N.Y. Banking Law § 108: Rates of interest; installment obligations; personal loan departments

§ 108. Rates of interest; installment obligations; personal loan

departments. 1. Except as otherwise provided in this section, no bank or

trust company shall take, receive, reserve or charge on any loan or

discount made, or upon any note, bill of exchange or other evidence of

debt, negotiable or otherwise, interest, as computed pursuant to this

subdivision, at a rate greater than the rate prescribed by the

superintendent of financial services pursuant to section fourteen-a of

this chapter, or, if no rate has been so prescribed, six per centum per

annum, or two dollars if the interest so computed is less than that

amount. Such interest may be taken in advance, reckoning the days for

which the note, bill or evidence of debt has to run. If interest is so

taken in advance and the maturity of the debt is accelerated and

judgment is obtained, or the debt is otherwise paid prior to its normal

date of maturity, the bank or trust company shall refund to the obligor

or his legal representative, as the case may be, the unearned interest

previously deducted and the unused portion of any premiums charged for

insuring the obligor under a group credit insurance policy, such refund

to be calculated in accordance with the method described in paragraph

(e) of subdivision four of this section. A reasonable charge by a bank

or trust company for the collection of a bona fide bill of exchange,

note or other evidence of debt payable at a place other than the place

where purchased, discounted or sold, in addition to the interest, shall

not be considered interest for the purpose of any law regulating the

maximum rate of interest which may be charged, taken or received.

Anything contained in this subdivision to the contrary

notwithstanding, the charging of interest or discount on a loan or

discount made outside this state at a rate allowed by the laws of the

jurisdiction where such loan is made, or the acquisition by a bank or

trust company of a part interest or the entire interest in any loan or

discount heretofore or hereafter made by a bank or trust company or any

other banking institution, shall not be a violation of this section.

2. Any bank or trust company may purchase or otherwise acquire from

the payee, owner or holder thereof any obligation in writing to pay in

installments all or part of the price of personal property or that of

the performance of services, whether that obligation be a negotiable

promissory note or other evidence of debt, or any accounts receivable,

whether or not they are obligations in writing, or any lease of personal

property, and may lease personal property acquired by it, doing so for

such price or rentals or other consideration and upon such additional

terms and conditions as may be mutually agreeable.

3. Upon advances of money, repayable on demand, to an amount not less

than five thousand dollars, made upon documents of title within article

seven of the uniform commercial code or negotiable instruments within

article three or article eight of the uniform commercial code pledged as

collateral security for such repayment, any bank or trust company may

receive or contract to receive and collect as compensation for making

such advances any sum which may be agreed upon by the parties to such

transaction.

4. (a) A bank or trust company may operate a personal loan department

at all or at any one or more of its authorized places of business in

accordance with the requirements of this subdivision. The records of

such department shall be kept in such form as the superintendent may

from time to time prescribe. The superintendent may, after giving notice

of the contemplated action and reasonable opportunity to be heard, order

that the operation of such department be discontinued if he shall find

that the bank or trust company has failed to conform to any requirement

of this subdivision. The superintendent may forthwith, and for a period

not to exceed thirty days pending further investigation, order that the

operation of any such department be temporarily discontinued if he shall

have reasonable cause to believe that the requirements of this

subdivision are not having compliance. Such order of discontinuance or

temporary discontinuance may apply to one or more of the authorized

places of business of a bank or trust company. The superintendent may

terminate or modify such orders if he shall be satisfied that such

department will be operated in accordance with the requirements of this

subdivision. No order of discontinuance or temporary order of

discontinuance shall impair or affect the obligation of any preexisting

lawful loan or advance from a bank or trust company to any borrower.

(b) A bank or trust company which operates a personal loan department

may make loans and charge interest thereon, which may be calculated on

the actual unpaid principal balances of the loan or in the case of a

loan commitment from the date of each advance thereunder for the actual

time outstanding, according to a generally accepted actuarial method at

a fixed or variable rate in accordance with the provisions of the

evidence of the indebtedness, or taken in advance, computed from the

date of the loan, or in the case of a loan commitment from the date of

each advance thereunder, to the date of the last installment payable

thereunder, at the rate or rates agreed to by the bank or trust company

and the borrower, with respect to any loan which is repayable at regular

periodic intervals of not more than one month over a period from the

date of the loan not exceeding (i) thirty-seven months, if the face

amount of the loan is for not more than twelve hundred dollars, or (ii)

