New York State Banking Department - Scope

Scope

The following is a brief description of each of type of entity regulated by the Department:

Banks & trust companies The Banking Department charters and regulates banks and trust companies under Article III of the Banking Law. Historically, the Banking Department regulated both large domestic banks and smaller community and regional banks. However, the number of large domestic banks with state charters has been greatly reduced as a result of (i) mergers and (ii) “flipping” to federal charters by banks with operations in numerous other states who wanted to take advantage of a single set of nationwide federal rules, rather than complying with the consumer protection laws of all 50 states.

A trust company (which may be a stand-alone entity or be part of a bank that also conducts a general banking business) is an entity that is authorized by the Superintendent to exercise fiduciary (trust) powers.

Budget planners A budget planner is a non-profit corporation that enters into a contract with a debtor under which the debtor agrees to pay a sum of money periodically to the budget planner, which the budget planner distributes among the debtor’s creditors. A budget planner also provides credit counseling and financial education. Section 456 of the General Business Law prohibits budget planning by anyone other than a non-profit corporation. Budget planners are licensed by the Banking Department under Article XII-C of the Banking Law.

Check cashers A check casher is a person whose primary business is the cashing of checks, drafts or money orders for a fee. (A license is not required when a person cashes checks, drafts or money orders without charge, or when the person cashes checks, drafts or money orders as an incident to the conduct of another lawful business (e.g. a store) and not more than $1.00 is charged.) Check cashers are licensed by the Superintendent of Banks under Article IX-A of the Banking Law.

Credit unions There are two forms of credit unions under Article 11 of the Banking Law. A credit union is a non-stock corporation (i.e. a membership corporation) whose members must either have a common employer or be members of the same trade, industry, profession, club, union, society or other association. Credit unions accept deposits from, make loans to and issue credit cards to their members, among other things. A corporate credit union is a credit union whose members are primarily other credit unions. New York state-chartered credit unions are also regulated by the National Credit Union Administration, which also insures credit union share accounts up to certain limits.

Foreign banks (branches, agencies and representative offices) A New York branch is an office of a foreign bank that is licensed by the Superintendent to conduct a banking business in New York. A branch may exercise the same powers as a state-chartered commercial bank, including accepting deposits, making loans, issuing letters of credit, dealing in foreign exchange, making acceptances and, if authorized, exercising fiduciary powers. There are two types of foreign branches – insured and uninsured. An insured branch may conduct a retail banking business in New York, making consumer loans and accepting consumer deposits. An uninsured branch may accept deposits only as authorized by the FDIC Rules, with disclosure of their non-insured status. Since FDICIA was passed in 1991, no new insured branches have been allowed.

A New York agency has many of the same powers as a branch, except in the case of deposits. An agency may issue large-denomination ($100,000 or over) CDs, may accept deposits from foreign residents and citizens and may maintain credit balances for customers incidental to its banking business.

A foreign bank wishing merely to solicit business in the U.S. may establish a representative office to conduct research on the U.S. market and engage in marketing for the foreign bank. A representative office is not permitted to perform any core banking functions for the foreign bank or make any business decisions that would obligate the foreign bank, but it is permitted to engage in a number of activities not deemed to constitute the business of banking, including acting as liaison with customers and correspondents of the foreign bank, soliciting new business for the foreign bank, soliciting investors to buy loans from the foreign bank, and soliciting loans of $250,000 or more for the foreign bank.

Branches and agencies are covered in Article V of the Banking Law. Representative offices are covered in Article V-B of the Banking Law. Since 1991, they have also been subject to supervision by the Federal Reserve Board.

Holding companies For purposes of the Banking Law, a bank holding company is an entity (or natural person) that owns 10% or more of the voting stock, or otherwise controls, two or more New York banks or trust companies or national banks whose principal offices are located in New York State. Regulation of bank holding companies under Article III-A of the Banking Law is designed to prevent undue concentration of bank ownership. Consequently, unlike the Federal Reserve Board, which regulates all holding companies, even if they control only one bank, the Banking Department does not regulate one-bank holding companies.

