PRINTER'S NO. 1683
No. 1395 Session of 2005
INTRODUCED BY BROWNE, ADOLPH, BOYD, CALTAGIRONE, CAPPELLI,
CRAHALLA, DALLY, DENLINGER, GEIST, GINGRICH, GOOD, JAMES,
MANN, REICHLEY, SAYLOR, E. Z. TAYLOR, TIGUE, TRUE, WALKO AND
YOUNGBLOOD, APRIL 14, 2005
REFERRED TO COMMITTEE ON FINANCE, APRIL 14, 2005
AN ACT
1 Regulating tax refund anticipation loan and check providers;
2 providing for the powers and duties of the Secretary of
3 Banking; and prescribing penalties.
4 TABLE OF CONTENTS
5 Chapter 1. Preliminary Provisions
6 Section 101. Short title.
7 Section 102. Definitions.
8 Chapter 3. Licensure Provisions
9 Section 301. License requirement.
10 Section 302. Application for license.
11 Section 303. License bond.
12 Section 304. License renewal.
13 Section 305. License fee.
14 Section 306. Issuance of license.
15 Section 307. Powers of secretary.
16 Section 308. Examination by secretary.
17 Section 309. Reports to secretary.
1 Section 310. Recordkeeping.
2 Section 311. Interest and charges.
3 Section 312. Penalties.
4 Chapter 5. Miscellaneous Provisions
5 Section 501. Severability.
6 Section 502. Effective date.
7 The General Assembly of the Commonwealth of Pennsylvania
8 hereby enacts as follows:
9 CHAPTER 1
10 PRELIMINARY PROVISIONS
11 Section 101. Short title.
12 This act shall be known and may be cited as the Tax Refund
13 Anticipation Loan and Check Regulation Act.
14 Section 102. Definitions.
15 The following words and phrases when used in this act shall
16 have the meanings given to them in this section unless the
17 context clearly indicates otherwise:
18 "Applicant." A person who applies for registration as a
19 facilitator of loans.
20 "Check." A check or other payment mechanism representing the
21 proceeds of a consumer's tax refund or tax credits issued by a
22 depository institution or person that received a direct deposit
23 of the consumer's tax refund or tax credits, and for which the
24 consumer has paid a fee or other consideration for the payment
25 mechanism.
26 "Consumer." An individual who, singly or jointly with
27 another individual, is solicited for, applies for or receives
28 the proceeds of a loan or check.
29 "Creditor." A person who makes a refund anticipation loan or
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1 who takes an assignment of a refund anticipation loan.
2 "Department." The Department of Banking of the Commonwealth.
3 "License." A license issued under this act.
4 "Loan." A loan that is secured by or that a creditor
5 arranges to be repaid directly or indirectly from the proceeds
6 of a consumer's income tax refund or tax credits. The term
7 includes a sale assignment or purchase of a consumer's tax
8 refund at a discount, whether or not the consumer is required to
9 repay the buyer or assignee if the Internal Revenue Service
10 denies or reduces the consumer's tax refund.
11 "Loan fee." The charges, fees or other consideration charged
12 or imposed by a creditor or facilitator for the making of a
13 loan. This term does not include:
14 (1) A charge, fee or other consideration usually charged
15 or imposed by the facilitator in the ordinary course of
16 business, such as fees for tax return preparation and fees
17 for electronic filing of tax returns, if the same fees in the
18 same amount are charged to the facilitator's customers who do
19 not receive loans or checks.
20 (2) A charge, fee or other consideration for a deposit
21 account if the deposit account is used for receipt of the
22 consumer's tax refund to repay the amount owed on the loan.
23 "Loan interest rate." The interest rate for a loan
24 calculated on an annualized basis. The term includes all refund
25 anticipation loan fees, including any administrative, document
26 preparation or any fees that are not charged to customers who do
27 not receive a loan or check. If a deposit account is established
28 or maintained in whole or in part for the purpose of receiving
29 the consumer's tax refund to repay the amount owed on a refund
30 anticipation loan:
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1 (1) The maturity of the loan for the purpose of
2 determining the refund anticipation loan interest rate shall
3 be assumed to be the estimated date when the tax refund will
4 be deposited in the deposit account.
5 (2) A fee charged to the consumer for such deposit
6 account shall be considered a loan fee and shall be included
7 in the calculation of the interest rate.
8 "Loan provider" or "check provider." A person, including any
9 officer, agent, employee or representative, who individually or
10 in conjunction or cooperation with another person solicits the
11 execution of, processes, receives or accepts an application or
12 agreement for a refund anticipation loan or refund anticipation
13 check or in any other manner facilitates the making of a loan or
14 check.
