Regular Session 2015-2016 House Bill 0459 P.N. 0505

PRINTER'S NO. 505

THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

No.

459

Session of

2015

INTRODUCED BY ROSS AND GINGRICH, FEBRUARY 12, 2015

REFERRED TO COMMITTEE ON COMMERCE, FEBRUARY 12, 2015

AN ACT

Amending the act of April 8, 1937 (P.L.262, No.66), entitled, as

amended, "An act relating to consumer credit; requiring

licenses from the Secretary of Banking; restricting licenses

to domestic business corporations; fixing minimum capital

requirements; conferring certain powers on the Secretary of

Banking; limiting interest and other charges; providing

certain exemptions; and imposing penalties," further

providing for title, for definitions, for required license,

for application for license, for license bond, for license

fee, for organization and minimum capital, for issuance of

license, for records required, for reports to the Secretary

of Banking, for examinations by the secretary, for authority

of the secretary, for powers conferred on licensees, for

licensee requirements and limitations, for statement of

contract, for scope of act and for penalties.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

Section 1. The title of the act of April 8, 1937 (P.L.262,

No.66), known as the Consumer Discount Company Act, amended June

20, 1947 (P.L.665, No.288), is amended to read:

AN ACT

Relating to consumer credit; requiring licenses from the

[Secretary of Banking] Department of Banking and Securities;

restricting licenses to domestic business corporations;

fixing minimum capital requirements; conferring certain

powers on the [Secretary of Banking] Department of Banking

and Securities; limiting interest and other charges;

providing certain exemptions; and imposing penalties.

Section 2. The definition of "contract" in section 2 of the

act is amended and the section is amended by adding a definition

to read:

Section 2. Definitions.--The following terms shall be

construed in the act to have the following meanings, except in

those instances where the context clearly indicates otherwise:

"Department" means the Department of Banking and Securities

of the Commonwealth.

* * *

"Contract" means a promissory or judgment note, bill of

exchange, judgment, mortgage, conditional sales, contract, lease

or bailment by which the lessee or bailee has the option of

becoming or is bound to become the owner of real or personal

property upon full compliance with the terms of the agreement,

or any other form of negotiable or nonnegotiable instrument

evidencing an agreement to pay a sum certain in money at a fixed

or determinable time, of not less than ten (10) business days,

either by a single payment or by stated installments.

* * *

Section 3. Section 3A and C of the act, amended or added

December 12, 1994 (P.L.1060, No.144) and July 2, 1996 (P.L.490,

No.80), are amended to read:

Section 3. License Required.--A. On and after the effective

date of this act, no person shall engage or continue to engage

in this Commonwealth, either as principal, employe, agent or

broker, in the business of negotiating or making loans or

advances of money on credit, in the amount or value of twenty-

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five thousand dollars ($25,000) or less, and charge, collect,

contract for or receive interest, discount, bonus, fees, fines,

commissions, charges, or other considerations which aggregate in

excess of the interest that the lender would otherwise be

permitted by law to charge if not licensed under this act on the

amount actually loaned or advanced, or on the unpaid principal

balances when the contract is payable by stated installments

except a domestic business corporation organized under or

existing by virtue of the Business Corporation Law of this

Commonwealth, after first obtaining a license from the

[Secretary of Banking of the Commonwealth of Pennsylvania]

department in accordance with the provisions of this act.

* * *

C. Notwithstanding subsection A, the [Secretary of Banking]

department may license a branch office in another state provided

the licensee maintains a place of business in this Commonwealth

which is licensed under the provisions of this act.

Section 4. Section 4 of the act, amended July 2, 1996

(P.L.490, No.80), is amended to read:

Section 4. Application for License.--The application for

such license shall be in writing, under oath and in the form

prescribed by the [Secretary of Banking] department. The

application shall contain the corporate title of the applicant

and any registered or otherwise qualified name to be used as a

fictitious business name; the street and number, if any, city,

borough, township or municipality, and county where the business

is to be conducted; date of incorporation; name and residence

address of all directors; and such other information as the

[Secretary of Banking] department may require.

