July 8, 1999
Re: Request for an opinion letter in connection with proposed lending activities to be conducted in New York State
Dear Ms. [ ]:
Your June 19, 1999 letter to Peter Philbin, Deputy Superintendent, Licensed Financial Services Division, New York State Banking Department ("NYSBD"), in which you request an opinion letter from the NYSBD regarding the applicable licensing requirements for certain lending activities in which the [ ] ("HPCC") proposes to engage has been referred to me for response.
According to the business plan set forth in your letter, the [ ] Company ("HP") established HPCC for the purpose of facilitating the financing of HP products and services sold over the internet and at retail outlets since HP currently does not finance such sales. Currently, credit card payment is the only method of financing available to purchasers of HP products and services. The purchasers credit application information and the decision by HPCC on the application will be transmitted electronically. If HPCC approves the credit application, then the application material is printed and the executed documents are forwarded to HPCC.
Although set forth in your letter, it is assumed for the purpose of this response that HPCC will be an out-of-state sales finance company with no physical presence in New York and will not make any application processing or underwriting determinations within New York State.
Based on the description of the activities contained in your letter, HPCC is a "financing agency as described in Section 401(18) of the New York Personal Property Law ("PPL"). As a result, HPCC may enter into retail installment credit agreements pursuant to the terms of PPL §413(1). Although Banking Law §492(1) states that a sales finance company license is required to, "[e]ngage in the business of a sales finance company in this state " (emphasis added), it is the position of the NYSBD that a sales finance company with no physical presence in New York that acquires or creates New York retail installment credit arrangements is not required to obtain a sales finance company license since such activity does not constitute engaging in the business of a sales finance company in this state.
However, you should be aware that certain case law may have potential contrary implications. In Schleimer v. McPherson, 60 A.D.2d 837, 400 N.Y.S.2d 566 (1978), the court held that a New Jersey resident, engaged in the business of purchasing retail installment sales contracts from New York dealers could not enforce said motor vehicle retail installment contracts in New York because she had not obtained a New York sales finance company license. The NYSBD is of the view that the factual recitation set forth in Schleimer is ambiguous and, as a result, that case offers no guidance in interpreting the licensing requirements of the statute.
I trust this is responsive to your inquiry.
Very truly yours,