THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY ROSS, BEAR, BARBIN, BOYD, BRENNAN, BRIGGS, BUXTON, CALTAGIRONE, CHRISTIANA, CREIGHTON, DALEY, DELOZIER, DeLUCA, ELLIS, FABRIZIO, FARRY, GEORGE, GERGELY, GIBBONS, GINGRICH, GROVE, HARHAI, HARHART, HARKINS, HARRIS, HENNESSEY, HICKERNELL, HORNAMAN, JOSEPHS, KILLION, KOTIK, MARSICO, MILLARD, MILLER, MILNE, MUNDY, MURT, O'NEILL, PASHINSKI, QUINN, RAPP, SAINATO, SAYLOR, SCHRODER, STEPHENS, SWANGER, TAYLOR, TOEPEL, VEREB, VULAKOVICH, WHITE, YOUNGBLOOD, DENLINGER, CARROLL, DONATUCCI, DERMODY, J. EVANS AND MARKOSEK, MARCH 14, 2012

REFERRED TO COMMITTEE ON CONSUMER AFFAIRS, MARCH 14, 2012  

AN ACT

Amending Titles 7 (Banks and Banking) and 18 (Crimes and

Offenses) of the Pennsylvania Consolidated Statutes, in Title

7, providing for short-term loan protection; and, in Title

18, further providing for deceptive or fraudulent business

practices and providing for unlicensed short-term lending.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1.  Title 7 of the Pennsylvania Consolidated Statutes

is amended by adding a chapter to read:

CHAPTER 51

SHORT-TERM LOAN PROTECTION

Subchapter

A.  Preliminary Provisions

B.  Nature and Effect of Short-Term Loans

C.  Administrative and Licensure Provisions

D.  Miscellaneous Provisions

SUBCHAPTER A

PRELIMINARY PROVISIONS

Sec.

5101.  Scope of chapter.

5102.  Definitions.

§ 5101.  Scope of chapter.

This chapter relates to consumer short-term loan protection.

§ 5102.  Definitions.

The following words and phrases when used in this chapter

shall have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Applicant."  A person that applies for a license under this

chapter.

"Check."  A check as that term is defined in 13 Pa.C.S. §

3104(f) (relating to negotiable instrument) which is drawn on a

depository institution.

"Consumer."  An individual who is the recipient of a short-

term loan or a renewal loan.

"Deferment period."  The term of a loan or the number of days

a lender agrees to defer depositing or presenting a repayment

mechanism, as the context may require.

"Department."  The Department of Banking of the Commonwealth.

"Depository institution."  A person authorized to accept

deposits in accordance with Federal or State law.

"Gross monthly income."  Wages or commissions received by a

consumer in the 30-day period immediately preceding the date of

the consumer's application for a loan or as otherwise determined

by the Department of Banking.

"Licensee."  A person licensed by the Department of Banking

under this chapter.

"Loan."  A short-term loan or a renewal loan, as the context

may require.

"Loan agreement."  A signed written agreement between a

lender and a consumer that complies with the requirements of

section 5112 (relating to loan agreement requirements)

evidencing a loan.

"Person."  An individual, association, joint venture or

joint-stock company, partnership, limited liability company,

limited partnership, limited partnership association, business

corporation or any other group of individuals, however

organized.

"Renewal loan."  A short-term loan that a consumer obtains

from a short-term lender, the proceeds of which are applied to

the balance due on an existing short-term loan previously

obtained by the consumer from the same short-term lender. The

term shall not include a loan taken after an existing loan is

paid in full.

"Repayment mechanism."  Any method agreed to by a consumer

which a short-term lender may use to effect repayment of a loan,

including a present-dated or postdated check, electronic debit

or assignment of a future deposit.

"Short-term lender."  A person who, as principal or agent,

markets, negotiates, arranges, places, makes, holds or

originates short-term loans for consumers for a fee, finance

charge or other consideration. The term includes a short-term

lender who acquires a short-term loan from another short-term

lender by purchase or assignment.

"Short-term loan."  A loan or advance of money or credit to a

consumer by a short-term lender that, for a fee, finance charge

or other consideration, does all of the following:

(1)  Accepts a check or other instrument from the

consumer.

(2)  Agrees to hold the check or instrument for a

deferment period.

(3)  Pays to the consumer a cash advance, a locally

cashable check, debit card or money order or credits to the

consumer's account the amount of the check less finance

charges permitted under section 5113 (relating to authorized

finance charges, origination fees and loan verification

costs). The term includes any arrangement in which a person

pays a cash advance to a consumer in return for a repayment

mechanism and a fee, finance charge or other consideration.

"Short-term loan business."  A person is deemed to be engaged

in the short-term loan business in this Commonwealth if that

person, in the ordinary course of its business, advertises,

causes to be advertised, solicits, negotiates or arranges,

offers to make, makes or holds a short-term loan or renewal loan

in this Commonwealth, whether directly or through any other

person acting for his benefit.

"Tangible net worth."  Net worth less all of the following:

(1)  That portion of assets pledged to secure obligations

of any person other than that of the applicant.

(2)  Any asset due from officers or stockholders of the

applicant or related companies in which the applicant's

officers or stockholders have an interest.

(3)  That portion of the value of any marketable

security, listed or unlisted, not shown at lower of either

cost or market.