15 "Market or advertise." To produce, distribute or otherwise
16 display or have displayed, written material describing a
17 facilitator's products and services, radio and other oral
18 marketing and advertising and telephone and in-person
19 interactions with customers.
20 "Person." An individual, firm, partnership, association,
21 corporation or any other entity.
22 "Registrant." A person who is registered under this act as a
23 facilitator of loans or checks and any officer, agent, employee
24 or representative thereof.
25 "Secretary." The Secretary of Banking of the Commonwealth.
26 CHAPTER 3
27 LICENSURE PROVISIONS
28 Section 301. License requirement.
29 No person, partnership, association, business corporation,
30 nonprofit corporation, common law trust, joint-stock company or
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1 any group of individuals however organized shall, on and after
2 the effective date of this section, engage or continue to engage
3 in business as a loan provider or check provider in this
4 Commonwealth except as authorized by this act and without first
5 obtaining a license from the secretary.
6 Section 302. Application for license.
7 (a) General rule.--The application for a license shall be in
8 writing, under oath and in the form prescribed by the secretary
9 and shall contain:
10 (1) the name and address of the residence of the
11 applicant and if the applicant is a partnership, association,
12 joint-stock company or common law trust of every member
13 thereof and, if the applicant is a business corporation or
14 nonprofit corporation, of each officer and director thereof;
15 (2) the county and municipality with street and number,
16 if any, office building and room number, if any, where the
17 business is to be conducted; and
18 (3) such further information as the secretary may
19 require.
20 The application shall be signed by the individual owner if the
21 applicant is an individual, by all the partners if the applicant
22 is a partnership, by two officers if the applicant is an
23 association, joint-stock company or common law trust and by the
24 president and secretary if the applicant is a business
25 corporation or a nonprofit corporation.
26 (b) Posting of application.--An applicant for a new license
27 shall post, for a period of at least 30 days beginning with the
28 day the application is filed with the secretary, in a
29 conspicuous place on the outside of the premises or at the
30 proposed new location for which the licensee applies, a notice
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1 of the application in the form, of the size and containing
2 provisions as the secretary may require by regulation. Proof of
3 the posting of the notice shall be filed with the secretary.
4 (c) Posting.--A loan or check provider licensed by the
5 department shall display in a conspicuous place within the
6 registered building the license approved by the secretary.
7 Section 303. License bond.
8 (a) Requirements.--
9 (1) A bond in the penal sum of $100,000 shall accompany
10 each application for license. The bond shall be executed by a
11 surety company authorized by the laws of this Commonwealth to
12 transact business within this Commonwealth. The secretary
13 may, in lieu of such surety company bond, accept a bond
14 executed by the applicant for license if such bond is secured
15 by the deposit with the secretary of cashier's checks,
16 treasurer's checks or certificate of deposit of a banking
17 institution or readily marketable security approved by the
18 secretary. The collateral, deposited in lieu of a surety
19 company bond, shall be deposited for safekeeping by the
20 secretary in the office of the State Treasurer.
21 (2) The bond shall be renewed and refiled annually not
22 later than October 1 of each year. The bond shall be executed
23 to the Commonwealth of Pennsylvania. The bond shall be for
24 the use of the Commonwealth and for any person or persons who
25 may have a cause of action against the loan or check provider
26 as a licensee under this act.
27 (3) The condition of the bond shall be that the loan or
28 check provider shall comply with and abide by all the
29 provisions of this act and all rules and regulations of the
30 secretary lawfully issued under this act and shall pay to the
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1 Commonwealth, to the secretary or to any person or persons
2 any and all moneys that may come due to the Commonwealth, to
3 the secretary or to any person or persons from the refund
4 anticipation loan or refund anticipation check provider under
5 and by virtue of the provisions of this act.
6 (b) Separate bonds.--A separate bond shall be required for
7 each place of business conducted by a loan or check provider.
8 (c) Execution on bond.--If any person shall be aggrieved by
9 the misconduct of a loan or check provider and shall recover
10 judgment against the loan or check provider, the person may, on
11 any execution issued under such judgment, maintain an action
12 upon the bond of the loan or check provider in any court having
13 jurisdiction of the amount claimed, provided the secretary
14 assents thereto.
15 Section 304. License renewal.
16 (a) General rule.--An application for license renewal shall
17 be published 30 days before renewal in a newspaper of general
18 circulation in the municipality where the license is to be
19 renewed.
20 (b) Limitation.--The secretary shall not issue a license or
21 a license renewal for a period of at least five years to any
22 applicant who has been determined to be operating as a loan or
23 check provider without a license.
