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PRINTER'S NO. 2129
THE GENERAL ASSEMBLY OF PENNSYLVANIA
SENATE BILL
No.
1379
Session of
2015
INTRODUCED BY YUDICHAK, WHITE, BROWNE AND SCARNATI,
OCTOBER 13, 2016
REFERRED TO BANKING AND INSURANCE, OCTOBER 13, 2016
AN ACT
Amending Titles 12 (Commerce and Trade) and 18 (Crimes and
Offenses) of the Pennsylvania Consolidated Statutes,
providing for financial services credit ladder and imposing
penalties; in forgery and fraudulent practices, further
providing for deceptive or fraudulent business practices;
and, in trade and commerce, providing for unlicensed
installment lender.
The General Assembly of the Commonwealth of Pennsylvania
hereby enacts as follows:
Section 1. Title 12 of the Pennsylvania Consolidated
Statutes is amended by adding a chapter to read:
CHAPTER 64
FINANCIAL SERVICES CREDIT LADDER
Subchapter
A. Preliminary Provisions
B. Licenses
C. Nature of Loans and Consumer Protections
D. Administrative Practices and Procedures
E. Costs and Charges
F. Penalties
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SUBCHAPTER A
PRELIMINARY PROVISIONS
Sec.
6401. Scope of chapter.
6402. Definitions.
6403. Applicability.
6404. Certain loans prohibited.
6405. Preemption.
6406. Prohibited location.
§ 6401. Scope of chapter.
This chapter relates to certain installment loans made to
consumers by licensed lenders.
§ 6402. Definitions.
The following words and phrases when used in this chapter
shall have the meanings given to them in this section unless the
context clearly indicates otherwise:
"Applicant." A person that applies for a license under this
chapter.
"Check." As defined in 13 Pa.C.S. § 3104(f) (relating to
negotiable instrument) that is drawn on a depository
institution.
"Consumer." An individual who applies for or is the
recipient of an installment loan under this chapter.
"Controlling interest."
(1) The direct or indirect power of an individual to
manage the business of an applicant or licensee, whether
through the ownership of voting securities, by contract other
than a commercial contract for goods or nonmanagement
services or otherwise, unless the power is the result of an
official position held by the individual in the business.
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(2) A controlling interest shall be presumed if an
individual, directly or indirectly, owns, controls, holds
with the power to vote or holds proxies representing 10% or
more of the votes that all shareholders would be entitled to
cast in the election of directors. The presumption may be
rebutted by a showing that control does not exist in fact.
"Department." The Department of Banking and Securities of
the Commonwealth.
"Depository institution." A person authorized to accept
deposits in accordance with Federal or State law.
"Installment loan." A loan or advance of money or credit to
a consumer:
(1) for an amount of not less than $1,000 nor more than
$5,000, exclusive of fees or charges for the loan or advance
that the consumer may finance along with the original amount
to be borrowed;
(2) with a loan period of at least 12 months;
(3) with a simple interest rate that does not exceed
36%;
(4) that may involve a fee, finance charge or other
consideration in conjunction with the loan or advance;
(5) where at any time the consumer may pay all or part
of the unpaid balance of the loan or advance before the end
of the loan period without a prepayment penalty or other
charge for prepayment;
(6) where the consumer may grant access to the
consumer's deposit account or paycheck as a repayment
mechanism; and
(7) that does not involve a security interest in the
consumer's motor vehicle in connection with the loan or
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advance.
"Licensee."
(1) A person that:
(i) Is licensed under this chapter by the Department
of Banking and Securities of the Commonwealth.
(ii) Advertises, causes to be advertised, markets,
solicits, negotiates, arranges, originates, offers to
make, makes, services, places, extends or holds an
installment loan in this Commonwealth for a consumer:
(A) In the ordinary course of business.
(B) Whether directly or through another person
acting for the person's benefit.
(C) Whether electronically or by other means.
(iii) Engages in any practice under subparagraph
(ii) for a fee, finance charge or other
consideration.
(2) The term includes a person that acquires, by
purchase or assignment, an installment loan from another
licensee, whether or not the person is a depository
institution.
(3) The term excludes:
(i) A person regulated as a depository institution
by Federal or State law.
(ii) A pawnbroker as defined under section 2 of the
act of April 6, 1937 (P.L.200, No.51), known as the
Pawnbrokers License Act.
"Loan agreement." A signed written installment loan
agreement between a licensee and a consumer.
"Loan period." The length of the contractual obligation for
an installment loan, measured from the date of the loan
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agreement.
"Person convicted of a crime." Either of the following:
(1) A person who, in the case of a felony or crime of
moral turpitude:
(i) is found guilty by the verdict of a jury or the
decision or judgment of a Federal magistrate or court in
any jurisdiction, notwithstanding pronouncement or
suspension of sentence, unless the decision or judgment
is set aside, vacated, reversed or otherwise abrogated by
lawful judicial process; or
(ii) enters a guilty plea or plea of nolo contendere
to a criminal charge before a Federal magistrate or court
in any jurisdiction, unless the guilty plea or plea of
nolo contendere is set aside, vacated, reversed or
otherwise abrogated by lawful judicial process.