any number of months agreed to by the bank or trust company and the

borrower, (A) if the face amount of the loan is for more than twelve

hundred dollars, (B) if the loan is for more than twelve hundred

dollars, and is made for a commercial or business use or purpose or for

investment in or purchase of an unincorporated business or commercial

enterprise, (C) if the loan or loan commitment is made for educational

purposes as specified in subdivision five-b of this section, or (D) if

the loan or advance of credit is made for the purpose of financing

alterations, repairs and improvements upon or in connection with, or as

the superintendent may authorize the equipping of existing structures,

and the building of new structures, upon urban, suburban, or rural real

property (including the restoration, rehabilitation, rebuilding and

replacement of such improvements which have been damaged or destroyed by

earthquake, conflagration, tornado, hurricane, cyclone, flood or other

catastrophe), by the owners thereof or by lessees of such real property

under a lease expiring not less than six months after the maturity of

the loan or advance of credit or by lessees under proprietary leases

from corporations or partnerships formed for the purpose of the

cooperative ownership of real estate. The total unpaid principal

balances of any one or more loans made by such bank or trust company to

the borrower pursuant to this subdivision shall be determined by

agreement between such bank or trust company and the borrower. If the

loan is made for a period of one year or more, provision may be made in

the note, instrument or other evidence of debt, for the omission of

payments during not more than any three specified months in any

twelve-month period, but the maximum period of thirty-seven months,

shall not be exceeded. On any loan with a variable rate of interest made

pursuant to this paragraph, the rate shall be determined at regular

intervals as set forth in the evidence of indebtedness and in accordance

with such regulations as the superintendent of financial services shall

prescribe but said rate shall not vary more often than once in any three

month period and shall be based on a published index that is (a) readily

available, (b) independently verifiable, (c) beyond the control of the

bank or trust company and (d) approved by the superintendent.

The superintendent of financial services shall adopt regulations,

including but not limited to: (a) providing for disclosure to the

borrower by the bank or trust company of the circumstances under which

the rate may increase, any limitations on the increase, the effect of an

increase and an example of the payment terms that would result from an

increase; (b) providing for disclosure to the borrower by the bank or

trust company of a history of the fluctuations of the index over a

reasonable period of time; and (c) providing for notice to the borrower

from the bank or trust company prior to any rate increase or change in

the terms of payment.

(c) The rate of interest authorized by this subdivision shall be

inclusive of all charges incident to investigating and making any loan.

No fee, commission, expense, or other charge whatsoever in addition

thereto shall be taken, received, reserved, or contracted for, except

(i) the fees payable to the appropriate public officer to perfect any

lien or other security interest taken to secure the loan or the premium,

not in excess of such filing fee, payable for any insurance in lieu of

such filing; (ii) in case of default, and in accordance with the

provisions of the instrument evidencing the obligation, either a fine in

an amount not to exceed five cents per dollar on any installment which

has become due and remained unpaid for a period in excess of ten days,

but no such fine shall exceed five dollars and only one fine shall be

collected on any such installment regardless of the period during which

it remains in default, and provided further that should the aggregate of

such fines collected in connection with any loan exceed two per centum

of such loan, or in any event twenty-five dollars, the bank or trust

company shall refund such excess to the borrower within sixty days after

the loan is paid in full, or, subject to an allowance of unearned

interest attributable to the amount in default, interest on each amount

past due at a rate not in excess of the rate provided for in the

instrument evidencing the obligation; (iii) the actual expenditures,

including reasonable attorney's fees for necessary court process; and

(iv) in case the bank or trust company insures a borrower under a credit

unemployment insurance policy, group life insurance policy, group health

insurance policy, group accident insurance policy, or group health and

accident insurance policy, or requires insurance on personal property

securing any such loan, an amount not in excess of the premiums

chargeable in accordance with rate schedules then in effect and on file

with the superintendent of financial services for such insurance by the

insurer. No bank or trust company shall require a borrower to place any

sum on deposit, or to make deposits in lieu of regular periodic

installment payments, or to do or refrain from doing any other act which

would entail additional expense or sacrifice, as a condition precedent

to granting a loan under the authority of this subdivision except as

provided in subdivision five-b of this section. Notwithstanding the

foregoing, a bank or trust company may, with the prior approval of the

superintendent, offer a loan product that encourages personal savings by

requiring a borrower to place a portion of the principal of the loan

into an interest-bearing savings account as a condition precedent to

granting a loan under the authority of this subdivision. In deciding

whether to approve a loan product pursuant to the preceding sentence,

the superintendent may consider the recent results of examinations of

the bank or trust company, the terms and structure of, and the

underwriting criteria and marketing plan for the proposed loan product,

other loans offered by the bank or trust company, and such other factors

the superintendent deems to be relevant. Notwithstanding the provisions

of this paragraph no refund of excess fines shall be required if it

amounts to less than one dollar.

(d) In each note, instrument or other evidence of debt given by a

borrower to evidence a loan under this subdivision, where such loan is

not subject to the provisions of the act of congress entitled "Truth in

Lending Act" and the regulations thereunder, as such act and regulations

may from time to time be amended, the rate of charge (stating any

minimum as permitted by this subdivision four), shall be expressed

either in accordance with the method prescribed by such act of congress

or: (i) as a rate in dollars per annum discount per one hundred dollars

face amount of loan, or (ii) as the rate or rates agreed to by the bank

or trust company and the borrower.

