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                                                       PRINTER'S NO. 525

THE GENERAL ASSEMBLY OF PENNSYLVANIA


SENATE BILL

No. 483 Session of 2007


        INTRODUCED BY BROWNE, FERLO, BOSCOLA, PILEGGI, ERICKSON, COSTA
           AND BAKER, MARCH 15, 2007

        REFERRED TO BANKING AND INSURANCE, MARCH 15, 2007

                                     AN ACT

     1  Amending the act of January 30, 1974 (P.L.13, No.6), entitled
     2     "An act regulating agreements for the loan or use of money;
     3     establishing a maximum lawful interest rate in the
     4     Commonwealth; providing for a legal rate of interest;
     5     detailing exceptions to the maximum lawful interest rate for
     6     residential mortgages and for any loans in the principal
     7     amount of more than fifty thousand dollars and Federally
     8     insured or guaranteed loans and unsecured, noncollateralized
     9     loans in excess of thirty-five thousand dollars and business
    10     loans in excess of ten thousand dollars; providing
    11     protections to debtors to whom loans are made including the
    12     provision for disclosure of facts relevant to the making of
    13     residential mortgages, providing for notice of intention to
    14     foreclose and establishment of a right to cure defaults on
    15     residential mortgage obligations, provision for the payment
    16     of attorney's fees with regard to residential mortgage
    17     obligations and providing for certain interest rates by banks
    18     and bank and trust companies; clarifying the substantive law
    19     on the filing of and execution on a confessed judgment;
    20     prohibiting waiver of provisions of this act, specifying
    21     powers and duties of the Secretary of Banking, and
    22     establishing remedies and providing penalties for violations
    23     of this act," defining "department"; and further providing
    24     for the definition of "residential mortgage" and for the
    25     duties of the Department of Banking.

    26     The General Assembly of the Commonwealth of Pennsylvania
    27  hereby enacts as follows:
    28     Section 1.  The definition of "residential mortgage" in
    29  section 101 of the act of January 30, 1974 (P.L.13, No.6),

     1  referred to as the Loan Interest and Protection Law, and more
     2  commonly referred to as the Usury Law, amended April 6, 1979
     3  (P.L.15, No.4), is amended and the section is amended by adding
     4  a definition to read:
     5     Section 101.  Definitions.--As used in this act:
     6     * * *
     7     "Department" means the Department of Banking of the
     8  Commonwealth.
     9     * * *
    10     "Residential mortgage" means an obligation to pay a sum of
    11  money in an original bona fide principal amount of [fifty
    12  thousand dollars ($50,000) or less] one hundred ninety-seven
    13  thousand dollars ($197,000) or less, adjusted annually for
    14  inflation by the Department of Banking through notice published
    15  in the Pennsylvania Bulletin, evidenced by a security document
    16  and secured by a lien upon real property located within this
    17  Commonwealth containing two or fewer residential units or on
    18  which two or fewer residential units are to be constructed and
    19  shall include such an obligation on a residential condominium
    20  unit.
    21     * * *
    22     Section 2.  Section 201 of the act is amended to read:
    23     Section 201.  Maximum Lawful Interest Rate.--(a)  Except as
    24  provided in Article III of this act, the maximum lawful rate of
    25  interest for the loan or use of money in an amount of fifty
    26  thousand dollars ($50,000) or less in all cases where no express
    27  contract shall have been made for a less rate shall be six per
    28  cent per annum.
    29     (b)  The maximum lawful rate of interest set forth in this
    30  section shall not apply to:
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     1     (1) an obligation to pay a sum of money in an original bona
     2  fide principal amount of more than fifty thousand dollars
     3  ($50,000);
     4     (2) an unsecured, noncollateralized loan in excess of thirty-
     5  five thousand dollars ($35,000); or
     6     (3) business loans of any principal amount.
     7     Section 3.  Section 301(f) of the act, amended October 5,
     8  1978 (P.L.1100, No.258), is amended to read:
     9     Section 301.  Residential Mortgage Interest Rates.--* * *
    10     (f)  The maximum lawful rate of interest set forth in this
    11  section [and in Article II of this act] shall not apply to (i)
    12  an obligation to pay a sum of money in an original bona fide
    13  principal amount of more than [fifty thousand dollars ($50,000)]
    14  one hundred ninety-seven thousand dollars ($197,000), adjusted
    15  annually for inflation by the department through notice
    16  published in the Pennsylvania Bulletin; (ii) an obligation to
    17  pay a sum of money in an original bona fide principal amount of
    18  [fifty thousand dollars ($50,000) or less] one hundred ninety-
    19  seven thousand dollars ($197,000) or less, adjusted annually for
    20  inflation by the department through notice published in the
    21  Pennsylvania Bulletin, evidenced by a security document and
    22  secured by a lien upon real property, other than residential
    23  real property as defined in this act; [(iii) to a loan to a
    24  person subject to the act of April 27, 1927 (P.L.404, No.260),
    25  entitled "An act prohibiting corporations from pleading usury as
    26  a defense," section 313 of the act of May 5, 1933 (P.L.364,
    27  No.106), known as the "Business Corporation Law," or Title 15
    28  Pa.C.S. section 7544; or (iv) an unsecured, noncollateralized
    29  loan in excess of thirty-five thousand dollars ($35,000);] or
    30  (v) business loans [the principal amount of which is in excess
    20070S0483B0525                  - 3 -     