A separate application on the prescribed form shall be filed

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for each place of business conducted by a licensee.

Section 5. Section 5 of the act, amended July 30, 1963

(P.L.335, No.183), is amended to read:

Section 5. License Bond.--A bond in the penal sum of five

thousand dollars ($5,000) shall accompany every application for

license. Such bond shall be executed by a surety company

authorized by the laws of Pennsylvania to transact business

within this Commonwealth. The bond shall be renewed and refiled

annually not later than June first for the first three

consecutive years from the date on which the licensee was first

licensed. The bond shall be executed to the Commonwealth of

Pennsylvania and shall be for the use of the Commonwealth and

for any person or persons who may have a cause of action against

the licensee. The condition of the bond shall be that the

licensee will comply with and abide by all the provisions of

this act and all the rules and regulations of the [Secretary of

Banking] department, lawfully issued in accordance with this act

and that the licensee will pay to the Commonwealth, to the

[Secretary of Banking] department, or to any person or persons,

any and all monies that may come due to the Commonwealth, to the

[Secretary of Banking] department, or to any person or persons,

from the said licensee under and by virtue of the provisions of

this act. If any person shall be aggrieved by the misconduct of

a licensee and shall recover judgment against such licensee,

such person may, on any execution issued under such judgment,

maintain an action upon the bond of the licensee in any court

having jurisdiction of the amount claimed, provided the

[Secretary of Banking] department assents thereto.

A separate bond shall be provided for each place of business

conducted by a licensee. After the licensee has been

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continuously licensed for three (3) consecutive years, such bond

shall not be renewed or refiled unless the [Secretary of

Banking] department has reason to believe that such bond is

necessary and notifies the licensee in writing on or before May

1 that such bond is required.

Section 6. Section 6 of the act, amended December 30, 1970

(P.L.959, No.301), is amended to read:

Section 6. License Fee.--A license fee [of two hundred

dollars ($200)] as prescribed by section 603-A(1) of the act of

April 9, 1929 (P.L.177, No.175), known as "The Administrative

Code of 1929," shall accompany each application for license

under this act. Each license shall remain in full force and

effect until surrendered, revoked or suspended as herein

provided. The license fee [of two hundred dollars ($200)] shall

be paid annually on or before June first. No abatement of the

said license fee shall be made if the license is issued for less

than one year. An additional license fee [of two hundred dollars

($200)] as prescribed by section 603-A(1) of "The Administrative

Code of 1929" shall be paid for each place of business conducted

by a licensee.

All license fees and fines received by the [Secretary of

Banking] department under this act shall be deposited in the

State Treasury to the credit of the Banking [Department] Fund

for the use of the [Secretary of Banking] department in

administering this act.

Section 7. Section 7 of the act, amended December 9, 1982

(P.L.1072, No.249), is amended to read:

Section 7. Organization; Minimum Capital.--A license under

the provisions of this act shall be issued only to a corporation

organized under the Business Corporation Law of the Commonwealth

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of Pennsylvania. Such corporation shall be incorporated with a

minimum capitalization of seventy-five thousand dollars

($75,000). At the time of applying for a license under this act,

the minimum paid in capital shall be seventy-five thousand

dollars ($75,000). The minimum capitalization required shall be

increased by twenty-five thousand dollars ($25,000) for each

additional place of business licensed under this act and no

license for such additional place of business shall be granted

until the minimum capitalization requirements are met provided,

however, in the event that such place of business is to be

operated by an affiliate or subsidiary corporation, whether

newly organized or otherwise related to the licensee by virtue

of common ownership or management the minimum capitalization for

such affiliate or subsidiary shall be only twenty-five thousand

dollars ($25,000), and the minimum capitalization of the

licensee need not be increased. The minimum capitalization shall

be maintained as permanent capital which shall not be

distributed to stockholders or be purchased by a licensee

without the prior written approval of the [Secretary of Banking]

department. Corporations holding valid licenses on the effective

date of this amendment shall meet the minimum capitalization

requirements listed above within two years after the effective

date of this amendment.