(e) A borrower may prepay the loan in full or, with the consent of the

bank or trust company, may refinance the loan. If the interest is

calculated on the actuarial basis, or if the evidence of the

indebtedness provides that the rate of interest may vary from time to

time, a borrower may prepay the loan in full without penalty. If the

interest was taken in advance, in the event of such prepayment or

refinancing, the bank or trust company shall refund: (1) the unearned

portion of the interest to the borrower the amount of which portion

shall be determined according to a generally accepted actuarial method;

provided, however, that if the amount of interest previously deducted

(i) was less than ten dollars, no refund shall be required; or (ii)

exceeded the sum of ten dollars and the earned interest is less than

that amount, the bank or trust company may retain such an additional

amount as will bring the earned interest to the sum of ten dollars and

refund the remainder, and provided further, that unless the loan is

refinanced, no refund shall be required if it amounts to less than one

dollar; and (2) if a charge was made to the borrower for premiums for

insuring the borrower under a credit unemployment insurance policy,

group life insurance policy, or under a group health, group accident or

group health and accident insurance policy, the excess of the charge to

the borrower therefor over the premiums paid or payable by the bank or

trust company, if such premiums were paid or payable by the bank or

trust company periodically, or the refund for such insurance premium

received or receivable by the bank or trust company, if such premium was

paid or payable in a lump sum by the bank or trust company, provided

that no such refund shall be required if it amounts to less than one

dollar. In the event (i) the maturity of the loan is accelerated due to

the default of the borrower or otherwise and judgment is obtained, or

(ii) repayment is made pursuant to any such insurance policy, the

borrower or his legal representative, as the case may be, shall be

entitled to the same refund as if the loan had been prepaid in full on

the date of acceleration or repayment.

(f) A bank or trust company may, upon agreement with the borrower,

extend the scheduled due date or defer the scheduled payment of all or

any part of any installment or installments payable under the loan. The

agreement for such extension or deferment must be in writing and signed

by the borrower. The bank or trust company may charge and contract for

the payment of an extension or deferral charge by the borrower and

collect and receive the same, at the rate or rates agreed to by the bank

or trust company and the borrower, on the amount of the installment or

installments, or part thereof, extended or deferred for the period of

extension or deferral. Such period shall not exceed the period from the

date when such extended or deferred installment or installments, or part

thereof, would have been payable in the absence of such extension or

deferral, to the date when such installment or installments, or part

thereof, are made payable under the agreement of extension or deferment;

except that a minimum charge of one dollar for the period of extension

or deferral may be made in any case where the extension or deferral

charge, when computed at such rate, amounts to less than one dollar.

Such agreement may also provide for the payment by the borrower of the

additional cost to the bank or trust company of premiums for continuing

in force, until the end of such period of extension or deferral, any

insurance coverages provided in connection with the loan subject to the

other provisions of this subdivision.

(g) If the borrower is obligated in connection with the loan to

maintain insurance on a motor vehicle securing the loan and if

subsequent to the making of the loan the borrower fails to maintain the

insurance, the bank or trust company may make advances to procure the

equivalent limits of insurance for either the interests of the borrower

and the bank or trust company or of either of them, and any amount so

advanced may be the subject of an interest charge from the date of such

advance as though such amount was part of the unpaid principal balance

of the loan. Each amount so advanced shall be secured by the personal

property if so provided in the security agreement covering the personal

property and if the bank or trust company notifies the borrower in

writing of the advance of such amount and of his or her option to repay

such amount in any one of the following ways:

(1) Full payment within ten days from the date of giving or mailing

the notice;

(2) Full amortization during the term of the insurance or the

remaining term of the loan, at the option of the bank or trust company;

(3) If offered by the bank or trust company, as a final balloon

payment payable one month after the last scheduled payment in connection

with the loan;

(4) If offered by the bank or trust company, full amortization after

the term of the loan, to be payable in instalments which do not exceed

the average instalment payable in connection with the loan; or

(5) If offered by the bank or trust company, any other amortization

plan.

If the borrower neither pays in full the amount so advanced nor

notifies the bank or trust company in writing of his or her choice

regarding amortization options before the expiration of ten days from

the date of giving or mailing of the notice by the bank or trust

company, the bank or trust company shall amortize the amount so advanced

pursuant to subparagraph two of this paragraph.

5. (a) A bank or trust company which operates a personal loan

department pursuant to paragraph (a) of subdivision four hereof may

establish credits under written agreements with borrowers, pursuant to

which one or more loans or advances to or for the account of a borrower

may be made from time to time, by means of honoring one or more checks

or other written, electronic or telephonic orders or requests of the

borrower and may charge interest on such loans and advances at the rate

permitted by paragraph (b) of this subdivision, provided such loans and

advances comply with the provisions of this subdivision. This

subdivision does not authorize any bank or trust company to make any

loan or advance in connection with the purchase or lease of goods or

services by means of a credit card as defined in section five hundred

eleven of the general business law, except for a loan or advance

resulting from the use of a card which may be used to access a deposit

account and line of credit associated with that account. The records of

such loans and advances shall be kept in such form as the superintendent

may from time to time prescribe.

