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Installment Loans Regulating Law

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Hello,
I want to pick some brains and get a little help on this topic. I am trying to find information regulating Installment Loans. Specifically the laws/requirments governing these types of loans.

For example "Little Loan Shoppe" claiming to be a short term installment loan when they are a PDL. I have read in this forum that installment loans must be backed by a bank and licensed in their state to lend to out of state consumers. Then I have read that installment loans NOT backed by a bank must be licensed in the consumers state to lend.

Where exactly can I find the laws regulating this information?
Thanks in advance :)




It depends what state you're in. Each state will have it's own laws regarding licensing requirements. There is no federal law that requires licensing, except for actual charter banks which fall under jurisdiction of the Fed Reserve Board of Governors.

Your state department of financial institutions most likely has a website that lists all of its laws. Just google "[your state] + DFI" and you can probably find their website.

Sub: #1 posted on Sat, 07/12/2008 - 15:28

DebtCruncher DebtCruncher
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I am in VA state. So you are saying that that "Installment Loans" are regulated by charter banks?

I understand the laws regulating Payday Lender companies in state of VA. Just couldn't find a law that regulates "Installment Loans". Or what qualifies a lender as a "installment" rather than a payday lender.

Sub: #2 posted on Sat, 07/12/2008 - 17:16

Cool_Abyss Cool_Abyss
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Quote:
So you are saying that that "Installment Loans" are regulated by charter banks?

No. Charter banks can offer installment loans, but installment loans do not have to come from a bank. They can be made by any finance company. For example, your car note is considered an installment loan. Suppose you finance your car through Ford Motor Credit ... well, Ford is not a bank (they are a finance co.), but yet they give installment loans.
Quote:
what qualifies a lender as a "installment" rather than a payday lender
Installment notes are called that because repayment is broken up into two or more "installments" that become due at different points in time... (as opposed to a "demand" note, where the entire balance becomes payable on a certain date. [PDLs are moreso a form of demand note]). So basically, any loan that is broken up into monthly payments will be classified as an installment loan. Some lenders, like Americash, offer both installment and payday loans ... and so they have two sets of laws to follow depending on which kind of loan they give out.
Quote:
Just couldn't find a law that regulates "Installment Loans"

It depends who gave the loan out ... a bank or a finance company? Finance companies are generally regulated at the state level by DFI and go by state law. As for banks, it can be complicated to determine which laws they have to follow. Banks can fall into several jurisdictions, depending on its charter. A state charter will probably have to follow state laws. In contrast, a national bank (w/ federal charter) may be exempt from state laws. When a bank is under federal jurisdiction, states will often exempt those banks from state law because it would create more overhead and expenses for the state to monitor/audit all those federal banks -- when the fed is already monitoring them.

If your lender falls under your state jurisdiction, then you will find installment loan laws somewhere here:
Co de of Virginia - Title 6.1 - BANKING AND FINANCE, or specifically
Chapter 6 - Consumer Finance Act

For federal laws regarding banks, try here:
TITLE 12????????BANKS AND BANKING
Fed Reserve Board - Regulations
Co de of Federal Regulations - Banking

Sorry I don't have a specific answer where to find the laws, because it really does depend on who gave the loan out. If nothing else, call your state DFI and ask them which laws would apply to a given loan/company.

Sub: #3 posted on Sun, 07/13/2008 - 02:12

DebtCruncher DebtCruncher
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Ok thanks for all the helpful information. The loan company is no licensed in VA. They are licensed in Utah. So my laws would apply if it is an installment loan is what I am getting?

Sub: #4 posted on Mon, 07/14/2008 - 19:18

Cool_Abyss Cool_Abyss
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DC is correct - Installement loans do not have to be backed by a bank. I think that misconception rises from posts talking about how if an installment loan IS backed by an FDIC insured bank, federal law allows them to import their home state's interest rate laws and license. When backed by an FDIC insured bank, the loan company does not need a state license from anywhere but they state they are located in to lend legally in all 50 states.

