To: Principal Bank Examiner Nardulli
From: Harry C. Goberdhan– Associate Counsel
Date: February 6, 2006
Subject: Brokering activities under Article IX of the Banking Law
Would brokering activities trigger the licensing requirements under Article IX of the Banking Law?
Information provided by [ ], indicated that their client provides advertising, soliciting, negotiating and/or taking of applications for loans covered by Article IX of the Banking Law, which applications are then transferred to a lender and the loans closed in the lender’s name.
According to Section 340, Article IX of the New York Banking Law:
No person or other entity shall engage in the business of making loans in the principal amount of twenty-five thousand dollars or less for any loan to an individual for personal, family, household, or investment purposes and in a principal amount of fifty thousand dollars or less for business and commercial loans, and charge, contract for, or receive a greater rate of interest than the lender would be permitted by law to charge if he were not a licensee hereunder except as authorized by this article and without first obtaining a license from the superintendent.
Section 340 further provides that:
[A] person or entity shall be considered as engaging in the business of making loans in New York, and subject to the licensing requirements of this article, if it solicits loans in the amounts prescribed by this section within this state and, in connection with such solicitation, makes loans to individuals then resident in this state, except that no person or entity shall be considered as engaging in the business of making loans in this state on the basis of isolated, incidental or occasional transactions which otherwise meet the requirements of this section.
Because the above-recited section of the Banking Law is written in the conjunctive – “solicits and makes” – an entity would have to be involved in both activities in order for it to be required to be licensed under Article IX of the Banking Law. Therefore, when, as in this case all the entity is doing is brokering – soliciting, advertising, negotiating and/or taking applications – no license under Article IX is required prior to being involved in such activities.