(4)  Any investment shown on the applicant's balance

sheet in the applicant's joint ventures, subsidiaries,

affiliates or related companies which is greater than the

value of the assets at equity.

(5)  Goodwill.

(6)  The value placed on insurance renewals, property

management contract renewals or other similar intangibles of

the applicant.

(7)  Organization costs of the applicant.

(8)  Any real estate held for investment where

development will not start within two years from the date of

its initial acquisition.

(9)  Any leasehold improvements not being amortized over

the lesser of the expected life of the asset or the remaining

term of the lease.

SUBCHAPTER B

NATURE AND EFFECT OF SHORT-TERM LOANS

Sec.

5111.  License requirements.

5112.  Loan agreement requirements.

5113.  Authorized finance charges, origination fees and loan

verification costs.

5114.  Maximum amount of loans, terms of loans and right of

rescission.

5115.  Prohibitions.

5116.  Renewal loans.

5117.  Form of loan proceeds.

5118.  Endorsement of check.

5119.  Redemption of repayment mechanism.

5120.  Authorized charge for dishonored repayment mechanisms.

5121.  Posting of charges and notice of mandatory extended

payment plan.

5122.  Notice of assignment or sale of loans.

5123.  No criminal culpability.

5124.  Unfair or deceptive practices.

5125.  Extended payment plan.

5126.  Prohibited practices regarding loans.

5127.  Commonwealth Financial Literacy Account.

5128.  Licensee duties with respect to military personnel.

§ 5111.  License requirements.

(a)  General rule.--No person may market, service, arrange,

make, hold, originate, extend, contract or negotiate, whether

electronically or by other means, a short-term loan or renewal

loan to an individual who resides in this Commonwealth or, if

the person has a place of business in this Commonwealth, to any

individual regardless of his residence, without first obtaining

a license from the department under this chapter and otherwise

complying with all of the provisions of this chapter.

(b)  Exemptions.--

(1)  Except as provided under paragraph (2), this chapter

shall not apply to depository institutions.

(2)  A short-term lender that is an agent of a depository

institution for the purpose of brokering short-term loans

made by a depository institution shall be subject to all

provisions of this chapter except those provisions related to

finance charges. This paragraph shall be limited to the

brokering of short-term loans that are made and held by a

depository institution.

§ 5112.  Loan agreement requirements.

(a)  General rule.--Each loan shall be documented by a loan

agreement which shall contain all of the following:

(1)  The name and address of the consumer.

(2)  The transaction date and a prominently labeled

transaction number.

(3)  The amount of the loan or advance.

(4)  A statement of the total amount of finance charges

charged, expressed both as a dollar amount and an annual

percentage rate.

(5)  A specific date for the end of the deferment period

or extended payment plan.

(6)  The name, address and telephone number of the short-

term lender and the name and title of the individual employee

who signs the loan agreement on behalf of the short-term

lender.

(7)  An itemization of the fees and interest charges to

be paid by the consumer.

(8)  Disclosures required by the Truth in Lending Act

(Public Law 90-321, 15 U.S.C. § 1601 et seq.), regardless of

whether the Truth in Lending Act applies to the particular

loan.

(9)  A clear description of the consumer's payment

obligations under the loan and a clear description of the

repayment mechanism agreed to by the short-term lender and

the consumer.

(10)  A clear description of the consumer's right to an

extended payment plan under section 5125 (relating to

extended payment plan).

(11)  Disclosure in boldface print and in at least ten-

point type that the consumer may not obtain renewal for the

short-term loan more than one time for an additional

deferment period mutually agreed to by the consumer and the

short-term lender.

(12)  Disclosure in boldface print and in at least ten-

point type indicating the maximum loan amount and finance

charge.

(13)  Disclosure in boldface print and in at least ten-

point type indicating the restrictions on multiple loans

provided for under this chapter.

(14)  Disclosure in boldface print and in at least ten-

point type indicating the consumer's right of rescission

under this chapter. The disclosure of the consumer's right of

rescission shall be set forth immediately above the

consumer's signature line and shall state as follows:

This transaction is not meant to meet long-term

financial needs and should be used only to meet

short-term cash needs. Renewing a short-term loan

rather than repaying it in full at the end of its

term will result in further finance charges. You have

the right to rescind this transaction at any time

before the lender's close of business on the next

business day after the transaction date shown above.

In order to rescind, you must return all of the loan

proceeds you received to the lender. The lender will

refund to you all fees if you rescind this

transaction.

(15)  Any other information as the department may

require.

(a.1)  Deferment period.--A deferment period may not be in

excess of 60 days and shall include at least one regular

installment of income for the consumer. The deferment period

shall be calculated from the date of the loan agreement.

(b)  Limitations.--A loan agreement, or any other document or

instrument signed by the consumer in connection with the loan,

shall not contain any of the following:

(1)  A mandatory arbitration clause that does not comply

with the standards set forth in the statement of principles

of the National Consumer Disputes Advisory Committee of the

American Arbitration Association in effect on the effective

date of this section.

(2)  A hold harmless clause for the benefit of the short-

term lender.

(3)  A confession of judgment clause.

(4)  A waiver by the consumer of any contractual right or

any provision of this chapter.

§ 5113.  Authorized finance charges, origination fees and loan

verification costs.

(a)  Interest.--A short-term lender may charge and receive on

each loan interest at a simple annual rate that does not exceed

28% per year. The interest on the short-term loan shall be

calculated in compliance with 15 U.S.C. § 1606 (relating to

determination of annual percentage rate). A licensee may also

charge an origination fee as provided under subsection (b) and a

verification fee as provided under subsection (c).

