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  • Washington governor enacts bill to provide student loan debt relief

    Lending

    On March 22, the Washington governor signed HB 1169, which establishes the student opportunity, assistance, and relief act to address student loan debt. Among other things, HB 1169 (i) repeals certain statutes allowing the suspension of a professional license or certificate due to student loan default; (ii) changes the judgment interest rate for unpaid private student loan debt to two percentage points above the prime rate, unless the judgment interest rate is specified in the contract; (iii) defines “private student loan,” and outlines exclusions, such as “an extension of credit made under an open-end consumer credit plan, a reverse mortgage transaction, a residential mortgage transaction, or any other loan that is secured by real property or a dwelling”; and (iv) outlines provisions and exemptions for bank account and wage garnishment. The act takes effect June 7.

    As previously covered in InfoBytes, earlier in March the Washington governor established the “Washington student education loan bill of rights” to outline licensing requirements and responsibilities for student loan servicers.

    Lending State Issues State Legislation Student Lending Debt Relief

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  • West Virginia passes bill amending licensing requirements for mortgage loan originators

    Lending

    On March 22, the West Virginia governor signed HB 4285, which amends provisions under the West Virginia Safe Mortgage Licensing Act (Act) related to licensing requirements for mortgage loan originators, including those related to continuing education. HB 4285, among other things, (i) updates requirements for applicants registering for mortgage loan originator licenses; (ii) requires nonresident mortgage loan originators licensed under the Act to “acknowledge that they are subject to the jurisdiction of the courts of West Virginia”; (iii) outlines provisional license exceptions for loan originators; and (iv) specifies prelicensing and relicensing education requirements. The amendments take effect May 31.

    Lending State Issues State Legislation Mortgage Origination Mortgages Licensing

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  • Florida enacts legislation prohibiting the misrepresentation of a residential mortgage loan as a business purpose loan

    Lending

    On March 21, the Florida governor signed HB 935, which prohibits the misrepresentation of a residential mortgage loan as a business purpose loan. HB 935 defines “business purpose loan” and requires that “a person must refer to the official interpretation” of the CFPB under 12 C.F. R. Section 1026.3(a) to determine if a loan is for a “business purpose.”  It also provides penalties for knowingly or willfully misrepresenting a residential mortgage loan as a business purpose loan. Additionally, HB 935 defines the phrase “hold himself or herself out to the public as being in the mortgage lending business” to include representing to the public through advertisements or solicitations that the individual or business is a licensed mortgage lender. The law is effective July 1.

    Lending State Issues State Legislation Mortgages

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  • Tennessee amends interest rate legislation

    Lending

    On March 23, the Governor of Tennessee signed HB 1944, which amends lending provisions of the Tennessee Code Annotated to change the application of interest rates to the amount financed instead of the total amount of the loan with regard to certain loans made by Tennessee industrial loan and thrift companies. The following interest rate requirements under present Tennessee law now apply to the amount financed: (i) under $100, no interest shall be charged on the principal or on the unpaid balance due after maturity in excess of a maximum effective rate of 18 percent per annum; (ii) between $100 and $5,000, no interest shall be charged on the principal or on the unpaid balance due after maturity in excess of a maximum effective rate of 30 percent per annum; (iii) greater than $5,000, no interest shall be charged on the principal or on the unpaid balance due after maturity in excess of a maximum effective rate of 24 percent per annum; and (iv) for open-end credit plans, a maximum effective rate of 24 percent per annum applies to the principal or on the unpaid balance due after maturity. HB 1944 is effective immediately and applies to loans made on or after March 23.

    Lending State Issues Interest Rate Consumer Finance Usury State Legislation

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  • Florida allows 60 - 90 day payday loan

    Lending

    On March 19, the Florida governor signed legislation, SB 920, which authorizes the lending of an additional type of payday loan (referred to as, “deferred presentment installment transaction”). The legislation now allows loans under $1,000 that have a repayment term between 60 and 90 days with maximum fees of 8 percent of the outstanding transaction balance charged on a biweekly basis. Fees must be calculated using a simple interest calculation. Previously, Florida only authorized small-dollar loans under $500 that had repayment terms between seven and 30 days (referred to as, “deferred presentment transaction[s]”).

    The expansion of the allowable small-dollar loans, appears to be in response to the CFPB’s final rule addressing payday loans, vehicle titles loans, and certain other extensions of credit (previously covered in a Buckley Sandler Special Alert), which covers most transactions with repayment terms of less than 45 days. While the CFPB’s rule became effective on January 16, compliance for most of the rule’s provisions is not required until August 2019. Moreover, in January, the CFPB announced its plan to reconsider the final rule (covered by InfoBytes here).

