Assembly Member Seawright's Legislation Limiting Lender Annual Fees Signed in Law by Governor Cuomo

Governor Andrew Cuomo today signed into law Assemblymember Rebecca Seawright's legislation to limit the annual fees lenders can charge for credit cards, home-equity loans, and other forms of revolving credit.

In 1996, the Legislature authorized licensed lenders to charge annual fees on open-end loans. The law further provided that any such fee may not exceed the lesser of 1% of the loan amount or $50. This 1996 law contained a sunset date of June 30, 2000, when the Legislature began passing a series of two-year extensions.

The 1996 law recognized that annual fees are a commonly used feature in the pricing of open-end loan products, such as credit cards, home equity loans, and personal loans. 

This type of fee reflects the fact that additional costs are incurred in the administration of revolving loans, such as preparing and mailing monthly billing statements, processing transactions, and increasing monitoring costs.

Many borrowers favor open-end credit agreements, which can offer more control over the time and amount borrowed. Interest typically changes only for the amount the borrower needs, leading to interest savings for the borrower compared to using an installment loan. The law extends the limits for two years to June 30, 2023.