PRINTER'S NO. 3135
No. 2247 Session of 2005
INTRODUCED BY MANDERINO, HASAY, THOMAS, ARMSTRONG, BEBKO-JONES, BELARDI, BIANCUCCI, BISHOP, BLACKWELL, BUXTON, CALTAGIRONE, COHEN, COSTA, CRAHALLA, CREIGHTON, CURRY, DALLY, DeLUCA, DIVEN, DONATUCCI, D. EVANS, FABRIZIO, FRANKEL, FREEMAN, GEIST, GEORGE, GERGELY, GOODMAN, GRUCELA, HANNA, HARHART, HARPER, HERMAN, HESS, HICKERNELL, JAMES, JOSEPHS, LaGROTTA, LEACH, LEDERER, LEVDANSKY, McCALL, MUNDY, O'NEILL, PALLONE, PETRONE, PISTELLA, PRESTON, REED, ROEBUCK, SAMUELSON, SCAVELLO, SHAPIRO, SOLOBAY, SURRA, TANGRETTI, E. Z. TAYLOR, TIGUE, TRUE, VITALI, WALKO, WATERS, WILLIAMS, WOJNAROSKI AND YOUNGBLOOD, NOVEMBER 21, 2005
REFERRED TO COMMITTEE ON CONSUMER AFFAIRS, NOVEMBER 21, 2005
AN ACT 1 Amending the act of April 8, 1937 (P.L.262, No.66), entitled, as 2 amended, "An act relating to consumer credit; requiring 3 licenses from the Secretary of Banking; restricting licenses 4 to domestic business corporations; fixing minimum capital 5 requirements; conferring certain powers on the Secretary of 6 Banking; limiting interest and other charges; providing 7 certain exemptions; and imposing penalties," further 8 providing for definitions and for licensure; and prohibiting 9 payday loans. 10 The General Assembly of the Commonwealth of Pennsylvania 11 hereby enacts as follows: 12 Section 1. Section 2 of the act of April 8, 1937 (P.L.262, 13 No.66), known as the Consumer Discount Company Act, amended June 14 20, 1947 (P.L.665, No.288), December 9, 1982 (P.L.1072, No.249) 15 and December 21, 1998 (P.L.1287, No.167), is amended to read: 16 Section 2. Definitions.--The following terms shall be 17 construed in the act to have the following meanings, except in
1 those instances where the context clearly indicates otherwise: 2 "Person" includes an individual, partnership, association, 3 business corporation, nonprofit corporation, common law trust, 4 joint-stock company or any other group of individuals however 5 organized. 6 "Contract" means a promissory or judgment note, bill of 7 exchange, judgment, mortgage, conditional sales, contract, lease 8 or bailment by which the lessee or bailee has the option of 9 becoming or is bound to become the owner of real or personal 10 property upon full compliance with the terms of the agreement, 11 or any other form of negotiable or nonnegotiable instrument 12 evidencing an agreement to pay a sum certain in money at a fixed 13 or determinable time, either by a single payment or by stated 14 installments. 15 "Applicant" means a corporation applying for a license under 16 the provisions of this act. 17 "Licensee" means a corporation holding a license issued under 18 the provisions of this act, which license has not been 19 cancelled, surrendered or revoked and has not expired. 20 "Consumer" means the person who is the maker on a note, or 21 the acceptor of a bill of exchange, or the defendant on a 22 judgment, or the mortgagor on a mortgage, or the lessee on a 23 lease, or the bailee on a bailment, or the purchaser on a 24 conditional sales contract, or the person or persons obligated 25 to pay any other negotiable instrument defined as a "contract" 26 under this act. 27 "Charges" means and includes all interest or discount and the 28 service charge which a licensee is authorized to collect by the 29 provisions of this act. 30 "Default" means failure to pay a contract when due or failure 20050H2247B3135 - 2 -
1 to pay any stated installment when due. 2 "Revolving loan account" means an agreement pursuant to which 3 (i) the licensee may permit the borrower to obtain one or a 4 series of loans or advances from time to time: Provided, 5 however, That the aggregate of the unpaid principal balances due 6 a licensee from a consumer under this act on any date shall not 7 exceed the sum of twenty-five thousand dollars ($25,000), (ii) 8 the unpaid principal balances and the appropriate charges are 9 debited to an account, (iii) the charges for the loan are 10 computed on the outstanding unpaid principal balances of the 11 account from time to time, and (iv) the borrower has the 12 privilege of paying the balances in installments. 13 "Capital or capitalization" means the legal or stated capital 14 which, at any particular time, is fully paid in and the sum of 15 the par value of all shares issued and outstanding or the amount 16 of consideration received by the corporation for all shares 17 issued and outstanding without par value but is limited to the 18 amount which has been credited to capital stock accounts. 19 "Payday loan" means a short-term cash advance of three 20 thousand dollars ($3,000) or less which is secured or 21 facilitated by (i) holding a consumer's personal check for 22 future deposit or (ii) access to the consumer's bank account. 23 The term includes any form of this lending, notwithstanding the 24 presence of some other element introduced to disguise the true 25 nature of the transaction, such as the sale or provision of 26 personal property or service incidental to the advance of funds, 27 and notwithstanding the medium in which the transaction is 28 conducted. 29 Section 2. Section 3 of the act, amended December 18, 1984 30 (P.L.1083, No.216), December 12, 1994 (P.L.1060, No.144) and 20050H2247B3135 - 3 -
