PRIOR PRINTER'S NO. 1796 PRINTER'S NO. 2309
No. 1478 Session of 2005
INTRODUCED BY ROSS, BIANCUCCI, CAPPELLI, CASORIO, CRAHALLA,
CURRY, DeLUCA, DENLINGER, FAIRCHILD, HARHAI, HARRIS, HERSHEY,
HESS, JAMES, KILLION, KOTIK, McILHATTAN, R. MILLER, PICKETT,
SATHER, SAYLOR, SCHRODER, SEMMEL, SHANER, B. SMITH, STAIRS,
STERN, TANGRETTI, E. Z. TAYLOR, TIGUE, WILT, PISTELLA,
SIPTROTH, WANSACZ, MELIO AND GOODMAN, MAY 2, 2005
AS AMENDED ON THIRD CONSIDERATION, HOUSE OF REPRESENTATIVES,
JUNE 21, 2005
AN ACT
1 Amending Titles 7 (Banks and Banking) and 18 (Crimes and
2 Offenses) of the Pennsylvania Consolidated Statutes,
3 regulating payday loans in terms of practice, licensure and
4 penalties; further providing for deceptive or fraudulent
5 business practices; and providing for unlicensed payday
6 lending.
7 The General Assembly of the Commonwealth of Pennsylvania
8 hereby enacts as follows:
9 Section 1. Title 7 of the Pennsylvania Consolidated Statutes
10 is amended by adding parts to read:
11 Part
12 I. Preliminary Provisions (Reserved)
13 II. Licensing
14 PART I
15 PRELIMINARY PROVISIONS
16 (Reserved)
17 PART II
1 LICENSING
2 Chapter
3 51. Payday Loan Protection
4 CHAPTER 51
5 PAYDAY LOAN PROTECTION
6 Subchapter
7 A. Preliminary Provisions
8 B. Nature and Effect of Payday Loans
9 C. Administrative and Licensure Provisions
10 D. Miscellaneous Provisions
11 SUBCHAPTER A
12 PRELIMINARY PROVISIONS
13 Sec.
14 5101. Scope.
15 5102. Definitions.
16 § 5101. Scope.
17 This chapter relates to consumer payday loan protection.
18 § 5102. Definitions.
19 The following words and phrases when used in this chapter
20 shall have the meanings given to them in this section unless the
21 context clearly indicates otherwise:
22 "Applicant." A person that applies for a license under this
23 chapter.
24 "Check." A check as that term is defined in 13 Pa.C.S. §
25 3104(f) (relating to negotiable instrument) which is drawn on a
26 depository institution.
27 "Consumer." An individual who is the recipient of a payday
28 loan or a renewal loan.
29 "Deferment period." The term of a loan or the number of days
30 a lender agrees to defer depositing or presenting a repayment
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1 mechanism, as the context may require. The period shall not be
2 in excess of 30 days or less than seven days. The deferment
3 period shall be calculated from the date of the loan agreement.
4 "Department." The Department of Banking of the Commonwealth.
5 "Depository institution." A person authorized to accept
6 deposits in accordance with Federal or State law.
7 "Gross monthly income." Wages or commissions received by a
8 consumer in the 30-day period immediately preceding the date of
9 the consumer's application for a loan, or as otherwise
10 determined by the Department of Banking.
11 "Licensee." A person licensed by the Department of Banking
12 under this chapter.
13 "Loan." A payday loan or a renewal loan, as the context may
14 require.
15 "Loan agreement." A signed written agreement between a
16 payday lender and a consumer that complies with the requirements
17 of section 5112 (relating to loan agreement requirements)
18 evidencing a loan.
19 "Payday lender." A person who, as principal or agent,
20 markets, negotiates, arranges, places, makes, holds or
21 originates payday loans for consumers for a fee, finance charge
22 or other consideration. The term shall include a payday lender
23 who acquires a payday loan or renewal loan from another payday
24 lender by purchase or assignment.
25 "Payday loan." A loan or advance of money or credit to a
26 consumer by a payday lender that, for a fee, finance charge or
27 other consideration, does all of the following:
28 (1) Accepts a check from the consumer.
29 (2) Agrees to hold the check for a deferment period.
30 (3) Pays to the consumer a cash advance, a locally
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1 cashable check, debit card or money order or credits to the
2 consumer's account the amount of the check less finance
3 charges permitted under section 5113 (relating to authorized
4 finance charges). The term includes any arrangement in which
5 a person pays a cash advance to a consumer in return for a
6 repayment mechanism and a fee, finance charge or other
7 consideration.
8 "Payday loan business." A person is deemed to be engaged in
9 the payday loan business in this Commonwealth if that person, in
10 the ordinary course of its business, advertises, causes to be
11 advertised, solicits, negotiates or arranges, offers to make,
12 makes or holds a payday loan or renewal loan in this
13 Commonwealth, whether directly or through any other person
14 acting for his benefit.
15 "Person." An individual, association, joint venture or joint
16 stock company, partnership, limited liability company, limited
17 partnership, limited partnership association, business
18 corporation or any other group of individuals, however
19 organized.
20 "Renewal loan." A payday loan that a consumer obtains from a
21 payday lender, the proceeds of which are applied to the balance
22 due on an existing payday loan previously obtained by the
23 consumer from the same payday lender.
24 "Repayment mechanism." Any method agreed to by a consumer
25 which a payday lender may use to effect repayment of a loan,
26 including a present-dated or post-dated check, electronic debit
27 or assignment of a future deposit.
28 "Tangible net worth." Net worth less all of the following:
29 (1) That portion of assets pledged to secure obligations
30 of any person other than that of the applicant.
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1 (2) Any asset due from officers or stockholders of the
2 applicant or related companies in which the applicant's
3 officers or stockholders have an interest.
4 (3) That portion of the value of any marketable
5 security, listed or unlisted, not shown at lower of either
6 cost or market.
7 (4) Any investment shown on the applicant's balance
8 sheet in the applicant's joint ventures, subsidiaries,
9 affiliates or related companies which is greater than the
10 value of the assets at equity.
11 (5) Goodwill.
12 (6) The value placed on insurance renewals, property
13 management contract renewals or other similar intangibles of
14 the applicant.
15 (7) Organization costs of the applicant.
16 (8) Any real estate held for investment where
17 development will not start within two years from the date of
18 its initial acquisition.
19 (9) Any leasehold improvements not being amortized over
20 the lesser of the expected life of the asset or the remaining
21 term of the lease.
22 SUBCHAPTER B
23 NATURE AND EFFECT OF PAYDAY LOANS
24 Sec.
25 5111. License requirements.
26 5112. Loan agreement requirements.
27 5113. Authorized finance charges.
28 5114. Maximum amount of loans; terms of loans; right of
29 rescission.
30 5115. Prohibitions.
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1 5115.1. MANDATORY REPORTING OF DATA TO A SUBPRIME CREDIT BUREAU. <--
2 5116. Renewal loans.
3 5117. Form of loan proceeds.
4 5118. Endorsement of check.
5 5119. Redemption of repayment mechanism.
6 5120. Authorized charge for dishonored repayment mechanisms.
7 5121. Posting of charges and notice of mandatory extended
8 payment plan.
9 5122. Notice of assignment or sale of loans.
10 5123. No criminal culpability.
11 5124. Unfair or deceptive practices.
12 5125. Extended payment plan.
13 5126. Prohibited practices regarding loans.
14 5127. Commonwealth Financial Literacy Account.
15 5128. Licensee duties with respect to military personnel.
16 § 5111. License requirements.
17 (a) General rule.--No person may market, service, arrange,
18 make, hold, originate, extend, contract or negotiate, whether
19 electronically or by other means, a payday loan or renewal loan
20 to an individual who resides in this Commonwealth or, if the
21 person has a place of business in this Commonwealth, to any
22 individual regardless of his residence, without first obtaining
23 a license from the department under this chapter and otherwise
24 complying with all of the provisions of this chapter.