Sub: #5 posted on Mon, 07/14/2008 - 20:04

goudah2424 goudah2424

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So if they are the original financer of the loan then what laws apply :?:

So correct me if I am wrong here. They are licensed in Utah, but not in my state (VA), and also not backed by FDIC. Then this means they have to follow my state laws?

Sub: #6 posted on Mon, 07/14/2008 - 21:11

Cool_Abyss Cool_Abyss
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Well........ It depends whether your state laws require them them follow your state law. Sounds kind of silly, but some states don't force companies to follow the state law if they are licensed elsewhere.

For example, Pennsylvania doesn't require finance companies to be licensed in or follow Pennsylvania law -- as long as they have a license in another state. In contrast, Illinois requires any finance company doing business in the state, to be licensed by the state and follow IL laws.

((Back to my Ford Motor Credit example. If you lived in PA and financed a car through Ford, then Ford would not have to be licensed in PA and they could go by the laws of whatever state they're licensed in. But if you lived in IL, then Ford has to be licensed in and follow IL laws.))

It's not so cut and dry, is it?


Here's my perspective, looking at your laws in VA. (Granted, I am not an attorney).

Looking at the VA licensing requirements, it appears that if a company wants to charge more than 12% to a VA resident, than they do have to be licensed by the State of VA. Chapt er ???? 6.1-250 makes certain exemptions for banks, credit unions, etc.; but finance companies in general would have to obtain a license from the State of VA before engaging in business with its residents.

Sub: #7 posted on Tue, 07/15/2008 - 05:41

DebtCruncher DebtCruncher
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That is what I got out of my laws as well DC. Also I contacted the SCC and BFI of my state and regarding licensing awhile back. Here is what I got in response.


My Inquiry:

Hello,

I'm trying to find out if an internet based payday loan company with no physical presence in Virginia needs to be licensed to lend by Virginia. If they don't need to be licensed by Virginia, would they still need to follow Virginia's payday loan laws, or would they need to follow the laws of the state in which they are licensed? Also I have found out several payday lenders I have investigated are completely unlicensed and out of country lenders how shall I proceed?

Thanks!

Their Reply:

Virginia code specifically states the following regarding licensure and Virginia's laws governing payday lenders apply to any entity making a payday loan to a Virginia resident.

???? 6.1-445. License requirement.
A. No person shall engage in the business of making payday loans to any consumer residing in the Commonwealth, whether or not the person has a location in the Commonwealth, except in accordance with the provisions of this chapter and without having first obtained a license under this chapter from the Commission.
B. No person shall engage in the business of arranging or brokering payday loans for any consumer residing in the Commonwealth, whether or not the person has a location in the Commonwealth.

Knowledge of or complaints about such can be filed with the Bureau. A complaint form can be found on the SCC web site at:
http://www.scc.virg inia.gov/bfi/complain.aspx
Kenneth J. Schrad
Director, Division of Information Resources
State Corporation Commission
PO Box 1197
Richmond, VA 23218
(804) 371-9211 (fax)

Sub: #8 posted on Tue, 07/15/2008 - 06:07

Cool_Abyss Cool_Abyss
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The other compounding factor is where did you execute the agreement? (PDLs like to use this).

Suppose you drive across the state line to a loan store in Tennessee. Well, since you physically left your state and entered their state, the loan would follow TN laws and they would not have to be licensed in VA.

Internet PDLs like to argue that you executed the contract in Utah. That by accessing their website/computers in Utah, you actually signed the contract in a different state. I don't think that argument holds up, but they will still try to use it on you.

Sub: #9 posted on Tue, 07/15/2008 - 06:26

DebtCruncher DebtCruncher
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I have been residing in VA the whole time.

That argument that I accessed the loan agreement through their state due to use of world wide web is far fetched to me. You are right, they have tried it with me before.

That would subject me to laws of Malta or Ireland if I got an ILLEGAL loan through the web. I know they put that bogus clause in their contract, but I do not think that would hold up, when it comes to the laws.

Sub: #10 posted on Tue, 07/15/2008 - 06:34

Cool_Abyss Cool_Abyss
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