I Still Love New York: The Empire State’s New Disclosures – Part II: Broker Obligations

by Ken Greene

Ken Greene is an attorney at his SoCal firm, the Law Office of Kenneth Charles Greene. He began his career with BankAmerilease in 1981 and has been a partner in several firms, including Ross & Ivanjack, one of the first law firms devoted exclusively to the equipment finance industry. He continues representation of lenders, lessors and brokers in contract preparation, compliance, licensing, litigation and transactions. Greene is presently General Counsel to the AACFB, has served twice on the BOD of NEFA and was its Legal Committee Chairman, Legal Line Editor, Regional Committee Chair and Conference Chairman. He was Leasing News Legal Editor since early 2022. Greene received his BA from Brandeis University and his JD from Santa Clara University School of Law. He is frequent writer and speaker on matters of leasing law. Greene’s passions are family, music, travel and more. In his “spare” time, he plays and records with several bands and produces concerts and charity events.

Ken Green of the Law Office of Kenneth Charles Greene is back for the second part of his detailed review of New York’s new commercial finance disclosure law.

As discussed in my last article on this subject, the New York State Department of Financial Services (“DFS”) has finalized the regulations elucidating its new Commercial Finance Disclosure Law (CFDL). The complete text of the CFDL can be found in Article 8, Sections 801-811 of the New York Financial Services Law.

I previously focused on the general parameters of the new regulations as they apply to NY lenders. This article will discuss the issues that concern all you Brooklyn and Bronx brokers (yes, Buffalo, Babylon, Belmont and Baldwin (my hometown) too.

For those of you who find it difficult to fall asleep at night, the 53 pages of Disclosure Requirements might remedy that problem. Sweet dreams!

To quickly recap the key (but not all) provisions of the new rules:

  • Disclosures are only required for transactions that are less than $2.5 million;
  • Banks and similar depository financial institutions are exempt, and those exemptions extend to all majority owned subsidiaries of banks. Compare California which does not consider bank subsidiaries exempt (a subject for a different day);
  • True (operating) leases are exempt;
  • Commercial transactions secured by real estate are exempt;
  • Anyone who makes no more than five transactions in NY 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;
  • Generally, the disclosures must include the amount of financing, APR (based on the federal Truth in Lending Act), repayment amounts, term, finance charge, and description of collateral, if any; and
  • The law applies only to transactions where the recipient is “principally directed or managed from the State of New York,” or in the case of a natural person, the recipient is a legal resident of NY.

Other than worrying about the Yankees never-ending injury list, or whether the Nets will ever sustain a winning team, what, if anything, does a broker bred in Brooklyn (I love alliteration) need to know if brokering a commercial transaction in New York? Here’s a checklist:

  • First, New York defines “broker” as “any person other than a financer, recipient, or recipient’s agent, who, for a fee, commission, or other consideration, participates in any financing negotiation; counsels or advises the recipient about financing options; participates in the preparation of any financing documents, including financing applications; or contacts the financer on behalf of the recipient . . . .”
  • “Financer” means the entity or person who provides or will provide the commercial financing to the recipient. This is significant. A broker may be a provider, but the financer is the one providing the financing. As simple (confusing?) as this sounds, this means the broker does not have to prepare the disclosures, even if it is the broker communicating the financer’s offer. The financer prepares the offer and either sends it to the broker or the recipient. The broker is then the “provider,” but not the “financer”, upon whom the obligation to prepare disclosures rests.
  • The financer must provide a copy of compliant disclosures to a broker whenever the financer provides a broker with a specific commercial financing offer.
  • The financer must develop procedures reasonably designed to ensure that recipients receive the disclosures financer provides to the broker (i.e. including the requirement in its broker agreement)
  • The broker must transmit the unaltered disclosures received from the financer to the recipient, and retain evidence of the transmission, including the time of transmission.
  • The provider must inform the recipient, in writing, of how and by whom the broker will be compensated for the broker’s role in any transaction.
  • Brokers are not required to evaluate the accuracy of the disclosures.
  • Brokers do not have any liability for inaccurate disclosures.

Licensing in NY is a complicated issue. I will address it in a future article. In the meantime, will someone please send me some cannoli from Ferrara?

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.


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