N.Y. Banking Law § 351: Restrictions on loans subject to the provisions of this article; interest; other charges

§ 351. Restrictions on loans subject to the provisions of this

article; interest; other charges. 1. Every licensee hereunder may loan

any sum of money not exceeding the maximum principal amounts prescribed

in section three hundred forty of this article, and may charge, contract

for, and receive thereon interest at the rate or rates agreed to by the

licensee and the borrower. Such interest may either (a) 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 and in accordance with the provisions of the

evidence of the indebtedness or (b) precomputed under subdivision five

of this section.

2. On any loan with a variable rate of interest made pursuant to this

subdivision, 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

licensee, and (d) approved by the superintendent.

The superintendent of financial services shall adopt regulations,

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

borrower by the licensee 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; (ii)

providing for disclosure to the borrower by the licensee of a history of

the fluctuations of the index over a reasonable period of time; and

(iii) providing for notice to the borrower from the licensee prior to

any rate increase or change in the terms of payment.

3. Loans may be granted under an open end or closed end loan agreement

providing for a fixed or variable rate.

4. Interest, consideration, or charges for the use of money shall not

be deducted or received in advance and shall be computed on unpaid

principal balances. Such interest, consideration, or charges shall not

be compounded; provided that, if part or all of the principal amount of

any loan contract is the unpaid principal balance of a prior loan, the

unpaid interest, consideration or charges for the use of money on such

prior loan which have accrued within sixty days before the making of

such loan contract may be incorporated as interest bearing principal in

the principal amount of such loan contract, and for the purposes of this

subdivision any such new loan shall be deemed a separate loan

transaction.

5. When a closed-end loan agreement requires repayment in

substantially equal and consecutive monthly installments of principal

and interest combined, the interest may be precomputed at the agreed

rate on scheduled unpaid principal balances according to the terms of

the agreement and added to the principal amount of the loan. Every

payment may be applied to the combined total of principal and

precomputed interest until the loan agreement is fully paid and the

acceptance or payment of interest on loans made under the provisions of

this subdivision shall not be deemed to constitute payment, deduction or

receipt thereof in advance nor compounding under subdivision four of

this section. Such precomputed interest shall be subject to the

following adjustments:

(a) If the loan agreement is prepaid in full by cash, a new loan,

refinancing or otherwise before the final installment date, the borrower

shall receive a refund of (i) the unearned portion of the interest the

amount of which portion shall be determined according to a generally

accepted actuarial method; provided, however, that if the amount of

precomputed interest (A) is less than ten dollars, no refund shall be

required; or (B) exceeds the sum of ten dollars and the earned interest

is less than that amount, the licensee 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 (ii)

if a charge was made to the borrower for credit related insurance for

insuring the borrower the excess of the charge to the borrower therefor

over the insurance charges paid or payable by the licensee, if such

insurance charges were paid or payable by the licensee periodically, or

the refund for such insurance charges received or receivable by the

licensee, if such premium was paid or payable in a lump sum by the

licensee, 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 credit related

insurance policy for which a charge was made to the borrower for the

premium thereon, the borrower or legal representative, as the case may

be, shall be entitled to the same refund of interest and insurance

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

acceleration or repayment.

(b) (i) In the event of default of more than ten days in the payment

of any scheduled installment, the licensee may charge and collect a

default charge not exceeding five percent of the installment in default.

This charge may not be collected more than once for the same default and

may be collected at the time of such default or at any time thereafter.

(ii) After the final due date or upon acceleration of maturity for

default, the licensee may charge interest at the original agreed rate on

actual unpaid balances if the loan agreement so provides.

(c) If payment of all unpaid installments on which no default charge

has been charged and collected is deferred one or more full months, and

if the loan agreement so provides, the licensee may charge and collect

an amount which shall be equal to the difference between the refund that

would be required for prepayment in full as of the scheduled due date of

the first deferred installment and the amount which would be required

for prepayment in full as of one month prior to said date, multiplied by

the number of months in the deferment period. The deferment period is

that period in which no scheduled payment has been made and in which no

payment is required by reason of the deferment. Such charge may be

collected at the time of deferment or may be collected at any time

thereafter. If a refund of precomputed interest is required during a

deferment period the borrower shall also receive a refund of the

deferment charge for the number of months remaining in said period, for

which purpose a portion of a month exceeding fifteen days shall be

deemed a month.

(d) If two or more installments or parts thereof are in default for

five days or more, the licensee may, if the loan agreement so provides,

elect to convert the loan from a precomputed one to one in which

interest is paid on actual unpaid balances. In this event, the licensee

shall make the same refund of interest as if the loan were prepaid in

full on the scheduled payment due date preceding the date of conversion

and thereafter may charge interest at the agreed rate, by the actuarial

method, on actual unpaid balances for the time actually outstanding.

6. * (a) In addition to the interest, consideration, or charges above

specified, no further or other charge or amount whatsoever for any

examination, service, brokerage, commission, expense, fee, or bonus or

other thing or otherwise shall be directly or indirectly charged,

contracted for, or received, except the premium or identifiable charge

for insurance authorized by section three hundred fifty-seven of this

article; the lawful fees, if any, actually and necessarily paid out by

the licensee to any public officer for filing, recording, or releasing

in any public office any instrument securing the loan, which fees may be

collected when the loan is made or at any time thereafter or non-filing

insurance premiums not in excess of seven dollars in lieu of filing,

recording or releasing any such instrument; an annual fee on open end

loans authorized by the superintendent and made pursuant to subdivision

three of this section, provided, however, that no such fee shall exceed

an amount equal to one percent of the amount of the loan or fifty

dollars, whichever is less; and a fee, not to exceed the amount set

forth in section 5-328 of the general obligations law, for return by a

depository institution of a dishonored check, negotiable order of

withdrawal, or share draft.

* NB Effective until June 30, 2027

* (a) In addition to the interest, consideration, or charges above

specified, no further or other charge or amount whatsoever for any

examination, service, brokerage, commission, expense, fee, or bonus or

other thing or otherwise shall be directly or indirectly charged,

contracted for, or received, except the premium or identifiable charge

for insurance authorized by section three hundred fifty-seven of this

article; the lawful fees, if any, actually and necessarily paid out by

the licensee to any public officer for filing, recording, or releasing

in any public office any instrument securing the loan, which fees may be

collected when the loan is made or at any time thereafter or non-filing

insurance premiums not in excess of seven dollars in lieu of filing,

recording or releasing any such instrument; and a fee, not to exceed the

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

return by a depository institution of a dishonored check, negotiable

order of withdrawal, or share draft.

* NB Effective June 30, 2027

(b) Any licensee which knowingly receives, reserves or charges a

greater rate of interest than that authorized by this section shall

forfeit the entire interest which the note, 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 licensee twice the entire

amount of interest thus paid.

* (c) In addition to other such information as the superintendent may

require, any licensee which charges an annual fee on open end loan

accounts shall annually report, in a manner and form prescribed by the

superintendent, information to the department on open end loan

borrowers, which shall include: average annual income of borrowers at

the time of the loan, average amount of loans outstanding at the end of

each calendar year, average interest charged, average amount of annual

fees, and geographic distribution of loans made by the licensee.

* NB Repealed June 30, 2027