My hometown. What’s not to love? The Met. Babe Ruth. The Brooklyn Bridge. Joe Namath. Times Square. The perfect slice (orange and greasy, the reason New Yorkers wear black). The best bagels (with a shmear). Killer pastrami (probably literally). Then again, more recently, rampant homelessness, gun violence, George Santos – what a difference a couple of decades make. Oy vey!

I hate to rain on your very belated Thanksgiving Day Parade (another New York marvel), but the New York commercial transaction disclosure regulations have been finalized. You will need to comply by August 1, 2023.This article will discuss the general rules, and the lender’s obligations and duties. Part II (next week) will address the slightly less cumbersome broker obligations.

On Feb. 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.

Here are the key provisions of the CFDL:

• The law only applies to transactions which are less than $2.5 million;
• Banks and similar depository financial institutions are exempt;
• True (operating) leases are exempt;
• Commercial transactions secured by real property are exempt;
• Anyone who makes no more than five transactions in New York in a twelve 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;
• Generally, the disclosures must include the amount of financing, APR, repayment amounts, term, finance charge, and description of collateral, if any; and
• The law applies only to transactions where the recipient is in New York.

And now for some scintillating news: Exemptions extend to all majority owned subsidiaries of banks because, as the DFS concedes, they are subject to consolidated oversight- thank you Captain Obvious. Please call the DFPI). Is this important? Absolutely. Why? Well for one, California has refused to make this concession and, at least at the moment, federal and/or bank subsidiaries are apparently not exempt from disclosure or CFL licensing laws. I recently authored and sent to the DFPI a fairly comprehensive Request for Interpretative Opinion on this subject, which I thought was well reasoned and, irrefutably logical. The DFPI didn’t exactly disagree. They simply declined to provide an answer. Sidestepped the whole issue. Now, if I were in New York at the moment, I’d have two words for the DFPI. Grow a pair! (I know, I know – math is not my forte).

So for now, we either live with the consequences of life in the Golden State, or go avail ourselves of the Bronx Zoo, The Hamptons, Central Park, the Hudson River Line, and every Billy Joel song you can think of. Pack your bags, grab a Greyhound bus, and move to New York.

Before I go off the third rail, here is more information you will need to do business in the City the Empire State.

• NY does not (unlike California) require disclosure of broker compensation on the disclosure forms, but still requires disclosure of broker fees in writing (maybe on the bottom of a cannoli box).
• 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; and
• Has font, rows and column requirements virtually identical to California law;

The New York regulations are actually quite similar to the California rules. One critical difference between the two is the $2.5 million threshold in New York versus the $500k threshold in California. Another major distinction between the two is the express exemption for bank subsidiaries in New York  whereas, as discussed above, the California regulations are murky on this issue, at best.

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

Next week, we will talk about brokers, bialys, and blintzes.

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.