(b) Such agreement may provide for interest on the unpaid aggregate

principal amount of such loans and advances from time to time

outstanding at the rate or rates agreed to by the bank or trust company

and the borrower, as computed pursuant to this section, including, in

accordance with the provisions of the agreement, rates that may vary

from time to time reckoned on each loan or advance from the date

thereof, calculated on any of the following bases: (i) on the unpaid

principal amount of such loans and advances from time to time

outstanding, or (ii) for each month on an average balance outstanding

determined by dividing by two the sum of the balances of unpaid

principal of such loans and advances outstanding on two dates during

such month, as specified in such agreement; the first of which dates

being not later than the fifteenth day of such month and the second

being not earlier than the sixteenth day of such month and not less than

ten nor more than twenty days after the first date, or (iii) for each

month on a fixed amount selected from a schedule, which fixed amount may

exceed the average daily balance under (i) above, or the average balance

if determined under (ii) above, by a differential of not more than five

dollars, provided the same fixed amount is also used for computing

interest for any month for which such balance exceeds said fixed amount

by any amount up to at least the same differential. For purposes of this

subdivision, a month may but need not be a calendar month, and a bank or

trust company computing interest on a daily basis may charge for each

day one thirtieth of the monthly interest rate. No amendment to any

agreement shall take effect unless at least 30 days prior to the

effective date of such amendment, imposition or increase, a written

notice has been mailed or delivered to the borrower that clearly and

conspicuously describes such amendment, imposition or increase and the

indebtedness to which it applies and if the amendment has the effect of

increasing the rate of interest, either (a) the notice states that the

incurrence by the borrower or another person authorized by him of any

further indebtedness under the plan to which the agreement relates on or

after the effective date of such change specified in the notice shall

constitute acceptance of such change, and either the borrower agrees in

writing to such change or the borrower or another person authorized by

him incurs such further indebtedness on or after the effective date of

the change stated in the notice, or (b) the notice advises the borrower

that he has thirty days from the earlier of the mailing or delivery of

the notice to advise the bank or trust company in writing that he does

not accept such amendment, provided that such notice contains an address

to which the borrower may send notice of his election not to accept the

amendment and also provided that the notice specifies that the amendment

will take effect absent receipt of the borrower's written objection to

the amendment. Any borrower who has received a notice pursuant to clause

(a) who does not agree in writing to the amendment and no further

indebtedness is incurred under the plan to which the agreement relates,

and any borrower who gives a timely notice, pursuant to clause (b),

electing not to accept the amendment shall be permitted to pay his

outstanding indebtedness in accordance with the terms of the agreement

but the bank or trust company may terminate the amount of credit

available to the borrower and may require the borrower to return all

credit cards and checks issued in connection with the agreement. If such

a borrower subsequently obtains credit under the agreement, such use

shall constitute acceptance of the change of terms and shall be deemed

to have been accepted and shall become effective as to the borrower as

of the date such change would have become effective but for the giving

of notice by the borrower. If notice is given pursuant to clause (b) and

the borrower does not timely object in writing to the amendment, such

amendment shall become effective without action on the part of the

borrower; provided that in no event shall any such amendment or increase

take effect with respect to (i) the unpaid aggregate principal amount of

loans or advances representing indebtedness outstanding prior to January

1, 1981 and (ii) the unpaid aggregate principal amount of loans or

advances representing indebtedness incurred, under or pursuant to an

agreement in effect on December 1, 1980, between January 1, 1981, and

the effective date of such amendment or increase specified in the first

notice mailed or delivered pursuant to clause (a). Indebtedness

outstanding prior to January 1, 1981, for purpose of clause (i) above

and indebtedness outstanding prior to the effective date of an increase

for purposes of clause (ii) above shall be determined on the basis of

crediting payments and other credits first to that portion of any such

indebtedness representing interest charges, insurance premiums, service

charges and fines and then to that portion representing the principal

amount of loans or advances in the order in which made. The provisions

of this paragraph permitting an increase in a rate of interest shall not

apply in the case of an agreement which expressly prohibits changing of

interest rates or which provides limitations on changing of interest

rates which are more restrictive than the requirements of this

paragraph. An amendment to an agreement deleting a provision that the

rate of interest may vary from time to time may not become effective

within one year from the later of the effective date of the agreement or

the effective date of an amendment to an agreement adding a variable

rate provision. On any loans or advances with rates of interest that may

vary from time to time made pursuant to this paragraph, such variable

rates of interest shall be determined at regular intervals as set forth

in the agreement and in accordance with such regulations as the

superintendent of financial services shall prescribe but said rate shall

not vary more often than once in any three month period and shall be

based on a published index that is (a) readily available, (b)

independently verifiable, (c) beyond the control of the bank or trust

company and (d) approved by the superintendent, (e) such loan rate shall

be based on the index values, or the index numbers plus or minus

additional percentage points provided, however, that variations in the

rate must correspond directly to the movements of the index values plus

or minus additional percentage points only. Once such rate is

established no lending institution may add any factors to increase the

rate other than variations in the established index without the prior

approval of the superintendent of financial services. For purposes of

this paragraph, an adjustment in the rate of interest as a consequence

of movement in the selected index shall not constitute an amendment to

that agreement. A reduction in the grace period for the assessment of a

fee on any installment not paid when due, shall be considered an

amendment to an agreement as set forth in this paragraph.

