N.Y. Comp. Codes R. & Regs. tit. 23 § 600.12

Current through Register Vol. 46, No. 36, September 4, 2024

Section 600.12 - Factoring transaction disclosure formatting

Disclosures for factoring transactions provided in accordance with Financial Services Law section 806 shall comply with the requirements of this section.

(a) The provider shall present the required disclosures in a table consisting of eight rows and three columns.

(b) The first row of the table shall include only the following information:

(1) in the first column, the following language: "Funding Provided";

(2) in the second column, the amount financed; and

(3) in the third column, and in the order listed and in one paragraph: "This is how much will pay when you assign to.";

(i) if the amount financed is greater than the recipient funds: "Due to deductions or payments to others, the total funds that will be provided to you directly is. For more information on what amounts will be deducted, please review the attached document Itemization of Amount Financed."

(ii) if any portion of the amount financed will be used to pay down or pay off other amounts owed by the recipient that may change over time, and the amounts owed are known to the provider, the provider shall also include a short explanation that the amount paid directly to the recipient may change if the amount owed for the recipient's other obligations changes;

(iii) if, as a condition of financing, a recipient's amounts owed to third parties must be paid down or paid off using funds from the amount financed, and the amount owed is not known to the provider, the provider shall also include a short explanation that the amount paid directly to the recipient may change based upon the required disbursements to satisfy other obligations; and

(iv) if any portion of the amount financed will be used to satisfy obligations under another financing with the provider, in the third column, in a second paragraph: "Does the renewal financing include any amount that is used to pay unpaid finance charges or fees, also known as double dipping? {Yes, enter amount}. If the amount is zero, the answer would be No." If the financing being satisfied featured a fixed finance fee that did not vary based on the repayment period, the provider shall consider the amount that is used to pay unpaid finance charges or fees to be the pro rata portion of such finance fee based upon the fraction of the original total amount financed of the previous financing already repaid by the recipient.

(c) The second row of the table shall include only the following information:

(1) in the first column, the following language: "Estimated Annual Percentage Rate (APR)";

(2) in the second column, the estimated annual percentage rate calculated in accordance with sections 600.3 and 600.13 of this Part; and

(3) in the third column, the following language:

(i) "APR is the estimated cost of your financing expressed as a yearly rate. APR includes the amount and timing of the funding you receive, finance charges you pay, and payments made to.";

(ii) a short explanation of the assumptions relating to payment timing that the provider used to calculate the estimate. For example: "This estimate assumes the account debtor will pay the invoice on the invoice due date."; and

(iii) if no part of the finance charge is based upon an interest rate, the following language in addition to the language required by subdivision (c)(3)(i) of this section: "APR is not an interest rate and the amount of the factoring fee we charge is not based upon an interest rate."

(d) The third row of the table shall include the following information:

(1) in the first column, the following language: "Finance Charge";

(2) in the second column, the total finance charge calculated in accordance with section 600.2 of this Part; and

(3) in the third column, the provider's calculation of the finance charge, with the amount and description of each expense that is included in the finance charge.

(e) The fourth row of the table shall include only the following information:

(1) in the first column, the following language: "Payment";

(2) in the second column, the following language: "NA" "N/A" or "Not applicable"; and

(3) in the third column, a short explanation describing why the recipient is not ordinarily required to make payments under the contract. For example: "You are selling an invoice to us, so you will not be required to make any payments to us unless your customer fails to pay the invoice and we find that you breached your warranty to us by failing to deliver the invoiced goods to your customer."

(f) The fifth row of the table shall include only the following information:

(1) in the first column, the following language: "Estimated Term";

(2) in the second column, the term of the transaction; and

(3) in the third column, a short explanation describing how the provider calculated the term. For example: "The invoice is due for payment 30 days from today, so we have estimated a term of 1 month. The invoice may be paid sooner or later than the due date."

(g) The sixth row of the table shall include only the following information:

(1) in the first column, the following language: "Repurchase Costs"; and

(2) the second and third columns shall be combined, and:

(i) if the recipient is permitted to repurchase the legally enforceable claim for payment before the legally enforceable claim is due and payable, the resulting combined cell shall be divided vertically into two cells by a horizontal line, and:

(a) if at any time during the term of the transaction, repurchase of the legally enforceable claim will result in the recipient paying finance charges other than interest since the advance was made, the top cell shall include the following statement: "If you repurchase the before the due date you still must pay all or a portion of the finance charge, which could be as high as $.";

(b) in all other cases, the top cell shall include the following statement: "If you repurchase the before the due date you will not pay any portion of the finance charge other than unpaid interest accrued since disbursement.";

(c) if, at any time during the term of the transaction, repurchase of the legally enforceable claim will require the recipient to pay additional fees and charges not included in the finance charge relating to the prepayment, the bottom cell shall include the following statement: "If you repurchase the before the due date, you must pay additional fees and charges that are not part of the finance charge, including."; and

(d) in all other cases, the bottom cell shall state: "If you repurchase the before the due date, you will not be required to pay any additional fees and charges."; and

(ii) if the recipient is not permitted to repurchase the legally enforceable claim for payment before the legally enforceable claim is due and payable, the resulting cell shall include the following statements:

(a) "You are not permitted to pay the amount due on the before your customer's due date.";

(b) if applicable: "The finance charge will not decrease if your customer pays the before the due date."; and

(c) when calculating the required disclosures for factoring transactions, in order to provide a disclosure based upon a single transaction, the provider shall assume that it will receive full payment of the legally enforceable claim upon the date that legally enforceable claim becomes due and payable.

(h) The seventh row of the table shall include only the following information:

(1) in the first column, the following language: "Collateral Requirements"; and

(2) the second and third columns shall be combined and shall include only a description of the receivables purchased and any additional collateral requirements or security interests.

(i) The eighth row of the table shall include only the following information:

(1) in the first column, the following language: "Avoidable Fees and Charges"; and

(2) the second and third columns shall be combined and shall include only a description of all potential fees and charges that can be avoided by the recipient, if any, including, but not limited to, late payment fees and returned payment fees.

N.Y. Comp. Codes R. & Regs. Tit. 23 § 600.12

Adopted New York State Register February 1, 2023/Volume XLV, Issue 05, eff. 2/1/2023