Relates to refund anticipation loans; requires that at the time a borrower applies for a refund anticipation loan, a facilitator shall disclose to such borrower certain information; defines terms.
TITLE OF BILL:
An act to amend the banking law, in relation to refund anticipation loans
PURPOSE OR GENERAL IDEA OF BILL:
This bill protects New York consumers by regulating the offering of refund anticipation loans, including disclosures and reasonable limits on the amount of interest that can be charged for such loans.
SUMMARY OF PROVISIONS:
Bill § 1 adds a new §46 to the Banking Law entitled "Refund anticipation loans." The section includes definitions of the following terms: "borrower", "facilitator" (which means a person who makes or otherwise acts deals with the public to arrange a refund anticipation loan, but does not include banking institutions, licensed lenders or intermediaries), "refund anticipation loan", "refund anticipation loan fee", and "annual percentage rate".
At the time of an RAL application, §46 requires disclosures of:
* the estimated fee for preparing and electronically filing an income tax return;
* the RAL fee schedule;
* the annual percentage rate (APR) for the loan;
* the estimated total cost to the borrower of the RAL;
* the estimated number of days within which the loan proceeds will be paid to the borrower if the loan is approved;
* the borrower's responsibility for repayment of the loan and related fees in the event the income tax refund is not paid or not paid in full; and
* the availability of electronic tax return filing and the average time within which the borrower can expect to receive a refund with electronic filing if the borrower does not obtain an RAL.
Under §46, no RAL shall be made at any location other than a location in which the principal business is tax preparation. All disclosure documents shall be available in English, Spanish and in any other language spoken by more than 5% of the population in the vicinity of the facilitator's location. The provisions of the Banking Law and the General Obligations Law on interest rates are made inapplicable to RALs.
Instead, the maximum interest rate on RALs is set at 60% per annum for the first 21 days of the loan period and 20% per annum for any time period thereafter.
Violators are subject to a civil penalty of not more than $500 per violation, to be assessed by the Superintendent of Banks as provided in Banking Law §44. In addition, any facilitator who violates §46 can be held liable to any aggrieved borrower for three times the amount of the refund anticipation loan fee, plus reasonable attorney's fees, in a civil action brought by the aggrieved borrower or by the Attorney General on behalf of the aggrieved borrower. The Superintendent may prescribe regulations to carry out the purposes of §46.
The bill clarifies that it is not intended to impair or limit the validity of additional local laws or regulations, not inconsistent with the provisions of §46, applicable to the making of RALs. The provisions of §46 are also meant to be severable.
EFFECTS OF PRESENT LAW WHICH THIS BILL WOULD ALTER:
No current statutory provisions address the marketing, disclosure and offering of RAL products. Some local governments, such as New York City, have enacted local laws addressing disclosure requirements this bill would allow local regulation of RALs provided it is not inconsistent with the bill's provisions.
In recent years there has been a substantial increase in the marketing of so-called "rapid refund" loans and similar products that promise instant access to the anticipated proceeds of a tax refund. These heavily advertised "refund anticipation loans" are actually high-cost short term loans, similar to payday loans. Recent reports provide evidence that these products are being targeted towards lower-income taxpayers, and especially to those who qualify for an Earned Income Tax Credit. These are people who can least afford to pay the exorbitant fees charged for RALs.
This bill will outlaw the use of predatory practices by those who facilitate the making of RALs in New York by requiring disclosure of the true costs of the loan and by placing reasonable limits on the amount of fees that can be charged for such facilitated loans. This approach is modeled on legislation that has already been enacted by the State of Connecticut. RAL fees would be capped at 60% over the first 21 days of the loan and 20% thereafter. This would allow facilitators to recover their reasonable costs and operate profitably, but would be far less than the unconscionable 175%-700% APRs that New Yorkers are being charged today.
PRIOR LEGISLATIVE HISTORY: 2009-10: S.4222
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS: None.
EFFECTIVE DATE: The first day of October after becoming law -- the Superintendent of Banks is authorized to promulgate any rules and regulations and take any other actions necessary for implementation in advance of such date.