Section 8. Section 8 of the act, amended December 12, 1994

(P.L.1060, No.144), is amended to read:

Section 8. Issuance of License.--The [Secretary of Banking,

if he] department, if it approves the application for license,

shall issue to each applicant a certificate showing the name of

the corporation and address of the place of business. Such

license shall be posted in a conspicuous place in the office of

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the licensee. A license may not be transferred or assigned. A

licensee may, upon prior written notification to the [Secretary

of Banking] department, change its place of business to another

location within the same city, town, borough or township. A

licensee desiring to change its place of business to other than

the same city, town, borough or township shall give written

notice thereof to the [Secretary of Banking] department and

return the license certificate to the [Secretary of Banking]

department for amendment. The [Secretary of Banking, if he]

department, if it approves the removal of the place of business,

shall endorse on the license [his] its approval of the change of

address and the date thereof, which shall thereafter be the

authority for the operation of such business under such license

at the new location. Except as provided herein, no change in the

place of business of a licensee to a location outside the

original municipality shall be permitted: Provided, however, A

licensee may obtain a new license for a place of business in a

new location in a municipality other than that in which the

original place of business was located. Only one place of

business may be operated under the same license.

A licensee may operate more than one place of business, in

Pennsylvania or another state, by obtaining a separate license

by filing an application for each additional place of business,

and by furnishing a bond for each additional place of business

and by paying the license fee provided by law for each

additional place of business.

No license shall be required for any place of business at

which payments on contracts are received and processed, records

are maintained or servicing of contracts is performed. Any such

place of business may be located outside of this Commonwealth,

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and the licensee shall provide the [Secretary of Banking]

department with the address of such place of business. The

licensee shall maintain at its principal place of business

within this Commonwealth or at such place within or outside this

Commonwealth, subject to the prior written approval of the

[Secretary of Banking] department or designee, either the

original or a copy of such books, accounts, records and

documents, or electronic or other similar access thereto, of the

business conducted under the license as may be prescribed by the

department to enable it to determine whether the business of the

licensee is being conducted in accordance with the provisions of

this act and the orders, rules and regulations issued under this

act.

Section 9. Sections 9 and 10 of the act are amended to read:

Section 9. Records Required.--Licensees operating under the

provisions of this act shall maintain adequate and complete

records of all business transacted, containing such information

and in such form as shall be prescribed by the [Secretary of

Banking] department by general rule or regulation. The records

of licensees shall be maintained in the English language. The

records of licensees shall be retained for a period of two years

after the date of final payment on any contract.

Section 10. Reports to the [Secretary of Banking]

department.--Licensees operating under the provisions of this

act shall annually, on or before the first day of March, file a

report with the [Secretary of Banking] department, giving such

relevant information concerning the business and operations

during the previous calendar year as the [Secretary of Banking]

department may require. Such report shall be made under oath and

shall be in the form prescribed by the [Secretary of Banking]

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department. A separate report shall be filed for each place of

business maintained by a licensee. The [Secretary of Banking]

department may at any time upon thirty (30) days notice require

a licensee to file special reports in addition to the annual

report. For failure to file such reports within the time

specified, the licensee shall pay to the [Secretary of Banking]

department a penalty of ten dollars ($10) for each calendar day

which such report is overdue, but the [Secretary of Banking]

department may, in [his] its discretion, relieve a licensee of

any portion or of all such fine. Such fine, which has not been

paid by the licensee and for the payment of which the licensee

has not been relieved, may be collected by the [Secretary of

Banking] department from the bonding company which has executed

the bond required under this act, and the [Secretary of Banking]

department may maintain an action for the recovery of such fine

in any court of competent jurisdiction.

Section 10. Section 11 of the act, amended December 12, 1994

(P.L.1060, No.144), is amended to read:

Section 11. Examinations by the [Secretary of Banking]

department.--The [Secretary of Banking] department, and any

person designated by [him] it for that purpose, shall at least

once every two calendar years investigate the business and

affairs and examine the books, accounts, papers, records,

documents, and files therein of every licensee and of every

person who shall be engaged in business contemplated by this

act, whether such person shall act or claim to act as principal,

agent or broker, or under or without the authority of this act.