The superintendent of financial services shall adopt regulations with

respect to agreements that provide for a variable rate of interest,

including but not limited to: (a) providing for disclosure to the

borrower by the bank or trust company of the circumstances under which

the rate may increase, any limitations on the increase, the effect of an

increase and an example of the payment terms that would result from an

increase; (b) providing for disclosure to the borrower by the bank or

trust company of a history of the fluctuations of the index over a

reasonable period of time; and (c) providing for notice to the borrower

from the bank or trust company prior to any rate increase or change in

the terms of payment. The regulations shall allow a bank or trust

company after choosing an approved index to choose a spread and a

minimum and maximum rate of interest at its discretion.

A written agreement, whether it provides for a fixed or variable

interest rate, may provide for an introductory rate of interest at

either a fixed or a variable rate, provided that the terms of such

introductory rate, including, if applicable, the date on which the

introductory rate shall terminate, are disclosed to the borrower. Such

disclosure shall be contained on an application form or pre-approved

written solicitation as specified pursuant to subdivisions one and one-a

of section five hundred twenty of the general business law. A change in

the interest rate upon expiration of an introductory rate shall not be

considered a variable rate or a change in terms. The interest rate in

effect after expiration of an introductory rate may apply to all amounts

due under the agreement regardless of when incurred and disclosure of

the same shall be provided to the borrower in the written agreement.

Any interest charge, whether assessed by a fixed or variable rate, may

be reduced on such terms as the bank or trust company may determine,

provided that the terms of such reduction, including, if applicable, the

date on which the reduction will terminate, are disclosed to the

borrower on the written notice announcing the reduction, prior to the

effective date of the reduction. A new method of determining an interest

charge is a reduction in the interest charge if the charge determined

under the new method never exceeds the charge under the original method.

The original interest charge or original method of determining the

interest charge may be applied after the reduction ends to the entire

outstanding indebtedness, including any indebtedness incurred when a

reduced interest charge applied and disclosure of the same shall be

provided to the borrower in the written notice announcing the reduction.

A reduction to an interest charge, including the resumption of the

original interest charge or the original method of determining the

interest charge, shall not be considered an amendment of the agreement

for purposes of this paragraph.

(c) The aggregate unpaid principal amount of all such loans and

advances to a borrower made pursuant to this subdivision by a bank or

trust company at any one time outstanding shall be determined by

agreement between such bank or trust company and the borrower except to

the extent that such loans or advances are made pursuant to a written

agreement providing for establishing credits for a primarily commercial

or business use or purpose or for investment in or purchase of an

interest in an unincorporated business or commercial enterprise.

(d) The aggregate unpaid principal amount of all loans and advances

outstanding at any time pursuant to this subdivision shall be repayable

at regular periodic intervals of not more than one month and for such

term as agreed upon by such bank or trust company and the borrower;

provided, however, that nothing herein shall prohibit a bank or trust

company from providing in any agreement for the omission of payments for

three consecutive specified months during any consecutive twelve month

period. The initial installment of any loan or advance may be deferred

for a period of not more than sixty-five days from the date of such loan

or advance; provided, however, that the installments payable during any

such period on any prior loans or advances shall not be affected by any

such deferment. Provided, however, that an agreement may require a

minimum installment as agreed upon by the parties.

The borrower may at any time prepay the amount owing in part or in

full, with interest to the date of prepayment.

Notwithstanding the foregoing provisions of this paragraph, each

installment or other amount paid by the borrower to the bank or trust

company may be applied to interest, insurance premiums, service charges,

fines and principal in the order named, or in any such manner as the

agreement may provide. The term "installment" may be deemed to include

or exclude amounts to be applied to interest, insurance premiums,

service charges and fines.

(e) The fees and charges authorized by this paragraph and paragraph

(b) of this subdivision shall be inclusive of all charges to the

borrower incident to investigating and making any such loan or advance.

No fee, commission, expense, or other charge to the borrower whatsoever

shall be taken, received, reserved, or contracted for, except as

provided in this subdivision. In addition to the interest charge

permitted under paragraph (b) of this subdivision, the bank or trust

company may charge, receive and collect any one or more of the fees and

charges described in this paragraph, provided that any such fee or

charge is set forth in the written agreement with the borrower. The bank

or trust company may contract with the borrower for the payment by the

borrower of: (i) a service charge either as a percentage or an amount

upon each such check or other written, electronic or telephonic order or

request which is approved; (ii) a charge in an amount or percentage for

each check or other written, electronic or telephonic order or request

to obtain money from a credit line that cannot be approved since the

borrower is in violation of the terms of the agreement or payment of

such order or request would cause borrower to be in violation of the

terms of the agreement; (iii) a fee for any installment which is not

paid on or before the date on which it is due. A bank or trust company

that imposes the charge described in this subparagraph without allowing

a grace period of at least ten days must credit any cash payment made by

a borrower to a teller at a branch where deposits are accepted by the

bank or trust company, as of the date of receipt of the payment; (iv)

