- 1S10127 would cover invoice financing, RBF, MCAs and retail installment contracts.
- 2Products costing over 25% per annum all-in would be criminal.
- 3Penalties would be a Class E or Class C felony, up to 4 or 15 years.
A New York Senate bill would rewrite the state's criminal usury laws to cover merchant cash advances, invoice financing and other alternative finance products.
What the bill does
S10127, introduced by Senator Rachel May (D), would bring invoice financing, revenue-based financing, merchant cash advances and retail installment contracts under usury law. It would also reach "any transaction that in substance functions as the advance of funds in exchange for a future payment," whatever name the deal carries.
The bill states its purpose as ensuring that businesses cannot evade New York's longstanding usury laws by relabeling high-cost financing as services or other non-loan transactions, and applying existing civil and criminal interest rate protections to covered arrangements.
Penalties
A covered product would be treated as criminal if its total cost works out to more than 25% a year, or the same rate prorated over a longer or shorter term. Depending on the facts, the offense would be either a Class E felony, carrying up to four years in prison, or a Class C felony, carrying up to 15 years.
Status
The bill has only been introduced and has not yet moved through the legislature. The full text is available from the New York Senate.
Source reporting: deBanked.
