2023 New York Laws › BNK - Banking › Article 9 - Licensed Lenders › 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, 2025
* (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, 2025
(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, 2025