STATE OF NEW YORK ________________________________________________________________________ 1613 2011-2012 Regular Sessions IN SENATE January 10, 2011 ___________Introduced by Sen. SAVINO -- read twice and ordered printed, and when printed to be committed to the Committee on Banks AN ACT to amend the banking law, in relation to refund anticipation loans THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. The banking law is amended by adding a new section 46 to read as follows: S 46. REFUND ANTICIPATION LOANS. 1. AS USED IN THIS SECTION: (A) "BORROWER" MEANS A PERSON WHO RECEIVES THE PROCEEDS OF A REFUND ANTICIPATION LOAN; (B) "FACILITATOR" MEANS A PERSON WHO, INDIVIDUALLY, OR IN CONJUNCTION OR COOPERATION WITH ANOTHER PERSON, MAKES A REFUND ANTICIPATION LOAN, PROCESSES, RECEIVES OR ACCEPTS FOR DELIVERY AN APPLICATION FOR A REFUND ANTICIPATION LOAN, ISSUES A CHECK IN PAYMENT OF REFUND ANTICIPATION LOAN PROCEEDS, OR IN ANY OTHER MANNER ACTS TO ALLOW THE MAKING OF A REFUND ANTICIPATION LOAN. THE TERM DOES NOT INCLUDE A BANK, TRUST COMPANY, SAVINGS BANK, SAVINGS AND LOAN ASSOCIATION, CREDIT UNION OR PERSON OR ENTITY ISSUED A LICENSE UNDER THE PROVISIONS OF ARTICLE NINE OF THIS CHAPTER, OPERATING UNDER THE LAWS OF THE UNITED STATES OR THIS STATE, OR ANY PERSON WHO ACTS SOLELY AS AN INTERMEDIARY AND DOES NOT DEAL WITH THE PUBLIC IN THE MAKING OF A REFUND ANTICIPATION LOAN; (C) "REFUND ANTICIPATION LOAN" MEANS A LOAN ARRANGED TO BE PAID DIRECTLY FROM THE PROCEEDS OF A BORROWER'S INCOME TAX REFUND; (D) "REFUND ANTICIPATION LOAN FEE" MEANS ANY CHARGES, FEES OR OTHER CONSIDERATION CHARGED OR IMPOSED FOR THE MAKING OF A REFUND ANTICIPATION LOAN. THE TERM DOES NOT INCLUDE ANY CHARGES, FEES OR OTHER CONSIDERATION CHARGED OR IMPOSED IN THE ORDINARY COURSE OF BUSINESS BY A FACILITATOR FOR SERVICES THAT DO NOT RESULT IN THE MAKING OF A LOAN INCLUDING, BUT NOT LIMITED TO, FEES FOR TAX RETURN PREPARATION SERVICES OR FOR THE ELECTRONIC FILING OF INCOME TAX RETURNS; ANDEXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD05683-01-1 S. 1613 2
(E) "ANNUAL PERCENTAGE RATE" SHALL HAVE THE SAME MEANING AS PROVIDED IN PARAGRAPH (B) OF SUBDIVISION ONE OF SECTION SIX-L OF THIS CHAPTER. 2. AT THE TIME A BORROWER APPLIES FOR A REFUND ANTICIPATION LOAN, A FACILITATOR SHALL DISCLOSE TO SUCH BORROWER ON A DOCUMENT THAT IS SEPA- RATE FROM THE LOAN APPLICATION: (A) THE ESTIMATED FEE FOR PREPARING AND ELECTRONICALLY FILING AN INCOME TAX RETURN; (B) THE REFUND ANTICIPATION LOAN FEE SCHEDULE; (C) THE ANNUAL PERCENTAGE RATE FOR THE LOAN; (D) THE ESTIMATED TOTAL COST TO THE BORROWER FOR UTILIZING A REFUND ANTICIPATION LOAN; (E) THE ESTIMATED NUMBER OF DAYS WITHIN WHICH THE LOAN PROCEEDS SHALL BE PAID TO THE BORROWER IF THE LOAN IS APPROVED; (F) THE BORROWER IS RESPONSIBLE FOR REPAYMENT OF THE LOAN AND RELATED FEES IN THE