Investment companies (Article XII) An Article XII Investment company is a specialized non-depository lending institution that has broad borrowing and lending powers and may invest in stocks. An Article XII investment company may not accept “deposits” inside the U.S., although it may accept credit balances in New York that are incidental to the exercise of its other powers. Several foreign banks maintain Article XII investment companies. In addition, several large U.S. financial companies, including American Express, AIG, General Electric and Western Union, also have chartered Article XII investment companies.

Licensed lenders A licensed lender is an entity engaged in the business of making loans in the principal amount of (i) $25,000 or less to any individual for personal, family, household, or investment purposes, or (ii) $50,000 or less for business and commercial loans, and which charges a rate of interest greater than 16% per annum.

Money transmitters The business of money transmission includes the issuance and sale of traveler’s checks, issuance and sale of money orders, and the transmission of money on behalf of the public by any means including transmissions within this country or abroad by wire, check, draft, facsimile or courier. Generally, a money transmitter markets its services through a network of agents. Money transmitters are covered in Article XIII-B of the Banking Law.

Mortgage bankers A mortgage banker is a person who engages in the business of making five or more mortgage loans in any one calendar year (other than certain exempted entities, including a banking organization and an insurance company). Mortgage bankers are subject to licensing by the Superintendent of Banks under Article XII-D of the Banking Law.

Mortgage brokers A mortgage broker is a person who solicits, processes, places or negotiates a mortgage loan, but does not include a real estate broker or salesman, as defined in section 440 of the Real Property Law, if he does not directly or indirectly accept a fee for services rendered in connection with such solicitation, processing, placement or negotiation. Mortgage brokers are subject to registration by the Superintendent of banks under Article XII-D of the Banking Law.

Mortgage loan originators Under legislation passed in 2006 regulates mortgage loan originators (MLOs), who are individuals employed by or who have an independent contractor relationship with licensed mortgage bankers or registered mortgage brokers and who assist customers by soliciting, negotiating, explaining or finalizing the terms of a mortgage loan. MLOs are subject to a criminal background check and must complete certain educational requirements. MLOs are assessed fees that cover the cost of administering the registration program. MLOs are covered by Article XII-E of the banking Law.

Premium finance companies A premium finance company enters into premium finance agreements with an insured person or acquires premium finance agreements from insurance agents or brokers or other premium finance agencies. A premium finance agreement is an arrangement under which a premium finance agency or an insurance broker or agent advances funds to an insurance company to pay an insurance premium on behalf of the insured and receives repayment by the insured over a period of time. Under Article XII-B of the Banking Law, the Banking Department licenses insurance finance agencies and regulates the terms of the finance agreement.

Private bankers A private bank is a bank owned by an individual or a partnership. A private bank may engage generally in the full range of commercial banking activities, as well as in investment banking activities.

Safe deposit companies A safe deposit company acts as a custodian for storage of personal property and papers of any kind. It may also engage in the safe deposit business by renting vaults and safe deposit boxes. It cannot lend money or make advances on any property left in its possession. Safe Deposit Companies and the safe deposit business are covered in Articles VIII and VIII-A of the Banking Law.

Sales finance companies A sales finance company acquires retail installment contracts or other credit agreements made by other parties. The term also includes a retail car dealer who holds retail installment contracts acquired from retail buyers, which have aggregate unpaid time balances of $25,000 or more. The term also includes a person who enters into retail installment credit agreements with retail buyers under Section 413(11) of the Personal Property Law. The Banking Department licenses persons to engage as sales finance companies (other than banks, savings bank, savings and loan associations, trust companies, private bankers or investment companies or licensed lenders) under Article XI-B of the Banking Law.

Savings banks and savings & loan associations A savings bank or a savings and loan association is a type of financial institution whose main purpose is to take deposits from consumers and to make home mortgage loans or to invest in home mortgages. Some institutions also invest in commercial mortgages. Historically, savings banks were organized as mutual companies and savings and loan associations (S&Ls) were organized as stock companies. Savings banks and S&Ls are regulated, respectively, under Article 6 and Article 10 of the Banking Law. Deposits of each type of institution are insured by the Federal Deposit Insurance Corporation.