25 (b) Exemptions.--This chapter shall not apply to depository
26 institutions. A payday lender that is an agent of a depository
27 institution for the purpose of brokering payday loans made by a
28 depository institution shall be subject to all provisions of
29 this chapter except those provisions related to finance charges.
30 This exemption from the provisions of this chapter relating to
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1 finance charges is limited solely to the brokering of payday
2 loans that are made and held by a depository institution.
3 § 5112. Loan agreement requirements.
4 (a) General rule.--Each loan shall be documented by a loan
5 agreement which shall contain all of the following:
6 (1) The name and address of the consumer.
7 (2) The transaction date and a prominently labeled
8 transaction number.
9 (3) The amount of the loan or advance.
10 (4) A statement of the total amount of finance charges
11 charged, expressed both as a dollar amount and an annual
12 percentage rate.
13 (5) A specific date for the end of the deferment period
14 or extended payment plan.
15 (6) The name, address, telephone number of the payday
16 lender and the name and title of the individual employee who
17 signs the loan agreement on behalf of the payday lender.
18 (7) An itemization of the fees and interest charges to
19 be paid by the consumer.
20 (8) Disclosures required by the Truth in Lending Act
21 (Public Law 90-321, 15 U.S.C. § 1601 et seq.), regardless of
22 whether the Truth in Lending Act applies to the particular
23 loan.
24 (9) A clear description of the consumer's payment
25 obligations under the loan and a clear description of the
26 repayment mechanism agreed to by the payday lender and the
27 consumer.
28 (10) A clear description of the consumer's right to an
29 extended payment plan under section 5125 (relating to
30 extended payment plan) if a consumer does not have the
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1 ability to repay a loan when due.
2 (11) Disclosure in boldface print and in at least ten-
3 point type that the consumer may not obtain renewal for the
4 payday loan more than one time for an additional deferment
5 period mutually agreed to by the consumer and the payday
6 lender.
7 (12) Disclosure in boldface print and in at least ten-
8 point type indicating the maximum loan amount and finance
9 charge.
10 (13) Disclosure in boldface print and in at least ten-
11 point type indicating the restrictions on multiple loans
12 provided for in this chapter.
13 (14) Disclosure in boldface print and in at least ten-
14 point type indicating the consumer's right of rescission
15 under this chapter. The disclosure of the consumer's right of
16 rescission shall be set forth immediately above the
17 consumer's signature line and shall state as follows:
18 This transaction is not meant to meet long-term financial
19 needs and should be used only to meet short-term cash
20 needs. Renewing a payday loan rather than repaying it in
21 full at the end of its term will result in further
22 finance charges. You have the right to rescind this
23 transaction at any time before the lender's close of
24 business on the next business day after the transaction
25 date shown above. In order to rescind, you must return
26 all of the loan proceeds you received to the lender. The
27 lender will refund to you all fees if you rescind this
28 transaction.
29 (15) Such other information as the department may
30 require.
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1 (b) Limitations.--A loan agreement, or any other document or
2 instrument signed by the consumer in connection with the loan,
3 shall not contain any of the following:
4 (1) A mandatory arbitration clause that does not comply
5 with the standards set forth in the statement of principles
6 of the National Consumer Dispute Advisory Committee of the
7 American Arbitration Association in effect on the effective
8 date of this chapter.
9 (2) A hold harmless clause for the benefit of the payday
10 lender.
11 (3) A confession of judgment clause.
12 (4) A waiver by the consumer of any contractual right or
13 any provision of this chapter.
14 § 5113. Authorized finance charges.
15 A payday lender may impose a finance charge for each loan
16 made by the payday lender to a consumer. Total finance charges
17 imposed by a payday lender in a single transaction shall not
18 exceed 17.5% of the amount advanced. The finance charge shall be
19 deemed fully earned as of the date of the transaction unless the
20 consumer rescinds the loan under section 5114(b) (relating to
21 maximum amount of loans; terms of loans; right of rescission). A
22 payday lender may impose only fees and charges authorized in
23 this chapter in connection with a loan.
24 § 5114. Maximum amount of loans; terms of loans; right of
25 rescission.
26 (a) General rule.--A payday lender shall not make a loan to
27 a consumer in an amount that would result in the consumer having
28 outstanding loans to the payday lender in excess of the lesser
29 of $500 or 25% of the consumer's gross monthly income at any
30 time. The payday lender shall maintain records evidencing the
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1 consumer's gross monthly income as required by section
2 5136(a)(2) (relating to licensee requirements).
3 (b) Right to rescind.--
4 (1) A consumer may rescind a loan before the payday
5 lender's close of business on the next business day
6 immediately following the day on which the loan was made.
7 (2) In order to rescind a loan, a consumer shall notify
8 the payday lender of the consumer's desire to rescind the
9 loan and return to the payday lender, at the time of giving
10 notice, the proceeds of the loan received by the consumer
11 from the payday lender as contemplated by section 5117
12 (relating to form of loan proceeds).
13 (3) No finance charge or other charge or fee may be
14 charged or collected by the payday lender when a loan is
15 rescinded.
16 (4) Upon rescission of a loan, the payday lender shall
17 return to the consumer any check given to the payday lender
18 in connection with the loan or shall agree in writing that
19 any other repayment mechanism shall not be utilized.
20 (c) Completed transaction.--A loan transaction is completed
21 when the payday lender receives payment in full of the loan or
22 the consumer redeems the repayment mechanism being held by the
23 payday lender by paying the full amount represented by the
24 repayment mechanism to the payday lender. The consumer may repay
25 a loan at any office of the original payday lender or the
26 assignee of the payday lender at the consumer's election.
27 § 5115. Prohibitions.
28 (a) General rule.--A payday lender shall not knowingly make
29 a loan to a consumer who has an existing loan or loans with the
30 payday lender or any other licensee if the aggregate amount of
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1 all loans outstanding to the consumer exceeds the maximum amount
2 permitted under section 5114(a) (relating to maximum amount of
3 loans; terms of loans; right of rescission) or who has entered
4 into an extended payment plan under section 5125 (relating to
5 extended payment plan) which has not yet been paid in full. A
6 consumer may not have loans outstanding from more than two
7 payday lenders at any one time.
8 (b) General cooling-off period.--A payday lender shall not
9 knowingly make a loan to a consumer if the loan will result in
10 the consumer being or having been indebted to one or two payday <--
11 lenders THE PAYDAY LENDER for a period in excess of 60 <--
12 consecutive days. If a consumer has or has had loans outstanding
13 for 60 consecutive days, no payday lender may offer or make a
14 loan to the consumer for at least seven continuous days from the
15 date of repayment of the last loan. Notwithstanding this
16 prohibition, a payday lender may enter into an extended payment
17 plan agreement with a consumer in accordance with section 5125.
18 For purposes of this subsection, the term "consecutive days"
19 means a series of continuous days in which the consumer is party
20 to one or more loans with payday lenders, including up to six
21 days between such loans.
22 (c) Verification.--A consumer shall verify in writing at the
23 time of entering into a loan transaction:
24 (1) that the consumer does not have a loan or loans
25 outstanding from any payday lender, the aggregate outstanding
26 balance of which exceeds the maximum loan amount permitted
27 under section 5114(a);
28 (2) that the consumer has not entered into an extended
29 payment plan under section 5125 which has not yet been paid
30 in full; and
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1 (3) the date of repayment of the consumer's last loan,
2 if applicable.
3 (d) Confirmation.--A payday lender shall confirm the
4 accuracy of the verification required by subsection (c) by:
5 (1) A query of the payday lender's own records.
6 (2) A query of the database as described in subsection <--
7 (e).
