Banking Interpretations

NYSBL 14-a, 340

November 30, 2004

Re: Payday Loans

This is in response to your letter dated September 1 7, 2004 indicating your company's desire to obtain a license to offer payday loans in New York State.

Section 340 of Article IX of the New York Banking Law states that no person or other entity shall make loans to an individual for personal, family, household or investment purposes in a principal amount of $25,000 or less, and in a principal amount of $50,000 or less for business and commercial loans, if that person or entity charges an interest rate greater than permitted by law (currently 16% under Section 14-a of the Banking Law and Section 5-501 of the General Obligations Law) for a person or entity not licensed under Article IX, without first obtaining a licensed lender license from the Superintendent of Banks. However, even if your company were to obtain a license to make loans in New York State, any interest charged on such loans in excess of 25% per annum would be criminally usurious under New York law. Payday loans cannot be made in this state except by a bank located in another state in which said loans are legal (exportation of interest rates by banking institutions is permitted in those cases).

In addition, we note that the letterhead for this company states that it is "wholly-owned by [                                                              ] However, the Department does not have any record of this company being approved to do business in NY State, nor do we have any record of approving the use of the word "Trust" in the name. Please advise the undersigned as to the status of this entity. Does it have a physical presence in New York and, if it does, what type of business is it conducting in New York?


Regina A. Stone
Deputy Superintendent