PRIOR PRINTER'S NO. 3216

PRINTER'S NO.  3511

  

THE GENERAL ASSEMBLY OF PENNSYLVANIA

  

HOUSE BILL

 

No.

2191

Session of

2012

  

  

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

  

  

AS REPORTED FROM COMMITTEE ON CONSUMER AFFAIRS, HOUSE OF REPRESENTATIVES, AS AMENDED, MAY 9, 2012   

  

  

  

AN ACT

  

1

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

2

Offenses) of the Pennsylvania Consolidated Statutes, in Title

3

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

4

18, further providing for deceptive or fraudulent business

5

practices and providing for unlicensed short-term lending.

6

The General Assembly of the Commonwealth of Pennsylvania

7

hereby enacts as follows:

8

Section 1.  Title 7 of the Pennsylvania Consolidated Statutes

9

is amended by adding a chapter to read:

10

CHAPTER 51

11

SHORT-TERM LOAN PROTECTION

12

Subchapter

13

A.  Preliminary Provisions

14

B.  Nature and Effect of Short-Term Loans

15

C.  Administrative and Licensure Provisions

16

D.  Miscellaneous Provisions

 


1

SUBCHAPTER A

2

PRELIMINARY PROVISIONS

3

Sec.

4

5101.  Scope of chapter.

5

5102.  Definitions.

6

§ 5101.  Scope of chapter.

7

This chapter relates to consumer short-term loan protection.

8

§ 5102.  Definitions.

9

The following words and phrases when used in this chapter

10

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

11

context clearly indicates otherwise:

12

"Agency."  The Pennsylvania Housing Finance Agency.

<--

13

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

14

chapter.

15

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

16

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

17

depository institution.

18

"Consumer."  An individual who applies for or is the

<--

19

recipient of a short-term loan or a renewal loan.

<--

20

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

21

a lender licensee agrees to defer depositing or presenting a

<--

22

repayment mechanism, as the context may require.

23

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

24

"Depository institution."  A person authorized to accept

25

deposits in accordance with Federal or State law.

26

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

27

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

28

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

29

by the Department of Banking.

30

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

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1

under this chapter.

2

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

<--

3

may require.

4

"Loan agreement."  A signed written agreement between a

5

lender licensee and a consumer that complies with the

<--

6

requirements of section 5112 (relating to loan agreement

7

requirements) evidencing a loan.

8

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

9

joint-stock company, partnership, limited liability company,

10

limited partnership, limited partnership association, business

11

corporation or any other group of individuals, however

12

organized.

13

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

<--

14

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

15

the balance due on an existing short-term loan previously

16

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

17

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

18

paid in full.

19

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

20

which a short-term lender licensee may use to effect repayment

<--

21

of a loan, including a present-dated or postdated check,

22

electronic debit or assignment of a future deposit.

23

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

24

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

<--

25

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

26

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

27

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

28

lender by purchase or assignment.

29

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

30

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

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1

or other consideration, does all of the following:

2

(1)  Accepts a check or other instrument repayment

<--

3

mechanism from the consumer.

4

(2)  Agrees to hold the check or instrument repayment

<--

5

mechanism for a deferment period.

6

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

7

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

8

consumer's account the amount of the check less finance

9

charges permitted under section 5113 (relating to authorized

10

finance charges, origination fees and loan verification

<--

11

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

12

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

13

mechanism and a fee, finance charge or other consideration.

14

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

15

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

16

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

17

causes to be advertised, solicits, negotiates or arranges,

18

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

<--

19

renewal loan in this Commonwealth, whether directly or through

20

any other person acting for his benefit.

21

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

22

(1)  That portion of assets pledged to secure obligations

23

of any person other than that of the applicant.

24

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

25

applicant or related companies in which the applicant's

26

officers or stockholders have an interest.

27

(3)  That portion of the value of any marketable

28

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

29

cost or market.

30

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

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1

sheet in the applicant's joint ventures, subsidiaries,

2

affiliates or related companies which is greater than the

3

value of the assets at equity.

4

(5)  Goodwill.

5

(6)  The value placed on insurance renewals, property

6

management contract renewals or other similar intangibles of

7

the applicant.

8

(7)  Organization costs of the applicant.

9

(8)  Any real estate held for investment where

10

development will not start within two years from the date of

11

its initial acquisition.

12

(9)  Any leasehold improvements not being amortized over

13

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

14

term of the lease.

15

SUBCHAPTER B

16

NATURE AND EFFECT OF SHORT-TERM LOANS

17

Sec.

18

5111.  License requirements.

19

5112.  Loan agreement requirements.

20

5113.  Authorized finance charges, origination fees and loan

<--

21

verification costs.

22

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

23

rescission.

24

5115.  Prohibitions.

25

5116.  Renewal loans (Reserved).

<--

26

5117.  Form of loan proceeds.

27

5118.  Endorsement of check.

28

5119.  Redemption of repayment mechanism.

29

5120.  Authorized charge for dishonored repayment mechanisms.

30

5121.  Posting of charges and notice of mandatory extended

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1

payment plan.

2

5122.  Notice of assignment or sale of loans.

3

5123.  No criminal culpability.

4

5124.  Unfair or deceptive practices.

5

5125.  Extended payment plan.

6

5126.  Prohibited practices regarding loans.

7

5127.  Commonwealth Financial Literacy Consumer Credit

<--

8

Counseling Account.

9

5128.  Licensee duties with respect to military personnel.

10

5129.  Licensee duty to offer credit counseling.

<--

11

§ 5111.  License requirements.

12

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

13

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

14

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

<--

15

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

16

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

17

individual regardless of his residence, without first obtaining

18

a license from the department under this chapter and otherwise

19

complying with all of the provisions of this chapter.

20

(b)  Exemptions.--

21

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

22

shall not apply to depository institutions. To the extent

<--

23

permissible under Federal and State law, a depository

24

institution may make short-term loans in accordance with the

25

terms and interest rates, fees and charges authorized by this

26

chapter, but shall not otherwise be subject to this chapter.