the actual expenditures, including reasonable attorneys' fees for

necessary court process; (v) in case the bank or trust company insures a

borrower in accordance with applicable insurance law, including but not

limited to under a credit unemployment insurance policy, group life

insurance policy, group health insurance policy, group accident

insurance policy, or group health and accident insurance policy, an

amount for each month which, notwithstanding any other law, may be

computed on the amount of the borrower's entire unpaid indebtedness

under this subdivision except in the case of a loan or loan commitment

made under this subdivision for educational purposes as specified in

subdivision five-b of this section, and then on an amount no greater

than the unpaid balance of the borrower's scheduled periodic payments,

whether due or not due, upon the loan or loan commitment, at a rate not

in excess of the premiums chargeable for such month in accordance with

rate schedules then in effect and on file with the superintendent of

financial services for such insurance by the insurer; (vi) if loans or

advances may be obtained by use of a credit card issued by the bank or

trust company to the borrower, an annual fee for membership in the

credit card plan. If the borrower has requested the issuance of a credit

card, the fee for the first year may be charged by the bank or trust

company at any time. The bank or trust company shall in each subsequent

year in which an annual fee is payable, send the borrower in or with the

statement for the monthly billing period before that in which the fee is

to be billed, a notice that the annual fee will be billed in the next

monthly statement. A borrower who is not delinquent or otherwise in

breach of any term of the agreement with the bank or trust company shall

have the right during the first six months after the annual fee is

billed to notify the bank or trust company in writing, at its address on

the credit agreement, to terminate the borrower's account and request a

refund of the unused portion of the annual fee previously paid. Upon

receipt of the termination notice and refund request from such borrower,

the bank or trust company shall refund to the borrower the unused pro

rata share of any annual fee previously paid as of the first billing

statement date after receipt of the termination notice; and (vii) an

overlimit charge which may be imposed whenever the specified credit

limit is exceeded but not more than once in a monthly billing cycle. If

the overlimit charge is imposed, the credit limit must be disclosed on

the monthly billing statement; and (viii) a returned payment charge, in

the amount set forth in section 5-328 of the general obligations law,

for any check or other method of payment that is returned unpaid,

excluding payment made by automated teller machine or other electronic

media; (ix) a charge for replacement of lost or stolen credit cards,

which charge shall be applied only where a borrower has suffered a lost

or stolen credit card after two replacements thereof; (x) a charge for

additional credit cards for the borrower's account; and (xi) a charge

for copies of sales slips, cash advance slips, monthly statements and

other documents when such copies are not required by federal or state

law governing billing error disputes.

The fees and charges set forth in this paragraph shall not be

considered in applying sections 190.40 and 190.42 of the penal law. For

purposes of 12 U.S.C. §§ 85, 1831d, 1463(g) and 1785(g), the fees and

charges permitted under this paragraph are interest under New York law,

and all terms, conditions, and other provisions of a written agreement

between a bank or trust company and a borrower, including without

limitation, fees and charges, provisions related to the method of

determining the outstanding balance on which an interest charge is

imposed and circumstances in which an interest charge may be avoided,

are material to the determination of the interest rate under New York

law.

(f) No bank or trust company shall require a borrower to keep any sum

on deposit, or to make deposits in lieu of regular periodic installment

payments, or to do or refrain from doing any other act which would

entail additional expense or sacrifice, as a condition precedent to the

entering into of the agreement or granting of a loan or advance under

the authority of this subdivision, except as provided in subdivision

five-b of this section, provided, however, that nothing herein shall be

construed to prohibit a borrower from agreeing that such loans and

advances may be disbursed by crediting a demand deposit account to be

opened or maintained by the borrower on the same terms as are offered

generally by the bank or trust company to all or any class or classes of

demand deposit customers, and provided further, that a bank or trust

company may require a pledge to such bank or trust company of a

specifically identified interest-bearing deposit account at such bank or

trust company as collateral security for a loan made by such bank or

trust company under the authority of this subdivision.

5-a. A bank or trust company may make loans secured by mobile home

chattel paper evidencing a monetary obligation incurred to finance the

purchase of a mobile home located at the time of such purchase, or to be

located within ninety days, at a semipermanent site within the state or

in a contiguous state and to be maintained as a residence of the

borrower, the borrower's spouse, child, grandchild, parent or

grandparent.

(1) For this subdivision:

(i) "mobile home chattel paper" means written evidence of both a

monetary obligation and a security interest of first priority in a

mobile home and any equipment installed or to be installed therein; and

(ii) "mobile home" or "manufactured home" means a structure,

transportable in one or more sections, which in the traveling mode, is

eight body feet or more in width or forty body feet or more in length,

or when erected on site, is three hundred twenty or more square feet,

and which is built on a permanent chassis and designed to be used as a

dwelling with or without a permanent foundation when connected to

required utilities, and includes the plumbing, heating, air-conditioning

and electrical systems contained therein.

(2) If the loan is for the purpose of financing the purchase of a new

mobile home,

(i) it shall mature not later than two hundred forty months after the

date thereof, and

(ii) the amount advanced shall not exceed one hundred per cent of the

sum of (a) the manufacturer's invoice price of such mobile home

(including any installed equipment), excluding freight, plus (b) the

invoice price of the manufacturer of any new equipment installed or to

be installed by the dealer, excluding freight.

(3) If the loan is for the purpose of financing the purchase of a used

mobile home,

(i) it shall mature not later than two hundred forty months after the

date of the loan, and

(ii) the amount advanced shall not exceed one hundred per cent of the

purchase price of the used mobile home actually paid or the wholesale

value of such mobile home (including any installed equipment) as

established in the dealer's market, whichever is the lower.