EVENT THE INCOME TAX REFUND IS NOT PAID OR NOT PAID IN FULL; AND (G) THE AVAILABILITY OF ELECTRONIC FILING OF THE INCOME TAX RETURN OF THE BORROWER AND THE AVERAGE TIME ANNOUNCED BY THE INTERNAL REVENUE SERVICE WITHIN WHICH THE BORROWER CAN EXPECT TO RECEIVE A REFUND IF THE BORROWER'S RETURN IS ELECTRONICALLY FILED AND THE BORROWER DOES NOT OBTAIN A REFUND ANTICIPATION LOAN. 3. NO REFUND ANTICIPATION LOAN SHALL BE MADE AT ANY LOCATION OTHER THAN A LOCATION IN WHICH THE PRINCIPAL BUSINESS IS TAX PREPARATION. ALL DISCLOSURE DOCUMENTS REQUIRED BY SUBDIVISION TWO OF THIS SECTION SHALL BE AVAILABLE IN ENGLISH, SPANISH AND IN ANY OTHER LANGUAGE SPOKEN BY MORE THAN FIVE PERCENT OF THE POPULATION IN THE VICINITY OF THE FACILITATOR'S LOCATION. 4. NOTWITHSTANDING ANY OTHER PROVISION OF THE BANKING LAW OR THE GENERAL OBLIGATIONS LAW, THE INTEREST RATE FOR A REFUND ANTICIPATION LOAN SHALL NOT EXCEED (A) SIXTY PERCENT PER ANNUM FOR THE INITIAL TWEN- TY-ONE DAYS OF SUCH LOAN, AND (B) TWENTY PERCENT PER ANNUM FOR THE PERI- OD COMMENCING ON THE TWENTY-SECOND DAY OF SUCH LOAN AND ENDING ON THE DATE OF PAYMENT. 5. ANY FACILITATOR WHO VIOLATES ANY PROVISION OF THIS SECTION SHALL BE SUBJECT TO A CIVIL PENALTY OF NOT MORE THAN FIVE HUNDRED DOLLARS FOR EACH SUCH VIOLATION. SUCH PENALTY SHALL BE ASSESSED BY THE SUPERINTEN- DENT AS PROVIDED IN SECTION FORTY-FOUR OF THIS ARTICLE. IN ADDITION, ANY FACILITATOR WHO VIOLATES ANY PROVISION OF THIS SECTION SHALL BE LIABLE TO ANY AGGRIEVED BORROWER IN AN AMOUNT EQUAL TO THREE TIMES THE AMOUNT OF THE REFUND ANTICIPATION LOAN FEE, PLUS REASONABLE ATTORNEY'S FEES, IN A CIVIL ACTION BROUGHT BY THE AGGRIEVED BORROWER OR BY THE ATTORNEY GENERAL ON BEHALF OF THE AGGRIEVED BORROWER. 6. THE SUPERINTENDENT MAY PRESCRIBE REGULATIONS TO CARRY OUT THE PROVISIONS AND PURPOSES OF THIS SECTION. S 2. Nothing in this act shall be construed to impair or limit the validity of any additional local laws or regulations, not inconsistent with the provisions of this act, applicable to the making of refund anticipation loans. S 3. If any clause, sentence, paragraph, section or part of this act be adjudged by any court of competent jurisdiction to be invalid, such judgment shall not affect, impair or invalidate the remainder hereof but shall be applied in its operation to the clause, sentence, paragraph, section or part hereof directly involved in the controversy in which such judgment shall have been rendered. S 4. This act shall take effect on the first of October next succeed- ing the date on which it shall have become a law; provided, however,S. 1613 3
that effective immediately, the addition, amendment and/or repeal of any rule or regulation necessary for the implementation of this act on its effective date are authorized and directed to be made and completed on or before such effective date.