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New York state regulators will continue investigating online platform lenders to see if they have violated state lending laws or if their activities require licensing, regardless of how the Legislature handles a proposal to broaden regulation of the industry by statute, an official with the state Department of Financial Services (DFS) said March 27.
The official, Executive Deputy Superintendent Joy Feigenbaum, said at a Practising Law Institute forum in New York that online platform lending “will continue to be a focus of the department,” notwithstanding legislative action on the regulatory proposal.
DFS spokesman Richard Loconte said the department sent requests for information to several lenders last year and is reviewing the replies.
The DFS regulatory proposal was included in a budget plan submitted by Gov. Andrew Cuomo early this year. It has hit rough sledding in the Legislature, which dropped the proposal from its version of the spending plan put forward this month in Assembly Bill 3008 and Senate Bill 2008.
The proposal would extend state licensing requirements to all lenders making loans of $25,000 or less for personal uses and of $50,000 or less for business uses. The requirements now apply to those loans only if the interest rate exceeds the state’s 16 percent usury cap.
The proposal also specifies that the licensing requirement applies to any company that solicits loans and buys loans. That apparently would cover online lenders that partner with banks in some standard industry set-ups, such as one in which the online platform originates the loan and a bank partner issues the loan and then sells it within days to the online lender, which then both securitizes and services the loan.
The legislative revision does not necessarily represent the final version of the budget, due before the April 1 start of the fiscal year. And some elements of the budget may be tweaked later in the legislative session, scheduled to end June 21, Loconte said.
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