8 (e) Procedure to determine outstanding loans and repayment
9 dates.--
10 (1) The department shall engage a third-party provider
11 capable of developing, implementing and maintaining a
12 database with real time access for reporting of loan
13 transactions and verifying the information required by
14 subsections (a), (b) and (c).
15 (2) Payday lenders shall report to the database
16 information determined by the department to be necessary to
17 verify the number and amount of loans a consumer has
18 outstanding with any payday lender and the date of repayment
19 of a consumer's last loan.
20 (3) The department may charge licensees a fee, to be
21 determined by the department, for each database transaction
22 in order to offset the department's costs in establishing and
23 maintaining the database. SUCH OTHER INFORMATION AS MAY BE <--
24 REASONABLY AND LAWFULLY AVAILABLE TO THE PAYDAY LENDER.
25 (E) PROHIBITED LOCATION.--THE LOCATION OF A PAYDAY LOAN
26 BUSINESS, EXCEPT A LOCATION IN EXISTENCE AS OF THE EFFECTIVE
27 DATE OF THIS SUBSECTION, MAY NOT BE WITHIN 100 FEET OF A HORSE
28 RACETRACK SUBJECT TO THE ACT OF DECEMBER 17, 1981 (P.L.435,
29 NO.135), KNOWN AS THE RACE HORSE INDUSTRY REFORM ACT, OR WITHIN
30 100 FEET OF A LICENSED GAMING FACILITY AT WHICH SLOT MACHINE
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1 GAMING IS CONDUCTED PURSUANT TO 4 PA.C.S. PT. II (RELATING TO
2 GAMING).
3 § 5115.1 MANDATORY REPORTING OF DATA TO A SUBPRIME CREDIT
4 BUREAU.
5 (A) REPORTING.--EVERY PAYDAY LENDER SHALL REPORT SUCH
6 TRADELINE DATA AS IS PERMITTED UNDER THE FAIR CREDIT REPORTING
7 ACT (FCRA) (PUBLIC LAW 91-508, 15 U.S.C. § 1681 ET SEQ.) FOR ALL
8 TRANSACTIONS CONDUCTED PURSUANT TO THIS CHAPTER TO A QUALIFIED
9 CREDIT BUREAU. THE DEPARTMENT SHALL PROMULGATE REGULATIONS
10 SPECIFYING THE DATA WHICH MUST BE REPORTED TO SUCH CREDIT BUREAU
11 AND MANDATING THE FREQUENCY AT WHICH SUCH REPORTING MUST OCCUR.
12 (B) MINIMUM REQUIREMENTS FOR CREDIT BUREAU.--THE DEPARTMENT
13 SHALL DETERMINE THE MINIMUM REQUIREMENTS SUCH CREDIT BUREAU MUST
14 MEET TO BE DEEMED QUALIFIED TO TRACK AND ACCURATELY REPORT DATA
15 FOR TRANSACTIONS OCCURRING PURSUANT TO THIS ACT. SUCH CREDIT
16 BUREAUS MUST REPORT TRADELINE DATA FOR EACH SUCH TRANSACTION AND
17 CALCULATE A CREDIT SCORE BASED ON EACH CONSUMER'S CREDIT HISTORY
18 WHICH ACCURATELY REFLECTS THE CREDITWORTHINESS OF SUCH CONSUMER
19 BASED ON THE CONSUMER'S BORROWING AND REPAYMENT OF PAYDAY LOANS.
20 (C) DEPARTMENT REQUIREMENTS.--THE DEPARTMENT MAY REQUIRE ANY
21 INDIVIDUAL OR ENTITY LICENSED BY THE COMMONWEALTH UNDER THE ACT
22 OF APRIL 8, 1937 (P.L.262, NO.66), KNOWN AS THE CONSUMER
23 DISCOUNT COMPANY ACT, THE ACT OF SEPTEMBER 2, 1965 (P.L.490,
24 NO.249), REFERRED TO AS THE MONEY TRANSMISSION BUSINESS
25 LICENSING LAW, THE ACT OF DECEMBER 12, 1980 (P.L.1179, NO.219),
26 KNOWN AS THE SECONDARY MORTGAGE LOAN ACT, AND/OR THE ACT OF
27 DECEMBER 22, 1989 (P.L.687, NO.90), KNOWN AS THE MORTGAGE
28 BANKERS AND BROKERS AND CONSUMER EQUITY PROTECTION ACT, TO
29 REPORT CONSUMER TRADELINE DATA TO A CREDIT BUREAU DEEMED
30 QUALIFIED UNDER THIS CHAPTER. IN ADDITION, LENDERS AUTHORIZED TO
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1 TRANSACT BUSINESS IN THIS COMMONWEALTH OTHER THAN UNDER THIS
2 CHAPTER MAY VOLUNTARILY SUBMIT TRADELINE DATA REGARDING CONSUMER
3 TRANSACTIONS TO THE CREDIT BUREAU PROVIDED THE INCLUSION OF SUCH
4 DATA IN CONSUMER CREDIT REPORTS DOES NOT VIOLATE THE FCRA.
5 (D) ACCESS TO CONSUMER CREDIT REPORTS AND CREDIT SCORES.--
6 (1) INQUIRIES TO THE CREDIT BUREAU MAY BE MADE BY ANY
7 PERSON OR ENTITY, AND/OR FOR ANY PURPOSE PERMITTED UNDER THE
8 FCRA.
9 (2) CONSUMERS MAY OBTAIN COPIES ON THEIR OWN CREDIT
10 REPORTS AND SCORES UPON WRITTEN REQUEST TO THE CREDIT BUREAU
11 FREE OF CHARGE ONCE PER CALENDAR QUARTER, AT ANY TIME
12 FOLLOWING THE DENIAL OF CREDIT IF SUCH DENIAL WAS BASED, IN
13 WHOLE OR IN PART, UPON INFORMATION PROVIDED BY THE CREDIT
14 BUREAU, AND FOR ANY OTHER REASON PERMITTED UNDER THE FCRA.
15 (3) IT BEING THE GENERAL ASSEMBLY'S EXPRESS PURPOSE TO
16 ENCOURAGE POTENTIAL CREDITORS TO OFFER MAINSTREAM CREDIT
17 PRODUCTS ON COMPETITIVE TERMS TO PAYDAY LOAN CONSUMERS, THE
18 CREDIT BUREAU IS PROHIBITED FROM CONSIDERING THE FREQUENCY OF
19 INQUIRIES REGARDING A PARTICULAR CONSUMER'S CREDIT IN
20 CALCULATING THAT CONSUMER'S CREDIT SCORE.
21 (4) IN ADDITION TO ANY AND ALL REMEDIES AVAILABLE UNDER
22 THE FCRA, A VIOLATION OF ANY PROVISION OF THIS CHAPTER SHALL
23 BE DEEMED TO BE A VIOLATION OF THE ACT OF DECEMBER 17, 1968
24 (P.L.1224, NO.387), KNOWN AS THE UNFAIR TRADE PRACTICES AND
25 CONSUMER PROTECTION LAW, AND THE VIOLATOR SHALL BE SUBJECT TO
26 THE PENALTIES SET FORTH THEREIN.
27 § 5116. Renewal loans.
28 A payday loan may not be renewed more than once. A renewal
29 loan must satisfy the existing payday loan in full, shall be
30 documented by a loan agreement, including the inclusion of a new
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1 deferment period and a new set of disclosures, and shall require
2 the agreement by the consumer and the payday lender of a new
3 repayment mechanism. At the end of the deferment period for the
4 renewal loan, the consumer must either pay the renewal loan in
5 cash or its equivalent or enter into an extended payment plan in
6 accordance with section 5125 (relating to extended payment
7 plan). If the consumer fails to pay the renewal loan when due or
8 enter into an extended payment plan, the payday lender may
9 deposit the consumer's check or utilize any other repayment
10 mechanism provided for in the loan agreement. It shall be the
11 option of the payday lender to determine whether to offer a
12 renewal loan to a consumer.