(2) A person who, in the case of a crime committed in
another jurisdiction that would constitute a felony or crime
of moral turpitude if committed in this Commonwealth:
(i) is found guilty by the verdict of a jury or the
decision or judgment of a Federal magistrate or court,
notwithstanding pronouncement or suspension of sentence,
unless the decision or judgment is set aside, vacated,
reversed or otherwise abrogated by lawful judicial
process; or
(ii) enters a guilty plea or plea of nolo contendere
to a criminal charge before a Federal magistrate or
court, unless the guilty plea or plea of nolo contendere
is set aside, vacated, reversed or otherwise abrogated by
lawful judicial process.
"Records." Books, accounts, documents, files, instruments
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and other information regarding installment loans made or
licenses issued under this chapter.
"Repayment mechanism."
(1) A method agreed to by a consumer that a licensee may
use to effect repayment of the consumer's installment loan.
(2) The term may include, but is not limited to, a
present-dated or postdated check, electronic debit or
assignment of a future deposit.
"Secretary." The Secretary of Banking and Securities of the
Commonwealth.
§ 6403. Applicability.
This chapter shall apply to an installment loan that is:
(1) made or executed within this Commonwealth; or
(2) negotiated, offered or transacted within this
Commonwealth or with a resident of this Commonwealth, in
whole or in part, by a licensee.
§ 6404. Certain loans prohibited.
A person may not provide a loan or advance of money or credit
to a consumer if the loan or advance involves:
(1) a loan period of less than 12 months;
(2) a simple interest rate in excess of 36%;
(3) access to the consumer's deposit account or paycheck
as a repayment mechanism and as a condition to secure the
loan or advance; or
(4) an offer of a lower rate or better terms and
conditions in exchange for access to the consumer's deposit
account or paycheck as a repayment mechanism.
§ 6405. Preemption.
(a) General rule.--Except as provided under subsection (b),
the following shall apply:
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(1) This chapter shall preempt an ordinance, resolution
or regulation imposing reporting requirements, financial or
lending activities or other obligations upon a person subject
to this chapter.
(2) A political subdivision shall be prohibited from
enacting and enforcing an ordinance, resolution and
regulation expressly pertaining to a person subject to this
chapter.
(b) Exception.--A political subdivision may adopt and
enforce ordinances under the act of July 31, 1968 (P.L.805,
No.247), known as the Pennsylvania Municipalities Planning Code,
to require a licensee to:
(1) locate within approved residential, industrial,
commercial or other zones; and
(2) obtain necessary and appropriate zoning and
subdivision permits, pay appropriate fees and undergo
required inspections under the zoning and subdivision
ordinances.
§ 6406. Prohibited location.
The location of a licensee's business may not be within 1,000
feet of the following:
(1) A racetrack or other nonprimary location where
thoroughbred or harness horse race meetings are conducted,
respectively, with pari-mutuel wagering in accordance with
the former act of December 17, 1981 (P.L.435, No.135), known
as the Race Horse Industry Reform Act.
(2) A licensed facility at which slot machine gaming is
conducted under 4 Pa.C.S. Pt. II (relating to gaming).
(3) A military installation or a facility operated by
the United States Department of Veterans Affairs.
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SUBCHAPTER B
LICENSES
Sec.
6411. License required.
6412. Application for license or license renewal.
6413. Annual license fee.
6414. Adjustment of fees.
6415. Issuance or denial of license.
6416. License duration.
6417. Suspension, revocation or refusal to renew.
6418. Reinstatement of license.
6419. Surrender of license.
§ 6411. License required.
(a) General rule.--
(1) Except as otherwise provided in subsection (b), a
person may not engage in any activity regarding an
installment loan unless the person is a licensee under this
chapter and otherwise complies with this chapter.
(2) Paragraph (1) shall apply to an installment loan
made to a consumer:
(i) who resides in this Commonwealth; or
(ii) regardless of the consumer's residence if the
person has a place of business in this Commonwealth.
(b) Exception.--A depository institution may make an
installment loan in accordance with the terms and interest
rates, fees and charges permissible under Federal or State law.
§ 6412. Application for license or license renewal.
(a) Form.--An application for a license or license renewal
under this chapter shall be on a form prescribed and provided by
the department.
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(b) Contents.--The application shall include:
(1) The name of the applicant or licensee.
(2) The address of the principal place of business of
the applicant or licensee.
(3) The address or addresses where the business of the
applicant or licensee is to be conducted.
(4) The full name, official title and business address
of each director and principal officer of the loan business.
(5) The name and address of each agent in this
Commonwealth authorized by appointment or by law to receive
service of process on behalf of the licensee.
(6) Any other information that the department may
require.
(c) Policies and procedures for inquiries and grievances.--
An applicant or licensee shall demonstrate to the satisfaction
of the department that policies and procedures have been
developed to receive and process consumer inquiries and
grievances promptly and fairly.
(d) Duty to update.--Each applicant and licensee shall
provide the department with written notice of the change in
information contained in an application for a license or license
renewal within 10 days of the applicant or licensee becoming
aware of the change.
