N.Y. Financial Services Law § 803: Sales-based financing disclosure requirements

§ 803. Sales-based financing disclosure requirements. A provider

subject to this article shall provide the following disclosures to a

recipient at the time of extending a specific offer of sales-based

financing according to formatting prescribed by the superintendent:

(a) The total amount of the commercial financing, and the disbursement

amount, if different from the financing amount, after any fees deducted

or withheld at disbursement.

(b) The finance charge.

(c) The estimated annual percentage rate, using the words annual

percentage rate or the abbreviation "APR", expressed as a yearly rate,

inclusive of any fees and finance charges, and calculated in accordance

with the federal Truth in Lending Act, Regulation Z, 12 C.F.R. §

1026.22, based on the estimated term of repayment and the projected

periodic payment amounts, regardless of whether such act or such

regulation would require such a calculation. The estimated term of

repayment and the projected periodic payment amounts shall be calculated

based on the projection of the recipient's sales, called the projected

sales volume. The projected sales volume may be calculated using the

historical method or the opt-in method. The provider shall provide

notice to the superintendent on which method they intend to use across

all instances of sales-based financing offered in calculating estimated

annual percentage rate pursuant to this section.

(i) The provider using the historical method shall use an average

historical volume of sales or revenue by which the financing's payment

amounts are based and the estimated annual percentage rate is

calculated. The provider shall fix the historical time period used to

calculate the average historical volume and use such period for all

disclosure purposes for all sales-based financing products offered. The

fixed historical time period shall either be the preceding time period

from the specific offer or, alternatively, the provider may use average

sales for the same number of months with the highest sales volume within

the past twelve months. The fixed historical time period shall be no

less than one month and not exceed twelve months.

(ii) The provider using the opt-in method shall determine the

estimated annual percentage rate, the estimated term, and the projected

payments, using a projected sales volume that the provider elects for

each disclosure, provided, that they participate in a review process

prescribed by the superintendent. A provider shall, on an annual basis,

report data to the superintendent of estimated annual percentage rates

disclosed to the recipient and actual retrospective annual percentage

rates of completed transactions. The report shall contain such

information as the superintendent, by rule or regulation, may prescribe

as necessary or appropriate for the purpose of making a determination of

whether the deviation between the estimated annual percentage rate and

actual retrospective annual percentage rates of completed transactions

was reasonable. The superintendent shall establish the method of

reporting and may, upon a finding that the use of projected sales volume

by the provider has resulted in an unacceptable deviation between

estimated and actual annual percentage rate, require the provider to use

the historical method. The superintendent may consider unusual and

extraordinary circumstances impacting the provider's deviation between

estimated and actual annual percentage rate in the determination of such

finding.

(d) The total repayment amount, which is the disbursement amount plus

the finance charge.

(e) The estimated term is the period of time required for the periodic

payments, based on the projected sales volume, to equal the total amount

required to be repaid.

(f) The payment amounts, based on the projected sales volume:

(i) for payment amounts that are fixed, the payment amounts and

frequency (e.g., daily, weekly, monthly), and, if the payment frequency

is other than monthly, the amount of the average projected payments per

month; or

(ii) for payment amounts that are variable, a payment schedule or a

description of the method used to calculate the amounts and frequency of

payments, and the amount of the average projected payments per month.

(g) A description of all other potential fees and charges not included

in the finance charge, including, but not limited to, draw fees, late

payment fees, and returned payment fees.

(h) Were the recipient to elect to pay off or refinance the commercial

financing prior to full repayment, the provider must disclose:

(i) whether the recipient would be required to pay any finance charges

other than interest accrued since their last payment. If so, disclosure

of the percentage of any unpaid portion of the finance charge and

maximum dollar amount the recipient could be required to pay; and

(ii) whether the recipient would be required to pay any additional

fees not already included in the finance charge.

(i) A description of collateral requirements or security interests, if

any.