Banking Interpretations

Banking Law 591-a 
General Obligations Law 5-531

August 5, 2004

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Re: Proposed Student Loan Consolidation Program

Dear Ms. [ ]:

Your letter dated May 7, 2004 to Superintendent of Banks Taylor has been referred to me for reply. As we understand it, [ ]"Company"), which is "registered as a mortgage broker by the Banking Department, has developed a proposed program in which the Company would broker a student loan consolidation product. The brokering activities will be conducted through independent contractors who are the exclusive agents of the Company. The brokering will be limited to the following activities: (1) taking an application and promissory note from the applicant; (2) ensuring that said documents are completed and executed; and (3) forwarding the original documents to a federally supervised lender for processing. The lender will be responsible for all student loan consolidation and processing and servicing, including, but not limited to consolidation approval, notification of payment terms, interest rate determination, and collection. The Company will not charge a fee to the applicant. The Company will pay the Company's agents a commission. You assert, based on the foregoing facts, that neither the Company nor its agents would be considered loan brokers within the meaning of Section 5-531 of the New York General Obligations Law, which governs the brokerage of loans. The activities in which you propose to engage do not require any registration with or licensing from the Banking Department, as the Department does not regulate loan brokers, as defined in Section 5-531. Loan brokerage is an activity subject to the provisions of Section 5-531, which, we note, the Banking Department does not possess any special expertise in. Consequently, the Department cannot render an opinion on the question you raise in your letter.

I trust that this letter will be of assistance to you.


Jay Kane
Assistant Counsel