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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.

This article is presented by the Law Office of Kenneth Charles Greene. All copyrightable text, the selection, arrangement, and presentation of all materials (including information in the public domain), and the overall design of this presentation are the property of the Law Office of Kenneth Charles Greene. All rights reserved. Permission is granted to download and reprint materials from this article for the purpose of viewing, reading, and retaining for reference. Any other copying, distribution, retransmission, or modification of information or materials from this article, whether in electronic or hard copy form, without the express prior written permission of Kenneth C. Greene, is strictly prohibited. The materials available from this article are for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to any particular issue or problem. Use of and access to these materials does not create an attorney-client relationship between the Law Office of Kenneth Charles Greene and the user or viewer. The opinions expressed herein are the opinions of the individual author.

Canadian Lending Looks Strong Post-Pandemic

After having their entire industry threatened by pandemic-induced restrictions, the Canadian alternative finance space has started 2022 off with a bang. Canadian lending saw billions in growth, as the industry hopes to utilize fintech’s technology and the government’s new take on open banking to bring their industry back to full swing. 

“Main Street small business recovery is looking very strong for 2022 as restrictions ease moving into the warmer weather,” said Tal Schwartz, Senior Advisor for the Canadian Lenders Association. “However, in the short term, lenders are paying close attention to the Omicron variant, and particularly how aggressive the federal government is prepared to be in terms of sustained subsidies.”

Despite the uncertainty of the next several months, Canadian finance seems to have a healthy balance of offering modern financial products alongside an effort a return to normalcy. The crypto-lender Ledn raised $70M USD for the world’s first crypto-secured mortgage product, while the BNPL company Flexiti received a $527M facility from the National Bank of Canada. Merchant Growth, a small business lender, also raised $4m in equity financing. 

According to Schwartz, most lenders who stayed in business used the last year to deeply invest in their technology across the board. 

“[Lenders] have equally repositioned themselves in ways that better service a post-pandemic SMB clientele,” he said. “There is significant effort among lenders to evolve into financial health dashboards of a business, rather than being viewed exclusively as a financing source.”

According to the numbers, there has been significant growth by two notable Canadian lenders that are acting both as a financial management tool and a lending source. Canada’s largest subprime lender goeast Ltd, and Borrowell, a mobile loan marketplace, achieved $2B in portfolios and 2M users respectively to end the year. 

“Fintech platforms become more sticky and can capture more client data if they become a hub for business management, with financing simply being a component of their platform,” said Schwartz. “Fintech lenders are coming out of the pandemic much stronger and with a sharper mandate than before.”

AMEX’s Journey from Courier to Creditor

Have you swiped your American Express card lately?

If so, you belong to one of the most ambitious company pivots ever known. The credit card company known for its prestigious clientele was once a shipping company and up until the early 1900’s, it exclusively shipped stuff at an expedited pace across America.

The origins of the namesake comes from the company’s previous model, an express courier service in the mid 1800s. During that time, “express” services were the next up-and-coming industry. These services allowed quick and precise shipping of small, valuable items around the United States, and were frequent among people who were concerned with the fragility of their items. It was also a second, faster option to the US Postal Service.

By 1850, the top express services realized that their competition was doing more harm than good for one another. That’s when three New York-based express companies owned by Henry Wells, William Fargo, and John Butterfield combined their companies into one, dubbing the new service American Express.

During the formation of American Express, the California gold rush was at its peak. Promises of new cities that were an escape from the smog dens of the east coast brought millions of Americans out west. Wells and Fargo, the first President and Vice President of American Express, respectively, moved out to San Francisco in an attempt to extend American Express to the west coast during this time.

Wells and Fargo were discouraged by their colleagues at American Express to branch out west, and were forced to simultaneously run American Express in the East, and their new company in the west. This western venture became known as Wells Fargo.

Throughout the rest of the 1800s, American Express continued their ventures in express shipping, expanding operations into railways and expanding their routes around the east coast. The Civil War was a huge growth spurt for the company as the demand for express shipping skyrocketed.

After both Wells and Fargo made their way through the ranks at American Express, both serving as President prior to their departure, it was James Fargo, the son of William, who some say is the individual who introduced the idea of providing financial services for customers in 1891. James was the one to introduce American Express’ money order, a cheaper and more modern version of a system already in place by the postal service at that time. American Express became the provider of the go-to money order for immigrants who wished to send money to their families in various parts of the world. After the huge success of the money orders, this led to the company releasing their trademark product, the traveler’s check, at the turn of the century.

Their full blown transition to financial services occurred in 1918, when the US government nationalized all express shipping companies as part of the World War I fighting effort. This resulted in the company being left only to function off of its two side ventures, money orders and travelers checks.

These stayed relatively stagnant for the next fifty-or-so years until American Express started to become what we know them as in today’s market. In 1958, the company issued its first credit card. Half a million people signed up for the card in its first 90 days on the market.

The rest is history. The charge card, then the tier’d cards, followed by their prestigious centurion or “black” card, the options expanded into different tiers of luxury through credit. This prestige that justifies the consumer fee, combined with the high fees they charge merchants to process the payments, is why the company is so successful. As American Express clients tend to make and spend more money, merchants are inclined to take American Express cards to attract their market, and just consider the higher fees as just a cost of doing business.

Not only is American Express an impeccable example of brand construction and marketing, but a great learning opportunity for any business who is forced to change their business model due to extenuating circumstances. Their story gives the notion that no matter the size of the company, the opportunities are endless with the right balance of dedication, innovation, and calculated risk taking.