(b)  Loan origination fee.--A licensee may charge and receive

a loan origination fee in an amount not to exceed 10% of the

amount of the loan proceeds advanced to the borrower or $100,

whichever is less.

(c)  Verification fee.--A licensee may charge and receive a

verification fee in an amount not to exceed $15 for a loan or a

renewal made under this chapter. The verification fee shall be

used in part to defray the costs of submitting a compliance

system inquiry as provided under section 5115 (relating to

prohibitions) and for the financial literacy program under

section 5127 (relating to Commonwealth Financial Literacy

Account).

§ 5114.  Maximum amount of loans, terms of loans and right of

rescission.

(a)  General rule.--A short-term lender may not make a loan

to a consumer in an amount that would result in the consumer

having outstanding loans to the short-term lender in excess of

the lesser of $1,000 or 25% of the consumer's gross monthly

income at any time. The short-term lender shall maintain records

evidencing the consumer's gross monthly income as required under

section 5136(a)(2) (relating to licensee and compliance system 

provider requirements).

(b)  Right to rescind.--

(1)  A consumer may rescind a loan before the short-term

lender's close of business on the next business day

immediately following the day on which the loan was made.

(2)  In order to rescind a loan, a consumer shall notify

the short-term lender of the consumer's desire to rescind the

loan and return to the short-term lender, at the time of

giving notice, the proceeds of the loan received by the

consumer from the short-term lender under section 5117

(relating to form of loan proceeds).

(3)  No finance charge or other charge or fee may be

charged or collected by the short-term lender if a loan is

rescinded.

(4)  Upon rescission of a loan, the short-term lender

shall return to the consumer any check given to the short-

term lender in connection with the loan or shall agree in

writing that any other repayment mechanism shall not be

utilized.

(c)  Completed transaction.--A loan transaction shall be

completed when the short-term lender receives payment in full of

the loan or the consumer redeems the repayment mechanism being

held by the short-term lender by paying the full amount

represented by the repayment mechanism to the short-term lender.

The consumer may repay a loan at any office of the original

short-term lender or the assignee of the short-term lender at

the consumer's election.

§ 5115.  Prohibitions.

(a)  General rule.--A short-term lender shall not knowingly

make a loan to a consumer who has an existing loan with the

short-term lender or any other licensee if the aggregate amount

of all loans outstanding to the consumer exceeds the maximum

amount permitted under section 5114(a) (relating to maximum

amount of loans, terms of loans and right of rescission) or who

has entered into an extended payment plan under section 5125

(relating to extended payment plan) which has not yet been paid

in full. A consumer may not have loans outstanding from more

than two short-term lenders at any one time.

(b)  (Reserved).

(c)  (Reserved).

(d)  Verification.--A consumer shall verify in writing at the

time of entering into a loan transaction:

(1)  That the consumer does not have a loan outstanding

from any short-term lender, the aggregate outstanding balance

of which exceeds the maximum loan amount permitted under

section 5114(a).

(2)  That the consumer has not entered into an extended

payment plan under section 5125 which has not yet been paid

in full.

(3)  The date of repayment of the consumer's last loan,

if applicable.

(e)  Confirmation.--A short-term lender shall confirm the

accuracy of the verification required under subsection (d) by

all of the following:

(1)  A query of the short-term lender's own records.

(2)  A query of the compliance system under subsection

(f)(1).

(f)  Procedure to determine outstanding loans and repayment

dates.--

(1)  The department shall engage a third-party provider

capable of developing, implementing and maintaining a

compliance system with real time access for reporting of loan

transactions and verifying the information required under

subsection (a).

(2)  Short-term lenders shall report to the compliance

system information determined by the department to be

necessary to verify the number and amount of loans a consumer

has outstanding with any short-term lender and the date of

repayment of a consumer's last loan.

(3)  The department may charge licensees a fee, not to

exceed $1 for each compliance system transaction. Seventy-

five cents of the fee shall be used by the department for the

costs of establishing and maintaining the compliance system 

and any other information as may be reasonably and lawfully

available to the short-term lender. Twenty-five cents shall

be used to provide funding for the financial literacy

programs established under section 5127 (relating to

Commonwealth Financial Literacy Account).

(g)  Prohibited location.--The location of a short-term loan

business, except a location in existence as of the effective

date of this subsection, may not be within 100 feet of any of

the following:

(1)  A horse racetrack subject to the act of December 17,

1981 (P.L.435, No.135), known as the Race Horse Industry

Reform Act.

(2)  A licensed gaming facility at which slot machine

gaming is conducted under 4 Pa.C.S. Pt. II (relating to

gaming).

§ 5116.  Renewal loans.

A short-term loan may only be renewed once. A borrower who

seeks the renewal of a short-term loan shall not be subject to

an origination fee. A one-time renewal fee may be charged which

shall not exceed $20 and the renewal loan shall be subject to

the verification fee and the interest charge established under

section 5113 (relating to authorized finance charges,

origination fees and loan verification costs).

§ 5117.  Form of loan proceeds.

(a)  General rule.--A short-term lender shall disburse the

proceeds of a loan to the consumer in the form of an immediately

and locally cashable check, money order, cash, debit card or

credit to the consumer's account at a depository institution.