1 July 2, 1996 (P.L.490, No.80), is amended to read: 2 Section 3. License Required.--A. On and after the effective 3 date of this act, no person shall engage or continue to engage 4 in this Commonwealth, either as principal, employe, agent or 5 broker, in the business of negotiating or making loans or 6 advances of money on credit, in the amount or value of twenty- 7 five thousand dollars ($25,000) or less, and charge, collect, 8 contract for or receive interest, discount, bonus, fees, fines, 9 commissions, charges, or other considerations which aggregate in 10 excess of the interest that the lender would otherwise be 11 permitted by law to charge if not licensed under this act on the 12 amount actually loaned or advanced, or on the unpaid principal 13 balances when the contract is payable by stated installments 14 except a domestic business corporation organized under or 15 existing by virtue of the Business Corporation Law of this 16 Commonwealth, after first obtaining a license from the Secretary 17 of Banking of the Commonwealth of Pennsylvania in accordance 18 with the provisions of this act. 19 B. Any person who shall hold himself out as willing or able 20 to arrange for or negotiate such loans of twenty-five thousand 21 dollars ($25,000), or less where the interest, discount, bonus, 22 fees, fines, commissions or other considerations in the 23 aggregate exceeds the interest that the lender would otherwise 24 be permitted by law to charge or who solicits prospective 25 borrowers of such loans of twenty-five thousand dollars 26 ($25,000), or less shall be deemed to be engaged in the business 27 contemplated by this act, unless otherwise permitted by law to 28 engage in such activities. [The referring borrowers to a 29 licensee shall not be deemed to be engaged in the business 30 contemplated by this act if no charge, no matter how 20050H2247B3135 - 4 -
1 denominated, for such reference is imposed on the prospective 2 borrower by the person making the reference.] No licensee shall 3 knowingly include in any loan under this act any amount which is 4 to be paid by the borrower to another as a fee or charge, no 5 matter how denominated, for referring said borrower to the 6 licensee. 7 C. Notwithstanding subsection A, the Secretary of Banking 8 may license a branch office in another state provided the 9 licensee maintains a place of business in this Commonwealth 10 which is licensed under the provisions of this act. 11 D. Notwithstanding any other provision of law, including the 12 act of December 16, 1992 (P.L.1144, No.150), known as the 13 "Credit Services Act," any person in the business of 14 negotiating, arranging for or assisting in procuring a loan 15 referred to in this section shall be deemed to be engaged in the 16 business of negotiating or making a loan referred to in this 17 section. This subsection applies to payday loans. 18 Section 3. The act is amended by adding a section to read: 19 Section 18.1. Prohibition Against Payday Loans.--A. It 20 shall be unlawful for any person to engage in the business of 21 making, arranging for or soliciting payday loans. This 22 prohibition shall not apply to a loan made by a bank, thrift 23 union or credit union, except that it will apply to any person 24 that arranges a loan made by a bank, thrift union or credit 25 union if the entire circumstances of the transaction show that 26 the arranger holds, acquires or maintains a preponderant 27 economic interest in the revenues generated by the loan. 28 B. Any person, including any responsible agent or officer of 29 a corporation, partnership or association, that engages in the 30 business of making, arranging for or soliciting payday loans 20050H2247B3135 - 5 -
1 shall be guilty of a misdemeanor of the first degree. 2 C. Any payday loan made in violation of this section shall 3 be void. In addition, the consumer shall be entitled to recover 4 against any person violating this section actual damages, plus a 5 statutory penalty in the amount of three times the face amount 6 of the payday loan, together with reasonable attorney fees and 7 costs. 8 Section 4. This act shall take effect in 60 days. G12L07VDL/20050H2247B3135 - 6 -