THIS SUBDIVISION IN AN AMOUNT EQUAL TO ANY ACTUAL DAMAGES SUSTAINED PLUS
 A PENALTY OF FIFTY DOLLARS. THE TOTAL CLASS ACTION PENALTY  AGAINST  ANY
 SUCH  CREDITOR SHALL NOT EXCEED TEN THOUSAND DOLLARS IN ANY CLASS ACTION
 OR SERIES OF CLASS ACTIONS ARISING OUT OF THE USE BY A  CREDITOR  OF  AN
 AGREEMENT  WHICH  FAILS TO COMPLY WITH THIS SUBDIVISION. NO ACTION UNDER
 THIS SUBDIVISION MAY BE BROUGHT AFTER BOTH PARTIES TO THE AGREEMENT HAVE
 
  EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
              

                       [ ] is old law to be omitted.
                                                            LBD03232-05-0

 S. 8538                             2
 
 FULLY PERFORMED THEIR OBLIGATION UNDER SUCH  AGREEMENT,  NOR  SHALL  ANY
 CREDITOR  WHO  ATTEMPTS IN GOOD FAITH TO COMPLY WITH THIS SUBDIVISION BE
 LIABLE FOR SUCH PENALTIES. THIS SUBDIVISION SHALL  NOT  APPLY  TO  LOANS
 INVOLVING  AMOUNTS  IN  EXCESS OF TWO HUNDRED FIFTY THOUSAND DOLLARS NOR
 PROHIBIT THE USE OF WORDS OR PHRASES OR FORMS OF AGREEMENT  REQUIRED  BY
 STATE OR FEDERAL LAW, RULE OR REGULATION OR BY A GOVERNMENTAL INSTRUMEN-
 TALITY.
   C.  A  VIOLATION  OF  THE  PROVISIONS OF SUBDIVISION B OF THIS SECTION
 SHALL NOT RENDER ANY SUCH  AGREEMENT  VOID  OR  VOIDABLE  NOR  SHALL  IT
 CONSTITUTE:
   1. A DEFENSE TO ANY ACTION OR PROCEEDING TO ENFORCE SUCH AGREEMENT; OR
   2. A DEFENSE TO ANY ACTION OR PROCEEDING FOR BREACH OF SUCH AGREEMENT.
   D.  IN  ADDITION  TO ANY OTHER PROVISION OF THIS SECTION, WHENEVER THE
 ATTORNEY GENERAL FINDS THAT THERE HAS BEEN A VIOLATION OF THIS  SECTION,
 HE  OR  SHE  MAY  PROCEED  AS  PROVIDED IN SUBDIVISION TWELVE OF SECTION
 SIXTY-THREE OF THE EXECUTIVE LAW.
   § 3. Section 173 of the banking law is amended by adding a new  subdi-
 vision 4 to read as follows:
   4.  ALL  RIGHTS  AND  PRIVILEGES GRANTED UNDER THIS SECTION TO PERSONS
 SHALL ALSO APPLY TO SMALL BUSINESSES. FOR PURPOSES OF THIS  SUBDIVISION,
 A  SMALL  BUSINESS  SHALL  BE DEEMED TO BE ONE WHICH IS RESIDENT IN THIS
 STATE, INDEPENDENTLY OWNED AND OPERATED, NOT DOMINANT IN ITS  FIELD  AND
 EMPLOYS ONE HUNDRED OR LESS PERSONS.
   §  4. Section 380-e of the banking law, as separately amended by chap-
 ters 349 and 1072 of the laws of 1968, is amended to read as follows:
   § 380-e. Effect of usury. The knowingly taking, receiving,  reserving,
 or  charging  by a savings and loan association of interest, as computed
 pursuant to this article, at a rate greater than such rate  of  interest
 as  may  be authorized by law shall be held and adjudged a forfeiture of
 the entire interest which the note or other  evidence  of  debt  carries
 with  it,  or  which has been agreed to be paid thereon. If such greater
 rate of interest has been paid, the person paying the same or his  legal
 representatives  may recover from the savings and loan association twice
 the entire amount of the interest thus paid.  Nothing  in  this  section
 shall be deemed to affect the powers of any savings and loan association
 with  respect  to  loans  or  investments it is authorized to make.  THE
 RIGHTS AND PRIVILEGES GRANTED UNDER THIS SECTION  SHALL  ALSO  APPLY  TO
 SMALL  BUSINESSES.  FOR PURPOSES OF THIS SECTION, A SMALL BUSINESS SHALL
 BE DEEMED TO BE ONE WHICH IS RESIDENT IN THIS STATE, INDEPENDENTLY OWNED
 AND OPERATED, NOT DOMINANT IN ITS FIELD AND EMPLOYS ONE HUNDRED OR  LESS
 PERSONS.
   § 5. This act shall take effect immediately.