13 § 5117. Form of loan proceeds.
14 (a) General rule.--A payday lender shall disburse the
15 proceeds of a loan to the consumer in the form of an immediately
16 and locally cashable check, money order, debit card or credit to
17 the consumer's account at a depository institution or cash.
18 (b) Prohibition.--A payday lender may not impose an
19 additional finance charge or fee for cashing the payday lender's
20 check or money order or for otherwise effecting the disbursement
21 of loan proceeds.
22 § 5118. Endorsement of check.
23 A payday lender may not negotiate or present a check for
24 payment of a loan unless the instrument is endorsed with the
25 actual business name of the payday lender.
26 § 5119. Redemption of repayment mechanism.
27 Prior to the payday lender's negotiating or presenting a
28 consumer's check, or utilizing any other repayment mechanism,
29 the consumer shall have the right to redeem the check or any
30 other repayment mechanism if the consumer pays the full amount
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1 of the check or other repayment mechanism to the payday lender.
2 § 5120. Authorized charge for dishonored repayment mechanisms.
3 (a) General rule.--If a consumer's repayment mechanism is
4 dishonored due to insufficient funds in the consumer's account,
5 the payday lender:
6 (1) Shall have the right to exercise all civil means
7 authorized by law to collect the face value of the repayment
8 mechanism.
9 (2) May contract for and collect from the consumer a
10 charge not to exceed $25.
11 (3) May not collect any other fees as a result of the
12 dishonor, including damages available under 42 Pa.C.S. § 8304
13 (relating to damages in actions on bad checks).
14 (b) When charge not allowed.--A charge authorized by this
15 section shall not be allowed:
16 (1) if the consumer does not receive the loan proceeds
17 from the payday lender for any reason; or
18 (2) if the consumer places a stop-payment order due to
19 forgery or theft.
20 § 5121. Posting of charges and notice of mandatory extended
21 payment plan.
22 (a) Posting of charges.--A payday lender shall post in large
23 type in plain view of the public at any place of business where
24 payday loans are made a notice of the finance charges and any
25 related charges, such as the charge for dishonored repayment
26 mechanisms, imposed for loans.
27 (b) Mandatory notice.--A payday lender shall provide to each
28 consumer at the time a loan agreement is signed, and
29 conspicuously display in the lending area of each business
30 location of the payday lender, the following notice:
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1 Notice: If you are unable to repay your payday loan, you
2 may be entitled to an extended payment plan agreement. <--
3 ARE ENTITLED TO AN EXTENDED PAYMENT PLAN AGREEMENT WITH A <--
4 FULLY DISCLOSED RATE, TERM AND PAYMENT BEFORE YOU ARE
5 COMMITTED TO YOUR FIRST LOAN. The lender must provide you
6 with an extended payment plan agreement at any time you
7 declare an inability to repay a second loan from the
8 lender made within six days of the first loan prior to
9 the loan's due date or any outstanding loans at the end
10 of 60 consecutive days of indebtedness. The lender may
11 collect a finance charge for each extended payment plan.
12 If the lender refuses to provide you with an extended
13 payment plan, you should contact the Pennsylvania
14 Department of Banking. In addition, you are required to
15 enter into an extended payment plan under certain
16 circumstances that the lender is required to describe to
17 you.
18 § 5122. Notice of assignment or sale of loans.
19 (a) General rule.--A payday lender shall inform a consumer
20 in writing immediately of the name, address and telephone number
21 of the person to whom a loan is assigned or sold. A payday
22 lender may only assign or sell a loan to another payday lender
23 or to a depository institution.
24 (b) Notice.--Prior to the assignment or sale of a loan, a
25 payday lender shall provide the following notice to the buyer or
26 assignee:
27 The repayment mechanism associated with this loan has
28 been given by a consumer to secure a payday loan
29 transaction under Pennsylvania State law and the assignee
30 or buyer is deemed to have knowledge of and shall be
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1 bound by the terms and conditions of the loan agreement
2 between the consumer and the original lender.
3 § 5123. No criminal culpability.
4 A consumer shall not be subject to a criminal penalty:
5 (1) For entering into a loan agreement.
6 (2) In the event a consumer's repayment mechanism is
7 dishonored unless the consumer's account on which the
8 repayment mechanism is drawn is closed by the consumer before
9 the end of the agreed-upon deferment period, in which event
10 the provisions of 18 Pa.C.S. § 4105 (relating to bad checks)
11 or 4106 (relating to access device fraud), as applicable,
12 shall apply.
13 § 5124. Unfair or deceptive practices.
14 A person may not engage in unfair or deceptive acts,
15 practices or advertising in connection with a loan. A violation
16 of this section shall be deemed a violation of the act of
17 December 17, 1968 (P.L.1224, No.387), known as the Unfair Trade
18 Practices and Consumer Protection Law.
19 § 5125. Extended payment plan.
20 (a) General rule.--
21 (1) A payday lender shall offer a consumer an extended
22 payment plan agreement if at any time the consumer declares
23 an inability to repay:
24 (i) a second loan from a payday lender when due,
25 provided that the second loan was from the same payday
26 lender and entered into within six days of the due date
27 of the prior payday loan; or
28 (ii) any outstanding loans at the end of 60
29 consecutive days of indebtedness as contemplated by
30 section 5115(b) (relating to prohibitions).
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1 (2) The consumer shall accept an extended payment plan
2 agreement if the consumer declares an inability to repay:
3 (i) a single renewal loan when due; or
4 (ii) any outstanding loans at the end of 60
5 consecutive days of indebtedness as contemplated by
6 section 5115(b).
7 (b) Extended payment plan agreement.--An extended payment
8 plan agreement shall:
9 (1) be considered an extension of the existing loan
10 obligation;
11 (2) be subject to the requirements and restrictions of a
12 loan agreement as specified in section 5112 (relating to loan
13 agreement requirements), excluding section 5112(a)(4), (8),
14 (10), (11) and (13) and the form notice in section
15 5112(a)(14); and
16 (3) be subject to the following terms:
17 (i) The principal balance due under the extended
18 payment plan shall be the outstanding principal balance
19 and finance charge due under the existing loan plus the
20 finance charge permitted under subparagraph (ii). The
21 payday lender may encourage, but shall not require, the
22 consumer to reduce the balance of the existing loan by
23 paying the payday lender cash on the date the consumer
24 enters into the extended payment plan agreement.
25 (ii) The payday lender may impose a finance charge
26 for entering into the extended payment plan that may not
27 exceed 10% of the principal balance due under the
28 existing loan. The finance charge shall be deemed fully
29 earned as of the date of the transaction unless the
30 consumer rescinds the extended payment plan under
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1 subparagraph (v). The payday lender may impose only the
2 fees and charges authorized in this section and in
3 section 5120 (relating to authorized charge for
4 dishonored repayment mechanisms) in connection with an
5 extended payment plan.
6 (iii) The extended payment plan agreement shall
7 allow the consumer to pay the sums due under the extended
8 payment plan over at least eight 14-day terms. Each
9 installment shall be in an amount arrived at by dividing
10 the total amount outstanding under subparagraph (i) to a
11 payday lender by the number of 14-day terms of the
12 extended payment plan. If the consumer has loans
13 outstanding to two lenders and is unable to pay both
14 loans, the consumer shall enter into an extended payment
15 plan with each payday lender. A consumer may, at any
16 time, partially or entirely pay off an extended payment
17 plan.
18 (iv) A payday lender shall report to the database
19 described in section 5115 that the consumer is enrolled
20 in an extended payment plan.
21 (v) Except when the consumer is required to enter
22 into an extended payment plan under the provisions of
23 this chapter, the consumer shall have the same right to
24 rescind an extended payment plan as is provided in
25 section 5114(b) (relating to maximum amount of loans;
26 terms of loans; right of rescission) for the rescission
27 of a loan.