(e) Financial structure and bond.--
(1) An applicant or licensee must establish that the
applicant or licensee:
(i) has, at the time of application, a minimum
tangible net worth of $250,000 or 5% of the total value
of the installment loans issued, or anticipated to be
issued in the case of an applicant, whichever is greater;
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(ii) will at all times maintain the minimum tangible
net worth required under subparagraph (i); and
(iii) has an otherwise adequate financial structure.
(2) The following shall apply:
(i) Prior to and as a condition of the issuance of a
license, an applicant for a license shall maintain a bond
in the amount of $100,000 in a form acceptable to the
department from a surety company authorized to do
business in this Commonwealth.
(ii) The bond shall be:
(A) a penal bond conditioned on compliance by
the licensee with this chapter and subject to
forfeiture;
(B) for the use of:
(I) the Commonwealth; and
(II) a consumer against the licensee for
failure to carry out the terms of any loan or
extended payment plan; and
(C) held by the department for the term of the
license.
(iii) If a consumer is aggrieved, the consumer may:
(A) with the written consent of the department,
recover the amount by which the consumer is aggrieved
from the bond by filing a claim with the surety
company or maintaining an action on the bond; or
(B) recover the amount by which the consumer is
aggrieved by filing a formal complaint against the
licensee with the department, which shall adjudicate
the matter.
(iv) An adjudication under subparagraph (iii)(B)
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shall be binding upon the surety company and enforceable
by the department in Commonwealth Court and by an
aggrieved consumer in any court.
(v) An aggrieved consumer seeking to recover an
amount from a bond that has already been forfeited by the
licensee or which the department is in the process of
having forfeited may recover payment on the bond if,
after filing a petition with the department, the
department consents to the requested payment or portion
of the payment. The department may pay the aggrieved
consumer from the bond proceeds recovered by the
department under this subparagraph.
(vi) Nothing under this paragraph shall be construed
as limiting the ability of a court or magisterial
district judge to award to an aggrieved consumer other
damages, court costs and attorney fees permitted by
applicable law, except that claims that are not directly
related to the loan or extended payment plan may not be
recovered from the proceeds of the bond.
(vii) The department may consent to or order pro
rata or other recovery on the bond for any aggrieved
consumer if claims against the bond may or do exceed its
full monetary amount.
(viii) A bond is not in compliance with this
paragraph unless it contains a provision that it may not
be canceled for a cause unless notice of intention to
cancel is given to the department at least 30 days before
the day upon which cancellation takes effect. If a bond
is to be canceled, a licensee shall replace the bond with
a bond substantially in the same form as the original
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bond as approved by the department. Cancellation of a
bond does not invalidate the bond regarding the period of
time that it was in effect.
(f) Issuance of license or license renewal.--
(1) A license:
(i) Shall be issued for an initial term of not more
than 14 months.
(ii) May be renewed by the department for a term of
not more than 12 months upon application by the licensee
and the payment of applicable renewal fees.
(2) A licensee shall comply with the same requirements
for renewal of its license as it did for the issuance of the
original license.
§ 6413. Annual license fee.
(a) General rule.--When an application for a license or
license renewal is filed, an applicant or licensee shall pay to
the department a license fee for the principal place of business
of $3,000 and an additional license fee for each branch office
of $1,000.
(b) Recovery of costs.--
(1) No abatement of a license fee may be made if the
license is issued for a period of less than one year.
(2) The department may recover the cost of investigation
in excess of the license fee or license renewal fee from the
licensee or another person not licensed under this chapter
but is believed to be engaged in the loan business.
§ 6414. Adjustment of fees.
(a) Amount.--The secretary may adjust upward fees
established under this subchapter if there is an upward
adjustment in the Consumer Price Index for that year. The
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authorized adjustment shall be for the same percentage that the
Consumer Price Index increases.
(b) Notice.--The department shall publish each adjusted fee
schedule in the Pennsylvania Bulletin and on the department's
publicly accessible Internet website at least 60 days prior to
the effective date of the upward adjustment of fees.
§ 6415. Issuance or denial of license.
(a) Investigation.--Upon receipt of an application for a
license or license renewal, the department may conduct an
investigation to determine that the applicant or licensee and
its officers, directors and principals are of good character and
ethical reputation.
(b) Determination.--Within 60 days of receipt of a completed
application, the department shall:
(1) issue a license; or
(2) refuse to issue a license for a reason under:
(i) subsection (e) or (f); or
(ii) section 6417 (relating to suspension,
revocation or refusal to renew).
(c) Appeal of denial.--
(1) If the department refuses to issue a license or
license renewal, it shall notify the applicant or licensee in
writing of:
(i) The denial.
(ii) The reason for the denial.
(iii) The right of the applicant or licensee to
appeal the denial to the secretary.
(2) An applicant or licensee must file an appeal under
this subsection within 30 days of notice of refusal.
(d) Contents of license.--Each license issued by the
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department shall specify:
(1) The name and address of the licensee and the address
or addresses covered by the license.
(2) The licensee's reference number.
(3) Any other information that the department may
require to implement this chapter.
