N.Y.
Financial Services Law Section 801
Definitions
(a)
“Factoring transaction” means an accounts receivable purchase transaction that includes an agreement to purchase, transfer, or sell a legally enforceable claim for payment held by a recipient for goods the recipient has supplied or services the recipient has rendered that have been ordered but for which payment has not yet been made.(b)
“Commercial financing” means open-end financing, closed-end financing, sales-based financing, factoring transaction, or other form of financing, the proceeds of which the recipient does not intend to use primarily for personal, family or household purposes. For purposes of determining whether a financing is a commercial financing, the provider may rely on any statement of intended purposes by the recipient. The statement may be a separate statement signed by the recipient; may be contained in the financing application, financing agreement, or other document signed or consented to by the recipient; or may be provided orally by the recipient so long as it is documented in the recipient’s application file by the provider. Electronic signatures and consents are valid for purposes of the foregoing sentence. The provider shall not be required to ascertain that the proceeds of a commercial financing are used in accordance with the recipient’s statement of intended purposes.(c)
“Open-end financing” means an agreement for one or more extensions of open-end credit, secured or unsecured, the proceeds of which the recipient does not intend to use primarily for personal, family or household purposes. “Open-end financing” includes credit extended by a provider under a plan in which:(i)
the provider reasonably contemplates repeated transactions;(ii)
the provider may impose a finance charge from time to time on an outstanding unpaid balance; and(iii)
the amount of credit that may be extended to the recipient during the term of the plan (up to any limit set by the provider) is generally made available to the extent that any outstanding balance is repaid.(d)
“Closed-end financing” means a closed-end extension of credit, secured or unsecured, including equipment financing that does not meet the definition of a lease under section 2-A-103 of the uniform commercial code, the proceeds of which the recipient does not intend to use primarily for personal, family or household purposes. “Closed-end financing” includes financing with an established principal amount and duration.(e)
“Finance charge” means the cost of financing as a dollar amount. It includes any charge payable directly or indirectly by the recipient and imposed directly or indirectly by the provider as an incident to or a condition of the extension of financing. It includes all charges that would be included under 12 C.F.R. part 1026.4 as if the transaction were subject to 12 C.F.R. part 1026.4. In addition, the finance charge shall include any charges as determined by the superintendent. For the purposes of an open-end financing, the finance charge shall assume the maximum amount of credit available to the recipient, in each case, is drawn and held for the duration of the term or draw period. For the purposes of a factoring transaction, the finance charge includes the discount taken on the face value of the accounts receivable.(f)
“Financial institution” means any of the following:(i)
a bank, trust company, or industrial loan company doing business under the authority of, or in accordance with, a license, certificate or charter issued by the United States, this state or any other state, district, territory, or commonwealth of the United States that is authorized to transact business in this state;(ii)
a federally chartered savings and loan association, federal savings bank or federal credit union that is authorized to transact business in this state; or(iii)
a savings and loan association, savings bank or credit union organized under the laws of this or any other state that is authorized to transact business in this state.(g)
“Person” means an individual, corporation, partnership, limited liability company, joint venture, association, joint stock company, trust or unincorporated organization including, but not limited to, a sole proprietorship.(h)
“Provider” means a person who extends a specific offer of commercial financing to a recipient. Unless otherwise exempt, “provider” also includes a person who solicits and presents specific offers of commercial financing on behalf of a third party. For the avoidance of doubt, the extension of a specific offer or provision of disclosures for a commercial financing, in and of itself, shall not be construed to mean that a provider is originating, making, funding or providing commercial financing.(i)
“Recipient” means a person who applies for commercial financing and is made a specific offer of commercial financing by a provider. A recipient may also be an authorized representative of such person. A person acting as a broker cannot be a recipient.(j)
“Sales-based financing” means a transaction that is repaid by the recipient to the provider, over time, as a percentage of sales or revenue, in which the payment amount may increase or decrease according to the volume of sales made or revenue received by the recipient. Sales-based financing also includes a true-up mechanism where the financing is repaid as a fixed payment but provides for a reconciliation process that adjusts the payment to an amount that is a percentage of sales or revenue.(k)
“Specific offer” means the specific terms of commercial financing, including price or amount, that is quoted to a recipient, based on information obtained from, or about the recipient, which, if accepted by a recipient, shall be binding on the provider, as applicable, subject to any specific requirements stated in such terms.
Source:
Section 801 — Definitions, https://www.nysenate.gov/legislation/laws/FIS/801 (updated Jan. 7, 2022; accessed Oct. 26, 2024).
