New NY DFS Regulations on Small Non-Bank Loans

On December 23, 2020, then Governor Andrew Cuomo signed N.Y. CLS Fin. Serv. §§ 801-812 (the “Law”) mandating truth-in-lending style disclosure for small non-bank loans of $2.5 million or less, but only going into effect when final regulations under the Law are published. The N.Y. Department of Financial Services (the “DFS”) adopted final regulations on February 1, 2023, to take effect on August 1, 2023. The DFS’s complex regulations contains some carve-outs, for example for financial institutions that are regulated elsewhere. They will apply, however, to certain loans given to N.Y. recipients who are legal residents of the state or to business principally directed or managed from the state. The rules are simlar to, but not entirely the same as, those of California, and attempt to protect small commercial borrowers.