THE GENERAL ASSEMBLY OF PENNSYLVANIA

SENATE BILL

INTRODUCED BY BROWNE, FERLO, HUGHES, LOGAN, M. WHITE, ALLOWAY, MUSTO, WOZNIAK, KITCHEN AND WILLIAMS, AUGUST 10, 2009

REFERRED TO BANKING AND INSURANCE, AUGUST 10, 2009  

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, deferred deposit 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.

"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) if a consumer does not have the

ability to repay a loan when due.

(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 nor less than an individual's pay period or

seven days, whichever is greater. 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 Dispute 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

an annual percentage rate of 36%. 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), and for

the purpose of this section, the term "annual percentage rate"

shall have the same meaning as given to it in 15 U.S.C. §

1606(a). 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 $50,

whichever is less.

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

verification fee in an amount not to exceed $5 for a loan made

under this chapter. The verification fee shall be used in part

to defray the costs of submitting a database inquiry as provided

under section 5115 (relating to prohibitions). The verification

fee shall also include those amounts required by the lender

under section 5127 (relating to Commonwealth Financial Literacy

Account) for the 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 $500 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 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)  Excessive loans.--A consumer shall be prohibited from

receiving more than eight small loans from all short-term

lenders in any 12-month period. A lender shall be prohibited

from making a short-term loan to a consumer if making that loan

would result in a consumer receiving more than eight small loans

from all lenders in any 12-month period, except that if a

consumer is denied a short-term loan from a depository

institution after the eighth loan, a consumer may borrow from a

short-term lender. Any subsequent loan granted by a short-term

lender must contain a consumer affidavit that the consumer was

rejected for a loan by a depository institution, whether or not

that depository institution participates in the Credit Union

Better Choice program. Any subsequent loan that is made after

the eighth loan by a lender must contain the following:

(1)  A written contract that contains a repayment plan

that exceeds the consumer's pay period, if the consumer

elects a repayment plan.

(2)  Evidence that the consumer has contacted a consumer

credit counseling agency within the previous year. In order

to verify that the consumer has made an appointment with a

consumer credit counseling agency, the lender may require the

consumer to provide it with the name and telephone number of

the agency with which the consumer has made the appointment.

(3)  A written statement that the loan is not secured by

loan proceeds with any form of government assistance,

including unemployment or Social Security income.

(4)  Evidence that demonstrates the ability to repay the

loan.

(c)  General cooling-off period.--A short-term lender may not

knowingly make a loan to a consumer if the loan will result in

the consumer being or having been indebted to one or two short-

term lenders for a period in excess of 60 consecutive days. If a

consumer has or has had loans outstanding for 60 consecutive

days, no short-term lender may offer or make a loan to the

consumer for at least ten continuous days from the date of

repayment of the last loan, except that a short-term lender may

enter into an extended payment plan agreement with a consumer in

accordance with section 5125. For purposes of this subsection,

the term "consecutive days" means a series of continuous days in

which the consumer is party to one or more loans with short-term

lenders, including up to six days between the loans.

(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 (c) by

all of the following:

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

(2)  A query of the database 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

database with real time access for reporting of loan

transactions and verifying the information required under

subsections (a), (b) and (c).

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

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, to be

determined by the department, for each database transaction

in order to offset the department's costs in establishing and

maintaining the database and any other information as may be

reasonably and lawfully available to the short-term lender.

(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 not be renewed.

§ 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.

§ 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 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 short-term loan,

you are entitled to an extended payment plan agreement

with a fully disclosed rate, term and payment plan before

you are committed to your first loan. The lender must

provide you with an extended payment plan agreement at

any time you declare an inability to repay a second loan

from the lender made within six days of the first loan

prior to the loan's due date or any outstanding loans at

the end of 60 consecutive days of indebtedness. The

lender may collect a finance charge for each extended

payment plan. If the lender refuses to provide you with

an extended payment plan, you should contact the

Pennsylvania Department of Banking. In addition, you are

required to enter into an extended payment plan under

certain circumstances that the lender is required to

describe to you.

§ 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.--

(1)  A short-term lender shall offer a consumer an

extended payment plan agreement if at any time the consumer

declares an inability to repay:

(i)  a second loan from a short-term lender when due,

provided that the second loan was from the same short-

term lender and entered into within six days of the due

date of the prior short-term loan; or

(ii)  any outstanding loans at the end of 60

consecutive days of indebtedness as contemplated by

section 5115(b) (relating to prohibitions).

(2)  The consumer shall accept an extended payment plan

agreement if the consumer declares an inability to repay:

(i)  a single loan when due; or

(ii)  any outstanding loans at the end of 60

consecutive days of indebtedness as contemplated by

section 5115(b).