(e) Denial of license due to conviction.--
(1) The department may deny a license if it finds that
the applicant or a director, officer, partner, employee or
individual with a controlling interest of the applicant is a
person convicted of a crime.
(2) A license under this chapter shall be deemed to be a
covered license within the meaning of section 405 of the act
of May 15, 1933 (P.L.565, No.111), known as the Department of
Banking and Securities Code. The department shall notify a
licensee if a covered individual, within the meaning of
section 405 of the Department of Banking and Securities Code,
who is or will be employed or contracted by the licensee has
a criminal background that renders the employee unfit for
employment in the short-term loan business.
(f) Denial of license for other than conviction.--The
department may deny a license or restrict a license if it finds
that the applicant or a director, officer, partner, employee,
agent or individual with a controlling interest of the
applicant:
(1) has had a license application or license issued by
the department or another State business licensing agency
denied, not renewed, suspended or revoked;
(2) is the subject of an order of the department;
(3) has violated or failed to comply with a provision of
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this chapter or a regulation or order of the department;
(4) has an outstanding debt to the Commonwealth or any
Commonwealth agency; or
(5) does not possess the financial responsibility,
character, reputation, integrity and general fitness to
command the confidence of the public and to warrant the
belief that the loan business will be operated lawfully,
honestly, fairly and within the legislative intent of this
chapter and in accordance with the general laws of this
Commonwealth. For purposes of this paragraph, an applicant is
not financially responsible if the applicant has shown a
disregard in the management of his or her own financial
condition. The factors that the department may consider in
making a determination regarding an applicant's financial
responsibility shall include:
(i) Current outstanding judgments, other than
judgments solely as a result of medical expenses.
(ii) Current outstanding tax liens or other
government liens and filings.
(iii) Foreclosures within the past three years.
(iv) A pattern of seriously delinquent accounts
within the past three years.
§ 6416. License duration.
A license issued by the department:
(1) Must be renewed on the license's renewal date upon
payment of the renewal fee and after the department
determines that the licensee is conducting business in
accordance with this chapter. No refund of a portion of the
license fee shall be made if the license is voluntarily
surrendered to the department or suspended or revoked by the
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department prior to its expiration date.
(2) Shall be invalid if the licensee's authority to
conduct business is voided under a law of this Commonwealth
or another state unless the licensee demonstrates that the
applicable court or governmental entity was clearly erroneous
in voiding the licensee's authority to conduct business.
(3) Is not assignable or transferable by operation of
law or otherwise.
§ 6417. Suspension, revocation or refusal to renew.
The department may suspend, revoke or refuse to renew a
license issued under this chapter if either of the following
applies:
(1) A fact or condition exists or is discovered that, if
it had existed or had been discovered at the time of the
filing of the application for the license or license renewal,
would have warranted the department to refuse to issue or
renew the license.
(2) A licensee or director, officer, partner, employee
or individual with a controlling interest of the licensee is
a person convicted of a crime or has done any of the
following:
(i) Made a material misstatement in an application,
report or submission required by this chapter, department
regulation or order.
(ii) Failed to comply with or violated this chapter
or a regulation or order promulgated or issued under this
chapter.
(iii) Engaged in dishonest, fraudulent or illegal
practices or conduct in a business, or unfair or
unethical practices or conduct in connection with the
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loan business.
(iv) Permanently or temporarily been enjoined by a
court of competent jurisdiction from engaging in or
continuing conduct or a practice involving an aspect of
the loan business.
(v) Become the subject of an order of the department
denying, suspending or revoking a license applied for or
issued under this chapter.
(vi) Become the subject of a United States Postal
Service fraud order.
(vii) Become the subject of an order of the
department denying, suspending or revoking a license
under any other law administered by the department.
(viii) Demonstrated negligence or incompetence in
performing an act for which the licensee is required to
hold a license under this chapter.
(ix) Failed to comply with the requirements of this
chapter to make and keep records prescribed by regulation
or order of the department, to produce records required
by the department or to file financial reports or other
information that the department, by regulation or order,
may require.
(x) Become insolvent. For purposes of this
subparagraph, the term "become insolvent" shall mean
that:
(A) the liabilities of the licensee exceed the
assets of the licensee;
(B) the licensee cannot meet the obligations of
the licensee as they mature; or
(C) the licensee's financial condition
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demonstrates that the licensee cannot continue in
business with safety to the customers of the
licensee.
(xi) Failed to comply with the terms of an agreement
under which the department authorizes the licensee to
maintain records at a place other than the licensee's
principal place of business.
§ 6418. Reinstatement of license.
The department may reinstate a license that was previously
revoked or denied renewal if all of the following apply:
(1) The condition that warranted the revocation or
denial has been corrected to the department's satisfaction.
(2) The department has reason to believe that the
condition leading to the revocation or denial is not likely
to occur again.
(3) The licensee satisfies all other requirements of
this chapter.
§ 6419. Surrender of license.
(a) Authorization.--A licensee may voluntarily surrender its
license to the department after:
(1) Providing written notice of the surrender to the
department.