(b)  Prohibition.--A short-term lender may not impose an

additional finance charge or fee for cashing the short-term 

lender's check or money order or for otherwise affecting the

disbursement of loan proceeds.

(c)  Same day loan.--Upon repayment of a renewal loan, a

short-term lender may not make or offer a loan to the consumer

on the same day that the consumer repays the renewal loan.

§ 5118.  Endorsement of check.

A short-term lender may not negotiate or present a check for

payment of a loan unless the instrument is endorsed with the

actual business name or registered fictitious name of the short-

term lender.

§ 5119.  Redemption of repayment mechanism.

Prior to the short-term lender's negotiating or presenting a

consumer's check or utilizing any other repayment mechanism, the

consumer shall have the right to redeem the check or any other

repayment mechanism if the consumer pays the full amount of the

check or other repayment mechanism to the short-term lender.

§ 5120.  Authorized charge for dishonored repayment mechanisms.

(a)  General rule.--If a consumer's repayment mechanism is

dishonored due to insufficient funds in the consumer's account,

the short-term lender:

(1)  Shall have the right to exercise all civil means

authorized by law to collect the face value of the repayment

mechanism.

(2)  May contract for and collect from the consumer a

charge not to exceed $25.

(3)  May not collect any other fees as a result of the

dishonor, including damages available under 42 Pa.C.S. § 8304

(relating to damages in actions on bad checks).

(b)  When charge not allowed.--A charge authorized by this

section shall not be allowed:

(1)  if the consumer does not receive the loan proceeds

from the short-term lender for any reason; or

(2)  if the consumer places a stop-payment order due to

forgery or theft.

§ 5121.  Posting of charges and notice of mandatory extended

payment plan.

(a)  Posting of charges.--A short-term lender shall post, in

large type in plain view of the public at any place of business

where short-term loans are made, a notice of the finance charges

and any related charges, such as the charge for dishonored

repayment mechanisms, imposed for loans.

(b)  Mandatory notice.--A short-term lender shall provide to

each consumer at the time a loan agreement is signed, and

conspicuously display in the lending area of each business

location of the short-term lender, the following notice:

Notice:  If you are unable to repay your loan, you are

entitled to an extended payment plan agreement with a

fully disclosed rate, term and payment plan.

§ 5122.  Notice of assignment or sale of loans.

(a)  General rule.--A short-term lender shall inform a

consumer in writing immediately of the name, address and

telephone number of the person to whom a loan is assigned or

sold. A short-term lender may only assign or sell a loan to

another short-term lender or to a depository institution.

(b)  Notice.--Prior to the assignment or sale of a loan, a

short-term lender shall provide the following notice to the

buyer or assignee:

The repayment mechanism associated with this loan has

been given by a consumer to secure a short-term loan

transaction under Pennsylvania State law and the assignee

or buyer is deemed to have knowledge of and shall be

bound by the terms and conditions of the loan agreement

between the consumer and the original lender.

§ 5123.  No criminal culpability.

A consumer shall not be subject to a criminal penalty:

(1)  For entering into a loan agreement.

(2)  In the event that a consumer's repayment mechanism

is dishonored, unless the consumer's account on which the

repayment mechanism is drawn is closed by the consumer before

the end of the agreed-upon deferment period, in which case

the provisions of 18 Pa.C.S. § 4105 (relating to bad checks)

or 4106 (relating to access device fraud), as applicable,

shall apply.

§ 5124.  Unfair or deceptive practices.

A person may not engage in unfair or deceptive acts,

practices or advertising in connection with a loan. A violation

of this section shall be deemed a violation of the act of

December 17, 1968 (P.L.1224, No.387), known as the Unfair Trade

Practices and Consumer Protection Law.

§ 5125.  Extended payment plan.

(a)  General rule.--A short-term lender shall offer a

consumer at least once per year an extended payment plan

agreement if at any time prior to the loan's due date the

consumer declares an inability to repay.

(b)  Extended payment plan agreement.--An extended payment

plan agreement shall be subject to the following terms:

(1)  The principal balance due under the extended payment

plan shall be the outstanding principal balance and finance

charge due under the existing loan. The short-term lender may

encourage, but shall not require, the consumer to reduce the

balance of the existing loan by paying the short-term lender

cash on the date the consumer enters into the extended

payment plan agreement.

(2)  The short-term lender may not impose a finance

charge for entering into the extended payment plan. The

short-term lender may impose only the fees and charges

authorized in section 5120 (relating to authorized charge for

dishonored repayment mechanisms) in connection with an

extended payment plan.

(3)  The extended payment plan agreement shall allow the

consumer to pay the sums due under the extended payment plan

over at least four 14-day terms. Each installment shall be in

an amount arrived at by dividing the total amount outstanding

under paragraph (1) to a short-term lender by the number of

14-day terms of the extended payment plan. If the consumer

has loans outstanding to two lenders and is unable to pay

both loans, the consumer shall enter into an extended payment

plan with each short-term lender. A consumer may, at any

time, partially or entirely pay off an extended payment plan.

(4)  A short-term lender shall report to the compliance

system described in section 5115 (relating to prohibitions)

that the consumer is enrolled in an extended payment plan.

(5)  Except when the consumer is required to enter into

an extended payment plan under the provisions of this

chapter, the consumer shall have the same right to rescind an

extended payment plan as is provided in section 5114(b)

(relating to maximum amount of loans, terms of loans and

right of rescission) for the rescission of a loan.

