General Obligations Law 5-328
Re: Returned Check Charges in commercial Premium Finance Contracts.
Your letter, dated December 13, 2007, to the New York State Banking Department (the "Department"), has been referred to me for response. In your letter you asked: (i) whether a premium finance company is permitted to charge commercial premium finance customers a non-sufficient funds fee; and (ii) if the fees are permitted, what limits might be placed on such a fee.
As a preliminary matter, it should be noted that although Article XII-B of the Banking Law, and the regulations promulgated thereunder, are applicable to transactions including both commercial and non-commercial customers, it does not regulate fees charged in connection with checks presented against non-sufficient funds.
Not withstanding the fact that Article XII-B does not address the issue, it is the Department's position that fees relating to dishonored checks are regulated by Section 5-328 of the General Obligations Law. This conclusion is based on the fact that considering that section 5-328(3) of the General Obligations Law is prefaced by the phrase "notwithstanding any other provision of law," the limitations therein would apply to all types of commercial loans; and, therefore, even if Article XII-B had a conflicting provision, under the rules of statutory construction Section 5-328 would apply.
According to Section 5-328(3):
Not withstanding any other provision of law, any person to whom a check, draft or like instrument, other than a money order, bank cashier's check or certified check, is tendered for any transaction, other than a consumer transaction, may, if such instrument is dishonored charge or collect from the maker or drawer the amount of twenty dollars for the return of such unpaid or dishonored instrument.
In accordance with the statute therefore, a premium finance agency may charge a commercial customer up to twenty dollars, in the event such customer's check, draft or like instrument is returned to the agency as unpaid or dishonored.
I trust the foregoing is responsive to your inquiry.
Very truly yours,
Harry C. Goberdhan