(2) Either:
(i) satisfying the department that all creditors of
the licensee have been paid; or
(ii) other arrangements satisfactory to the
creditors and the department have been made.
(b) Effect.--Surrender of a license under this section does
not affect a licensee's civil or criminal liability for an act
or omission by the licensee.
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SUBCHAPTER C
NATURE OF LOANS AND CONSUMER PROTECTIONS
Sec.
6421. Loan agreement.
6422. Nature of payments.
6423. Notification before accessing deposit account.
6424. Underwriting of installment loan.
6425. Rescission by consumer.
6426. Posting of finance charges.
6427. Assignment or sale of installment loan.
6428. Form of installment loan proceeds.
6429. Extension of installment loan.
§ 6421. Loan agreement.
(a) Contents.--Each installment loan shall be documented by
a loan agreement that contains all of the following:
(1) The name and address of the consumer.
(2) The transaction date and a prominently labeled
transaction number.
(3) The name, address and telephone number of the
licensee and the name and title of the individual employee
who signs the loan agreement on behalf of the licensee.
(4) The amount of the installment loan.
(5) A statement of the total amount of finance charges
charged, expressed both as a dollar amount and an annual
percentage rate.
(6) An itemization of all fees, charges and penalties
that may be paid by the consumer or charged by the lender in
relation to the installment loan.
(7) On a separate page, the total amount to be paid by
the consumer under the installment loan and a monthly
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repayment schedule, including principal, finance charges,
fees and other charges, assuming that all payments to the
licensee will be made on time without incurring any late
fees. The separate page shall include a disclaimer that the
total amount and repayment schedule may change if a late fee
or penalty is assessed.
(8) The specific dates on which the consumer must make
payments regarding the installment loan.
(9) Disclosures required under the Truth in Lending Act
(Public Law 90-321, 15 U.S.C. § 1601 et seq.).
(10) Disclosure in boldface print and in at least 10-
point type indicating the loan amount and applicable charges,
other restrictions provided for under this chapter and the
consumer's right of rescission under this chapter. For
purpose of proper rescission, the disclosure of the
consumer's right of rescission shall be set forth immediately
above the consumer's signature line and shall state as
follows:
"You have the right to rescind this transaction at any
time before the lender's close of business on the second
business day after the transaction date shown above. In
order to rescind, you must return all of the loan
proceeds you received to the lender within two business
days of the notice of rescission. The lender will refund
to you all fees, except the application fee if you
rescind this transaction."
(11) Proof that the consumer was notified of the
availability of credit counseling under section 6436
(relating to credit counseling).
(12) Any other information as the department may
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require.
(b) Limitations.--A loan agreement, or any other document or
instrument signed by the consumer in connection with an
installment loan, may not contain any of the following:
(1) A mandatory arbitration clause that does not comply
with the standards set forth in the statement of principles
of the National Consumer Disputes Advisory Committee of the
American Arbitration Association in effect on the effective
date of this section.
(2) A hold harmless clause for the benefit of the
licensee.
(3) A confession of judgment clause.
(4) A waiver by the consumer of any contractual right or
mandatory provision of this chapter.
§ 6422. Nature of payments.
(a) Equal amounts and time periods.--To the extent possible,
a loan agreement shall provide for repayment terms in
substantially equal installment amounts and time periods
consistent with regular occurrences of income.
(b) Balloon payment prohibited.--A loan agreement may not
require a consumer to make a balloon payment.
§ 6423. Notification before accessing deposit account.
(a) Notification before transaction required.--If a consumer
consents to allowing the licensee to have direct access to a
deposit account under the consumer's control as the repayment
mechanism for the loan, the consumer shall be given advance
notice of three business days before the transaction is
submitted for repayment to the consumer's bank, credit union or
other financial institution or prepaid account. The advance
notice may be satisfied by electronic means.
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(b) Cancellation of access to deposit account.--A consumer
may revoke the licensee's consent for direct access to a deposit
account by providing written notice to the licensee at least
three business days before a transaction is scheduled.
§ 6424. Underwriting of installment loan.
(a) Full examination required.--A licensee shall make an
installment loan to a consumer only if the consumer is subject
to a full underwriting examination and the licensee makes a
reasonable good faith determination that the consumer has the
ability to repay the loan. In determining a consumer's ability
to repay the loan, a licensee shall consider:
(1) The consumer's current or reasonably expected income
or assets.
(2) If the licensee relies on income from the consumer's
employment in determining repayment ability, the consumer's
current employment status.
(3) The consumer's monthly payment on the proposed
installment loan.
(4) The consumer's monthly payment on any simultaneous
loan that the creditor knows or has reason to know will be
made.
(5) The consumer's monthly payment for mortgage-related
or rent-related obligations.
(6) The consumer's current debt obligations, alimony and
child support.
(7) The consumer's monthly debt-to-income ratio or
residual income.
(8) The consumer's credit history.
(b) Consumer report.--
(1) As a part of the underwriting process and at no cost
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to the consumer, a licensee shall request a consumer report
of the consumer from a consumer reporting agency.
(2) In making an installment loan for a consumer, a
licensee may rely on a consumer report of the consumer as a
permissible method of verifying the consumer's employment
status, debt obligations and credit history.
