Last week, the American Securitization Forum filed a comment letter with the staff of the State of New York Banking Department regarding New York sales finance licenses, requesting that the department clarify the status under New York Banking Law Article 11-B of parties that acquire retail installment contracts in the secondary market.
The Association's request occurs after the New York department reversed its longstanding position in its letter last Nov. 23 and advised that a corporation with no physical presence in the State of New York needs to be licensed under the article in order to purchase retail installment contracts entered into the State of New York. The ASF is planning on requesting a follow-up meeting with New York department officials to air its concerns regarding this matter.
In its letter, the ASF argued that Article 11-B does not apply to secondary holders based on the fact that these holders are not really engaged in the business of being sales finance companies within the meaning of Article 11-B. Thus the trade association is requesting that the Department publish an immediate clarification to the effect that Article 11-B does not apply to secondary holders.
The problem is that if this provision applies as it has been amended, then it would have negative ramifications on the auto ABS sector.
Tom Deutsch, associate director at the ASF, explained that if the Banking Department were to apply Article 11-B to secondary holders - securitization trusts, ABCP conduits or whole loan purchasers - those holders would likely have to obtain sales finance licenses from the State of New York for all of their NY auto assets.
The fees paid for the licenses and compliance costs of creating the fair lending plan needed to get those licenses would significantly increase the costs in secondary market auto loan transactions.
Ultimately, these costs might be passed on to New York consumers. However, there would be little, if any, benefit to New York consumers in terms of additional fair lending protections by requiring secondary holders to obtain these licenses, Deutsch stated
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