For this purpose the [Secretary of Banking] department shall

have access during normal business hours to the offices and

places of business, books, accounts, papers, records, documents,

20150HB0459PN0505 - 9 -

files, safes and vaults of all such persons. A person, who is

not licensed under this act, shall be presumed to be engaged in

business contemplated by this act if he advertises or solicits

business as principal, agent or broker for which a license is

required by the provisions of this act, and the [Secretary of

Banking] department, and any person designated by [him] it for

that purpose, is in such cases authorized to examine the books,

accounts, papers, records, documents, files, safes and vaults of

such persons for the purpose of discovering violations of this

act.

The cost of every examination of the business of a licensee

by the [Secretary of Banking] department, or [his] its duly

authorized representative, shall be paid by the licensee so

examined, and the [Secretary of Banking] department may collect

such costs from the licensee or from the surety company which

has executed the bond required under this act, and [he] it may

maintain an action for the recovery of such costs in any court

of competent jurisdiction.

Section 11. Section 12 of the act, amended December 17, 1959

(P.L.1890, No.691) and repealed in part January 6, 1970 (1969

P.L.434, No.185) and April 28, 1978 (P.L.202, No.53), is amended

to read:

Section 12. Authority of the [Secretary of Banking]

department.--The [Secretary of Banking] department shall have

the power to reject any application for license if [he] it is

satisfied that the financial responsibility, experience,

character and general fitness of the person or persons shown on

the application for license as officers and directors of the

applicant corporation are not such as to command the confidence

of the community and to warrant the conclusion that the business

20150HB0459PN0505 - 10 -

will be operated honestly, fairly, and within the intent and

purpose of this act and in accordance with the general laws of

this Commonwealth: Provided, however, That no license may be

issued, if any director, officer, employe, or agent of the

applicant corporation has been convicted under this act for

engaging in business contemplated by this act without having

obtained a license under this act, or if any director, officer,

employe, or agent of the applicant corporation was a director,

officer, employe, or agent of a corporation which had been

convicted of a second offense violation of this act and had its

license revoked. Whenever the [Secretary of Banking] department

rejects an application for a license, [he] it shall furnish the

applicant with a written specification of the reason or reasons

therefor. The failure of the [Secretary of Banking] department

to act upon an application within three (3) months of receipt

thereof shall be deemed to be an approval of such application.

The [Secretary of Banking] department, upon thirty (30) days'

written notice to the licensee, forwarded by registered mail to

the place of business of such licensee, as shown on the

application for license, stating the contemplated action and in

general the grounds therefor, may revoke any license if the

licensee shall violate any provision of this act; or if the

licensee shall violate any rule or regulation issued by the

[Secretary of Banking] department under and within the authority

of this act; or if a licensee shall fail to comply with any

demand, rule or regulation, lawfully made by the [Secretary of

Banking] department under and within the authority of this act;

or if the licensee shall refuse to permit the [Secretary of

Banking] department, or [his] its designated representative, to

make examinations authorized by this act; or if the licensee

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shall fail to pay the cost of examination by the [Secretary of

Banking] department, or [his] its duly authorized

representative; or if the licensee has failed to maintain in

effect the bond required under the provisions of this act; or if

the licensee has failed to maintain records prescribed by the

[Secretary of Banking] department; or if the licensee has failed

to file the annual report to the [Secretary of Banking]

department within the time stipulated in this act; or if the

licensee, having failed to file the annual report within the

stipulated time, has not paid the fine required under this act;

or if any fact or condition exists or is discovered, which, if

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

the application for such license, would have warranted the

[Secretary of Banking] department in refusing to issue such

license. Whenever such license is revoked, the [Secretary of

Banking] department shall not issue another license to the

licensee until the expiration of at least one year from the date

of revocation of said license and not at all if such licensee,

or any officer, director, employe or agent thereof, shall have

been convicted for a second offense violation of this act.

