Banking Interpretations

NYBL 340

December 16, 2011 


Dear [---],

I write in response to your November 21, 2011, request of the Department of Financial Services to render an opinion as to whether [---](“STB”) is exempt from being licensed as a Licensed Lender in the State of New York under Article IX of the Banking Law.

As stated in your email, STB is a Georgia state-chartered depository bank that is insured by the FDIC and a state member of the Federal Reserve Board. STB plans to offer residents of New York consumer loans ranging in the amounts of $25,000.00 or less and possibly with an interest rate greater than 16%.

Under Section 340 of Article IX of the Banking Law, engaging in the business of lending to individuals in the amount of $25,000 or less for personal, family, household or investment purposes and in the amount of $50,000 or less for business and commercial purposes does not require a license in New York State unless such lending is at a rate greater than what is permitted by law. The New York Usury limit is currently 16% per annum. The Licensed Lender Law further provides that "engaging in the business of making loans' includes the solicitation of loans, and in connection therewith, making loans to individuals then resident in this state. Part 407 of the Superintendent's Regulations sets forth the Department's procedure for licensing out-of-state lenders that solicit small loans in New York. (3 N.Y.C.R.R. Part 407).

Based upon 12 U.S.C. § 1831d, the Department would not require STB, as an FDIC-insured out-of-state bank, to be licensed as a Licensed lender in New York, in order to make loans of $25,000 or less to individuals, at greater than 16% interest. 12 U.S.C. §1831d permits insured state-charter banks to export the interest laws of their home states in various loan transactions with out-of-state borrowers, and this section has been interpreted by federal courts to preempt otherwise applicable state usury laws. See Greenwood Trust Company v. Commonwealth of Massachusetts, 971 F.2d 818 (C.A.1 Mass. 1992); Hill v. Chemical Bank, 799 F. Supp. 948 (D.Minn.1992). Thus, STB would not be required to comply with New York's licensed Lender Law or Part 407 of the Superintendent's regulations.

I trust that this is responsive to your inquiry.

Very truly yours,

Orinthia E. Perkins
Assistant Counsel