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Financial Services Law Insights and Observations

New York expands commercial lending disclosure coverage

State Issues State Legislation Commercial Finance Commercial Lending Merchant Cash Advance

State Issues

On February 16, the New York governor signed S898, which amends the state’s recently enacted commercial financing disclosure law to expand its coverage and delay the effective date. As previously covered by InfoBytes, in December 2020, the governor signed S5470, which establishes consumer-style disclosure requirements for certain commercial transactions under $500,000. The law exempts (i) financial institutions (defined as a chartered or licensed bank, trust company, industrial loan company, savings and loan association, or federal credit union, authorized to do business in New York); (ii) lenders regulated under the federal Farm Credit Act; (iii) commercial financing transactions secured by real property; (iv) technology service providers;  and (v) lenders who make no more than five applicable transactions in New York in a 12-month period. The law is currently set to take effect on June 21, which is 180 days after the December 23, 2020 enactment. As noted by the sponsor memo, prior to signing the law, the governor “expressed concerns about the reach of the bill and the time needed to implement the required rulemaking.” After enactment, the legislature introduced S898, which contains the “negotiated change to the underlying chapter [to] address[] those concerns.”

S898 increases the coverage of the consumer-style disclosure requirements to commercial transactions under $2.5 million and creates a new exemption for certain vehicle dealers. The law also extends the effective date to January 1, 2022.

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