(c) Definitions.--As used in this section, the following
words and phrases shall have the meanings given to them in this
subsection unless the context clearly indicates otherwise:
"Consumer report." As defined in 15 U.S.C. § 1681a(d)
(relating to definitions; rules of construction).
"Consumer reporting agency." As defined in 15 U.S.C. §
1681a(f).
§ 6425. Rescission by consumer.
(a) Right to rescind.--A consumer may rescind an installment
loan before the licensee's close of business on the second
business day after the day on which the consumer received the
installment loan proceeds.
(b) Notification and return of proceeds by consumer.--To
rescind an installment loan, within the next two business days
of receiving the installment loan proceeds, a consumer must
notify the licensee of the consumer's desire to rescind the
installment loan and return the installment loan proceeds to the
licensee within two business days of the notice of rescission.
If the installment loan proceeds are returned to the licensee
within two business days of the notice of rescission, it shall
be presumed that the consumer provided proper notice to the
licensee.
(c) Finance charge inapplicable.--A licensee may not charge
or collect a finance charge or other charge or fee if the
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installment loan is rescinded under this section.
(d) Return of payment.--Upon rescission of an installment
loan, the licensee shall:
(1) return to the consumer any check given to the
licensee in connection with the installment loan; or
(2) agree in writing that another repayment mechanism
will not be used.
§ 6426. Posting of finance charges.
A licensee shall post, in large type in plain view of the
public at a place of business where it makes installment loans,
a notice of the types and amounts of finance charges and any
related fees or charges, such as a charge for a dishonored
repayment mechanism, imposed for an installment loan.
§ 6427. Assignment or sale of installment loan.
(a) Authority.--A licensee may assign or sell an installment
loan to another licensee or to a depository institution.
(b) Notice.--A licensee shall inform a consumer in writing
immediately of the name, address and telephone number of the
person to whom the consumer's installment loan is assigned or
sold.
§ 6428. Form of installment loan proceeds.
(a) General rule.--A licensee shall disburse the proceeds of
an installment loan to the consumer in the form of an
immediately and locally cashable check, money order, cash, debit
card or credit to the consumer's deposit account at a depository
institution.
(b) Prohibition.--A licensee may not impose a fee for
cashing the licensee's check or money order or for otherwise
affecting the disbursement of loan proceeds.
§ 6429. Extension of installment loan.
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(a) Time period.--An installment loan:
(1) shall be extended for three months beyond the
original loan period because of the documented financial
hardship of the consumer as a result of the loss of
employment by the consumer; or
(2) may be extended for three months beyond the original
loan period because of the documented financial hardship of
the consumer as a result of extraordinary circumstances that
do not involve the loss of employment by the consumer.
(b) Terms and conditions of extension.--The terms and
conditions under the loan agreement for the installment loan
shall apply to the extension except that the licensee may not
charge a late fee, interest or additional charge in connection
with the extension. An additional consumer report under section
6424 (relating to underwriting of installment loan) is not
required for the extension. The provisions of this chapter shall
also apply to the extension.
SUBCHAPTER D
ADMINISTRATIVE PRACTICES AND PROCEDURES
Sec.
6431. Records.
6432. Advertisement.
6433. Prohibited acts or practices.
6434. Authority of department.
6435. Whistleblower protection.
6436. Credit counseling.
6437. Commonwealth Consumer Credit Counseling Account.
6438. Verification of compliance.
6439. Compliance fee.
6440. Reports to the department.
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6441. Accounting records.
6442. Anti-money laundering requirements.
6443. Report to General Assembly.
6444. Report to consumer reporting agency.
§ 6431. Records.
(a) Maintenance of records.--
(1) A licensee shall maintain original records, a copy
of original records or electronic access to original records
to enable the department to determine whether the licensee is
complying with this chapter and the orders, regulations and
statements of policy issued under this chapter. Records may
be maintained through p hotostatic, microfilm or electronic
copies or copies provided in some other manner approved by
the department.
(2) A licensee shall maintain records under this
section:
(i) at the licensee's principal place of business
within this Commonwealth; or
(ii) at a place outside this Commonwealth if the
department agrees.
(3) Records under this section shall be:
(i) Kept separate and apart from the records of any
other business conducted by the licensee.
(ii) Preserved and available for investigation or
examination by the department for a period determined by
the department.
(4) The department may deny or revoke the authority to
maintain records outside this Commonwealth:
(i) for good cause;
(ii) to protect the interest of consumers in this
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Commonwealth; or
(iii) because of the licensee's failure to provide
records to the department upon request.
(b) Examination of records.--
(1) The department may examine the records of a licensee
or person having a connection to the licensee if the
department deems the examination to be necessary or desirable
to administer this chapter.
(2) During an examination, the department shall have
free access, during regular business hours, to the necessary
records at the location where the records are maintained,
whether the records are maintained in or outside this
Commonwealth.
(3) The department may remove records from the location
that the licensee or person maintained the records.
(c) Costs of examination.--A licensee or person subject to
the examination under this subsection shall bear the costs
regarding the examination of records under this section,
including necessary travel costs of an employee or agent of the
department.