The [Secretary of Banking] department is hereby authorized

and empowered to issue rules and regulations governing the

records to be maintained by licensees, the statements of

contract to be given consumers, the receipts for payment of

contracts to be given consumers, the foreclosure and replevin of

real or personal property upon default, and the procedure for

sale of real or personal property upon default, and [he] it is

further authorized and empowered to issue such general rules and

regulations as may be necessary for the protection of the

public, for insuring the proper conduct of the business

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contemplated by this act, and for the enforcement of this act,

which rules and regulations shall have the force and effect of

law.

The [Secretary of Banking] department shall be authorized to

require the attendance and testimony of witnesses and the

production of any books, accounts, papers, records, documents,

and files relating to such business which the [Secretary of

Banking] department has authority by this act to investigate,

and, for this purpose, the [Secretary of Banking] department may

sign subpoenas, administer oaths and affirmations, examine

witnesses and receive evidence. In case of disobedience of any

subpoena or the contumacy of any witness appearing before the

[Secretary of Banking] department, the [Secretary of Banking]

department may invoke the aid of the courts, and such court

shall thereupon issue an order requiring the person subpoenaed

to obey the subpoena or to give evidence or to produce books,

accounts, papers, records, documents, and files relative to the

matter in question. Any failure to obey such order of the court

may be punished by such court as a contempt thereof.

Section 12. Sections 13Q introductory paragraph and (2) and

14I of the act, amended or added December 21, 1998 (P.L.1287,

No.167), are amended to read:

Section 13. Powers Conferred on Licensees.--In addition to

the general powers conferred upon a corporation by the Business

Corporation Law of this Commonwealth, a corporation licensed

under this act shall have power and authority:

* * *

Q. To conduct the business regulated by this act in any

licensed place of business where another business is conducted

by the licensee or another person unless the [Secretary of

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Banking] department shall find, after a hearing, the conduct of

the other business has concealed evasions of this act and shall

order such person to desist from such conduct and to offer other

services and products for voluntary purchase subject to the

provisions of this clause.

* * *

(2) A licensee may offer the types of services and products

described in this subclause and may conduct or permit others to

conduct the types of business described in this subclause within

the same office, room or place of business where the licensee

conducts its licensed business without prior approval by the

[Secretary of Banking] department.

* * *

Section 14. Licensee Requirements and Limitations.--* * *

I. A licensee may sell contracts to and buy contracts from

another licensee upon giving prior written notification to the

[Secretary of Banking] department. The written notification

shall state the name and address of the licensee to whom or from

whom the contracts are being sold or purchased, the type of loan

and number of contracts in the transaction and their aggregate

principal balances. A licensee may not sell contracts to a

person or corporation not holding a license under this act

without the prior written approval of the [Secretary of Banking]

department.

Section 13. Section 15 of the act is amended to read:

Section 15. Statement of Contract.--A licensee shall furnish

to the consumer a statement setting forth the type of contract,

description of the security on the contract, the date of the

contract, the total amount due on the contract, the date upon

which the contract is due or the dates upon which the

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installment payments are payable, the amount of such installment

payments, and a statement indicating the basis for computing

default charges. No default charges may be collected if the

statement of contract does not give due notice of the licensee's

intention to collect default charges. This statement of the

contract shall contain such additional information as the

[Secretary of Banking] department may require.

Section 14. Section 17 of the act, amended May 23, 1947

(P.L.296, No.128), is amended to read:

Section 17. Scope of Act.--This act shall not affect any

existing laws, special or general, authorizing a charge for the

loan of money in excess of interest at the legal rate. This act

shall not apply to any person, persons, partnership, association

or corporation operating under the laws related to banking

institutions, building and loan associations, credit unions or

licensed under the Small Loans Act, approved June seventeen, one

thousand nine hundred fifteen, and supplements or amendments, or

licensed by the [Secretary of Banking of the Commonwealth of

Pennsylvania] department under the provisions of any other

statute. This act shall not apply to any bona fide sale of

personal property by a person regularly engaged in the sale of

such personal property, wherein the purchaser may pay any part

or all of the purchase price in stated installments, nor to any

such bona fide sale under a conditional sale contract, lease or

bailment, wherein the purchaser, lessee or bailee has the option

of becoming, or is bound to become, the owner of the property

upon full compliance with the terms of the agreement. This act

shall not apply to nonprofit corporations organized under the

laws of the Commonwealth of Pennsylvania having memberships

consisting exclusively of duly licensed physicians, surgeons and

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dentists, operated exclusively for and by their members, and

engaged in, among other activities, the financing of personal

obligations arising from the rendering of professional services

by the members of such nonprofit corporations, which are limited

strictly to medical, surgical, dental, operative, diagnostic and

treatment services, or nursing and hospital care.

