New York Governor Andrew Cuomo is seeking to end his state’s role as the nation’s collections department for predatory loans to small businesses.
Cuomo plans to submit legislation to curtail the use of confessions of judgment, he said Tuesday in his annual message to the state legislature. Confessions are legal instruments that allow lenders to seize the assets of borrowers without notice or a court hearing.
The merchant cash-advance industry, which lends money at rates that can exceed 400 percent annualized, has been filing confessions in New York state courts to target delinquent borrowers nationwide. The companies have won more than 25,000 judgments in New York since 2012, most in the past two years, court data show.
The governor would prohibit confessions for small-business loans smaller than $250,000, as well as ones that don’t have a connection to New York. His proposal cites a November story in Bloomberg Businessweek that described abuses in the use of confessions by the industry.
The proposal is one of dozens the governor announced. Backed for the first time by a Democratic majority in both houses of the legislature, he also called for congestion-pricing tolls on motorists entering midtown Manhattan, a state law protecting women’s right to an abortion, legalized adult marijuana use, a “Green New Deal” to fight climate change and an end to cash bail to protect indigent criminal defendants.
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