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Dreher Tomkies LLP
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Columbus, Ohio 43215
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NEW YORK BANKING DEPARTMENT DECLARES MORATORIUM ON LICENSING OF SECONDARY HOLDERS OF CONTRACTS

The State of New York Banking Department has issued an industry letter declaring a moratorium on the application of New York's sales finance company licensing requirement to secondary holders. Industry Letter from Richard H. Neiman, Superintendent of Banks (June 27, 2007). The Department indicated that such secondary holders are those natural persons or other legal entities that: (i) acquire retail installment contracts, obligations or credit agreements (collectively "contracts"), or interests therein, from
persons who are not retail sellers with respect to such contracts; (ii) are not themselves retail sellers with respect to such contracts;
and (iii) do not service such contracts, or in the ordinary course have any contact with the obligors under such contracts; provided,
however, that any contact between a secondary holder and an obligor shall be initiated solely by the obligor. The Department indicated that the moratorium is necessary so that the Department may review the effects of its November 23, 2006 Staff Interpretation on secondary holders. In its November 23, 2006 Staff Interpretation, the Department abandoned its prior opinions, and indicated that out-of-state sales finance companies must obtain a license in order to purchase contracts entered into in New York. Letter from Harry C. Goberdhan, Assistant Counsel of the State of New York Banking Department (Nov. 23, 2006).

During the moratorium, such secondary holders, whether located within or outside New York, are not required to obtain a license. If the Department eventually determines that secondary holders must obtain a license, the Department will provide advance notice and a reasonable period of time for secondary holder to obtain licenses.

  • Michael Tomkies and Charles Gall