February 12, 2002
Your correspondence to the Banking Department has been referred to me for response. You have requested information pertaining to the establishment of a small loan business in New York State.
Banking Law Section 340 prohibits any person or entity from engaging in the business of making loans to an individual for personal, family, household, or investment purposes in the principal amount of twenty-five thousand dollars or less, without a license issued by the Superintendent of Banks. Article IX of the Banking Law, of which Banking Law Section 340 is a part, describes, among other things, the requirements and processes for obtaining such a license. Article IX of the Banking Law also states that no such license is required if the rate of interest charged on small loans does not exceed 16% per annum. If the “electronic money business” mentioned in your letter involves the transmission of monies, you will have to obtain a money transmission license under Article XIII-B of the Banking Law.
You may wish to seek the advice of private counsel who could guide you through the applicable New York State laws and through the applications that are available on our website at www.banking.state.ny.us. You can also request applications from the Licensed Financial Services Division of the Banking Department by calling them at 212-618-6410.
I trust that you find this advice helpful.