(c)  Eligibility requirements.--In order to enter into an

extended payment plan, a consumer must:

(1)  Have obtained a loan from the same short-term 

lender, or its assignee, that will enter into the extended

payment plan.

(2)  Request an extended payment plan prior to the due

date of the loan.

(3)  Reasonably inform the short-term lender, either

orally or in writing, that the consumer requests an extended

payment plan.

(d)  Prohibition.--During any period in which all or part of

an extended payment plan is outstanding and during the seven-day

period following a consumer's payment in full of an extended

payment plan, no short-term lender may make or offer to make a

short-term loan to the consumer.

§ 5126.  Prohibited practices regarding loans.

(a)  Practices.--The following are prohibited regarding

loans:

(1)  Taking or attempting to take any security other than

the consumer's check or other repayment mechanism.

(2)  Taking or attempting to take more than a single

check or other repayment mechanism from the consumer in

connection with a single transaction.

(3)  Selling, offering or soliciting any application for

credit insurance in connection with a transaction.

(4)  Tying a transaction to any other transaction, offer

or obligation of the consumer.

(5)  Assigning or selling a loan to another person other

than in accordance with the provisions of this chapter.

(6)  Engaging in any device or subterfuge to evade the

requirements of this chapter, including making loans

disguised as personal property sales and leaseback

transactions or disguising loan proceeds as cash rebates for

the pretextual installment sale of goods and services.

(7)  Failing to collect and provide information regarding

the number, total and average transaction amounts and other

information the department may request.

(8)  Offering, arranging, negotiating, making, holding or

acting as an agent or broker for the making of a loan unless

the short-term lender complies with all applicable provisions

of this chapter.

(9)  Altering or deleting the date on any loan agreement

or repayment mechanism held by the short-term lender.

(10)  Rolling over, refinancing, extending or

consolidating short-term loans except as provided in sections

5116 (relating to renewal loans) and 5125 (relating to

extended payment plan).

(11)  Failing to immediately and accurately report a loan

or an extended payment plan to the compliance system provider

as required by this chapter or by the department.

(12)  Threatening to use or using the criminal process in

any state to collect the balance due on a loan.

(13)  Depositing a check or otherwise implementing any

repayment mechanism prior to the expiration of the agreed-

upon deferment period.

(b)  Penalty.--In addition to any other penalties provided

under law, any transaction in violation of subsection (a) shall

be uncollectible and unenforceable.

§ 5127.  Commonwealth Financial Literacy Account.

(a)  Establishment of account.--There is established within

the Banking Department Fund a restricted account to be known as

the Commonwealth Financial Literacy Account. Funds collected

under section 5115(f)(3) (relating to prohibitions) shall be

deposited in the account.

(b)  Designation and approval by department.--

(1)  The department shall designate and approve nonprofit

consumer credit counseling agencies in each county to be

available to assist the department in implementing the

provisions of this chapter, including, but not limited to,

mandated counseling.

(2)  The department shall maintain an up-to-date list of

approved consumer credit counseling agencies for each county

and publish the list on the department's publicly accessible

Internet website.

(c)  Funding.--The department shall allocate, at its

discretion, funds to credit counseling agencies from the

Commonwealth Financial Literacy Account for each loan the

department reviews upon request of a consumer.

§ 5128.  Licensee duties with respect to military personnel.

(a)  Collection activity.--A licensee shall defer collection

activity against:

(1)  a consumer who is a member of the military that has

been deployed to combat or a combat support posting, for the

duration of the posting; or

(2)  a reserve or National Guard member called to active

duty.

(b)  Military personnel.--A licensee shall not contact the

military chain of command of a consumer who is a member of the

military in an effort to collect a loan.

(c)  Repayment agreement.--A licensee shall honor the terms

of any repayment agreement that it has entered into with a

consumer who is a member of the military, including any

repayment agreement negotiated through military counselors or

third-party credit counselors.

(d)  Compliance with Federal law.--All lenders must comply

with any Federal statutes and provisions regarding military

personnel and their dependents.

SUBCHAPTER C

ADMINISTRATIVE AND LICENSURE PROVISIONS

Sec.

5131.  Application for license.

5132.  Annual license fee.

5133.  (Reserved).

5134.  Issuance of license.

5135.  License duration.

5136.  Licensee and compliance system provider requirements.

5137.  Licensee limitations.

5138.  Surrender of license.

5139.  Authority of department.

5140.  Suspension, revocation or refusal.

5141.  Penalties.

§ 5131.  Application for license.

(a)  Contents.--An application for a license under this

chapter shall be on a form prescribed and provided by the

department. The application shall include the name of the

applicant, the address of the principal place of business of the

applicant and the address or addresses where the applicant's

short-term loan business is to be conducted, the full name,

official title and business address of each director and

principal officer of the short-term loan business and any other

information that may be required by the department. An applicant

shall demonstrate to the department that policies and procedures

have been developed to receive and process consumer inquiries

and grievances promptly and fairly.

(b)  Duty to update.--All applicants and licensees shall be

required to provide the department with written notice of the

change in any information contained in an application for a

license or for any renewal of a license promptly upon an

applicant or licensee becoming aware of such change.

(c)  Financial structure.--

(1)  The applicant must establish that the applicant:

(i)  has, at the time of application, a minimum

tangible net worth of $250,000;

(ii)  will at all times maintain the minimum tangible

net worth required by subparagraph (i); and

(iii)  has an otherwise adequate financial structure.

