June 28, 2005
Re: Licensing Requirements
Dear [ ]:
Your May 24, 2005 letter to the New York State Banking Department has been forwarded to me for reply.
In this letter, you state that you are a licensed New York State auto dealer in the Buffalo New York area. You would like to offer in-house financing to customers who cannot obtain financing at traditional banks. You ask whether you would need a license to conduct this activity.
Under Article 11-B of the Banking Law, Section 491(7), a "sales finance company" license is required for a retail seller of motor vehicles engaged in whole or in part, in the business of holding retail installment contracts acquired from retail buyers, which have aggregate unpaid time balances of $25,000 dollars or more at any one time.... The simple answer to your question is that if your company provides financing to customers for balances of $25,000 or more it will require a sales finance company license if the balances are under $25,000 then it will not require a license.
With respect to your question regarding the charging of interest, "interest" is deemed to be a credit service charge as defined in Article 9 (Motor Vehicle Installment Sales) of the New York Personal Property law. You may impose a credit service charge on any retail installment contract, however you need to be licensed as a sales finance company only if the amounts financed are for $25,000 or above. A license would be needed if you hold balances or retail installment contracts above that amount even in a case in which a service charge was not imposed.
Should you have any other questions, please feel free to contact me at the above address.
Christine M. Tomczak