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
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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
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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
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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
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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.
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