     1  of ten thousand dollars ($10,000)] of any principal amount.
     2     Section 4.  Sections 505 and 506 of the act are amended to
     3  read:
     4     Section 505.  Penalties.--(a)  Any person who knowingly and
     5  intentionally violates the provisions of this act shall be
     6  guilty of a misdemeanor of the third degree.
     7     (b)  Any person who violates a provision of this act shall be
     8  subject to a fine levied by the department of ten thousand
     9  dollars ($10,000) per offense.
    10     Section 506.  Enforcement.--(a)  When the Attorney General
    11  has reason to believe that any person has violated the
    12  provisions of this act, or the regulations promulgated
    13  hereunder, he shall have standing to bring a civil action for
    14  injunctive relief and such other relief as may be appropriate to
    15  secure compliance with this act or the regulations promulgated
    16  hereunder.
    17     (b)  The department may examine any instrument, document,
    18  account, book, record, electronic data or file of any person, or
    19  make such other investigation as may be necessary to administer
    20  the provisions of this act. Any person subject to such
    21  examination or investigation shall pay the department any costs
    22  associated with such examination or investigation. In connection
    23  with any examination or investigation authorized by this act,
    24  the department shall have the power to issue subpoenas requiring
    25  the attendance of, or the production of pertinent books, papers,
    26  electronic data or information of any kind which is in any form
    27  by, the officers, directors, agents, employees, or members,
    28  respectively, of any person which the department is authorized,
    29  under the provisions of this act, to examine. The department
    30  shall have power to issue subpoenas to any other person or
    20070S0483B0525                  - 4 -     

     1  entity of any kind whatsoever provided that the information from
     2  such person or entity is necessary for the enforcement of this
     3  act. The department shall also have the power to question such
     4  witnesses under oath or affirmation, and to examine such books
     5  and papers. Any witness who refuses to obey a subpoena issued
     6  under this section, or who refuses to be sworn or affirmed, or
     7  to testify, or who is guilty of any contempt after summons to
     8  appear, may be found in contempt of court. For this purpose, an
     9  application may be made to Commonwealth Court or any court of
    10  common pleas within whose territorial jurisdiction the offense
    11  was committed, for which purpose such court is hereby given
    12  jurisdiction.
    13     (c)  If the department determines that a person has violated
    14  the provisions of this act, the department may do any of the
    15  following:
    16     (1)  Suspend, revoke or refuse to renew any license issued to
    17  the person by the department.
    18     (2)  Prohibit or permanently remove an individual responsible
    19  for a violation of this act from working in his or her present
    20  capacity or in any other capacity related to activities
    21  regulated by the department.
    22     (3)  Order the person to cease and desist any violation of
    23  this act and to make restitution for actual damages to any
    24  aggrieved person.
    25     (4)  Require the person to pay costs associated with any
    26  department enforcement action initiated under the provisions of
    27  this act.
    28     (5)  Impose such other conditions by order or otherwise as
    29  the department deems appropriate.
    30     Section 5.  This act shall take effect in 60 days.
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