Banking Interpretations

December 6, 1999

Dear [ ]:

Your two letters of October 29, 1999 to [ ], which concern the need for licensing under the Banking Law, have been referred to me for reply. In your first letter, you ask whether a client of your firm would require a license to purchase motor vehicle retail installment contracts in New York from auto dealers. You indicate that your client would not have any office in this State. Based on this fact, the Banking Department would interpose no objection to your client conducting the contemplated activity without obtaining a sales finance license under Article 11-B of the Banking Law. I direct your attention, however, to the case of Schleimer v. McPherson, 60 A.D.2nd837, 400 N.Y.S.2nd 566, 405 N.Y.S.2nd 460 (1978), which holds than an out-of-State entity engaging in the business of a sales finance company must obtain a license therefor.

Your second letter concerns another client, a finance company which is seeking to extend consumer loans for aircraft, aircraft engines and aircraft service packages through the mail and which will have no office in New York. Unlike the case of sales finance companies, out-of-State entities making loans to New York consumers of $25,000 or less are required to obtain a license from the Banking Department unless the interest rate on such loans does not exceed 16% per annum. In any event, given the very specific nature of your client’s proposed lending business and the fact that it would appear that its loans would exceed $25,000, your client would not require a small loan license under Article 9 of the Banking Law. Under New York law, non-bank, unlicensed lenders, as a general rule, may charge up to 25% per annum to corporate borrowers and up to 16% per annum to borrowers which have not incorporated. For loans in an amount of $250,000 or more, the general rule is that the interest rate may be up to 25% per annum regardless of the organizational structure of the borrower. Additionally, loans of $2.5 million or more are not subject to the criminal usury ceiling of 25% per annum and the interest rate on such loans is subject only to the agreement of the parties.

I trust that letter is of assistance to you.

Very truly yours