New York recently passed new legislation to add Section 129-a to New York Banking Law. Applicable only to New York state chartered banks and trust companies, the new law requires a written notice to be provided to borrowers prior to establishing an alternate payment schedule (NY Banking Law §129-a). The law does not apply to other New York state chartered financial institutions or to federally chartered institutions.
The written notice advises borrowers that accepting the alternative payment schedule may have a negative impact on the borrower’s credit score or rating. The sponsor of the legislation states that the purpose of the new law is “to address the practice some banks use by which they arrange an alternative payment schedule with a customer and leave the customer with the impression that this arrangement will prevent the financial institution from hurting the customer’s credit rating.” However, late payments may still be reported even when an alternative payment schedule has been agreed to.
The notification must be provided at the time a loan application is made, at the time a loan is granted, and at the time a borrower requests than an alternative payment be established for a loan (but prior to the actual establishment of an alternative payment schedule).
New York Banking Law §129-a is effective on February 1, 2022. Accordingly, DocMagic has made a new NY Alternative Payment Schedule Notice (DocMagic Form ID: NYAPSN.MSC) available in the Forms List.
If you have any questions regarding this article, please contact DocMagic’s Compliance Department.