28 (c) Eligibility requirements.--In order to enter into an
29 extended payment plan, a consumer must:
30 (1) Have obtained a loan from the same payday lender, or
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1 its assignee, that will enter into the extended payment plan.
2 (2) Request an extended payment plan no later than the
3 due date of the loan.
4 (3) Reasonably inform the payday lender, either orally
5 or in writing, that the consumer requests an extended payment
6 plan.
7 (d) Prohibition.--During any period in which all or part of
8 an extended payment plan is outstanding and during the seven-day
9 period following a consumer's payment in full of an extended
10 payment plan, no payday lender may make or offer to make a
11 payday loan to the consumer.
12 § 5126. Prohibited practices regarding loans.
13 The following are prohibited regarding loans:
14 (1) Taking or attempting to take any security other than
15 the consumer's check or other repayment mechanism.
16 (2) Taking or attempting to take more than a single
17 check or other repayment mechanism from the consumer in
18 connection with a single transaction.
19 (3) Selling, offering or soliciting any application for
20 credit insurance in connection with a transaction.
21 (4) Tying a transaction to any other transaction, offer
22 or obligation of the consumer.
23 (5) Assigning or selling a loan to another person other
24 than in accordance with the provisions of this chapter.
25 (6) Engaging in any device or subterfuge to evade the
26 requirements of this chapter, including making loans
27 disguised as personal property sales and leaseback
28 transactions or disguising loan proceeds as cash rebates for
29 the pretextual installment sale of goods and services.
30 (7) Failing to collect and provide information regarding
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1 the number, total and average transaction amounts and other
2 information the department may request.
3 (8) Offering, arranging, negotiating, making, holding or
4 acting as an agent or broker for the making of a loan unless
5 the payday lender complies with all applicable provisions of
6 this chapter.
7 (9) Altering or deleting the date on any loan agreement
8 or repayment mechanism held by the payday lender.
9 (10) Rolling over, refinancing, extending or
10 consolidating payday loans except as provided in sections
11 5116 (relating to renewal loans) and 5125 (relating to
12 extended payment plan).
13 (11) Failing to immediately and accurately report a loan
14 or an extended payment plan to the database provider as
15 required by this chapter or by the department.
16 (12) Threatening to use or using the criminal process in
17 any state to collect the balance due on a loan.
18 (13) Depositing a check or otherwise implementing any
19 repayment mechanism prior to the expiration of the agreed-
20 upon deferment period.
21 § 5127. Commonwealth Financial Literacy Account.
22 (a) Establishment of account.--There is hereby established
23 within the Banking Department Fund a restricted account to be
24 known as the Commonwealth Financial Literacy Account. Funds
25 collected under subsections (b) and (c) shall be deposited in
26 the account.
27 (b) Required deposits.--On December 1 of each year beginning
28 with the December immediately following the effective date of
29 this section, payday lenders shall deposit into the account 25¢
30 for each payday loan transaction entered into by them during the
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1 preceding 12-month period.
2 (c) Penalties and interest.--In addition to any other remedy
3 provided by law, the department may enforce collection of the
4 amount of the deposit required by subsection (b) by imposing the
5 following remedies:
6 (1) When a payday lender fails to make the deposit on
7 the date required, the department shall add interest at the
8 rate provided in section 806 of the act of April 9, 1929
9 (P.L.343, No.176), known as The Fiscal Code, to the unpaid
10 amount until the date it is paid.
11 (2) When a payday lender fails to make the deposit in a
12 timely manner or provide records or information to the
13 department for calculation of the amount owed, the department
14 shall impose a penalty against the payday lender in the
15 amount of $10,000, plus an additional amount of $200 per day
16 for each additional day that the payday lender fails to
17 provide the required information or records.
18 (3) The department may waive all or part of the penalty
19 assessed against a payday lender pursuant to paragraph (2)
20 for good cause shown by the payday lender.
21 (d) Liens.--Any amount owed by and interest and penalties
22 assessed against a payday lender under this section shall be a
23 lien on the real and personal property of the payday lender in
24 the manner provided by section 1401 of The Fiscal Code. The lien
25 may be entered by the department in the manner provided by
26 section 1404 of The Fiscal Code and shall continue and retain
27 priority in the manner provided in section 1404.1 of The Fiscal
28 Code.
29 § 5128. Licensee duties with respect to military personnel.
30 (a) Collection activity.--A licensee shall defer collection
20050H1478B2309 - 23 -
1 activity against:
2 (1) a consumer who is a member of the military that has
3 been deployed to combat or a combat support posting, for the
4 duration of the posting; or
5 (2) a reserve or National Guard member called to active
6 duty.
7 (b) Military personnel.--A licensee shall not contact the
8 military chain of command of a consumer who is a member of the
9 military in an effort to collect a loan.
10 (c) Repayment agreement.--A licensee shall honor the terms
11 of any repayment agreement that it has entered into with a
12 consumer who is a member of the military, including any
13 repayment agreement negotiated through military counselors or
14 third-party credit counselors.
15 SUBCHAPTER C
16 ADMINISTRATIVE AND LICENSURE PROVISIONS
17 Sec.
18 5131. Application for license.
19 5132. Annual license fee.
20 5133. Public notification.
21 5134. Issuance of license.
22 5135. License duration.
23 5136. Licensee requirements.
24 5137. Licensee limitations.
25 5138. Surrender of license.
26 5139. Authority of department.
27 5140. Suspension, revocation or refusal.
28 5141. Penalties.
29 § 5131. Application for license.
30 (a) Contents.--An application for a license under this
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1 chapter shall be on a form prescribed and provided by the
2 department. The application shall include the name of the
3 applicant, the address of the principal place of business of the
4 applicant and the address or addresses where the applicant's
5 payday loan business is to be conducted, the full name, official
6 title and business address of each director and principal
7 officer of the payday loan business and any other information
8 that may be required by the department. An applicant shall
9 demonstrate to the department that policies and procedures have
10 been developed to receive and process consumer inquiries and
11 grievances promptly and fairly.
12 (b) Duty to update.--All applicants and licensees shall be
13 required to provide the department with written notice of the
14 change in any information contained in an application for a
15 license or for any renewal of a license promptly upon an
16 applicant or licensee becoming aware of such change.
17 (c) Financial structure.--
18 (1) The applicant must establish that:
19 (i) At the time of application, the applicant has a
20 minimum tangible net worth of $250,000.
21 (ii) The applicant will, at all times thereafter,
22 maintain the minimum tangible net worth required by
23 subparagraph (i).
24 (2) Prior to and as a condition of the issuance of a
25 license, an applicant for a license shall maintain a bond in
26 the amount of $100,000 in a form acceptable to the department
27 from a surety company authorized to do business in this
28 Commonwealth. The bond shall be a penal bond conditioned on
29 compliance by the licensee with this chapter and subject to
30 forfeiture and shall run to the Commonwealth for its use and
20050H1478B2309 - 25 -
1 shall be held by the department for the term of the license.
2 The bond shall also be for the use of any consumer against
3 the licensee for failure to carry out the terms of any loan
4 or extended payment plan. If a consumer is aggrieved, he may,
5 with the written consent of the department, recover the
6 amount by which the consumer is aggrieved from the bond by
7 filing a claim with the surety company or maintaining an
8 action on the bond. In the alternative, an aggrieved consumer
9 may recover the amount by which the consumer is aggrieved by
10 filing a formal complaint against the licensee with the
11 department which shall adjudicate the matter. Such an
12 adjudication shall be binding upon the surety company and
13 enforceable by the department in Commonwealth Court and by an
14 aggrieved consumer in any court. Any aggrieved consumer
15 seeking to recover any amount from a bond that has already
16 been forfeited by the licensee or which the department is in
17 the process of having forfeited may recover payment on such
18 bond if, after filing a petition with the department, the
19 department consents to the requested payment or portion
20 thereof. The department may pay the aggrieved consumer from
21 the bond proceeds recovered by the department in such case.
