Banking Interpretations

NYSBL 132 & 590

May 14, 2007


Re: Banking Law Section 132

Dear Mr. [---]:

Your inquiry to the New York State Banking Department ("the Department"), regarding the use of the word "bank", by your client, an out-of-state, state chartered commercial bank, has been referred to me for response.

In your e-mail, sent on March 29, 2007, you stated that your client, a foreign state-chartered, federally insured commercial bank ("the Bank") engages in traditional mortgage lending and is considering expanding the program to originate mortgage loans through a third party broker for other states, including New York. You also state that the Bank will not have any offices or employees located in New York and that the loan closings that take place in New York will be performed by an outside third party licensed to conduct business in New York.  As part of the closing, the mortgagor will be required to sign a promissory note which includes the Bank's full name and out-of-state address. You have requested confirmation from the Department that the actions described above would not trigger a need for approval from the Department pursuant to Section 132 of the New York Banking Law.

Banking Law Section 132 provides that, "No person, except a national bank, a federal reserve bank, or a corporation duly authorized by the superintendent to transact business in this state, shall make use of any office sign at the place where such business is transacted having thereon any artificial or corporate name, or other words indicating that such place or office is the place of business or office of a bank or trust company; nor shall any such person or persons make use of or circulate any letterheads, bill heads, blank forms, notes, receipts, certificates, circulars, or any written or printed or partly written and partly printed paper whatever, having thereon any artificial or corporate name, or other word or words, indicating that such business is the business of a bank or trust company."

The purpose of Banking Law Section 132 is to restrict the use of the words bank or trust company by corporations that are not duly authorized to act as such and to avoid the false impression that these corporations are authorized to act as a bank or trust company. In this situation, your client is an out of state-state chartered commercial bank and is authorized to act as a banking institution. Further, your client is an "exempt organization" pursuant to Banking Law Section 590 and may act as a mortgage banker in New York State. Accordingly, it follows that the use of the promissory notes with your client's name and address at a closing in New York State would not violate Banking Law Section 132.

I trust that this has been helpful. Please contact me at (212) 709-1674 if you have any additional questions.

Very truly yours,

Megan Prendergast
Associate Attorney