New York Commercial Disclosure Regulations Approved

With permission to be republished from Leasing News
Ken Greene is an attorney and Editor of Leasing News. To contact Ken, email: ken@kengreenelaw.com.

On February 1, 2023, the New York State Department of Financial Services (“DFS”) adopted final regulations related to its new Commercial Finance Disclosure Law (“CFDL”) found in Article 8, Sections 801-811 of the New York Financial Services Law.

As a reminder, here are the major provisions of the CFDL:

• The law only applies to transactions which are less than $2.5 million;
• Banks and similar financial institutions are exempt;
• True (operating) leases are exempt;
• Commercial transactions secured by real property are exempt;
• Anyone who makes no more than 5 transactions in New York in a 12 month period is exempt;
• Certain vehicle dealers (for transactions which exceed $50k) are exempt;
• Disclosures must be made at the time of extending a specific offer; and
• Generally, the disclosures must include the amount of financing, APR, repayment amounts, term, finance charge, and description of collateral, if any.

Pursuant to the 53 pages of regulation, the CFDL:

• Applies only to transactions where the recipient is in New York;
• Exemptions extend to all majority owned subsidiaries of banks (because they are subject to consolidated oversight);
• Does not require disclosure of broker compensation in the disclosure forms, but still requires disclosure of broker fees in writing;
• Requires that APR be calculated in accordance with either the United States Rule or Appendix J of Reg Z;
• Allows for a digital signature by the recipient on the disclosure forms;
• Has font, rows and column requirements virtually identical to California law;
• Limits the duties of brokers to transmittal of disclosures and providing financer with evidence of transmission. There does not appear to be a document retention requirement like the one in California.

The New York regulations are quite similar to the California rules.

One important difference between the two is the $2.5 million threshold for New York versus the $500k threshold in California. Another major distinction between the two is the express inclusion of bank subsidiaries in the New York law, whereas the California regulations are unclear on this issue.

The compliance date for these regulations is six months after publication of the Notice of Adoption in the State Register. That appears to have happened already, so prepare for compliance on or before August 1, 2023.

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