22 Nothing in this paragraph shall be construed as limiting the
23 ability of any court or magisterial district judge to award
24 to any aggrieved consumer other damages, court costs and
25 attorney fees permitted by applicable law, but those claims
26 that are not directly related to the loan or extended payment
27 plan may not be recovered from the proceeds of the bond. The
28 department, in its discretion, may consent to or order pro
29 rata or other recovery on the bond for any aggrieved consumer
30 if claims against the bond may or do exceed its full monetary
20050H1478B2309 - 26 -
1 amount. No bond shall comply with the requirements of this
2 paragraph unless it contains a provision that it shall not be
3 canceled for any cause unless notice of intention to cancel
4 is given to the department at least 30 days before the day
5 upon which cancellation shall take effect. In such event, the
6 licensee shall be required to replace the bond with a bond
7 substantially in the same form as the original bond.
8 Cancellation of the bond shall not invalidate the bond
9 regarding the period of time it was in effect.
10 (3) The applicant must also establish to the
11 satisfaction of the department that the applicant has an
12 otherwise adequate financial structure.
13 (d) License renewals.--Licenses shall be issued for terms of
14 12 months and may be renewed by the department upon application
15 by the licensee and the payment of any and all applicable
16 renewal fees. A licensee shall comply with the same requirements
17 for renewal of its license as it did for the issuance of the
18 original license.
19 § 5132. Annual license fee.
20 (a) General rule.--An applicant for a license shall pay to
21 the department at the time an application is filed and upon
22 filing of each application for renewal thereof a license fee for
23 the principal place of business of $1,000 and an additional
24 license fee for each branch office of $1,000.
25 (b) Recovery of costs.--No abatement of a licensee fee shall
26 be made if the license is issued for a period of less than one
27 year. The department shall be entitled to recover any cost of
28 investigation in excess of license or renewal fees from the
29 licensee or from a person who is not licensed under this chapter
30 but who is believed to be engaged in the payday loan business.
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1 § 5133. Public notification.
2 (a) General rule.--Each applicant for a new license under
3 this chapter shall be required to post a notice for public
4 display at any location in this Commonwealth where licensing is
5 being requested. The purpose of the notice is to identify to the
6 public that an application to operate a payday loan office at
7 the location has been filed with the department. The applicant
8 shall:
9 (1) Be required to post a notice commencing on the day
10 the application was filed with the department.
11 (2) Be required to maintain the notice until a decision
12 to approve or disapprove the license has been made by the
13 department.
14 (3) Be responsible for posting the notice in a
15 conspicuous location that is as close as possible to the main
16 entrance of the location requesting licensure.
17 (4) Be required to use a notice that is in a size and
18 form as determined by the department.
19 (b) Applicability.--This section shall not apply to any
20 location where a payday loan business was being conducted in
21 this Commonwealth on the effective date of this chapter.
22 § 5134. Issuance of license.
23 (a) Time limit.--Within 60 days after a completed
24 application is received, the department shall either issue a
25 license or, for any reason which the department may refuse to
26 issue a license under this section or for which the department
27 may suspend, revoke or refuse to renew a license under section
28 5140 (relating to suspension, revocation or refusal), refuse to
29 issue a license. Upon receipt of an application for a license,
30 the department may conduct such investigation as it deems
20050H1478B2309 - 28 -
1 necessary to determine that the applicant and its officers,
2 directors and principals are of good character and ethical
3 reputation.
4 (b) Appeal of denial.--If the department refuses to issue a
5 license, it shall notify the applicant in writing of the denial,
6 the reason therefor and the applicant's right to appeal the
7 denial to the Secretary of Banking. An appeal from the
8 department's refusal to approve an application for a license
9 must be filed by the applicant within 30 days of notice of
10 refusal.
11 (c) Contents of license.--Each license issued by the
12 department shall specify:
13 (1) The name and address of the licensee and the address
14 or addresses covered by the license.
15 (2) The licensee's reference number.
16 (3) Any other information the department shall require
17 to carry out the purposes of this chapter.
18 (d) Denial of license due to conviction.--
19 (1) The department may deny a license if it finds that
20 the applicant or a director, officer, partner or ultimate
21 equitable owner of 10% or more of the applicant has been
22 convicted of a crime of moral turpitude or felony in any
23 jurisdiction or of a crime which, if committed in this
24 Commonwealth, would constitute a crime of moral turpitude or
25 felony. For the purposes of this chapter, a person shall be
26 deemed to have been convicted of a crime if the person:
27 (i) pleads guilty or nolo contendere to a criminal
28 charge before a Federal magistrate or a court; or
29 (ii) is found guilty by the decision or judgment of
30 a Federal magistrate or a court or by the verdict of a
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1 jury, irrespective of the pronouncement of sentence or
2 the suspension thereof, unless the plea of guilty or nolo
3 contendere or the decision, judgment or verdict is set
4 aside, vacated, reversed or otherwise abrogated by lawful
5 judicial process.
6 (2) A license under this chapter shall be deemed to be a
7 "covered license" within the meaning of section 405 of the
8 act of May 15, 1933 (P.L.565, No.111), known as the
9 Department of Banking Code. The department shall notify a
10 licensee if a "covered individual" within the meaning of
11 section 405 of the Department of Banking Code that is or will
12 be employed or contracted by the licensee has a criminal
13 background that renders the employee unfit for employment in
14 the payday loan business.
15 (e) Denial of license for other reason.--The department may
16 deny a license or otherwise restrict a license if it finds that
17 the applicant or a director, officer, partner, employee, agent
18 or ultimate equitable owner of 10% or more of the applicant:
19 (1) has had a license application or license issued by
20 the department denied, suspended or revoked;
21 (2) is the subject of an order of the department;
22 (3) has violated or failed to comply with any provisions
23 of this chapter or any regulation or order of the department;
24 (4) is not of good character and ethical reputation in
25 the opinion of the department; or
26 (5) has an outstanding debt to the Commonwealth or any
27 Commonwealth agency.
28 § 5135. License duration.
29 A license issued by the department:
30 (1) Must be renewed on February 1 of each year upon
20050H1478B2309 - 30 -
1 payment of the annual renewal fee and after the department
2 determines that the licensee is conducting business in
3 accordance with this chapter. No refund of any portion of the
4 license fee shall be made if the license is voluntarily
5 surrendered to the department or suspended or revoked by the
6 department prior to its expiration date.
7 (2) Shall be invalid if the licensee's authority to
8 conduct business is voided under any law of this Commonwealth
9 or any other state unless the licensee demonstrates that the
10 applicable court or governmental entity was clearly erroneous
11 in voiding the licensee's authority to conduct business.
12 (3) Shall not be assignable or transferable by operation
13 of law or otherwise.
14 § 5136. Licensee requirements.
15 (a) Requirements of a licensee.--A licensee shall:
16 (1) Conspicuously display its license at each licensed
17 place of business.
18 (2) Maintain at its principal place of business within
19 this Commonwealth, or at such place within or outside this
20 Commonwealth if agreed to by the department, the original or
21 a copy of any books, accounts, records and documents or
22 electronic or similar access thereto of the business
23 conducted under the license as prescribed by the department
24 to enable the department to determine whether the business of
25 the licensee is being conducted in accordance with the
26 provisions of this chapter and the orders, regulations and
27 statements of policy issued under this chapter. The
28 department shall have free access to and authorization to
29 examine records maintained outside this Commonwealth. The
30 costs of the examination, including travel costs, shall be
20050H1478B2309 - 31 -
1 borne by the licensee. The department may deny or revoke the
2 authority to maintain records outside this Commonwealth for
3 good cause in the interest of protection for Commonwealth
4 consumers, including for the licensee's failure to provide
5 books, accounts, records or documents to the department upon
6 request.