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

plan agreement shall be:

(1)  considered an extension of the existing loan

obligation;

(2)  subject to the requirements and restrictions of a

loan agreement as specified in section 5112 (relating to loan

agreement requirements), excluding section 5112(a)(4), (8),

(10), (11) and (13) and the form notice in section

5112(a)(14); and

(3)  subject to the following terms:

(i)  The principal balance due under the extended

payment plan shall be the outstanding principal balance

and finance charge due under the existing loan plus the

finance charge permitted under subparagraph (ii). 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.

(ii)  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.

(iii)  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 subparagraph (i) 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.

(iv)  A short-term lender shall report to the

database described in section 5115 that the consumer is

enrolled in an extended payment plan.

(v)  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 no later than 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.

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 database 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.

§ 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 subsections (b) and (c) shall be deposited in the account.

(b)  Required deposits.--On December 1 of each year beginning

with the December immediately following the effective date of

this section, short-term lenders shall deposit into the account

50¢ for each short-term loan transaction entered into by the

short-term lender during the preceding 12-month period.

(c)  Penalties and interest.--In addition to any other remedy

provided by law, the department may enforce collection of the

amount of the deposit required by subsection (b) by imposing the

following remedies:

(1)  When a short-term lender fails to make the deposit

on the date required, the department shall add interest at

the rate provided in section 806 of the act of April 9, 1929

(P.L.343, No.176), known as The Fiscal Code, to the unpaid

amount until the date it is paid.

(2)  When a short-term lender fails to make the deposit

in a timely manner or provide records or information to the

department for calculation of the amount owed, the department

shall impose a penalty against the short-term lender in the

amount of $10,000, plus an additional amount of $200 per day

for each additional day that the short-term lender fails to

provide the required information or records.

(3)  The department may waive all or part of the penalty

assessed against a short-term lender under paragraph (2) for

good cause shown by the short-term lender.

(d)  Liens.--Any amount owed by and interest and penalties

assessed against a short-term lender under this section shall be

a lien on the real and personal property of the short-term 

lender in the manner provided by section 1401 of The Fiscal

Code. The lien may be entered by the department in the manner

provided by section 1404 of The Fiscal Code and shall continue

and retain priority in the manner provided in section 1404.1 of

The Fiscal Code.

§ 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.  Public notification.

5134.  Issuance of license.

5135.  License duration.

5136.  Licensee 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 $1,000 and an additional

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

(b)  Recovery of costs.--No abatement of a licensee 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.  Public notification.

(a)  General rule.--Each applicant for a new license under

this chapter shall be required to post a notice for public

display at any location in this Commonwealth where licensing is

being requested. The purpose of the notice is to identify to the

public that an application to operate a short-term loan office

at the location has been filed with the department. The

applicant shall:

(1)  Be required to post a notice commencing on the day

the application was filed with the department.

(2)  Be required to maintain the notice until a decision

to approve or disapprove the license has been made by the

department.

(3)  Be responsible for posting the notice in a

conspicuous location that is as close as possible to the main

entrance of the location requesting licensure.

(4)  Be required to use a notice that is in a size and

form as determined by the department.

(b)  Applicability.--This section shall not apply to any

location where a short-term loan business was being conducted in

this Commonwealth on the effective date of this chapter.

§ 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 shall 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, 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)  is not of good character and ethical reputation in

the opinion of the department; or

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

Commonwealth agency.

§ 5135.  License duration.

A license issued by the department:

(1)  Must be renewed on February 1 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 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 the provisions of this chapter and the orders,

regulations and statements of policy issued under this

chapter. 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)  Annually, before December 1, 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. Licensees failing to file

the required report by December 1 shall be subject to a

penalty of $500 for each day after December 1 until the

report is filed. The report shall include:

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

the preceding calendar year.

(ii)  The minimum, maximum and average dollar amount

of short-term loans made during the preceding calendar

year.

(iii)  The average annual percentage rate and the

average term of short-term loans made during the

preceding calendar year.

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

of checks recovered and the total of checks charged off

during the preceding calendar year.

(v)  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.

(vi)  The total number of consumer complaints.

(vii)  Frequency of repeat use by consumers of

postdated or delayed deposit checks.

(viii)  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.

(ix)  Information on the number of consumers referred

to financial literacy counseling within the preceding

calendar year.

(x)  Any other information or data the department may

require.

(4)  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.

(5)  Include in all advertisements language indicating

that the licensee is licensed by the department.

(b)  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. 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.

(c)  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.

(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.