27

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

<--

28

depository institution for the purpose of brokering short-

29

term loans made by a depository institution shall be subject

30

to all provisions of this chapter except those provisions

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1

related to finance charges and loan terms. This paragraph

<--

2

shall be limited to the brokering of short-term loans that

3

are made and held by a depository institution.

4

§ 5112.  Loan agreement requirements.

5

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

6

agreement which shall contain all of the following:

7

(1)  The name and address of the consumer.

8

(2)  The transaction date and a prominently labeled

9

transaction number.

10

(3)  The amount of the loan or advance.

11

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

12

charged, expressed both as a dollar amount and an annual

13

percentage rate.

14

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

15

or extended payment plan.

16

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

<--

17

term lender licensee and the name and title of the individual

<--

18

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

<--

19

term lender licensee.

<--

20

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

<--

21

be paid by the consumer.

22

(8)  Disclosures required by the Truth in Lending Act

23

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

24

whether the Truth in Lending Act applies to the particular

25

loan.

26

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

27

obligations under the loan and a clear description of the

28

repayment mechanism agreed to by the short-term lender 

<--

29

licensee and the consumer.

<--

30

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

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1

request an extended payment plan under section 5125 (relating

<--

2

to extended payment plan).

3

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

<--

4

point type that the consumer may not obtain renewal for the

5

short-term loan more than one time for an additional

6

deferment period mutually agreed to by the consumer and the

7

short-term lender.

8

(12) (11)  Disclosure in boldface print and in at least

<--

9

ten-point type indicating the maximum loan amount and finance

10

charge.

11

(13) (12)  Disclosure in boldface print and in at least

<--

12

ten-point type indicating the restrictions on multiple loans

13

provided for under this chapter.

14

(14) (13)  Disclosure in boldface print and in at least

<--

15

ten-point type indicating the consumer's right of rescission

16

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

17

rescission shall be set forth immediately above the

18

consumer's signature line and shall state as follows:

19

This transaction is not meant to meet long-term financial

20

needs and should be used only to meet short-term cash

21

needs. Renewing a short-term loan rather than repaying it

<--

22

in full at the end of its term will result in further

23

finance charges. You have the right to rescind this

24

transaction at any time before the lender's close of

25

business on the next business day after the transaction

26

date shown above. In order to rescind, you must return

27

all of the loan proceeds you received to the lender. The

28

lender will refund to you all fees if you rescind this

29

transaction.

30

(15) (14)  Any other information as the department may

<--

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1

require.

2

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

<--

3

than 14 days or in excess of 60 days and shall include at least

4

one regular installment of income for the consumer. The

5

deferment period shall be calculated from the date of the loan

6

agreement.

7

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

8

instrument signed by the consumer in connection with the loan,

9

shall not contain any of the following:

10

(1)  A mandatory arbitration clause that does not comply

11

with the standards set forth in the statement of principles

12

of the National Consumer Disputes Advisory Committee of the

13

American Arbitration Association in effect on the effective

14

date of this section.

15

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

<--

16

term lender licensee.

<--

17

(3)  A confession of judgment clause.

18

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

19

any provision of this chapter.

20

§ 5113.  Authorized finance charges, origination fees and loan

<--

21

verification costs.

22

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

<--

23

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

24

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

25

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

26

determination of annual percentage rate). A licensee may also

27

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

28

verification fee as provided under subsection (c).

29

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

30

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

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1

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

2

whichever is less.

3

(a)  Authorized finance charges.--A licensee may impose a

<--

4

finance charge for each loan made by the licensee to a consumer

5

which may not exceed .125ยข per $1.00 of the short-term loan. The

6

finance charge shall be deemed fully earned as of the date of

7

the short-term loan transaction, unless the consumer rescinds

8

the loan under section 5114(b) (relating to maximum amount of

9

loans, terms of loans and right of rescission). A licensee may

10

impose only fees and charges authorized under this chapter in

11

connection with a short-term loan.

12

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

<--

13

a verification fee in an amount not to exceed $15 $5 for a loan

<--

14

or a renewal made under this chapter. The verification fee shall

15

be used in part to defray the costs of submitting a compliance

16

system inquiry as provided under section 5115 (relating to

17

prohibitions) and for the financial literacy program 

<--

18

Commonwealth Consumer Credit Counseling Account under section

<--

19

5127 (relating to Commonwealth Financial Literacy Consumer

<--

20

Credit Counseling Account).

21

(c)  Required remittance of fees.--

<--

22

(1)  A licensee shall remit all of the following monthly:

23

(i)  Fifty cents per loan transaction to the

24

Commonwealth Consumer Credit Counseling Account for the

25

agency to pay for costs to provide consumer budget and

26

credit counseling.

27

(ii)  A fee up to fifty cents per loan transaction,

28

as determined by the department, to a compliance system

29

provider for the purpose of determining outstanding loans

30

and repayment dates provided under section 5115.

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1

(iii)  One dollar and fifty cents per loan

2

transaction, plus any difference in the fee determined by

3

the department for the services of the compliance system

4

provider provided under section 5115(f)(1) (relating to

5

prohibitions) and the amount established under

6

subparagraph (ii) to the department.

7

(2)  A licensee may not charge a consumer and shall not

8

be required to remit to a compliance system provider any

9

amounts related to the compliance system until the department

10

has selected the compliance system provider as required under

11

section 5115(f)(1). The fees required to be remitted under

12

this subsection may be delivered to and disbursed by the

13

compliance system provider, as determined by the department.

14

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

15

rescission.

16

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

<--

17

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

18

consumer having outstanding loans to the short-term lender one

<--

19

or more licensee in excess of the lesser of $1,000 or 25% of the

20

consumer's gross monthly income at any time. The short-term

<--

21

lender licensee shall maintain records evidencing the consumer's

<--

22

gross monthly income as required under section 5136(a)(2)

23

(relating to licensee and compliance system provider

24

requirements).

