Banking Interpretations


April 29 , 2005

[ ]

Dear [ ]:

Your February 25, 2005 letter received by this office on March 10, 2005 has been referred to me for review and response. Let me begin by apologizing for the delay in responding.

Your letter asks the advice and opinion of the Department as to whether an entity you propose to organize would require a license to engage in the two alternative activities described in your letter. Specifically, you propose to advance filing fees in existing arbitration/litigation collection proceedings. The two scenarios differ on what occurs if the outcome of the case is unsuccessful.

Your letter raises some complex questions regarding the reach of Article 9 of the New York Banking Law as it relates to Licensed Lenders. As you may be aware, this Article applies to entities engaged in lending to New York consumers and businesses in defined amounts and at defined rates. We believe this Article may well apply to your entity; however, to be able to begin to determine if your business model actually falls under the reach of this Article so as to be able to respond accurately to your question, we would need to know the identity of the limited liability corporation and its creators, the amounts expected to be advanced by this proposed entity to each client, the likely compensation structure (including interest) in the event the collection proceedings are successful and what the outcomes would be (including interest) if they were not. I would also point out that the reach of Article 9 in the context of litigation advances is being reviewed by this agency. It is unclear when this review process will be completed.

I trust this letter will be helpful.

Very truly yours,

Gene C. Brooks
Assistant Counsel