24 Section 305. License fee.
25 (a) General rule.--An application for license under this act
26 shall be accompanied by an annual license fee of $1,000. A
27 license shall expire on October 1 annually. No abatement of the
28 license fee shall be made if the license is issued for less than
29 one year. A license shall be renewed annually on the first day
30 of October, and an annual license renewal fee of $1,000 shall be
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1 paid for the next ensuing license year.
2 (b) Deposits by secretary.--All license fees and fines
3 received by the secretary shall be deposited in the State
4 Treasury to the credit of the Banking Department Fund for the
5 use of the secretary in administering this act.
6 Section 306. Issuance of license.
7 (a) General rule.--The secretary, if he approves the
8 application for license, shall issue to each loan or check
9 provider a certificate showing the name of the loan or check
10 provider and the address of the place of business. The license
11 shall be posted in a conspicuous place in the office of the loan
12 or check provider so that it shall be in full view of the public
13 at all times. The license may not be transferred or assigned.
14 (b) Change of place of business.--
15 (1) Whenever a loan or check provider shall change his
16 place of business to another location within the same city,
17 borough or township, the loan or check provider shall at once
18 give written notice thereof to the secretary and return the
19 license certificate to the secretary for amendment.
20 (2) The secretary, if he approves the removal, shall
21 endorse on the license in writing his record of the change of
22 address and the date thereof, which shall be the authority
23 for the operation of the business under the license at the
24 new location.
25 (3) No change in the place of business of a loan or
26 check provider to a location outside the original city,
27 borough or township shall be permitted under the same
28 license. Not more than one place of business may be operated
29 under the same license.
30 (4) If a loan or check provider operates more than one
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1 place of business, additional licenses may be obtained by
2 filing a separate application for each additional place of
3 business and furnishing an additional bond for each
4 additional place of business and paying the license fee
5 provided in this act for each place of business.
6 Section 307. Powers of secretary.
7 (a) Grounds for rejecting application for license.--
8 (1) The secretary may reject an application for license
9 if the secretary is satisfied that the financial
10 responsibility, experience, character and general fitness of
11 the applicant or applicants are not such as to command the
12 confidence of the community and to warrant the conclusion
13 that the business will be operated honestly, fairly and
14 within the laws of this Commonwealth or if the secretary is
15 not satisfied that allowing the applicant to engage in
16 business will promote the convenience and advantage of the
17 community in which the business of the applicant is to be
18 conducted.
19 (2) No license may be issued to an applicant who has
20 been convicted under this act for engaging in the business of
21 loan or check providing in this Commonwealth without having
22 obtained a license under this act.
23 (3) The secretary may reject an application for a
24 license based upon proliferation of existing licenses within
25 the same area, community opposition to the application and
26 inability to meet minimum capital requirements or
27 recordkeeping obligations.
28 (b) Revocation of license.--The secretary may, upon 30 days'
29 written notice to the loan or check provider, forwarded by
30 registered mail to the place of business of the loan or check
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1 provider as shown in the application for license, stating the
2 contemplated action and in general the grounds for revocation,
3 revoke any license if:
4 (1) the loan or check provider violates any provisions
5 of this act;
6 (2) the loan or check provider violates any rule or
7 regulation made by the secretary under and within the
8 authority of this act;
9 (3) a refund loan or check provider fails to comply with
10 any demand, rule or regulation lawfully made by the secretary
11 under and within the authority of this act;
12 (4) the loan or check provider fails to pay the cost of
13 examination by the secretary or the secretary's authorized
14 representative;
15 (5) the loan or check provider fails to maintain in
16 effect the bond required under the provisions of this act;
17 (6) the loan or check provider fails to file the annual
18 report to the secretary within the time stipulated in this
19 act; or
20 (7) if any fact or condition exists which, if it had
21 existed at the time of original application for license,
22 clearly would have warranted the secretary originally in
23 refusing to issue the license.
24 (c) Limitation.--Whenever the license is revoked, the
25 secretary may not issue another license to the loan or check
26 provider until the expiration of at least one year from the date
27 of revocation of the license and not at all if the loan or check
28 provider shall have been convicted for a deliberate violation of
29 this act or for a second offense.
30 (d) Special reports.--The secretary may require a loan or
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1 check provider licensed under this act to file special reports
2 in addition to the annual report required under this act.
3 (e) Rules and regulations.--The secretary may issue rules
4 and regulations governing the records to be maintained by a loan
5 or check provider licensed under this act and may issue such
6 general rules and regulations as may be necessary for the
7 protection of the public and to insure the proper conduct of
8 such business and for the enforcement of this act, which rules
9 and regulations shall have the force and effect of law. These
10 rules and regulations shall include minimum start-up and capital
11 operating requirements, the filing of annual reports to the
12 secretary and any other financial recordkeeping the secretary
13 deems necessary to ensure compliance with this act.