25

(a.1)  Consumer report.--

<--

26

(1)  A short-term lender may request, at no cost to the

27

consumer, a borrower's consumer report from a consumer

28

reporting agency as part of the short-term lender's

29

underwriting process.

30

(2)  A short-term lender may rely on the consumer report:

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1

(i)  As a permissible method of verifying the

2

borrower's monthly gross income in making the short-term

3

loan.

4

(ii)  In underwriting and making subsequent short-

5

term loans to the same customer if the report was

6

obtained within the previous 12 months.

7

(3)  As used in this subsection, the following words and

8

phrases shall have the meanings given to them in this

9

paragraph unless the context clearly indicates otherwise:

10

"Consumer report."  As defined in 15 U.S.C. § 1681a(d)

11

(relating to definitions; rules of construction).

12

"Consumer reporting agency."  As defined in 15 U.S.C. §

13

1681a(f).

14

(b)  Right to rescind.--

15

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

<--

16

lender's licensee's close of business on the next business

<--

17

day immediately following the day on which the loan was made 

<--

18

proceeds were received by the consumer.

<--

19

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

20

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

<--

21

rescind the loan and return to the short-term lender 

<--

22

licensee, at the time of giving notice, the proceeds of the

<--

23

loan received by the consumer from the short-term lender

<--

24

licensee under section 5117 (relating to form of loan

<--

25

proceeds).

26

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

27

charged or collected by the short-term lender licensee if a

<--

28

loan is rescinded.

29

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

<--

30

licensee shall return to the consumer any check given to the

<--

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1

short-term lender licensee in connection with the loan or

<--

2

shall agree in writing that any other repayment mechanism

3

shall not be utilized.

4

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

5

completed when the short-term lender licensee receives payment

<--

6

in full of the loan or the consumer redeems the repayment

7

mechanism being held by the short-term lender licensee by paying

<--

8

the full amount represented by the repayment mechanism to the

9

short-term lender licensee. The consumer may repay a loan at any

<--

10

office of the original short-term lender licensee or the

<--

11

assignee of the short-term lender licensee at the consumer's

<--

12

election.

13

§ 5115.  Prohibitions.

14

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

<--

15

knowingly make a loan to a consumer who has an existing loan

16

with the short-term lender licensee or any other licensee if the

<--

17

aggregate amount of all loans outstanding to the consumer

18

exceeds the maximum amount permitted under section 5114(a)

19

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

20

of rescission) or who has entered into an extended payment plan

21

under section 5125 (relating to extended payment plan) which has

22

not yet been paid in full. A consumer may not have loans

23

outstanding from more than two short-term lenders licensees at

<--

24

any one time.

25

(b)  (Reserved).

26

(c)  (Reserved).

27

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

28

time of entering into a loan transaction:

29

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

30

from any short-term lender licensee, the aggregate

<--

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1

outstanding balance of amount of all loans which exceeds the

<--

2

maximum loan amount permitted under section 5114(a).

3

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

4

payment plan under section 5125 which has not yet been paid

5

in full.

6

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

7

if applicable.

8

(e)  Confirmation.--A short-term lender licensee shall

<--

9

confirm the accuracy of the verification required under

10

subsection (d) by all of the following:

11

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

<--

12

records.

13

(2)  A query of the compliance system under subsection

14

(f)(1).

15

(f)  Procedure to determine outstanding loans and repayment

16

dates.--

17

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

18

capable of developing, implementing and maintaining a

19

compliance system, at no cost to the department, with real

<--

20

time access for reporting of loan transactions and verifying

21

the information required under subsection (a).

22

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

<--

23

compliance system information determined by the department to

24

be necessary to verify the number and amount of loans a

25

consumer has outstanding with any short-term lender and 

<--

26

licensee, the date of repayment of a consumer's last loan and

<--

27

if a consumer has entered into an extended payment plan.

28

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

<--

29

exceed $1 for each compliance system transaction. Seventy-

30

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

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1

costs of establishing and maintaining the compliance system 

2

and any other information as may be reasonably and lawfully

3

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

4

be used to provide funding for the financial literacy

5

programs established under section 5127 (relating to

6

Commonwealth Financial Literacy Account).

7

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

8

business, except a location in existence as of the effective

<--

9

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

10

the following:

11

(1)  A horse racetrack subject to racetrack or other

<--

12

nonprimary location where thoroughbred or harness horse race

13

meetings are conducted, respectively, with pari-mutuel

14

wagering in accordance with the act of December 17, 1981

15

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

16

Act.

17

(2)  A licensed gaming facility at which slot machine

<--

18

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

19

gaming).

20

(3)  A military installation or a facility operated by

<--

21

the United States Department of Veterans Affairs.

22

§ 5116.  Renewal loans.

<--

23

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

24

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

25

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

26

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

27

the verification fee and the interest charge established under

28

section 5113 (relating to authorized finance charges,

29

origination fees and loan verification costs) (Reserved).

<--

30

§ 5117.  Form of loan proceeds.

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1

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

<--

2

disburse the proceeds of a loan to the consumer in the form of

3

an immediately and locally cashable check, money order, cash,

4

debit card or credit to the consumer's account at a depository

5

institution.

6

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

<--

7

impose an additional finance charge or a fee for cashing the

<--

8

short-term lender's licensee's check or money order or for

<--

9

otherwise affecting effecting the disbursement of loan proceeds.

<--

10

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

<--

11

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

<--

12

consumer on the same day that the consumer repays the renewal 

<--

13

loan.

14

§ 5118.  Endorsement of check.

15

A short-term lender licensee may not negotiate or present a

<--

16

check for payment of a loan unless the instrument is endorsed

17

with the actual business name or registered fictitious name of

18

the short-term lender licensee.

<--

19

§ 5119.  Redemption of repayment mechanism.

