Immigrant protection bill to move at the Capitol this week

And New York is putting 'Buy Now, Pay Later' lenders on notice in newly drafted regulations for the industry.

Good afternoon — It’s Monday and Banana Bread Day.

In today’s CapCon:

• The Dignity Not Detention Act, which would prohibit county jails from being used for immigrant detention, is expected to move in the Assembly this week for the first time since it was introduced in 2021.

• New York has issued draft regulations for Buy Now, Pay Later loans, making it one of the first states to strictly regulate that lending. Here’s what’s in them.

• Budget Brief: The state Division of Budget published two new reports on revenue and tax expenditures Friday night.

• Here’s what’s happening at the Capitol on Tuesday, Feb. 24, including one of the final five state budget hearings.

• A bill has been revived that would give the state Public Service Commission clear power to regulate broadband providers similarly to utility companies.

• This Week in New York History: The first female union and National Woman’s Day.

Names in today’s CapCon: Kathy Hochul, Andrew M. Cuomo, Eliot Spitzer, SUNY, CUNY, Karines Reyes, Julia Salazar, Erik Dilan, Chris Burdick

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(R.J. Johnston/Toronto Star via Getty Images)

💵 New York cracks down on Buy Now, Pay Later lenders

If you’re an avid online shopper, you may have noticed that some websites offer consumers the option to pay for a purchase in installments.

Those often come from companies like Affirm or Klarna that allow consumers to split the cost of a product into a number of payments, usually four. It’s technically a loan — the servicer pays for the product and you pay the servicer.

Those are called Buy Now, Pay Later loans. It’s common for them to offer 0% interest, which can appeal to someone who can’t pay the full cost upfront.

And while consumers can benefit from those loans, their servicers are also known to employ practices considered to be predatory. The top complaint is their claim of 0% interest.

That can easily be dwarfed by a number of fees those loan services often charge borrowers. Those include things like monthly fees for longer-term loans, convenience fees for using a card to make a payment and exorbitant late fees.

And while New York has a 16% interest cap on most loans, the fees charged to consumers of Buy Now, Pay Later loans can easily total an amount that would exceed that ceiling. That can put consumers into a cycle of debt despite signing up for 0% interest.

That’s why the state Legislature and Gov. Kathy Hochul included legislation in last year’s state budget to allow the state Department of Financial Services to issue comprehensive regulations over Buy Now, Pay Later loans. It was the first law of its kind in the country.

The State Assembly (Jim Franco/Times Union)

The agency issued its first pass at those regulations Monday, with a pre-proposal comment period now open until March 5. They’ll then be re-published and opened for another public comment period.

The framework that would be developed by the draft regulations is significant. It essentially seeks to set tight restrictions on Buy Now, Pay Later loans to align them more closely with other borrowing in New York.

Lenders would be required to seek a specific Buy Now, Pay Later license from the state Department of Financial Services to operate in New York. There would be two kinds of licenses: one for lenders of interest-free loans and one for interest-bearing loans.

But the protections for consumers are the meat of the proposed regulations. Lenders of interest-bearing loans would have to abide by the state’s typical 16% interest rate cap, for example.

The proposed regulations would also severely limit the amount that interest-free lenders could charge borrowers in fees. Late fees would be capped at $8 unless the lender obtains approval from the state to charge a higher amount.

The total amount of penalty fees combined would not be allowed to exceed the original amount of the loan. Lenders also wouldn’t be allowed to charge fees to consumers based on their payment method.

The regulations include other consumer protections, including a prohibition on lenders sharing someone’s personal data without their consent and a ban on refusing to lend to someone if they don’t agree to allow their data to be shared.

You can read the draft regulations here.

News on the state budget, including proposals, negotiations and results.

💰 Reports on tax expenditures and revenue methodology posted by DOB

The state Division of Budget posted two of its annual reports Friday night on how the state is projecting its revenue and spending over the next fiscal year: