The Pennsylvania Department of Banking will require Internet payday lenders and other out-of-state companies that make consumer loans to Pennsylvania residents to be licensed by the Department of Banking and comply with state laws.
The Department of Banking had previously interpreted the state's Consumer Discount Company Act, or CDCA, to apply only to companies with a physical location or employees in the commonwealth. As a result, companies in other states were able to make loans to Pennsylvania consumers via the Internet or mail under terms that would not comply with Pennsylvania law. The department's new position states that the CDCA applies to any company that lends to Pennsylvania consumers. The CDCA limits the interest and fees a non-bank company can charge for non-mortgage loans of $25,000 or less. If companies do not obtain a license from the Department of Banking by Feb. 1, they will face the potential for fines and other penalties. Notice to the industry can be found here.
This announcement is the latest action by the Department of Banking regarding payday lending. In May, the Pennsylvania Supreme Court upheld a lower court ruling in the department's lawsuit against Advance America, the nation's largest payday lender, for charging interest and fees on lines of credit that violated state law. The department is now seeking restitution for Advance America customers who were charged nearly $150 per month in fees for loans up to $500.
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