The Bureau of Consumer Frauds and Protection is part of the New York Attorney General's Economic Justice Division. The bureau is responsible for prosecuting businesses that engage in predatory or illegal lending practices. The state's consumer protection laws regulating lending practices are in the Personal Property Law in the Laws of New York. According to the Personal Property Law, state law regulates specific types of lenders.
Rent-to-Own Companies
Rent-to-own merchants typically charge high interest rates allowing consumers to submit periodic payments for merchandise, which they can then purchase after making a certain number of payments. Targeting low-income consumers, rent-to-own companies charge much more for their merchandise than consumers would pay if they simply purchased or financed it directly through retailers. New York law limits pricing, the term of the loan and requires merchants to use written agreements.
The state law limits lenders to a four-month loan-term, unless borrowers request additional months to rent their merchandise after the initial four-month term ends. Furthermore, merchants cannot charge more than two and one-half times an item's purchase or cash price over the entire course of the loan. Borrowers also have a legal right to exercise early ownership or purchasing options before their agreements expire.
Student Loan Lenders
According to an extensive investigation conducted by the Attorney General's Office, student loan lenders were guilty of illegal lending practices, often providing kick-backs to schools' financial aid offices in exchange for providing preferential treatment to certain lenders. The Attorney General's Office introduced the Student Lending Accountability, Transparency and Enforcement Act, or SLATE, and a Code of Conduct governing student loan lenders.
New York Law as a Catalyst for Federal Change
With the enactment of New York's law, Congress passed the Higher Education Act of 2008. The Code of Conduct prohibits schools from giving certain lenders preferential treatment and also prohibits deceptive lending practices, such as inflating interest rates or failing to disclose the essential terms of their loans. Failure to comply with the code or SLATE can lead to civil or criminal penalties, and may also lead to federal charges based on the Higher Education Act of 2008.
Credit Card Companies
New York law requires credit card companies to send all of their bills in at least eight-point font and must send written notices before changing the terms of their loan agreements. The state law requires lenders to provide at least 30 days of written notice, clearly and conspicuously detailing the changes.
A lender's written notice prior to increasing its interest rate or finance fees must include further disclosures. A credit card company must provide a written notification to borrowers that they can reject the terms of their new rates within 30 days; you automatically accept the change in terms if you subsequently use your card to purchase additional merchandise at the new rate. Failure to comply with the New York law can lead to damage penalties awarded to consumers equal to their increased finance charges and interest.
Considerations
Since state laws can frequently change, do not use this information as a substitute for legal advice. Seek advice through an attorney licensed to practice law in your state.
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