(2)  Prior to and as a condition of the issuance of a

license, an applicant for a license shall maintain a bond in

the amount of $100,000 in a form acceptable to the department

from a surety company authorized to do business in this

Commonwealth. The bond shall be a penal bond conditioned on

compliance by the licensee with this chapter and subject to

forfeiture and shall run to the Commonwealth for its use and

shall be held by the department for the term of the license.

The bond shall also be for the use of any consumer against

the licensee for failure to carry out the terms of any loan

or extended payment plan. If a consumer is aggrieved, he may,

with the written consent of the department, recover the

amount by which the consumer is aggrieved from the bond by

filing a claim with the surety company or maintaining an

action on the bond. In the alternative, an aggrieved consumer

may recover the amount by which the consumer is aggrieved by

filing a formal complaint against the licensee with the

department, which shall adjudicate the matter. Such an

adjudication shall be binding upon the surety company and

enforceable by the department in Commonwealth Court and by an

aggrieved consumer in any court. An aggrieved consumer

seeking to recover any amount from a bond that has already

been forfeited by the licensee or which the department is in

the process of having forfeited may recover payment on such

bond if, after filing a petition with the department, the

department consents to the requested payment or portion

thereof. The department may pay the aggrieved consumer from

the bond proceeds recovered by the department in such case.

Nothing in this paragraph shall be construed as limiting the

ability of any court or magisterial district judge to award

to any aggrieved consumer other damages, court costs and

attorney fees permitted by applicable law, but those claims

that are not directly related to the loan or extended payment

plan may not be recovered from the proceeds of the bond. The

department, in its discretion, may consent to or order pro

rata or other recovery on the bond for any aggrieved consumer

if claims against the bond may or do exceed its full monetary

amount. No bond shall comply with the requirements of this

paragraph unless it contains a provision that it shall not be

canceled for any cause unless notice of intention to cancel

is given to the department at least 30 days before the day

upon which cancellation shall take effect. In such event, the

licensee shall be required to replace the bond with a bond

substantially in the same form as the original bond.

Cancellation of the bond shall not invalidate the bond

regarding the period of time it was in effect.

(d)  License renewals.--Licenses shall be issued for terms of

12 months and may be renewed by the department upon application

by the licensee and the payment of any and all applicable

renewal fees. A licensee shall comply with the same requirements

for renewal of its license as it did for the issuance of the

original license.

§ 5132.  Annual license fee.

(a)  General rule.--An applicant for a license shall pay to

the department at the time an application is filed, and upon

filing of each application for renewal thereof, a license fee

for the principal place of business of $3,000 and an additional

license fee for each branch office of $1,000.

(b)  Recovery of costs.--No abatement of a license fee shall

be made if the license is issued for a period of less than one

year. The department shall be entitled to recover any cost of

investigation in excess of license or renewal fees from the

licensee or from a person who is not licensed under this chapter

but who is believed to be engaged in the short-term loan

business.

§ 5133.  (Reserved).

§ 5134.  Issuance of license.

(a)  Time limit.--Upon receipt of an application for a

license, the department may conduct such investigation as it

deems necessary to determine that the applicant and its

officers, directors and principals are of good character and

ethical reputation. Within 60 days of receipt of a completed

application, the department shall:

(1)  issue a license; or

(2)  refuse to issue a license for any reason which the

department may refuse to issue a license under this section

or for which the department may suspend, revoke or refuse to

renew a license under section 5140 (relating to suspension,

revocation or refusal).

(b)  Appeal of denial.--If the department refuses to issue a

license, it shall notify the applicant in writing of the denial,

the reason therefor and the applicant's right to appeal the

denial to the Secretary of Banking. The department shall require

that an appeal from refusal to approve an application for a

license be filed by the applicant within 30 days of notice of

refusal.

(c)  Contents of license.--Every license issued by the

department shall specify:

(1)  The name and address of the licensee and the address

or addresses covered by the license.

(2)  The licensee's reference number.

(3)  Any other information the department shall require

to carry out the purposes of this chapter.

(d)  Denial of license due to conviction.--

(1)  The department may deny a license if it finds that

the applicant or a director, officer, partner or ultimate

equitable owner of 10% or more of the applicant has been

convicted of a felony or a crime of moral turpitude in any

jurisdiction or convicted of a crime which, if committed in

this Commonwealth, would constitute a felony or a crime of

moral turpitude. For the purposes of this chapter, a person

shall be deemed to have been convicted of a crime if the

person:

(i)  enters a guilty plea or plea of nolo contendere

to a criminal charge before a Federal magistrate or a

court, unless the guilty plea or plea of nolo contendere

is set aside, vacated, reversed or otherwise abrogated by

lawful judicial process; or

(ii)  is found guilty by the verdict of a jury or the

decision or judgment of a Federal magistrate or court,

irrespective of pronouncement or suspension of sentence,

unless the decision or judgment is set aside, vacated,

reversed or otherwise abrogated by lawful judicial

process.

(2)  A license under this chapter shall be deemed to be a

"covered license" within the meaning of section 405 of the

act of May 15, 1933 (P.L.565, No.111), known as the

Department of Banking Code. The department shall notify a

licensee if a covered individual who is or will be employed

or contracted by the licensee has a criminal background that

renders the employee unfit for employment in the short-term 

loan business.