7 (3) Annually, before December 1, file a report with the
8 department setting forth such information as the department <--
9 shall require concerning the payday loan business conducted
10 by the licensee during the preceding calendar year. The
11 report shall be in writing and under oath on a form provided
12 by the department. Licensees failing to file the required
13 report by December 1 shall be subject to a penalty of $100
14 for each day after December 1 until the report is filed. THE <--
15 REPORT SHALL INCLUDE, BUT IS NOT LIMITED TO, THE FOLLOWING:
16 (I) THE TOTAL NUMBER OF PAYDAY LOANS MADE DURING THE
17 PRECEDING CALENDAR YEAR.
18 (II) THE MINIMUM, MAXIMUM AND AVERAGE DOLLAR AMOUNT
19 OF PAYDAY LOANS MADE DURING THE PRECEDING CALENDAR YEAR.
20 (III) THE AVERAGE ANNUAL PERCENTAGE RATE AND THE
21 AVERAGE TERM OF PAYDAY LOANS MADE DURING THE PRECEDING
22 CALENDAR YEAR.
23 (IV) THE TOTAL NUMBER OF RETURNED CHECKS, THE TOTAL
24 OF CHECKS RECOVERED AND THE TOTAL OF CHECKS CHARGED OFF
25 DURING THE PRECEDING CALENDAR YEAR.
26 (V) THE TOTAL NUMBER OF PAYDAY LOANS PAID IN FULL,
27 THE TOTAL NUMBER OF LOANS THAT WENT INTO DEFAULT AND THE
28 TOTAL NUMBER OF LOANS CHARGED OFF DURING THE PRECEDING
29 CALENDAR YEAR.
30 (VI) THE TOTAL NUMBER OF CONSUMER COMPLAINTS.
20050H1478B2309 - 32 -
1 (VII) FREQUENCY OF REPEAT USE BY CONSUMERS OF
2 POSTDATED OR DELAYED DEPOSIT CHECKS.
3 (VIII) VERIFICATION THAT THE LICENSEE HAS NOT USED
4 THE CRIMINAL PROCESS OR CAUSED THE CRIMINAL PROCESS TO BE
5 USED IN THE COLLECTION OF ANY PAYDAY LOAN DURING THE
6 PRECEDING CALENDAR YEAR.
7 (IX) INFORMATION ON THE NUMBER OF CONSUMERS REFERRED
8 TO FINANCIAL LITERACY COUNSELING WITHIN THE PRECEDING
9 CALENDAR YEAR.
10 (X) ANY OTHER INFORMATION OR DATA THE DEPARTMENT MAY
11 REQUIRE.
12 (4) Be subject to examination by the department at its
13 discretion, at which time the department shall have free
14 access, during regular business hours, to the licensee's
15 place or places of business in this Commonwealth and to all
16 instruments, documents, accounts, books and records which
17 pertain to a licensee's payday loan business, whether
18 maintained in or outside this Commonwealth. The department
19 may examine a licensee at any time if the department deems
20 the examination to be necessary or desirable. The cost of any
21 such examination shall be borne by the licensee.
22 (5) Include in all advertisements language indicating
23 that the licensee is licensed by the department.
24 (b) Accounting records.--The licensee's accounting records
25 must be constructed and maintained in compliance with generally
26 accepted accounting principles or as provided by the department
27 regulation. All instruments, documents, accounts, books and
28 records shall be kept separate and apart from the records of any
29 other business conducted by the licensee and shall be preserved
30 and kept available for investigation or examination by the
20050H1478B2309 - 33 -
1 department for a period determined by the department.
2 (c) Copies.--If copies of instruments, documents, accounts,
3 books or records are maintained under subsection (a)(2), they
4 may be photostatic, microfilm or electronic copies or copies
5 provided in some other manner approved by the department.
6 § 5137. Licensee limitations.
7 A licensee shall not:
8 (1) Transact any business under this chapter under any
9 other name or names except those designated in its license. A
10 licensee that changes its name or place or places of business
11 shall immediately notify the department, which shall issue a
12 certificate to the licensee, if appropriate, which shall
13 specify the licensee's new name or address.
14 (2) Conduct a business other than the payday loan
15 business licensed by the department under this chapter
16 without at least 30 days' prior written notification to and
17 approval by the department.
18 § 5138. Surrender of license.
19 Upon satisfying the department that all creditors of a
20 licensee have been paid or that other arrangements satisfactory
21 to the creditors and the department have been made, a licensee
22 may voluntarily surrender its license to the department by
23 delivering its license to the department with written notice
24 that the license is being voluntarily suspended, but such an
25 action by a licensee shall not affect the licensee's civil or
26 criminal liability for acts committed.
27 § 5139. Authority of department.
28 (a) General authority.--The department shall have the
29 authority to:
30 (1) Examine any instrument, document, account, book,
20050H1478B2309 - 34 -
1 record or file of a licensee or any person having a
2 connection to the licensee or make such other investigation
3 as may be necessary to administer the provisions of this
4 chapter. The costs of the examination shall be borne by the
5 licensee or the entity subject to the examination.
6 (2) Conduct administrative hearings on any matter
7 pertaining to this chapter, issue subpoenas to compel the
8 attendance of witnesses and the production of instruments,
9 documents, accounts, books and records at any such hearing.
10 The instruments, documents, accounts, books and records may
11 be retained by the department until the completion of all
12 proceedings in connection with which the materials were
13 produced. A department official may administer oaths and
14 affirmations to a person whose testimony is required. In the
15 event a person fails to comply with a subpoena issued by the
16 department or to testify on a matter concerning which he may
17 be lawfully interrogated, on application by the department,
18 the Commonwealth Court may issue an order requiring the
19 attendance of the person, the production of instruments,
20 documents, accounts, books and records and the giving of
21 testimony.
22 (3) Request and receive information or records of any
23 kind, including reports of criminal history record
24 information from any Federal, State, local or foreign
25 government entity regarding an applicant for a license,
26 licensee or person related in any way to the business of the
27 applicant or licensee, at a cost to be paid by the applicant
28 or licensee.
29 (4) Require a licensee or nonlicensee to pay the
30 department's costs incurred while conducting an investigation
20050H1478B2309 - 35 -
1 of the licensee or nonlicensee for purposes of issuance or
2 renewal of a license or for any violation of this chapter.
3 (5) Promulgate regulations and statements of policy and
4 issue orders as may be necessary for the proper conduct of
5 the payday loan business by payday lenders, the issuance and
6 renewal of licenses and the enforcement of this chapter.
7 (6) Prohibit or permanently remove an individual
8 responsible for a violation of this chapter from working in
9 his present capacity or in any other capacity related to
10 activities regulated by the department.
11 (7) Order a person to make restitution for actual
12 damages to consumers caused by any violation of this chapter.
13 (8) Impose such other conditions as the department deems
14 appropriate.
15 (b) Hearings.--A person aggrieved by a decision of the
16 department may appeal the decision of the department to the
17 Secretary of Banking. The appeal shall be conducted under 2
18 Pa.C.S. Ch. 5 Subch. A (relating to practice and procedure of
19 Commonwealth agencies).
20 (c) Injunctions.--The department may maintain an action for
21 an injunction or other process against a person to restrain and
22 prevent the person from engaging in an activity violating this
23 chapter.
24 (d) Final orders.--A decision of the Secretary of Banking
25 shall be a final order of the department and shall be
26 enforceable in a court of competent jurisdiction. The department
27 shall publish the final adjudication issued under this section,
28 subject to redaction or modification to preserve
29 confidentiality.
30 (e) Appeals.--A person aggrieved by a decision of the
20050H1478B2309 - 36 -
1 Secretary of Banking may appeal the decision under 2 Pa.C.S. Ch.
2 7 Subch. A (relating to judicial review of Commonwealth agency
3 action).
