Banking Interpretations

NYSBL 340 & 555

September 7, 2007


Dear Mr. [—]

Your letter dated August 21, 2007 to Deputy Superintendent and Counsel Gross, which concerns your client's need for licensed lender and premium finance licenses, has been referred to me for reply. Your client, a Utah chartered FDIC insured industrial bank, proposes to make small loans (within the amounts set forth in Article 9 of the New York Banking Law) to New York residents at rates exceeding 16% per annum. You indicate in your letter that all loan applications will be processed, approved and closed outside of New York and that loan proceeds will be sent from outside New York.

As you indicate in your letter, federal law authorizes an out-of-state bank, such as your client, to export the interest rate of its home state when making loans to residents of other states. Your letter does not state the maximum rate of interest that Utah law would permit your client to impose on New York customers but I note that a licensed lender license is only required if the lender charges more than 16% per annum on loans within the purview of Article IX of the New York Banking Law. In any event, it is the position of this Department that a duly chartered banking institution located in another state need not be licensed under Article IX as it is already highly regulated by a bank regulatory agency (New York banking institutions may, as a matter of law, impose interest on Article IX-type personal loans at a rate not exceeding 25% per annum - interest on such loans that is more than this rate would constitute criminal usury under the New York Penal Law). This being the case, a discussion of your arguments based on "Weighing of the Contacts" and the Commerce Clause of the U.S. Constitution is unnecessary. The fact that your client has a "licensed" loan production office in New York has no bearing on this opinion (for your information, Ipos are not licensed by this Department - we merely receive certain information about the Ipo in a notice)

In regard to the conduct by your client of the premium finance business in this state, although your client is not a "bank" under Section 554(2) of the Banking Law because that term is defined in Section 2(1) of the Banking Law as a New York chartered bank, this Department has taken the same position it has adopted for licensed lenders. Consequently, your client would not require a premium finance license to engage in the premium finance business in New York, as described in your letter. I also note, again for your information, that no license is required if the person or entity engaged in this business does not impose interest at a rate exceeding 16% per annum.

I trust that this letter is responsive to your inquiries.


Steven Barras
First Assistant Counsel