(e)  Denial of license for other reason.--The department may

deny a license or otherwise restrict a license if it finds that

the applicant or a director, officer, partner, employee, agent

or ultimate equitable owner of 10% or more of the applicant:

(1)  has had a license application or license issued by

the department denied, not renewed, suspended or revoked;

(2)  is the subject of an order of the department;

(3)  has violated or failed to comply with any provisions

of this chapter or any regulation or order of the department;

(4)  has an outstanding debt to the Commonwealth or any

Commonwealth agency; or

(5)  does not possess the financial responsibility,

character, reputation, integrity and general fitness to

command the confidence of the public and to warrant the

belief that the short-term loan business will be operated

lawfully, honestly, fairly and within the legislative intent

of this chapter and in accordance with the general laws of

this Commonwealth. For purposes of this paragraph, an

applicant is not financially responsible if the applicant has

shown a disregard in the management of his or her own

financial condition. The factors that the department may

consider in making a determination regarding an applicant's

financial responsibility shall include:

(i)  Current outstanding judgments, other than

judgments solely as a result of medical expenses.

(ii)  Current outstanding tax liens or other

government liens and filings.

(iii)  Foreclosures within the past three years.

(iv)  A pattern of seriously delinquent accounts

within the past three years.

§ 5135.  License duration.

A license issued by the department:

(1)  Must be renewed on the license's renewal date of

each year upon payment of the annual renewal fee and after

the department determines that the licensee is conducting

business in accordance with this chapter. No refund of any

portion of the license fee shall be made if the license is

voluntarily surrendered to the department or suspended or

revoked by the department prior to its expiration date.

(2)  Shall be invalid if the licensee's authority to

conduct business is voided under any law of this Commonwealth

or any other state unless the licensee demonstrates that the

applicable court or governmental entity was clearly erroneous

in voiding the licensee's authority to conduct business.

(3)  Is not assignable or transferable by operation of

law or otherwise.

§ 5136.  Licensee and compliance system provider requirements.

(a)  Requirements of a licensee.--A licensee shall do all of

the following:

(1)  Conspicuously display its license at each licensed

place of business.

(2)  Maintain at its principal place of business within

this Commonwealth, or at a place outside this Commonwealth if

agreed to by the department, the original, a copy or

electronic access to books, accounts, records and documents

of the business conducted under the license as prescribed by

the department to enable the department to determine whether

the business of the licensee is being conducted in accordance

with this chapter and the orders, regulations and statements

of policy issued under this chapter. Instruments, documents,

accounts, books and records shall be kept separate and apart

from the records of any other business conducted by the

licensee and shall be preserved and kept available for

investigation or examination by the department for a period

determined by the department. The department shall have free

access to and authorization to examine records maintained

outside this Commonwealth. The costs of the examination,

including travel costs, shall be borne by the licensee. The

department may deny or revoke the authority to maintain

records outside this Commonwealth for good cause in the

interest of protection for Commonwealth consumers, including

for the licensee's failure to provide books, accounts,

records or documents to the department upon request.

(3)  Be subject to examination by the department. The

department may examine a licensee if the department deems the

examination to be necessary or desirable. The cost of the

examination shall be borne by the licensee. During an

examination, the department shall have free access, during

regular business hours, to the licensee's place or places of

business in this Commonwealth and to all instruments,

documents, accounts, books and records which pertain to a

licensee's short-term loan business, whether maintained in or

outside this Commonwealth.

(4)  Include in all advertisements language indicating

that the licensee is licensed by the department.

(b)  Requirements of compliance system provider.--Annually,

on a date determined by the department, the compliance system 

provider shall file a report with the department setting forth

the information the department requires concerning the short-

term loan business conducted by the licensee during the

preceding calendar year. The report must be in writing and

subject to penalty of perjury on a form provided by the

department. Compliance system providers failing to file the

required report in a timely manner shall be subject to a penalty

of $500 for each day after December 1 until the report is filed.

The report shall include:

(1)  The total number of short-term loans made during the

preceding calendar year.

(2)  The minimum, maximum and average dollar amount of

short-term loans made during the preceding calendar year.

(3)  The average annual percentage rate and the average

term of short-term loans made during the preceding calendar

year.

(4)  The total number of returned checks, the total of

checks recovered and the total of checks charged off during

the preceding calendar year.

(5)  The total number of short-term loans paid in full,

the total number of loans which went into default and the

total number of loans charged off during the preceding

calendar year.

(6)  The total number of consumer complaints.

(7)  Frequency of repeat use by consumers of postdated or

delayed deposit checks.

(8)  Verification that the licensee has not used the

criminal process or caused the criminal process to be used in

the collection of any short-term loan during the preceding

calendar year.

(9)  Information on the number of consumers referred to

financial literacy counseling within the preceding calendar

year.

(10)  Any other information or data the department may

require.

(c)  Accounting records.--The licensee's accounting records

shall be constructed and maintained in compliance with generally

accepted accounting principles or as provided by department

regulation.

(d)  Copies.--If copies of instruments, documents, accounts,

books or records are maintained under subsection (a)(2), they

may be photostatic, microfilm or electronic copies or copies

provided in some other manner approved by the department.

§ 5137.  Licensee limitations.