4 § 5140. Suspension, revocation or refusal.
5 (a) Departmental action.--The department may suspend, revoke
6 or refuse to renew a license issued under this chapter if a
7 licensee or director, officer, partner or owner of a licensee
8 has:
9 (1) Made a material misstatement in an application or
10 any report or submission required by this chapter or any
11 department regulation, statement of policy or order.
12 (2) Failed to comply with or violated a provision of
13 this chapter or a regulation or order promulgated by the
14 department under this chapter.
15 (3) Engaged in dishonest, fraudulent or illegal
16 practices or conduct in a business or unfair or unethical
17 practices or conduct in connection with the payday loan
18 business.
19 (4) Been convicted of or pled guilty or nolo contendere
20 to a crime of moral turpitude or felony.
21 (5) Permanently or temporarily been enjoined by a court
22 of competent jurisdiction from engaging in or continuing
23 conduct or practice involving an aspect of the payday loan
24 business.
25 (6) Become the subject of an order of the department
26 denying, suspending or revoking a license applied for or
27 issued under this chapter.
28 (7) Become the subject of a United States Postal Service
29 fraud order.
30 (8) Failed to comply with the requirements of this
20050H1478B2309 - 37 -
1 chapter to make and keep records prescribed by regulation or
2 order of the department, to produce records required by the
3 department or to file financial reports or other information
4 that the department by regulation or order may require.
5 (9) Become the subject of an order of the department
6 denying, suspending or revoking a license under the
7 provisions of any other law administered by the department.
8 (10) Failed to comply with any order issued by the
9 department.
10 (11) Demonstrated negligence or incompetence in
11 performing an act for which the licensee is required to hold
12 a license under this chapter.
13 (b) Reinstatement.--The department may reinstate a license
14 which was previously revoked or denied renewal if all of the
15 following exist:
16 (1) The condition which warranted the original action
17 has been corrected to the department's satisfaction.
18 (2) The department has reason to believe that the
19 condition is not likely to occur again.
20 (3) The licensee satisfies all other requirements of
21 this chapter.
22 § 5141. Penalties.
23 (a) Nonlicensees.--A person subject to the provisions of
24 this chapter and not licensed by the department who violates any
25 provision of this chapter or who commits any action which would
26 subject a license to suspension, revocation or nonrenewal under
27 section 5140 (relating to suspension, revocation or refusal) may
28 be fined by the department up to $2,000 for each offense.
29 (b) Violation by licensee.--
30 (1) A person licensed under this chapter or director,
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1 officer, owner, partner or agent of a licensee who violates a
2 provision of this chapter or who commits any action which
3 would subject the licensee to suspension, revocation or
4 nonrenewal under section 5140 may also be fined by the
5 department up to $2,000 for each offense.
6 (2) It shall be an affirmative defense for a licensee
7 that, prior to an alleged violation of section 5115 (relating
8 to prohibitions), the licensee complied with all of the
9 following:
10 (i) Required a consumer to verify in writing that
11 the consumer does not have any outstanding loans with the
12 licensee or any other payday lender.
13 (ii) Accessed the database described in section
14 5115(e) to determine whether the consumer has any
15 outstanding loans.
16 SUBCHAPTER D
17 MISCELLANEOUS PROVISIONS
18 Sec.
19 5151. Applicability.
20 5152. Relationship to other laws.
21 5153. Report to General Assembly.
22 § 5151. Applicability.
23 The provisions of this chapter shall apply to a loan which:
24 (1) is made or executed within this Commonwealth; or
25 (2) is negotiated, offered or otherwise transacted
26 within this Commonwealth or with any resident of this
27 Commonwealth, in whole or in part, whether by the ultimate
28 lender or any other person.
29 § 5152. Relationship to other laws.
30 (a) General rule.--All political subdivisions of this
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1 Commonwealth, including home rule municipalities, shall be
2 prohibited from enacting and enforcing ordinances, resolutions
3 and regulations pertaining to the financial or lending
4 activities of persons that are subject to this chapter. The
5 requirements of this chapter shall supersede and preempt all
6 ordinances, resolutions and regulations imposing reporting
7 requirements or any other obligations upon persons regarding
8 financial or lending activities subject to this chapter. Except
9 as provided in subsection (b), political subdivisions of this
10 Commonwealth, including home rule municipalities, shall not
11 enact or enforce ordinances, resolutions and regulations
12 expressly pertaining to the facilities of persons whose
13 financial or lending activities are subject to this chapter.
14 (b) Exceptions.--Political subdivisions, including home rule
15 municipalities, shall retain the right pursuant to local zoning
16 ordinances to require a payday lender to locate within approved
17 residential, industrial, commercial or other zones and to
18 require a payday lender to obtain zoning permits, pay zoning
19 fees and undergo inspections related to zoning.
20 § 5153. Report to General Assembly.
21 Three years from the effective date of this chapter AND FOR <--
22 NO LESS THAN THREE TRIENNIAL PERIODS THEREAFTER, the department
23 shall report to the General Assembly on the status of the payday
24 loan industry, including, but not limited to, the number of
25 payday lenders with active licenses issued by the department, a <--
26 summary of the number of loans issued, the average loan amount
27 and any other information as determined by the department.
28 FOLLOWING: <--
29 (1) A COMPILATION OF AGGREGATE DATA CONCERNING THE
30 PAYDAY LENDING INDUSTRY IN THIS COMMONWEALTH AS REPORTED TO
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1 THE DEPARTMENT IN ACCORDANCE WITH SECTION 5136(A)(3)
2 (RELATING TO LICENSEE REQUIREMENTS).
3 (2) INFORMATION ON CONSUMER COMPLAINTS, INCLUDING
4 ALLEGED OR CONFIRMED REPORTS OF UNFAIR OR DECEPTIVE TRADE
5 PRACTICES AND FALSE, MISLEADING OR DECEPTIVE ADVERTISING.
6 (3) THE EFFECTIVENESS OF THE DATABASE IN PROVIDING REAL-
7 TIME REPORTING OF LOAN TRANSACTIONS, VERIFICATION OF
8 CONSUMERS' BORROWING AND REPAYMENT HISTORY, ENROLLMENT IN
9 EXTENDED PAYMENT PLANS AND USE OF FINANCIAL LITERACY
10 PROGRAMS.
11 (4) INFORMATION ON THE EFFECTIVENESS OF A FINANCIAL
12 LITERACY COUNSELING AND EDUCATION PROGRAM.
13 (5) ANY OTHER INFORMATION THE DEPARTMENT MAY DEEM
14 NECESSARY AND APPROPRIATE.
15 Section 2. Section 4107(a) of Title 18 is amended by adding
16 a paragraph to read:
17 § 4107. Deceptive or fraudulent business practices.
18 (a) Offense defined.--A person commits an offense if, in the
19 course of business, the person:
20 * * *
21 (9.1) violates 7 Pa.C.S. § 5124 (relating to unfair or
22 deceptive practices);
23 * * *
24 Section 3. Title 18 is amended by adding a section to read:
25 § 7331. Unlicensed payday lending.
26 A person that operates without a license in violation of 7
27 Pa.C.S. § 5111 (relating to license requirements) commits a
28 felony of the third degree.
29 Section 4. This act shall take effect as follows:
30 (1) The following provisions of 7 Pa.C.S. shall take
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1 effect upon the effective date of the regulations promulgated
2 by the Department of Banking under 7 Pa.C.S. § 5139(a)(5):
3 (i) Section 5115(d)(2) and (e)(2) and (3). <--
4 (ii) Section 5125(b)(3)(iv).
5 (iii) Section 5126(11).
6 (2) This section shall take effect immediately.
7 (3) The remainder of this act shall take effect in 60
8 days.
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