(4) The loan shall be payable in equal or substantially equal monthly

installments calculated from the date of the loan. Interest, which may

be taken in advance, may be charged thereon, computed from the date of

the loan to the date of the last installment payable thereunder, if the

loan has a maturity (i) not exceeding thirty-seven months, at a rate not

to exceed six dollars per annum discount per one hundred dollars of the

face amount or ten dollars if the interest so computed is less than that

amount, or (ii) exceeding thirty-seven months, at a rate not to exceed

five dollars per annum discount per one hundred dollars of the face

amount or ten dollars, if the interest so computed is less than that

amount; provided that the interest which may be charged, if it exceeds

ten dollars, shall not exceed one per cent per month on the unpaid

principal balance.

(5) The authorized interest shall include all charges incident to

investigating and making any loan. No fee, commission, expense, or other

charge shall be permitted except that the bank or trust company may

contract to charge the borrower (i) the fees payable to a public officer

to perfect any lien or other security interest taken to secure the loan,

or the premium, not in excess of such fee, payable for any insurance in

lieu of such filing; (ii) in case of default, and in accordance with the

instrument evidencing the obligation, either a fine in an amount not to

exceed five per cent on any installment which has become due and

remained unpaid for a period in excess of ten days, but no such fine

shall exceed five dollars and only one fine shall be collected on any

such installment regardless of the duration of the default, and provided

further that should the aggregate of such fines collected in connection

with any loan exceed two per cent of such loan or twenty-five dollars

the bank or trust company shall refund such excess within sixty days

after the loan is paid in full, or, subject to an allowance of unearned

interest attributable to the amount in default, interest on each amount

past due at a rate not in excess of one per cent per month during the

period of delinquency; (iii) the actual expenditures, including

reasonable attorney's fees for necessary court process, and (iv) in case

the bank or trust company insures a borrower under a credit unemployment

insurance policy, group life, health, accident, or health and accident

insurance policy, or requires insurance on the property securing such

loan, an amount not in excess of the premiums lawfully chargeable. No

bank or trust company shall require a borrower to place any sum on

deposit, or to make deposits in lieu of regular periodic installment

payments, or to do or refrain from doing any other act which would

entail additional expense or sacrifice, as a condition of a mobile home

loan, as the superintendent may from time to time approve. No refund or

excess fines shall be required if it amounts to less than one dollar.

(6) A borrower may prepay the loan in full or, with the consent of the

bank or trust company, may refinance the loan. In such event, the bank

or trust company shall refund: (1) the unearned portion of the interest

to the borrower the amount of which portion shall be determined

according to a generally accepted actuarial method; provided that if the

interest previously deducted (i) was less than ten dollars, no refund

shall be required; or (ii) exceeded ten dollars and the earned interest

is less than that amount, the bank or trust company may retain such an

additional amount as will bring the earned interest to ten dollars and

refund the remainder, and provided further, that unless the loan is

refinanced, no refund shall be required if it amounts to less than one

dollar; and (2) if a charge was made to the borrower for premiums for

insuring the borrower under a credit unemployment insurance policy,

group life insurance policy, or under a group health, group accident or

group health and accident insurance policy, the excess of the charge to

the borrower therefor over the premiums paid or payable by the bank, if

such premiums were paid or payable by the bank or trust company

periodically, or the refund for such insurance premium received or

receivable by the bank or trust company, if such premium was paid or

payable in a lump sum by the bank or trust company. No such refund need

be made if it amounts to less than one dollar. In the event (i) the

maturity of the loan is accelerated due to the default of the borrower

or otherwise and judgment is obtained, or (ii) repayment is made

pursuant to any such insurance policy, the borrower or his legal

representative, as the case may be, shall be entitled to the same refund

as if the loan had been prepaid in full on the date of acceleration or

repayment.

(7) As a condition of any loan made pursuant hereto, the borrower

shall certify that the mobile home, for the purchase of which the loan

is made, is intended to be maintained in the state or in a contiguous

state as a residence of the borrower, the borrower's spouse, child,

grandchild, parent or grandparent. If the mobile home shall not be so

maintained on the ninetieth day next succeeding the date of the loan or

if it is relocated so as to no longer be located in the state or a

contiguous state at any time before the first anniversary of the loan,

the loan and all authorized charges shall become immediately due and

payable subject only to the refund provisions of paragraph six and the

borrower may, if the contract so provides, be required to pay as an

additional authorized charge, a penalty in an amount not to exceed two

per cent of the face amount of the loan.

(8) No investment shall be made by a bank or trust company pursuant to

this subdivision if the total amount invested by it pursuant to this

subdivision exceeds, or by the making of such investment will exceed, an

amount equal to fifteen per cent of the assets of the bank or trust

company.