Section 15. Section 18 of the act, amended July 2, 1996

(P.L.490, No.80), is amended to read:

Section 18. Penalties.--Any person who has not obtained a

license from the [Secretary of Banking of the Commonwealth of

Pennsylvania] department in accordance with the provisions of

this act, and who shall engage in the business of negotiating or

making loans or advances of money or credit, in the amount or

value of twenty-five thousand dollars ($25,000) or less, and

charge, collect, contract for or receive interest, discount,

bonus, fees, fines, commissions, charges or other considerations

which aggregate in excess of the interest that the lender would

otherwise be permitted by law to charge if not licensed under

this act on the amount actually loaned or advanced, or on the

unpaid principal balances when the contract is payable by stated

installments, shall be guilty of a misdemeanor, upon conviction

thereof shall be sentenced to pay a fine of not less than five

hundred dollars ($500) or more than five thousand dollars

($5,000), and/or suffer imprisonment not less than six (6)

months nor more than three (3) years, in the discretion of the

court.

Except as the result of an accidental bona fide error, a

corporation licensed under the provisions of this act or any

director, officer, employe or agent who shall violate any

provision of this act or shall direct or consent to such

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violations, shall be guilty of a misdemeanor, and, upon

conviction thereof, shall be sentenced to pay a fine of not more

than two thousand dollars ($2,000) for the first offense, and

for each subsequent offense a like fine, and/or suffer

imprisonment not to exceed one year, in the discretion of the

court.

The payment of twenty-five thousand dollars ($25,000) or

less, in money, credit, goods or things in action as

consideration for any sale or assignment of, or order for, the

payment of wages, salary, commissions or other compensation for

services, whether earned or to be earned, shall, for the

purposes of regulation under this act, be deemed a loan secured

by such assignment, and the amount by which such assigned

compensation exceeds the amount of such consideration actually

paid shall for the purpose of regulation under this act, be

deemed interest or charges upon such loan from the date of such

payment to the date such compensation is payable. Such

transactions shall be governed by and subject to the provisions

of this act.

The payment of twenty-five thousand dollars ($25,000) or

less, in money, credit, goods or things in action as

consideration for any sale of real or personal property which is

made on condition or agreement, expressed or implied, that such

property be sold back at a greater price shall, for the purpose

of this act, be deemed to be a loan secured by such property,

and the amount by which the repurchase price exceeds such

original purchase price actually paid shall be deemed interest

or charges upon such loan from the date such original payment is

made until the date such repurchase price is paid. Such

transaction shall be governed by and subject to the provisions

20150HB0459PN0505 - 17 -

of this act.

When real or personal property is pledged as security on a

loan of twenty-five thousand dollars ($25,000) or less, and the

lender requires the borrower to pay for insurance thereon, such

charge for insurance shall be construed as interest under this

act when the lender has failed to have such insurance written by

an insurance company legally authorized to conduct business in

Pennsylvania. When the amount charged for such insurance is in

excess of the standard cost of similar insurance in other

insurance companies legally authorized to conduct business in

Pennsylvania, the excess shall be construed as interest under

this act.

If a contract is made in good faith in conformity with an

interpretation of this act by the appellate courts of the

Commonwealth or in compliance with a rule or regulation

promulgated by the [Secretary of Banking] department, no

provision of this section imposing any penalty shall apply,

notwithstanding that after such contract is made, such

interpretation, rule or regulation is amended, rescinded or

determined by judicial or other authority to be invalid for any

reason.

Section 16. The amendment of the definition of "contract" in

section 2 of the act shall apply to contracts entered into or

renewed on or after the effective date of this section.

Section 17. This act shall take effect in 60 days.

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