20

Prior to the short-term lender's licensee's negotiating or

<--

21

presenting a consumer's check or utilizing any other repayment

22

mechanism, the consumer shall have the right to redeem the check

23

or any other repayment mechanism if the consumer pays the full

24

amount of the check or other repayment mechanism to the short-

<--

25

term lender licensee.

<--

26

§ 5120.  Authorized charge for dishonored repayment mechanisms.

27

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

28

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

29

the short-term lender licensee:

<--

30

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

- 16 -

 


1

authorized by law to collect the face value of the repayment

2

mechanism.

3

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

4

charge not to exceed $25.

5

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

6

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

7

(relating to damages in actions on bad checks).

8

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

9

section shall not be allowed:

10

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

11

from the short-term lender licensee for any reason; or

<--

12

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

13

forgery or theft.

14

§ 5121.  Posting of charges and notice of mandatory extended

15

payment plan.

16

(a)  Posting of charges.--A short-term lender licensee shall

<--

17

post, in large type in plain view of the public at any place of

18

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

19

finance charges and any related charges, such as the charge for

20

dishonored repayment mechanisms, imposed for loans.

21

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

<--

22

provide to each consumer at the time a loan agreement is signed,

23

and conspicuously display in the lending area of each business

24

location of the short-term lender licensee, the following

<--

25

notice:

26

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

27

entitled to request an extended payment plan agreement

<--

28

with a fully disclosed rate, term and payment plan.

29

§ 5122.  Notice of assignment or sale of loans.

30

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

<--

- 17 -

 


1

a consumer in writing immediately of the name, address and

2

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

3

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

<--

4

loan to another short-term lender licensee or to a depository

<--

5

institution.

6

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

7

short-term lender licensee shall provide the following notice to

<--

8

the buyer or assignee:

9

The repayment mechanism associated with this loan has

10

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

11

transaction under Pennsylvania State law and the assignee

12

or buyer is deemed to have knowledge of and shall be

13

bound by the terms and conditions of the loan agreement

14

between the consumer and the original lender.

15

§ 5123.  No criminal culpability.

16

A consumer shall not be subject to a criminal penalty:

17

(1)  For entering into a loan agreement.

18

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

19

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

20

repayment mechanism is drawn is closed by the consumer before

21

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

22

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

23

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

24

shall apply.

25

§ 5124.  Unfair or deceptive practices.

26

A person may not engage in unfair or deceptive acts,

27

practices or advertising in connection with a loan. A violation

28

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

29

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

30

Practices and Consumer Protection Law.

- 18 -

 


1

§ 5125.  Extended payment plan.

2

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

<--

3

consumer at least once per year consumer shall be entitled to an

<--

4

extended payment plan agreement under subsection (b) at least

<--

5

once per year if at any time prior to on or before the loan's

<--

6

due date the consumer declares an inability to repay.

7

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

8

plan agreement shall be subject to the following terms:

9

(1)  The principal balance due under the extended payment

10

plan shall be the outstanding principal balance and finance

11

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

<--

12

licensee may encourage, but shall not require, the consumer

<--

13

to reduce the balance of the existing loan by paying the

14

short-term lender licensee cash on the date the consumer

<--

15

enters into the extended payment plan agreement.

16

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

<--

17

finance charge for entering into the extended payment plan.

18

The short-term lender licensee may impose only the fees and

<--

19

charges authorized in section 5120 (relating to authorized

20

charge for dishonored repayment mechanisms) in connection

21

with an extended payment plan.

22

(3)  The extended payment plan agreement shall allow the

23

consumer to pay the sums due under the extended payment plan

24

over at least four 14-day terms installments. Each

<--

25

installment shall be in an amount arrived at by dividing the

26

total amount outstanding under paragraph (1) to a short-term 

<--

27

lender licensee by the number of 14-day terms installments of

<--

28

the extended payment plan. If the consumer has loans

29

outstanding to two lenders licensees and is unable to pay

<--

30

both loans, the consumer shall enter into an extended payment

- 19 -

 


1

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

<--

2

any time, partially or entirely pay off an extended payment

3

plan.

4

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

<--

5

compliance system described in section 5115 (relating to

6

prohibitions) that the consumer is enrolled in an extended

7

payment plan.

8

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

9

an extended payment plan under the provisions of this

10

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

11

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

12

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

13

right of rescission) for the rescission of a loan.

14

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

15

extended payment plan, a consumer must:

16

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

<--

17

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

<--

18

payment plan.

19

(2)  Request an extended payment plan prior to or on the

<--

20

due date of the loan.

21

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

<--

22

either orally or in writing, that the consumer requests an

23

extended payment plan.

24

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

25

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

26

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

27

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

<--

28

make a short-term loan to the consumer.

29

§ 5126.  Prohibited practices regarding loans.

30

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

- 20 -

 


1

loans:

2

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

3

the consumer's check or other repayment mechanism.

4

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

5

check or other repayment mechanism from the consumer in

6

connection with a single transaction.

7

(3)  Selling, offering or soliciting any application for

8

credit insurance in connection with a transaction.

9

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

10

or obligation of the consumer.

11

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

12

than in accordance with the provisions of this chapter.

13

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

14

requirements of this chapter, including making loans

15

disguised as personal property sales and leaseback

16

transactions or disguising loan proceeds as cash rebates for

17

the pretextual installment sale of goods and services.

18

(7)  Failing to collect and provide information regarding

19

the number, total and average transaction amounts and other

20

information the department may request.

21

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

22

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

23

the short-term lender complies with all applicable provisions

24

of this chapter.

25

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

26

or repayment mechanism held by the short-term lender 

<--

27

licensee.

<--

28

(10)  Rolling over, refinancing, extending or

29

consolidating short-term loans except as provided in sections

<--

30

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

<--

- 21 -

 


1

to extended payment plan).

2

(11)  Failing to immediately and accurately report a loan

3

or an extended payment plan to the compliance system provider

4

as required by this chapter or by the department.

5

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

6

any state to collect the balance due on a loan.

7

(13)  Depositing a check or otherwise implementing any

8

repayment mechanism prior to the expiration of the agreed-

9

upon deferment period.

