DEPARTMENT OF BANKING
[10 PA. CODE CH. 41]
Consumer Discount Companies
[28 Pa.B. 44]
The Department of Banking (Department), under the authority contained in section 12 of the Consumer Discount Company Act (CDCA) (7 P. S. § 6212) proposes to amend the regulations to the CDCA codified in Chapter 41 (relating to consumer discount companies). The proposed amendments will implement the act of July 2, 1996 (P. L. 490, No. 80) (Act 80).
The purpose of the proposed amendments is to eliminate any discrepancy between the CDCA and its regulations.
Explanation of Regulatory Requirements
Act 80 amended the CDCA by raising the ceiling on permissible consumer discount company loans from $15,000 to $25,000. Act 80 amended the CDCA to permit licensed consumer discount companies to utilize a fictitious name as a substitute for, or in addition to, its corporate name. Act 80 removed the former requirement that a consumer discount company's corporate name contain the words ''Consumer Discount Company.'' Additionally, Act 80 amended the CDCA to permit a licensed consumer discount company to charge a delinquency fee of $20 or 10% of each payment, whichever is higher, which is in default for more than 15 days on interest-bearing closed end or revolving loan accounts. The proposed amendments seek to remove any discrepancy between the CDCA and its regulations as a result of the amendments to the CDCA as set forth in Act 80. Thus, the proposal amends the regulations to the CDCA by making ''technical'' amendments to those regulations. The proposal amends the regulations to the CDCA by changing ''$15,000'' to ''$25,000'' in several different provisions of the regulations. Additionally, the proposed amendments set forth language which recognizes the new ability of a licensed consumer discount company to utilize a fictitious name as a substitute for, or in addition to, its corporate name. Finally, the proposal adds language to § 41.3a(a) (relating to contracts with consumers) thereby clarifying that § 41.3a applies only to default charges on precomputed loans as authorized in section 13K. of the CDCA (7 P. S. § 6213K.).
The proposed amendments will affect the 76 licensed Commonwealth consumer discount companies, as well as any State or Federally-chartered banks or savings associations which originate loans under the CDCA. The proposed amendments also conform to the liberalized statutory requirements under which a licensed consumer discount company can extend credit to a consumer.
Cost and Paperwork Requirements
These proposed amendments will impose no additional paperwork or costs to the Commonwealth, the Department or any political subdivision of this Commonwealth. The proposed amendments also will not impose additional costs or paperwork requirements upon the regulated community.
The anticipated effective date is 30 days after the final adoption of the proposal.
There is no sunset date applicable to the proposed amendments.
Interested persons are invited to submit their written comments, if any, within 30 days of the date of this publication to Laurie Schnarrs, Deputy Chief Counsel, Department of Banking, 333 Market Street, 16th Floor, Harrisburg, PA 17101-2290, (717)787-1471.
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on December 19, 1997, the Department submitted a copy of these proposed amendments to the Independent Regulatory Review Commission (IRRC) and the Chairperson of the House Committee for Business and Economic Development and the Senate Committee on Banking and Insurance. In addition to submitting the proposal, the Department has provided IRRC and the Committees with a copy of a detailed Regulatory Analysis Form prepared by the agency in compliance with Executive Order 1982-2, ''Improving Government Regulations.'' A copy of this material is available to the public upon request.
If IRRC has objections to any portion of the proposed amendments, it will notify the Department within 30 days of the close of the Committee comment period. The notification shall specify the regulatory review criteria which have not been met by that portion. The Regulatory Review Act specifies detailed procedures for review and comments including objections to the proposed amendments by IRRC, the General Assembly and the Office of Attorney General prior to final publication and approval of the proposed amendments.
Fiscal Note: 3-36. No fiscal impact; (8) recommends adoption.
TITLE 10. BANKS AND BANKING
PART IV. BUREAU OF CONSUMER CREDIT AGENCIES
CHAPTER 41. CONSUMER DISCOUNT COMPANIES
§ 41.2. Advertising.
(a) In a printed or written advertisement, a licensee shall set forth its corporate or fictitious business name, or both, as designated in its license certificate; except that with respect to direct mail solicitation, it is only necessary for a licensee to set forth its corporate or fictitious business name, or both, once on any one of the pieces constituting a mail solicitation. A licensee shall set forth prominently its corporate or fictitious business name, or both, as designated in its license certificate on or at the entrance to its place of business. A licensee shall retain copies of advertising matter for at least [6 months] 2 years following the final public dissemination of the advertising and shall make the advertising available upon request for inspection by the Administrator.
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§ 41.3. Contracts with consumers.
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(o) For the purposes of this subsection, an individual signing the face of a joint note shall, in the absence of a specific designation to the contrary, be construed as being liable as maker. When a licensee knows or has reason to know that an individual consumer derives the use, benefit[,] or advantage of an aggregate amount in excess of $[15,000] 25,000 from the proceeds of one or more separate loan contracts granted by a licensee directly to the consumer or indirectly through other consumers, the loan contracts shall be construed as a single loan contract in excess of $[15,000] 25,000, and the interest on the amount in excess of $[15,000] 25,000 shall be limited to the legal rate established by section 202 of the act of January 30, 1974 (P. L. 13, No. 6)(41 P. S. § 202), which rate is 6% per annum simple interest. This limitation does not apply to the purchase of installment sale contracts or home improvement contracts, or another loan granted under another statute of the Commonwealth.
(p) When a loan in excess of $[15,000]25,000 is granted to one consumer or when an aggregate number of loans are granted to one consumer by a licensee under the same management or control, the total of which exceeds $[15,000]25,000, the interest rate on the amount in excess of $[15,000]25,000 shall be limited to the legal rate established by section 202 of the act of January 30, 1974 (P. L. 13, No. 6) [(41 P. S. § 202)], which rate is 6.0% per annum simple interest. This means that a licensee may grant a single loan in excess of $[15,000]25,000 or a series of loans the average of which exceeds $[15,000]25,000 and charge interest on the portion thereof not in excess of $[15,000]25,000 at the rate provided in the act and on the portion thereof in excess of $[15,000]25,000 at 6.0% per annum simple interest; except, interest shall be charged so as not to exceed that which could be charged in a manner which would amortize that portion of the loan balance on a single, or the aggregate on a series of loans, not in excess of $[15,000]25,000 simultaneously with the portion in excess of $[15,000]25,000. Licensees shall take reasonable precautions to prevent the granting of loans in violation of this subsection. This subsection does not apply to the purchase of installment sale contracts or home improvement contracts or to revolving loan accounts, or another loan granted under another statute of the Commonwealth.
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§ 41.3a. Calculation of default charges--statement of policy.
(a) This section applies only to default charges on precomputed loans as authorized in section 13K. of the act (7 P. S. § 6213K.). Refer to § 41.3(d)(relating to contracts with consumers) for information on default.
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[Pa.B. Doc. No. 98-16. Filed for public inspection January 2, 1998, 9:00 a.m.]
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