(9) Subject to such limitations and conditions as the superintendent

of financial services may prescribe by general regulation, a bank or

trust company may make a loan pursuant to this subdivision which the

federal housing administrator has insured or has made a commitment to

insure and may receive and hold such debentures as are issued by the

federal housing administrator in payment of such insurance, or which is

guaranteed pursuant to the provisions of the act of congress entitled

the "Servicemen's Readjustment Act of 1944." No law of this state

prescribing or limiting the interest rate upon loans or advances of

credit or prescribing a penalty for violation thereof or prescribing the

nature, amount or form of security or requiring security upon which

loans or advances of credit may be made or prescribing or limiting the

period for which loans or advances of credit may be made or limiting the

amount of any class of loans, advances of credit or purchases which may

be made shall be deemed to apply to loans, advances of credit or

purchases made or to loans acquired by purchase pursuant to this

paragraph.

5-b. Notwithstanding any inconsistent provision of this section, a

bank or trust company may make loans for the purpose of defraying the

cost of education of one or more students at a university or college, or

at an elementary or secondary school providing education required of

minors which may provide for (i) payment of origination fees, or

guarantee fees in such amounts as the superintendent may from time to

time approve; (ii) capitalization of interest, provided that the

borrower has the option to avoid capitalization by paying such interest

without penalty; and (iii) deferral and forbearance of payments under

circumstances for which such deferral or forbearance could be granted

for loans made pursuant to Title IV of the Higher Education Act of 1965

(20 USC 1070 et seq.).

6. The knowingly taking, receiving, reserving or charging a greater

rate of interest than that authorized by this section as computed by

this section, shall be held and adjudged a forfeiture of the entire

interest which the note, bill of exchange or other evidence of debt

carries with it, or which has been agreed to be paid thereon, and if a

greater rate of interest has been paid, the person paying the same or

his legal representative may recover from the bank or trust company

twice the entire amount of the interest thus paid.

7. Upon an advance of money, whether or not repayable on demand, to an

amount not less than five thousand dollars, made upon documents of title

within article seven of the uniform commercial code or negotiable

instruments within article three or article eight of the uniform

commercial code pledged as collateral security for such repayment, any

bank or trust company may receive or contract to receive and collect as

compensation for making such advance any sum which may be agreed upon by

the parties to such transaction; provided that such advance is (a) to or

for any partner of a firm which is a member firm of a national

securities exchange registered with the securities and exchange

commission as a national securities exchange under the federal

securities exchange act of 1934, as amended, to enable such partner to

make a contribution of capital to such firm or to purchase stock of an

affiliated corporation of such firm, provided that such partner is

actively engaged in the business of such firm and devotes the major

portion of his time thereto, or (b) to or for any person who is or will

become a holder of stock of a corporation which is a member corporation

of such a national securities exchange to enable such person to purchase

stock of such corporation or to purchase stock of an affiliated

corporation of such corporation, provided that such person is actively

engaged in the business of such corporation and devotes the major

portion of his time thereto.

8. (a) The superintendent shall have the power to prescribe by

regulation (i) the maximum charge which may be imposed in this state by

a bank or trust company in connection with a check or other written

order drawn upon it on insufficient funds, irrespective of whether the

instrument is paid, accepted, or returned by the bank, and (ii) the

maximum charge which may be imposed in this state by a bank or trust

company in connection with a check or other written order received by it

for deposit or collection and subsequently dishonored and returned for

any reason by the drawee.

(b) No bank or trust company shall, in connection with the payment,

acceptance or return of such check or order, impose any fee, fine,

commission or other charge, however designated, in addition to the

maximum charge established therefore by the superintendent of financial

services pursuant to paragraph (a) of this subdivision, except that

nothing herein expressed shall prevent a bank or trust company from

taking, receiving, reserving or charging interest, as authorized by law

in connection with credit extended in connection with the payment of

such check or order or from imposing any charge in accordance with a

written agreement established in accordance with the provisions of

subdivision five of this section. A bank or trust company may, as an

accommodation to its customers, pay, accept, or return a check or order

without charge, or at a lesser charge than the maximum charge

established by the superintendent of financial services.

(c) In prescribing a maximum charge pursuant to paragraph (a) of this

subdivision, the superintendent shall consider the following factors:

(i) the cost of processing an overdraft or returned check or order, as

the case may be, (ii) the charge necessary to deter overdrafts or

returned checks or orders, as the case may be, and (iii) such other

economic or cost factors that the superintendent shall deem to be

appropriate. Prior to the superintendent's prescribing any such maximum

charge, the superintendent shall issue a written determination as to

such maximum charge, reciting the cost and other data upon which the

determination is based.

(d) The superintendent of financial services may promulgate such

regulations as he or she deems necessary and proper to implement and

define the provisions of this subdivision. The superintendent of

financial services may prescribe maximum charges from time to time, but

not more often than once in any six month period, and shall provide

reasonable notice to the public of any change in such maximum charges,

of the effective date of such change, which shall not be less than seven

days following the adoption of such change by the superintendent of

financial services, and of any rule or regulation adopted pursuant to

this subdivision.

9. A bank or trust company may, in the case of business or

agricultural loans in the amount of twenty-five thousand dollars or

more, take, receive, reserve, and charge on any loan or discount made,

or upon any note, bill of exchange, or other evidence of debt, interest

at a rate of not more than five per centum in excess of the discount

rate on ninety-day commercial paper in effect at the Federal Reserve

Bank of New York, and such interest may be taken in advance, reckoning

the days for which the note, bill, or other evidence of debt has to run.