10

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

11

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

12

be uncollectible and unenforceable.

13

§ 5127.  Commonwealth Financial Literacy Account.

<--

14

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

15

the Banking Department Fund a restricted account to be known as

16

the Commonwealth Financial Literacy Account. Funds collected

17

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

18

deposited in the account.

19

(b)  Designation and approval by department.--

20

(1)  The department shall designate and approve nonprofit

21

consumer credit counseling agencies in each county to be

22

available to assist the department in implementing the

23

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

24

mandated counseling.

25

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

26

approved consumer credit counseling agencies for each county

27

and publish the list on the department's publicly accessible

28

Internet website.

29

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

30

discretion, funds to credit counseling agencies from the

- 22 -

 


1

Commonwealth Financial Literacy Account for each loan the

2

department reviews upon request of a consumer.

3

§ 5127.  Commonwealth Consumer Credit Counseling Account.

<--

4

(a)  Establishment.--There is established within the agency a

5

restricted account to be known as the Commonwealth Consumer

6

Credit Counseling Account. Funds collected under section 5113(c)

7

(relating to authorized finance charges, origination fees and

8

loan verification costs) shall be deposited into the account.

9

(b)  Designation and approval by the agency.--

10

(1)  The agency shall designate and approve nonprofit

11

credit counseling agencies to be available to assist the

12

agency in implementing the provisions of this chapter related

13

to consumer credit counseling. Nonprofit credit counseling

14

agencies seeking to provide budget and credit counseling to

15

consumers must meet all requirements prescribed by the

16

agency.

17

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

18

approved nonprofit credit counseling agencies by county and

19

publish the list on the agency's publicly accessible Internet

20

website.

21

(3)  The agency shall allocate quarterly, at its

22

discretion, funds to approved nonprofit credit counseling

23

agencies from the account.

24

(4)  The agency shall pay all costs and expenses for

25

delivery of consumer credit counseling from amounts available

26

in the account.

27

§ 5128.  Licensee duties with respect to military personnel.

28

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

29

activity against:

30

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

- 23 -

 


1

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

2

duration of the posting; or

3

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

4

duty.

5

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

6

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

7

military in an effort to collect a loan.

8

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

9

of any repayment agreement that it has entered into with a

10

consumer who is a member of the military, including any

11

repayment agreement negotiated through military counselors or

12

third-party credit counselors.

13

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

<--

14

comply with any Federal statutes and provisions regarding

15

military personnel and their dependents.

16

§ 5129.  Licensee duty to offer credit counseling.

<--

17

(a)  General rule.--A licensee shall offer credit counseling

18

at no cost to a borrower from an unaffiliated not-for-profit

19

third party credit counselor approved by the agency to provide

20

credit counseling prior to executing a loan agreement with a

21

borrower.

22

(b)  Borrower acknowledgment.--The licensee shall have the

23

borrower acknowledge the licensee's offer of no-cost credit

24

counseling on a form prescribed by the department, which shall

25

include the following notice:

26

You are entitled to no-cost credit counseling in connection

27

with obtaining this short-term loan. This loan is not meant

28

to meet long-term financial needs and should be used only to

29

meet short-term cash needs. Taking advantage of this no-cost

30

credit counseling could help you avoid the need to seek this

- 24 -

 


1

kind of loan in the future.

2

SUBCHAPTER C

3

ADMINISTRATIVE AND LICENSURE PROVISIONS

4

Sec.

5

5131.  Application for license.

6

5132.  Annual license fee.

7

5133.  (Reserved).

8

5134.  Issuance of license.

9

5135.  License duration.

10

5136.  Licensee and compliance system provider requirements.

11

5137.  Licensee limitations.

12

5138.  Surrender of license.

13

5139.  Authority of department.

14

5140.  Suspension, revocation or refusal.

15

5141.  Penalties.

16

§ 5131.  Application for license.

17

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

18

chapter shall be on a form prescribed and provided by the

19

department. The application shall include the name of the

20

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

21

applicant and the address or addresses where the applicant's

22

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

23

official title and business address of each director and

24

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

25

information that may be required by the department. An applicant

26

shall demonstrate to the department that policies and procedures

27

have been developed to receive and process consumer inquiries

28

and grievances promptly and fairly.

29

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

30

required to provide the department with written notice of the

- 25 -

 


1

change in any information contained in an application for a

2

license or for any renewal of a license promptly upon an within

<--

3

ten days of the applicant or licensee becoming aware of such

4

change.

5

(c)  Financial structure.--

6

(1)  The applicant must establish that the applicant:

7

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

8

tangible net worth of $250,000;

9

(ii)  will at all times maintain the minimum tangible

10

net worth required by subparagraph (i); and

11

(iii)  has an otherwise adequate financial structure.

12

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

13

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

14

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

15

from a surety company authorized to do business in this

16

Commonwealth. The bond shall be a penal bond conditioned on

17

compliance by the licensee with this chapter and subject to

18

forfeiture and shall run to the Commonwealth for its use and

19

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

20

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

21

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

22

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

23

with the written consent of the department, recover the

24

amount by which the consumer is aggrieved from the bond by

25

filing a claim with the surety company or maintaining an

26

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

27

may recover the amount by which the consumer is aggrieved by

28

filing a formal complaint against the licensee with the

29

department, which shall adjudicate the matter. Such an

30

adjudication shall be binding upon the surety company and

- 26 -

 


1

enforceable by the department in Commonwealth Court and by an

2

aggrieved consumer in any court. An aggrieved consumer

3

seeking to recover any amount from a bond that has already

4

been forfeited by the licensee or which the department is in

5

the process of having forfeited may recover payment on such

6

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

7

department consents to the requested payment or portion

8

thereof. The department may pay the aggrieved consumer from

9

the bond proceeds recovered by the department in such case.

