Banking Interpretations

January 5, 2000

Dear [ ]:

Your letter to me dated November 15, 1999 requests an opinion from the Banking Department on the proposed activities of a Wisconsin chartered credit union. Specifically, that credit union is seeking to offer secured and unsecured loans to members residing in New York. The credit union would not have a physical presence in this state and all transactions will be effectuated through the mail, phone, fax or Internet. You ask whether the credit union must notify this Department or receive any licenses or approvals from it prior to the conduct of those activities here.

As I indicated to you in our phone conversation on the matter, none of the provisions of Articles IX and XI of the Banking Law would be applicable to your client’s proposed activities. In regard to loans secured by a first lien on a one-four family owner occupied home located in New York, the credit union would be deemed to be an "exempt organization" under Part 39 of the Banking Board’s General Regulations and, as such, would not be required to obtain a mortgage banking license under Article XII-D of the Banking Law. However, exempt organizations are mandated to comply with the provisions of Part 38 of those Regulations to the same extent as a licensee. Credit line mortgages are not within the purview of Part 38. Although your client would not require any approvals or licenses to engage in the specified activities, it should notify the Mortgage Banking Division of the Banking Department of its intention to function as an exempt organization in New York.

You also ask about the rate of interest that may be charged to members residing in New York. In regard to first lien mortgages, the provisions of the Monetary Control Act of 1980 are applicable to insured depository institutions and consequently the rates thereon are deregulated. As for junior lien mortgage loans, the fact that the property is located in New York leads me to believe that New York usury laws would be applicable but this should not be an issue because, for banking institutions, the maximum interest rate on such loans is 25% per annum. For the unsecured loans, it would appear that the rates permitted by Wisconsin would be applicable as the New York "contacts" with the transaction would be fewer than Wisconsin’s unless, of course, the loan documentation provided for New York law to govern.

I trust that this letter is of assistance to you.

Very truly yours