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Banking Interpretations

NYSBL 492, 555, 577
Pers. Prop. Law 301

October 3, 2007

Dear Mr. [---]:

Your letter of August 31, 2007 to Superintendent Neiman, which concerns insurance premium finance agencies, has been referred to me for reply. In your letter, you indicate that it is your opinion that the holder of a New York sales finance license under Article 11-B of the New York Banking Law or the holder of a licensed lender license under Article 9 of the Banking Law may finance insurance premiums for commercial vehicles without first obtaining a premium finance license under Article 12-B of that law.

Your conclusion is only partially correct. Section 577 of the Banking Law states, inter alia, that nothing in Article 12-B affects "the inclusion of amounts for insurance in retail instalment contracts or obligations in accordance with the motor vehicle retail instalment sales act...." A person or entity that engages in the business of purchasing or otherwise acquiring retail instalment contracts or obligations must obtain a sales finance license under Article 11-B, unless specifically exempted under that article. Section 301.4 of the New York Personal Property Law indicates that such contracts and obligations may only be utilized for a purpose "other than a business or commercial use". Consequently, if your client is or would be only a New York licensed sales finance company, it would still be required to be a licensed premium finance company under Article 12-B if it sought to finance commercial motor vehicle insurance policies as such financing would not be included in a retail instalment contract that would be used in connection with the sale of the vehicle to consumers.

Your opinion that the holder of a licensed lender license need not obtain a license under Article 12-B before engaging in the insurance premium finance business is correct.  Sections 555(1) and 577(b) of that article indicate that a licensee under Article 9 of the Banking Law is exempt from licensing under 12-B. I also note that any person or entity may engage in the insurance premium finance business if the rate of interest on the financing does not exceed 16% per annum (see Section 577(a)). Finally, I direct your attention to the fact that an Article 9 licensed lender may also engage in the sales finance business without first obtaining a license under Article 11-B (see Section 492(1)).

I trust that this letter is responsive to your inquiry.

Sincerely,

Steven Barras
First Assistant Counsel

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