10

Nothing in this paragraph shall be construed as limiting the

11

ability of any court or magisterial district judge to award

12

to any aggrieved consumer other damages, court costs and

13

attorney fees permitted by applicable law, but those claims

14

that are not directly related to the loan or extended payment

15

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

16

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

17

rata or other recovery on the bond for any aggrieved consumer

18

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

19

amount. No bond shall comply with the requirements of this

20

paragraph unless it contains a provision that it shall not be

21

canceled for any cause unless notice of intention to cancel

22

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

23

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

24

licensee shall be required to replace the bond with a bond

25

substantially in the same form as the original bond.

26

Cancellation of the bond shall not invalidate the bond

27

regarding the period of time it was in effect.

28

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

29

12 not more than 14 months and may be renewed by the department

<--

30

upon application by the licensee and the payment of any and all

- 27 -

 


1

applicable renewal fees. A licensee shall comply with the same

2

requirements for renewal of its license as it did for the

3

issuance of the original license.

4

§ 5132.  Annual license fee.

5

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

6

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

7

filing of each application for renewal thereof, a license fee

8

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

9

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

10

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

11

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

12

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

13

investigation in excess of license or renewal fees from the

14

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

15

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

16

business.

17

§ 5133.  (Reserved).

18

§ 5134.  Issuance of license.

19

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

20

license, the department may conduct such investigation as it

21

deems necessary to determine that the applicant and its

22

officers, directors and principals are of good character and

23

ethical reputation. Within 60 days of receipt of a completed

24

application, the department shall:

25

(1)  issue a license; or

26

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

27

department may refuse to issue a license under this section

28

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

29

renew a license under section 5140 (relating to suspension,

30

revocation or refusal).

- 28 -

 


1

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

2

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

3

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

4

denial to the Secretary of Banking. The department shall require

5

that an appeal from refusal to approve an application for a

6

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

7

refusal.

8

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

9

department shall specify:

10

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

11

or addresses covered by the license.

12

(2)  The licensee's reference number.

13

(3)  Any other information the department shall require

14

to carry out the purposes of this chapter.

15

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

16

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

17

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

<--

18

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

19

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

20

any jurisdiction or convicted of a crime which, if committed

21

in this Commonwealth, would constitute a felony or a crime of

22

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

23

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

24

person:

25

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

26

to a criminal charge before a Federal magistrate or a

27

court, unless the guilty plea or plea of nolo contendere

28

is set aside, vacated, reversed or otherwise abrogated by

29

lawful judicial process; or

30

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

- 29 -

 


1

decision or judgment of a Federal magistrate or court,

2

irrespective of pronouncement or suspension of sentence,

3

unless the decision or judgment is set aside, vacated,

4

reversed or otherwise abrogated by lawful judicial

5

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 who is or will be employed

11

or contracted by the licensee has a criminal background that

12

renders the employee unfit for employment in the short-term 

13

loan business.

14

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

15

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

16

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

17

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

18

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

19

the department or another state business licensing agency 

<--

20

denied, not renewed, 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)  has an outstanding debt to the Commonwealth or any

25

Commonwealth agency; or

26

(5)  does not possess the financial responsibility,

27

character, reputation, integrity and general fitness to

28

command the confidence of the public and to warrant the

29

belief that the short-term loan business will be operated

30

lawfully, honestly, fairly and within the legislative intent

- 30 -

 


1

of this chapter and in accordance with the general laws of

2

this Commonwealth. For purposes of this paragraph, an

3

applicant is not financially responsible if the applicant has

4

shown a disregard in the management of his or her own

5

financial condition. The factors that the department may

6

consider in making a determination regarding an applicant's

7

financial responsibility shall include:

8

(i)  Current outstanding judgments, other than

9

judgments solely as a result of medical expenses.

10

(ii)  Current outstanding tax liens or other

11

government liens and filings.

12

(iii)  Foreclosures within the past three years.

13

(iv)  A pattern of seriously delinquent accounts

14

within the past three years.

15

§ 5135.  License duration.

16

A license issued by the department:

17

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

18

each year upon payment of the annual renewal fee and after

19

the department determines that the licensee is conducting

20

business in accordance with this chapter. No refund of any

21

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

22

voluntarily surrendered to the department or suspended or

23

revoked by the department prior to its expiration date.

24

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

25

conduct business is voided under any law of this Commonwealth

26

or any other state unless the licensee demonstrates that the

27

applicable court or governmental entity was clearly erroneous

28

in voiding the licensee's authority to conduct business.

29

(3)  Is not assignable or transferable by operation of

30

law or otherwise.

- 31 -

 


1

§ 5136.  Licensee and compliance system provider requirements.

2

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

3

the following:

4

(1)  Conspicuously display its license at each licensed

<--

5

place of business.

6

(2)  Maintain at its principal place of business within

7

this Commonwealth, or at a place outside this Commonwealth if

8

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

9

electronic access to books, accounts, records and documents

10

of the business conducted under the license as prescribed by

11

the department to enable the department to determine whether

12

the business of the licensee is being conducted in accordance

13

with this chapter and the orders, regulations and statements

14

of policy issued under this chapter. Instruments, documents,

15

accounts, books and records shall be kept separate and apart

16

from the records of any other business conducted by the

17

licensee and shall be preserved and kept available for

18

investigation or examination by the department for a period

19

determined by the department. The department shall have free

20

access to and authorization to examine records maintained

21

outside this Commonwealth. The costs of the examination,

22

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

23

department may deny or revoke the authority to maintain

24

records outside this Commonwealth for good cause in the

25

interest of protection for Commonwealth consumers, including

26

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

27

records or documents to the department upon request.

28

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

<--

29

department may examine a licensee if the department deems the

30

examination to be necessary or desirable. The cost of the

- 32 -

 


1

examination shall be borne by the licensee. During an

2

examination, the department shall have free access, during

3

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

4

business in this Commonwealth and to all instruments,

5

documents, accounts, books and records which pertain to a

6

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

7

outside this Commonwealth.