§ 6432. Advertisement.
Each advertisement made by or on behalf of a licensee
regarding installment loans shall i nclude language indicating
that the licensee is licensed by the department.
§ 6433. Prohibited acts or practices.
A licensee may not do any of the following:
(1) Transact business under this chapter under another
name, or in another location except as designated in its
license, without at least 30 days prior written notification
to and approval by the department.
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(2) Conduct a business other than the business licensed
by the department under this chapter without at least 30
days' prior written notification to and approval by the
department.
(3) Tie the approval or disapproval of an installment
loan or securing an installment loan to a security interest
in the consumer's vehicle.
(4) Take a security interest in the consumer's vehicle
in connection with an installment loan.
(5) Tie the approval or disapproval of an installment
loan to a grant of access to the consumer's deposit account
or paycheck as a repayment mechanism.
(6) Offer a consumer a lower rate or better terms and
conditions in exchange for access to the consumer's deposit
account or paycheck as a repayment mechanism.
(7) Tie the approval or disapproval of an installment
loan to preauthorized electronic fund transfers in violation
of 12 CFR § 1005.10(e) (relating to preauthorized transfers).
(8) Sell, offer or solicit an application for credit
insurance in connection with an installment loan.
(9) Tie a transaction to another transaction, offer or
obligation of the consumer.
(10) Assign or sell an installment loan to another
person other than in accordance with this chapter.
(11) Engage in a device or subterfuge to evade the
requirements of this chapter, including making loans
disguised as personal property sales and leaseback
transactions or disguising loan proceeds as cash rebates for
the pretextual installment sale of goods and services.
(12) Fail to collect and provide information regarding
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the number, total and average transaction amounts and other
information that the department may request.
(13) Engage in an act regarding an installment loan that
does not comply with all applicable provisions of this
chapter.
(14) Alter or delete the date on a loan agreement held
by the licensee.
(15) Use or threaten to use the criminal process to
collect the balance due on an installment loan.
(16) Enter into an installment loan with a consumer that
has one or more outstanding installment loans at the time the
consumer applies for the installment loan, but nothing in
this paragraph shall prohibit a licensee and consumer from
refinancing or renegotiating the terms of an existing
installment loan.
§ 6434. Authority of department.
(a) General authority.--The department shall have the
following powers and duties:
(1) Examine records under section 6431 (relating to
records) or otherwise investigate a licensee or person having
a connection to the licensee as necessary to administer this
chapter.
(2) Conduct an administrative hearing on a matter
pertaining to this chapter and issue a subpoena to compel the
attendance of witnesses or the production of records in
connection with the hearing. The department may:
(i) Retain subpoenaed records until the completion
of all proceedings involving the records.
(ii) Empower a department official to administer an
oath or affirmation to an individual whose testimony is
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required at an administrative hearing.
(iii) Apply to Commonwealth Court to require the
person to attend an administrative hearing, provide
testimony or produce records, if a person fails to comply
with a subpoena issued by the department or testify on a
matter to which the person may be lawfully interrogated.
Following consideration of the department's application,
the Commonwealth Court may issue an appropriate order.
(3) Request and receive information or records,
including reports of criminal history record information from
any Federal, State, local or foreign government entity
regarding an applicant, licensee or a person having a
connection to the applicant or licensee, at a cost to be paid
by the applicant or licensee.
(4) Require a person to pay the department's costs
incurred while the department conducts an investigation of
the person regarding the issuance or renewal of a license or
an alleged violation of this chapter.
(5) Promulgate regulations and statements of policy and
issue orders as necessary to administer this chapter.
(6) Prohibit or permanently remove an individual
responsible for a violation of this chapter from working in
the individual's present capacity or in any other capacity
related to activities regulated by the department.
(7) Order a person to make restitution for actual
damages to consumers caused by a violation of this chapter.
(8) Maintain an action for an injunction or other
process against a person to restrain the person from engaging
in an activity that violates this chapter.
(9) Engage the services of or otherwise contract with
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outside consultants, examiners, legal counsel or other
professionals to conduct investigations or otherwise
administer the enforcement provisions of this chapter, as the
department deems necessary and appropriate. The applicant or
licensee that necessitated the use of the outside
professionals shall bear the costs associated with the
outside professionals.
(10) Impose conditions as the department deems
appropriate.
(b) Appeals and orders.--
(1) A person aggrieved by a decision of the department
may appeal the decision to the secretary. The appeal shall be
conducted under 2 Pa.C.S. Ch. 5 Subch. A (relating to
practice and procedure of Commonwealth agencies).
(2) A decision of the secretary shall be a final order
of the department and shall be enforceable in a court of
competent jurisdiction. The department shall publish the
final adjudication issued under this section, subject to
redaction or modification to preserve confidentiality.
(3) A person aggrieved by a decision of the secretary
may appeal the decision under 2 Pa.C.S. Ch. 7 Subch. A
(relating to judicial review of Commonwealth agency action).
§ 6435. Whistleblower protection.
