NY A1420/S1061 Threatens to Require Licensing for Commercial (Business Purpose) Loans and Other Transactions
New York is proposing a law via Assembly Bill A1420 and corresponding Senate Bill S1061 that will require private lenders and other persons to obtain a license before providing certain loans and other financial products to businesses located in New York. This would subsequently affect real estate investors as many sources of capital would no longer be available or the cost of borrowing would be substantially higher.
Loans and Other Transactions Covered
Licensing would be required to make loans of $500,000 or less to businesses located in New York for the purpose of assisting the businesses with their capital needs (“Covered Loans”). This requirement would apply to both secured and unsecured loans.
Licensing would also be required to provide other “Commercial Financing Products” to New York businesses, including lease and accounts receivables transactions of $500,000 or less (“Covered Transactions”).
Lenders and Other Persons Covered
Licensing requirements would apply to:
- All persons making Covered Loans or other Covered Transactions to New York businesses.
- All persons paid to refer Covered Loans or other Covered Transactions to New York businesses.
- All persons marketing Covered Loans or other Covered Transactions on behalf of persons who make Covered Loans or other Covered Transactions.
Exemptions
Licenses would not be required for:
- Persons making 5 or fewer Covered Loans or other Covered Transactions during any 12-month period.
- Banks, credit unions, insurance companies, trust companies and similar companies.
Timing
The Bill has not yet been signed by Governor Cuomo. It would take effect 180 days after the Governor signs it into law. As of the time of this writing, both the Assembly and corresponding Senate bill are with their Bank Committees. They have not yet passed out of committee to be placed on the Floor Calendars of the New York State Congress.
We believe passage of this legislation would:
- Make it harder for real estate investors to find and borrow capital for their deals. Multi-state lenders will likely choose to move their capital deployment to neighboring states that do not require licensing (NJ, PN, VT, NH, MA, CT, RI, and ME), or deploy their capital only on deals more than $500,000.
- Dramatically increase real estate investors’ interest rates and loan fees. While local private lenders will likely choose to get licensed, licensing is expensive and time-consuming to maintain. These costs will pass through to borrowers. Prior regulation also exempted licensing for loans smaller than $50,000 and with an interest rate of 16% or less – the new legislation has no such exemptions, so private lenders will have no regulatory reason to maintain lower interest rates or finance much-needed smaller loans amid less competition and the higher cost of doing business.
- Decimate the inventory of affordable housing as real estate investor (commercial) borrowers intentionally avoid smaller balance loan transactions due to the lack of capital available and the higher cost of borrowing.
- Lower the capital deployed into the New York economy as lenders and real estate investors choose to do business elsewhere.
- Hurt local trade jobs that depend on business income from commercial borrowers.
Think Realty and sister company The American Association of Private Lenders (AAPL) oppose this bill.
At a minimum, we would like to see an exemption for commercial loan transactions secured by real property as those loan transactions make up the majority of the loans transacted by our respective memberships.
How You Can Help
- Sign our petition opposing NY A1420 at aaplonline.com/petitions.
- Sign up for our legislative update emails at aaplonline.com/gov for information on upcoming opposition efforts, including committee hearings, meetings with legislators, and more.
- Contact the following Congresspersons by phone, email, and letter (REI sample objection letter) (Private Lender sample objection letter)
New York State Assembly (for Assembly Bill A1420)
- Kimberly Jean-Pierre (D), Assembly District 11, Bill Sponsor
- Victor M Pichardo (D), Assembly District 86, Committee on Banks Chair
These legislators on the Assembly’s Standing Committee on Banks are potential allies:
New York State Senate (for Senate Bill S1061)
These legislators on the Senate Banks Committee are potential allies:
- George M. Borrello (R), Senate District 57
- Daniel G. Stec (R), Senate District 45
- James Tedisco (R), Senate District 49
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