8

(4) (3)  Include in all advertisements language

<--

9

indicating that the licensee is licensed by the department.

10

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

11

on a date determined by the department, the compliance system 

12

provider shall file a report with the department setting forth

13

the information the department requires concerning the short-

14

term loan business conducted by the each licensee during the

<--

15

preceding calendar year. The report must be in writing and

16

subject to penalty of perjury on a form provided by the

17

department. Compliance system providers failing If the

<--

18

compliance system provider fails to file the required report in

19

a timely manner, it shall be subject to a penalty of $500 for

<--

20

each day after December 1 the report is due until the report is

<--

21

filed. The report shall include:

22

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

23

preceding calendar year.

24

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

25

short-term loans made during the preceding calendar year.

26

(3)  The average annual percentage rate and the average

27

term of short-term loans made during the preceding calendar

28

year.

29

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

30

checks recovered and the total of checks charged off during

- 33 -

 


1

the preceding calendar year.

2

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

3

the total number of loans which went into default and the

4

total number of loans charged off during the preceding

5

calendar year.

6

(6)  The total number of consumer complaints.

7

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

8

delayed deposit checks.

9

(8)  Verification that the licensee has not used the

10

criminal process or caused the criminal process to be used in

11

the collection of any short-term loan during the preceding

12

calendar year.

13

(9)  Information on the number of consumers referred to

14

financial literacy counseling within the preceding calendar

15

year.

16

(10)  Any other information or data the department may

17

require.

18

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

19

shall be constructed and maintained in compliance with generally

20

accepted accounting principles or as provided by department

21

regulation.

22

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

23

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

24

may be photostatic, microfilm or electronic copies or copies

25

provided in some other manner approved by the department.

26

§ 5137.  Licensee limitations.

27

A licensee may not do any of the following:

28

(1)  Transact any business under this chapter under any

29

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

30

licensee that changes its name or place or places of business

- 34 -

 


1

shall immediately notify the department. Upon notification,

<--

2

the department shall issue a certificate to the licensee, if

3

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

4

address.

5

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

6

business licensed by the department under this chapter

7

without at least 30 days' prior written notification to and

8

approval by the department.

9

§ 5138.  Surrender of license.

10

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

11

creditors of a licensee have been paid or that other

12

arrangements satisfactory to the creditors and the department

13

have been made, a licensee may voluntarily surrender its license

14

to the department by delivering its license to the department

<--

15

with providing written notice that the license is being

<--

16

voluntarily suspended surrendered.

<--

17

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

18

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

19

§ 5139.  Authority of department.

20

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

21

powers and duties:

22

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

23

record or file of a licensee or any person having a

24

connection to the licensee or make an investigation necessary

25

to administer this chapter. The costs of the examination

26

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

27

examination. Under the authority under this subsection, the

28

department may remove any instrument, document, account,

29

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

30

the licensee's office location.

- 35 -

 


1

(2)  Conduct an administrative hearing on any matter

2

pertaining to this chapter, issue subpoenas to compel the

3

attendance of witnesses and the production of instruments,

4

documents, accounts, books and records at the hearing.

5

Subpoenaed material may be retained by the department until

6

the completion of all proceedings in connection with the

7

materials. A department official may administer oaths and

8

affirmations to an individual whose testimony is required. If

9

a person fails to comply with a subpoena issued by the

10

department or to testify on a matter concerning which the

11

person may be lawfully interrogated, on application by the

12

department, the Commonwealth Court may issue an order

13

requiring the attendance of the person, the production of

14

instruments, documents, accounts, books or records or the

15

giving of testimony.

16

(3)  Request and receive information or records,

17

including reports of criminal history record information from

18

any Federal, State, local or foreign government entity

19

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

20

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

21

cost to be paid by the applicant or licensee.

22

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

23

incurred while conducting an investigation of the person for

24

purposes of issuance or renewal of a license or for any

25

violation of this chapter.

26

(5)  Promulgate regulations and statements of policy and

27

issue orders as necessary for the proper conduct of the

28

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

<--

29

issuance and renewal of licenses and the enforcement of this

30

chapter.

- 36 -

 


1

(6)  Prohibit or permanently remove an individual

2

responsible for a violation of this chapter from working in

3

the individual's present capacity or in any other capacity

4

related to activities regulated by the department.

5

(7)  Order a person to make restitution for actual

6

damages to consumers caused by any violation of this chapter.

7

(8)  Impose conditions as the department deems

8

appropriate.

9

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

10

department may appeal the decision of the department to the

11

Secretary of Banking. The appeal shall be conducted under 2

12

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

13

Commonwealth agencies).

14

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

15

an injunction or other process against a person to restrain the

16

person from engaging in an activity violating this chapter.

17

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

18

final order of the department and shall be enforceable in a

19

court of competent jurisdiction. The department shall publish

20

the final adjudication issued under this section, subject to

21

redaction or modification to preserve confidentiality.

22

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

23

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

24

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

25

action).

26

§ 5140.  Suspension, revocation or refusal.

27

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

28

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

29

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

30

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

- 37 -

 


1

application for the license, would have warranted the department

2

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

3

officer, partner, employee or owner of a licensee has:

<--

4

(1)  Made a material misstatement in any application,

5

report or submission required by this chapter or any

6

department regulation or order.

7

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

8

any regulation or order promulgated or issued under this

9

chapter.

10

(3)  Engaged in dishonest, fraudulent or illegal

11

practices or conduct in a business or unfair or unethical

12

practices or conduct in connection with the short-term loan

13

business.

14

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

15

to a crime of moral turpitude or a felony.

16

(5)  Permanently or temporarily been enjoined by a court

17

of competent jurisdiction from engaging in or continuing

18

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

19

loan business.

20

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

21

denying, suspending or revoking a license applied for or

22

issued under this chapter.

23

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

24

fraud order.

25

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

26

denying, suspending or revoking a license under any other law

27

administered by the department.

28

(9)  Demonstrated negligence or incompetence in

29

performing an act for which the licensee is required to hold

30

a license under this chapter.