(a) Adverse action prohibited.--An employer may not
discharge, threaten, discriminate or retaliate against an
employee regarding the employee's compensation, terms,
conditions, location or privileges of employment because the
employee makes a good faith report or is about to report,
verbally or in writing, to the employer or appropriate authority
an instance of wrongdoing or another violation of this chapter.
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(b) Remedies.--The remedies, penalties and enforcement
procedures for violations of this section shall be as provided
in the act of December 12, 1986 (P.L.1559, No.169), known as the
Whistleblower Law.
(c) Definitions.--As used in this section, the following
words and phrases shall have the meanings given to them in this
subsection unless the context clearly indicates otherwise:
"Appropriate authority." As follows:
(1) Any of the following:
(i) A Federal, State or local government body,
agency or organization having jurisdiction over criminal
law enforcement, regulatory violations, professional
conduct or ethics or waste.
(ii) A member, officer, agent, representative or
supervisory employee of the body, agency or organization.
(2) The term includes the Office of Attorney General,
the Department of the Auditor General, the Treasury
Department, the General Assembly and committees of the
General Assembly having the power and duty to investigate
criminal law enforcement, regulatory violations, professional
conduct or ethics or waste.
"Employee." A person who works for a licensee.
"Employer." A licensee.
"Good faith report." A report of conduct that:
(1) alleges wrongdoing or waste;
(2) is made by a person without malice or consideration
of personal benefit; and
(3) the person has reasonable cause to believe is true.
"Whistleblower." A person who:
(1) witnesses or has evidence of wrongdoing or waste
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while employed; and
(2) makes a good faith report of the wrongdoing or
waste, verbally or in writing, to:
(i) one of the person's superiors;
(ii) an agent of the employer; or
(iii) an appropriate authority.
"Wrongdoing." A violation that is not of a merely technical
or minimal nature of:
(1) a Federal or State statute or regulation.
(2) a political subdivision ordinance or regulation; or
(3) a code of conduct or ethics designed to protect the
interest of the public or the employer.
§ 6436. Credit counseling.
(a) General rule.--Prior to the execution of a loan
agreement under this chapter, a licensee shall deliver written
notice that advises the consumer that the consumer is entitled
to credit counseling at no cost to the consumer from an
unaffiliated third-party credit counselor approved by the
department.
(b) Consumer acknowledgment.--The licensee shall have the
consumer acknowledge the licensee's delivery of the notice under
subsection (a) on a form prescribed by the department.
(c) Contents of notice.--Notice under this section shall
include the following:
"You are entitled to no-cost credit counseling in
connection with obtaining this installment loan. This
loan is not meant to meet long-term financial needs and
should be used only to meet short-term cash needs. This
no-cost credit counseling could help you avoid the need
to seek this kind of loan in the future."
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(d) Grace period.--The following shall apply:
(1) Notwithstanding section 6453 (relating to late
fees), if a payment is no more than five days late and the
consumer notifies the licensee that the consumer cannot pay
the amount due by the next installment loan payment date, the
licensee shall provide a one-time grace period to the
consumer during which time the licensee may not consider the
consumer in default or accelerate the amounts due under the
loan agreement for 30 days.
(2) The grace period under paragraph (1) applies only if
the consumer participates in approved credit counseling of
which the consumer received written notice under subsection
(a) and completes the credit counseling within 15 days after
notifying the licensee under paragraph (1).
(3) The consumer may agree to comply with a repayment
plan approved by the credit counseling agency used by the
consumer under this subsection, in which case the licensee
shall be bound by that repayment plan.
(4) A licensee may not take further action against the
consumer regarding the installment loan during the 30-day
grace period under this subsection unless the consumer fails
to:
(i) comply with the repayment plan; or
(ii) notify the licensee of compliance with the
repayment plan.
(5) A consumer is entitled to only one 30-day grace
period with a licensee.
(6) Before entering into an installment loan agreement,
the licensee shall advise the consumer, both verbally and in
writing, of the availability of the grace period under this
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subsection. The licensee shall advise the consumer that the
grace period is contingent upon completing the approved
credit counseling.
§ 6437. Commonwealth Consumer Credit Counseling Account.
(a) Establishment.--There is established within the
department a restricted account to be known as the Commonwealth
Consumer Credit Counseling Account. Funds collected under
section 6439(c) (relating to compliance fee) shall be deposited
into the account.
(b) Designation and approval by department.--
(1) The department shall designate and approve credit
counseling agencies to be available to assist in implementing
the provisions of this chapter related to consumer credit
counseling. Credit counseling agencies seeking to provide
budget and credit counseling to consumers must meet the
requirements prescribed by the department.
(2) The department shall maintain an up-to-date list of
approved credit counseling agencies by county and publish the
list on the department's publicly accessible Internet
website.
(3) At its discretion, the department shall allocate on
a quarterly basis funds to approved credit counseling
agencies from the account.
(4) The department shall pay all costs and expenses for
delivery of consumer credit counseling from amounts available
in the account.
§ 6438. Verification of compliance.
(a) Consumer verification.--To ensure compliance with the
terms and conditions of this chapter and any subsequent rules
and regulations established by the department, a consumer shall
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