14 Section 308. Examination by secretary.
15 (a) General rule.--The secretary and any person designated
16 by the secretary for that purpose may at any time investigate
17 the business and examine the books, accounts, records and files
18 of every loan or check provider and of every person who or which
19 shall be engaged in the business of loan or check providing
20 whether the person shall act or claim to act as principal or
21 agent or under or without the authority of this act. For this
22 purpose, the secretary shall have free access to the office and
23 places of business, books, accounts, papers, records, files,
24 safes and vaults of all such persons. A person who is not
25 licensed under this act shall be presumed to be engaged in the
26 business of loan or check providing if that person advertises or
27 solicits business as a loan or check provider as defined in this
28 act, and the secretary is in such cases authorized to examine
29 the books, accounts, papers, files, safes and vaults of such
30 person for the purpose of discovering violations of this act.
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1 (b) Costs.--The costs of an examination of the business of a
2 licensed loan or check provider by the secretary shall be paid
3 by the loan or check provider so examined, and the secretary may
4 collect such costs from the surety company which has executed
5 the bond required under this act and may maintain an action for
6 the recovery of such costs in any court of competent
7 jurisdiction.
8 Section 309. Reports to secretary.
9 (a) Duty to report.--A loan or check provider licensed under
10 this act shall annually, on or before the first day of March,
11 file a report with the secretary giving such relevant
12 information as the secretary may require concerning the business
13 and operations during the previous calendar year of the licensed
14 place of business conducted by the loan or check provider within
15 this Commonwealth. Such report shall be made under oath and
16 shall be in the form prescribed by the secretary.
17 (b) Penalty.--A loan or check provider who fails to file a
18 report as required by this act shall pay to the secretary a
19 penalty of $10 for each calendar day which the report is
20 overdue, but the secretary may, in his discretion, relieve a
21 loan or check provider of any portion or all of such fine.
22 Section 310. Recordkeeping.
23 A loan or check provider licensed under this act shall
24 maintain adequate records of all business transacted containing
25 such information in English and in such forms as shall be
26 prescribed by the secretary by general rule or regulation. The
27 records of a loan or check provider shall be retained for a
28 period of two years after the date of the payment of any loan.
29 Section 311. Interest and charges.
30 (a) Interest rate.--
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1 (1) A loan or check provider may not charge, contract
2 for or receive interest in excess of 36% per year on any loan
3 or check.
4 (2) The interest and charges authorized by this act
5 shall be computed at the rates specified on the actual
6 principal balance of the loan due for the actual time which
7 has elapsed from the date of the loan to the date of payment.
8 (3) For the purpose of calculation of interest and
9 charges permitted under this act, a year shall be 12 calendar
10 months and a month shall be one calendar month, or any
11 fractional part thereof. A calendar month shall be any period
12 from a certain date in one month to the same date in the next
13 succeeding month.
14 (b) Fees.--A loan or check provider may not charge more than
15 $5 in administrative, document preparation or application fees
16 for each loan entered into with a consumer. This limitation on
17 fees shall apply to any electronic filing fee charged by the
18 facilitator unless the same electronic filing fee is charged to
19 the facilitator's customers who do not receive loans or checks.
20 (c) Prohibition.--No greater interest nor other fees, fines,
21 charges or costs shall be charged, contracted for or received,
22 directly or indirectly, under any pretext whatsoever. Interest
23 and charges permitted under this act may not be collected or
24 deducted in advance.
25 Section 312. Penalties.
26 Any person, partnership, association or corporation or any
27 partner, director, officer, agent or member thereof who shall
28 engage in the business of loan or check providing in this
29 Commonwealth without first obtaining a license under this act
30 commits a misdemeanor and, upon conviction thereof, shall be
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1 sentenced to pay a fine of not less than $500 nor more than
2 $5,000 or a term of imprisonment not less than six months nor
3 more than three years, or both, in the discretion of the court.
4 A loan or check provider licensed under the provisions of this
5 act who violates any provisions of this act or directs or
6 consents to such violations commits a misdemeanor and, upon
7 conviction thereof, shall be sentenced to pay a fine of not more
8 than $1,000 or a term of imprisonment not to exceed one year, or
9 both, in the discretion of the court.
10 CHAPTER 5
11 MISCELLANEOUS PROVISIONS
12 Section 501. Severability.
13 The provisions of this act are severable. If any provision of
14 this act or its application to any person or circumstance is
15 held invalid, the invalidity shall not affect other provisions
16 or applications of this act which can be given effect without
17 the invalid provision or application.
18 Section 502. Effective date.
19 This act shall take effect in 60 days.
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