- 38 -

 


1

(10)  Failed to comply with the requirements of this

2

chapter to make and keep records prescribed by regulation or

3

order of the department, to produce records required by the

4

department or to file financial reports or other information

5

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

6

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

7

the term "become insolvent" shall mean that the liabilities

8

of the applicant or licensee exceed the assets of the

9

applicant or licensee or that the applicant or licensee

10

cannot meet the obligations of the applicant or licensee as

11

they mature or is in a financial condition that the applicant

12

or licensee cannot continue in business with safety to the

13

customers of the applicant or licensee.

14

(12)  Failed to comply with the terms of any agreement

15

under which the department authorizes a licensee to maintain

16

records at a place other than the licensee's principal place

17

of business.

18

(b)  Reinstatement.--The department may reinstate a license

19

which was previously revoked or denied renewal if all of the

20

following exist:

21

(1)  The condition which warranted the original action

22

has been corrected to the department's satisfaction.

23

(2)  The department has reason to believe that the

24

condition is not likely to occur again.

25

(3)  The licensee satisfies all other requirements of

26

this chapter.

27

§ 5141.  Penalties.

28

(a)  Licensees.--A licensee and any director, officer, owner,

29

partner, employee or agent of a licensee that violates this

<--

30

chapter or commits any action which would subject the licensee

- 39 -

 


1

to sanction under section 5140 (relating to suspension,

2

revocation or refusal) may be fined by the department up to

3

$10,000 for each offense.

4

(b)  Nonlicensees.--A person subject to this chapter and not

5

licensed by the department that violates this chapter or commits

6

an action which would subject a licensee to sanction under

7

section 5140 may be fined by the department up to $10,000 for

8

each offense.

9

SUBCHAPTER D

10

MISCELLANEOUS PROVISIONS

11

Sec.

12

5151.  Applicability.

13

5152.  Preemption.

14

5153.  Report to General Assembly.

15

§ 5151.  Applicability.

16

This chapter shall apply to a loan which:

17

(1)  is made or executed within this Commonwealth; or

18

(2)  is negotiated, offered or otherwise transacted

19

within this Commonwealth or with any resident of this

20

Commonwealth, in whole or in part, whether by the ultimate

21

lender or any other person.

22

§ 5152.  Preemption.

23

(a)  General rule.--Except as set forth in subsection (b),

24

all of the following apply:

25

(1)  This chapter preempts ordinances, resolutions and

26

regulations imposing reporting requirements, financial or

27

lending activities or other obligations upon persons subject

28

to this chapter.

29

(2)  Political subdivisions are prohibited from enacting

30

and enforcing ordinances, resolutions and regulations

- 40 -

 


1

expressly pertaining to the facilities of persons subject to

2

this chapter.

3

(b)  Exceptions.--A political subdivision may, under zoning

4

ordinance, require a short-term lender to:

5

(1)  locate within approved residential, industrial,

6

commercial or other zones; and

7

(2)  obtain a zoning permit, pay a zoning fee and undergo

8

an inspection related to zoning.

9

§ 5153.  Report to General Assembly.

10

Three years from the effective date of this chapter and for

<--

11

three triennial periods after that date, the department shall

12

report to the Secretary of the Senate and the Chief Clerk of the

13

House of Representatives on the status of the short-term loan

14

industry. The report shall include:

15

(1)  The number of short-term lenders with active

16

licenses issued by the department and the number of persons

17

employed in this Commonwealth.

18

(2)  A summary of the number of loans issued, the average

19

loan amount and any other information as determined by the

20

department.

21

(3)  A compilation of aggregate data concerning the

22

short-term lending industry in this Commonwealth as reported

23

to the department under section 5136(b) (relating to licensee

24

and compliance system provider requirements).

25

(4)  Information on consumer complaints. This paragraph

26

includes alleged or confirmed reports of unfair or deceptive

27

trade practices and false, misleading or deceptive

28

advertising.

29

(5)  The effectiveness of the compliance system in

30

providing real-time reporting of loan transactions,

- 41 -

 


1

verification of consumers' borrowing and repayment history,

2

enrollment in extended payment plans and use of financial

3

literacy programs.

4

(6)  Information on the effectiveness of a financial

<--

5

literacy counseling and education program.

6

(7)  Other information the department deems necessary and

7

appropriate.

8

Section 2.  Section 4107(a) of Title 18 is amended by adding

9

a paragraph to read:

10

§ 4107.  Deceptive or fraudulent business practices.

11

(a)  Offense defined.--A person commits an offense if, in the

12

course of business, the person:

13

* * *

14

(9.1)  violates 7 Pa.C.S. § 5124 (relating to unfair or

15

deceptive practices);

16

* * *

17

Section 3.  Title 18 is amended by adding a section to read:

18

§ 7332.  Unlicensed short-term lending.

19

A person that operates without a license in violation of 7

20

Pa.C.S. § 5111 (relating to license requirements) commits a

21

felony of the third degree.

22

Section 4.  This act shall take effect as follows:

23

(1)  The following provisions of 7 Pa.C.S. shall take

24

effect upon the effective date of the regulations promulgated

<--

25

by the Department of Banking under 7 Pa.C.S. § 5139(a)(5) 30

<--

26

days after publication by the Department of Banking of a

27

notice in the Pennsylvania Bulletin that the Compliance

28

System described in 7 Pa.C.S. § 5115(f)(1) is operational and

29

ready to begin receiving the information required to be

30

provided to the Compliance System by licensees under 7

- 42 -

 


1

Pa.C.S. § 5115(f)(2):

2

(i)  Section 5115(d)(2) and (e)(2) 5115(e)(2) and

<--

3

(f)(2).

4

(ii)  Section 5125(b)(3) 5125(b)(4).

<--

5

(iii)  Section 5126(a)(11).

6

(2)  This section shall take effect immediately.

7

(3)  The remainder of this act shall take effect in 60

8

days.

- 43 -