A licensee may not do any of the following:

(1)  Transact any business under this chapter under any

other name or names except those designated in its license. A

licensee that changes its name or place or places of business

shall immediately notify the department. Upon notification,

the department shall issue a certificate to the licensee, if

appropriate, which shall specify the licensee's new name or

address.

(2)  Conduct a business other than the short-term loan

business licensed by the department under this chapter

without at least 30 days' prior written notification to and

approval by the department.

§ 5138.  Surrender of license.

(a)  Authorization.--Upon satisfying the department that all

creditors of a licensee have been paid or that other

arrangements satisfactory to the creditors and the department

have been made, a licensee may voluntarily surrender its license

to the department by delivering its license to the department

with written notice that the license is being voluntarily

suspended.

(b)  Effect.--Surrender under this section shall not affect

the licensee's civil or criminal liability for acts committed.

§ 5139.  Authority of department.

(a)  General authority.--The department has the following

powers and duties:

(1)  Examine any instrument, document, account, book,

record or file of a licensee or any person having a

connection to the licensee or make an investigation necessary

to administer this chapter. The costs of the examination

shall be borne by the licensee or the entity subject to the

examination. Under the authority under this subsection, the

department may remove any instrument, document, account,

book, record or file of a licensee to a location outside of

the licensee's office location.

(2)  Conduct an administrative hearing on any matter

pertaining to this chapter, issue subpoenas to compel the

attendance of witnesses and the production of instruments,

documents, accounts, books and records at the hearing.

Subpoenaed material may be retained by the department until

the completion of all proceedings in connection with the

materials. A department official may administer oaths and

affirmations to an individual whose testimony is required. If

a person fails to comply with a subpoena issued by the

department or to testify on a matter concerning which the

person may be lawfully interrogated, on application by the

department, the Commonwealth Court may issue an order

requiring the attendance of the person, the production of

instruments, documents, accounts, books or records or the

giving of testimony.

(3)  Request and receive information or records,

including reports of criminal history record information from

any Federal, State, local or foreign government entity

regarding an applicant for a license, a licensee or a person

related to the business of the applicant or licensee, at a

cost to be paid by the applicant or licensee.

(4)  Require a person to pay the department's costs

incurred while conducting an investigation of the person for

purposes of issuance or renewal of a license or for any

violation of this chapter.

(5)  Promulgate regulations and statements of policy and

issue orders as necessary for the proper conduct of the

short-term loan business by short-term lenders, the issuance

and renewal of licenses and the enforcement of this chapter.

(6)  Prohibit or permanently remove an individual

responsible for a violation of this chapter from working in

the individual's present capacity or in any other capacity

related to activities regulated by the department.

(7)  Order a person to make restitution for actual

damages to consumers caused by any violation of this chapter.

(8)  Impose conditions as the department deems

appropriate.

(b)  Hearings.--A person aggrieved by a decision of the

department may appeal the decision of the department to the

Secretary of Banking. The appeal shall be conducted under 2

Pa.C.S. Ch. 5 Subch. A (relating to practice and procedure of

Commonwealth agencies).

(c)  Injunctions.--The department may maintain an action for

an injunction or other process against a person to restrain the

person from engaging in an activity violating this chapter.

(d)  Final orders.--A decision of the secretary shall be a

final order of the department and shall be enforceable in a

court of competent jurisdiction. The department shall publish

the final adjudication issued under this section, subject to

redaction or modification to preserve confidentiality.

(e)  Appeals.--A person aggrieved by a decision of the

Secretary of Banking may appeal the decision under 2 Pa.C.S. Ch.

7 Subch. A (relating to judicial review of Commonwealth agency

action).

§ 5140.  Suspension, revocation or refusal.

(a)  Departmental action.--The department may suspend, revoke

or refuse to renew a license issued under this chapter if any

fact or condition exists or is discovered which, if it had

existed or had been discovered at the time of filing of the

application for the license, would have warranted the department

in refusing to issue the license or if a licensee or director,

officer, partner or owner of a licensee has:

(1)  Made a material misstatement in any application,

report or submission required by this chapter or any

department regulation or order.

(2)  Failed to comply with or violated this chapter or

any regulation or order promulgated or issued under this

chapter.

(3)  Engaged in dishonest, fraudulent or illegal

practices or conduct in a business or unfair or unethical

practices or conduct in connection with the short-term loan

business.

(4)  Been convicted of or pled guilty or nolo contendere

to a crime of moral turpitude or a felony.

(5)  Permanently or temporarily been enjoined by a court

of competent jurisdiction from engaging in or continuing

conduct or a practice involving an aspect of the short-term 

loan business.

(6)  Become the subject of an order of the department

denying, suspending or revoking a license applied for or

issued under this chapter.

(7)  Become the subject of a United States Postal Service

fraud order.

(8)  Become the subject of an order of the department

denying, suspending or revoking a license under any other law

administered by the department.

(9)  Demonstrated negligence or incompetence in

performing an act for which the licensee is required to hold

a license under this chapter.

(10)  Failed to comply with the requirements of this

chapter to make and keep records prescribed by regulation or

order of the department, to produce records required by the

department or to file financial reports or other information

that the department, by regulation or order, may require.

(11)  Become insolvent. For purposes of this paragraph,

the term "become insolvent" shall mean that the liabilities

of the applicant or licensee exceed the assets of the

applicant or licensee or that the applicant or licensee

cannot meet the obligations of the applicant or licensee as

they mature or is in a financial condition that the applicant