    Lending State Issues State Legislation Payday Lending

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  • Indiana amends financial services legislation, adds allowable charges

    State Issues

    On March 13, the Indiana governor signed HB 1397 and SB 377, which make a variety of changes to various Indiana banking, consumer, and financial services laws administered by the state’s Department of Financial Institutions (DFI). Among other things, HB 1397 amends Indiana’s Universal Commercial Credit Code (UCCC) to codify current DFI practice, which allows for additional charges in connection with a consumer credit sale or loan, including charges for a skip-a-payment service ($25 maximum), an expedited payment service ($10 maximum), and a guaranteed asset protection agreement. The legislation also adds electronic funds transfers to the list of return payments that may be assessed a $25 charge. For payday loans, the legislation clarifies that a borrower, during the third consecutive loan or any subsequent consecutive loan, may request an extended payment plan if the rescission period has expired and the borrower has not previously defaulted on the outstanding loan. Indiana’s SB 377 allows for the director of DFI to use certain technology solutions to oversee compliance with and enforce state laws associated with the regulation of payday loans.

    Both pieces of legislation are effective July 1. 

    State Issues Lending UCCC Payday Lending Consumer Finance State Legislation

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  • Washington state enacts student education loan bill of rights, outlines servicer requirements

    Lending

    On March 15, the Washington governor signed Senate Bill 6029, which establishes the “Washington student education loan bill of rights” and outlines licensing requirements and responsibilities for student loan servicers. The act, among other things, requires that the council designate a “student loan advocate” whose responsibilities include providing timely assistance to borrowers, reviewing borrower complaints, referring servicing-related complaints to the state’s Department of Financial Institutions (DFI) or the Attorney General’s office, compiling and disseminating data regarding borrower complaints, and establishing a student education loan borrower education course by October 1, 2020. The act also requires that student loan servicers be licensed through the state (certain entities that are exempt from the licensing requirement must still comply with the act’s other requirements). Under the act, student loan servicers—in addition to complying with applicable federal program requirements—must also (i) provide information to borrowers concerning repayment options, account history, and assessed fees; (ii) notify borrowers when acquiring or transferring servicing rights; and (iii) provide disclosures concerning the possible effects of refinancing student loans. The act further provides that third-parties offering student education loan modification services may not charge or receive money “prior to full and complete performance of the [agreed upon] services,” may not charge fees that are in excess of what is customary or reasonable, and must immediately inform a borrower in writing if the owner or servicer of a loan requires additional documentation or if “modification, refinancing, consolidation, or change in repayment plans . . . is not possible.”

    Furthermore, the act exempts from the outlined requirements “any person doing business under, and as permitted by, any law of this state or of the United States relating to banks, savings banks, trust companies, savings and loan or building and loan associations, or credit unions.” 

    Lending Student Lending Licensing State Issues Servicer State Attorney General

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  • South Dakota amends money lending licenses statute

    State Issues

    On March 1, the South Dakota governor signed H.B.1082, amending South Dakota’s money lending licenses statute. Pursuant to H.B. 1082, engagement in the “business of lending money,” for which a license is required, is expressly defined not to include engagement in: (i) “any seller-financed transaction for the sale of assets to a purchaser”; or (ii) “any seller-financed transaction for the sale of real estate through a contract for deed,” so long as the interest rate for such transactions does not exceed the rate permitted under S.D. Code Ann. § 54-4-44. 

    State Issues Lending Licensing State Legislation

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  • CFPB releases 2018 lists of rural, underserved counties

    Agency Rule-Making & Guidance

    On March 6, the CFPB released its annual list of rural counties and rural or underserved counties for lenders to use when determining qualified exemptions under certain TILA regulatory requirements. In addition to these lists, the Bureau also directed lenders to use its web-based Rural or Underserved Areas Tool to assess whether a rural or underserved property qualifies for safe harbor for purposes of Regulation Z.

    Agency Rule-Making & Guidance CFPB TILA Regulation Z Consumer Finance Lending

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  • Pennsylvania judge partially dismisses action against investors of an online lending scheme

    Courts

    On January 26, the U.S. District Court for the Eastern District of Pennsylvania partially dismissed an action brought by the Pennsylvania Attorney General against out-of-state investors of an online payday lender and the lender for violating Pennsylvania’s Corrupt Organizations Act (COA). The Attorney General alleged that an online payday lender and the investors “designed, implemented, and profited from a consumer lending scheme to circumvent the usury laws of states.” The alleged conduct, which the court referred to generally as “rent-a-bank” and “rent-a-tribe” schemes, involved the online lender partnering with an out-of-state bank and later with tribal nation to act as the nominal lenders of the loans. The investors moved to dismiss the claims against them, arguing that the court lacked personal jurisdiction over them and that the Attorney General failed to plead sufficient allegations with respect to the investors’ involvement in the “rent-a-bank” scheme. The court rejected the jurisdictional arguments, holding that even though the investors were a Delaware LLC with no physical connection to the state, their participation in a scheme targeting Pennsylvania consumers constituted sufficient minimum contacts. However, the court dismissed the “rent-a-bank” aspects of the complaint as to the investors because it found that the Attorney General failed to allege that they were anything more than passive investors in the scheme.

    Courts Payday Lending State Attorney General Jurisdiction Lending

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