N.Y. Senate Banking Committee advances seven bills, debates fintech oversight, fraud penalty language and crypto study task force

Senator James Sanders Jr., chair of the New York State Senate Banking Committee, presided over a committee meeting that moved seven bills forward on topics including expanded Department of Financial Services (DFS) oversight of unlicensed lenders and fintech firms, support for minority depository institutions, a requirement for licensed check cashers to file suspicious activity reports, changes to civil penalties for financial fraud, and creation of a temporary cryptocurrency and blockchain study task force.

The measures matter because they could expand state supervision of new financial services providers, change the standard for civil penalties in consumer-facing financial matters, and set policy direction on cryptocurrency and blockchain in New York. Several senators pressed staff for clarifications about the scope of regulation and possible impacts on small businesses, attorneys who provide pre-settlement funding, and employers that occasionally make short-term interest-free loans to employees.

On DFS oversight of unlicensed entities (Senate bill 1290). The bill, introduced in the meeting as “an act to amend the financial services law in relation to allowing the Department of Financial Services to have additional oversight of banks and insurance companies that are not currently licensed,” drew questions about which firms would be brought under supervision. Bobby Barnett, senior policy adviser for banks, told the committee that the bill targets two groups: entities operating outside an existing licensing regime for a product, and firms providing loan-like services — for example, some financial-technology companies that extend credit in ways that do not meet the federal definition of a loan but effectively provide credit directly to consumers. "There are 2, entities or 2 groups that the bill attempts to, bring into regulation," Barnett said, describing those two categories.

Committee members asked whether certain activities would fall under the proposal. Senator Barela, the committee’s ranking member, asked whether attorneys who provide pre-settlement funding and small employers that occasionally give interest-free "until-payday" loans to employees could be captured. Barnett said such actors "could be potentially regulated" if no existing banking-law regulation applies, but he noted that exceptions might apply when the provider is not primarily in the business of making loans and said staff would research the questions further: "We will definitely look at that further."

On civil penalties and the omission of "intentional" (Senate bill 3789). The committee considered a bill described as amending the financial services law "in relation to civil penalties for certain fraud or misrepresentation of a material fact with respect to a financial product or judges." Senator Barela voiced concern that the bill removes the word "intentional" from the statute, warning that doing so "opens up a Pandora's box" by broadening liability and could prompt more civil litigation. "I just I I have an issue with this because it's gonna move the word intentional… I think it is important that the word intentional be in there," Barela said. Chair Sanders said he was open to further discussion with the bill’s sponsor.

On the proposed cryptocurrency and blockchain study task force (Senate bill 4728). Sanders read a bill to create a temporary New York State cryptocurrency and blockchain study task force, noting that the bill includes a sunset provision. He said the governor’s office had expressed skepticism about a study-only approach: "She does not like just to do a study. You know, why study when we can act on the thing?" Sanders asked rhetorically, then added, "Wouldn't it be nice to know what you're doing before you act?" Ranking members raised the task force’s proposed membership: committee members observed the draft allocates four appointees to the temporary president of the Senate and four to the speaker of the Assembly but included no minority-party appointees. Sanders said he would try to address the concern but acknowledged that adding members might require returning to bill drafting.

Other bills moved and committee actions. The committee also moved these measures and recorded committee-level actions (motions and voice votes were taken; the transcript did not include roll-call tallies):

• Senate bill 17 (sponsored by Kavanaugh): "an act to amend the banking law in relation to mortgage loan services." Motion moved and reported out of committee.

• Senate bill 1290 (sponsored by Kruger): DFS oversight of unlicensed entities (described above). Motion moved and reported out of committee.

• Senate bill 3177 (sponsored by Sanders): "an act to amend the banking law and the administrative code of the City of New York in relation to regulating commercial finance licensing." The bill was reported to the Finance Committee.

• Senate bill 3615 (sponsored by Sanders): "an act to amend the banking law in relation to minority depository institutions, which apply to establish a home or branch office in an unbanked or underbanked community." The bill was reported to the Finance Committee.

• Senate bill 3698 (sponsored by Sanders): "an act to amend the banking law in relation to requiring licensed cashers of checks to file suspicious activity reports." Motion moved and reported out of committee.

• Senate bill 3789 (sponsored by Myrie): changes to civil penalties for certain fraud or misrepresentation (debated; objection raised about removing "intentional"). Motion moved and reported out; the committee recorded a "without recommendation" result in the transcript.

• Senate bill 4728 (sponsored by Sanders): establishing the New York State cryptocurrency and blockchain study task force with a repeal upon expiration. Motion moved; the transcript records the bill as reported out "without recommendation, pending amendment."

Votes at a glance: committee recorded voice votes for each motion; the transcript records committee-level "ayes," "nays," and several instances of "without recommendation" but does not provide roll-call counts or individual member votes. Where the transcript records a bill being "reported to finance," that referral is noted above.

What happens next. Measures referred to the Finance Committee or reported out of the Banking Committee will continue through the legislative process. Several senators asked staff for follow-up research on scope questions (for example whether employer-provided short-term loans or attorney pre-settlement funding would be captured by the oversight expansion). Chair Sanders closed the meeting after moving the final bill and thanked members and observers.

Sources: Committee transcript excerpts included in the meeting record; statements and clarifying answers during the hearing were provided by Bobby Barnett, senior policy adviser for banks, and members of the Senate Banking Committee, including Chair James Sanders Jr. and Ranking Member Barela.