TITLE 10. FINANCE AND FINANCIAL INSTITUTIONS
STATE CORPORATION COMMISSION
Proposed Regulation
REGISTRAR'S NOTICE: The State Corporation
Commission is exempt from the Administrative Process Act in accordance with
§ 2.2-4002 A 2 of the Code of Virginia, which exempts courts, any agency
of the Supreme Court, and any agency that by the Constitution is expressly
granted any of the powers of a court of record.
Title of Regulation: 10VAC5-200. Payday Lending (amending 10VAC5-200-100).
Statutory Authority: §§ 6.1-458 and 12.1-13
of the Code of Virginia.
Public Hearing Information: A public hearing will be
scheduled upon request.
Public Comments: Public comments may be
submitted until 5 p.m. on October 30, 2009.
Agency Contact: E. J. Face, Jr.,
Commissioner, Bureau of Financial Institutions, State Corporation Commission,
P.O. Box 640, Richmond, VA 23218, telephone (804) 371-9659, FAX (804) 371-9416,
or email joe.face@scc.virginia.gov.
Summary:
The proposed changes
incorporate certain provisions of Chapters 784 and 860 of the 2009 Acts of Assembly
that relate to the conduct of open-end credit business from payday lending
offices. The proposal also incorporates a provision of § 6.1-439 of the
Code of Virginia by providing that a person registered or required to be
registered as a check casher under Chapter 17 (§ 6.1-432 et seq.) of Title
6.1 of the Code of Virginia is prohibited from making loans unless the person
is licensed under, and the loans are made in accordance with, the Payday Loan
Act. Subsection B of 10VAC5-200-100 specifies additional findings that the
State Corporation Commission (commission) would need to make before approving
an application to conduct other business in a licensee's payday lending
offices. Subsection E of 10VAC5-200-100 adds a set of uniform conditions that
would generally be applicable to the conduct of other business in payday
lending offices. Subsections F through K of 10VAC5-200-100 prescribe the
conditions that would be attached to specific types of other businesses, such
as making open-end auto title loans, acting as an agent of a money transmitter,
and providing tax preparation services. Under subsection M of 10VAC5-200-100,
the conditions set forth in the regulation would generally supersede the
conditions established in the approval orders that were previously entered by
the commission. Lastly, subsection O of 10VAC5-200-100 is added to expressly
provide that failure to comply with applicable laws or conditions may result in
revocation of a payday lender's other business authority, fines, suspension, or
revocation of a payday lender's license, or other appropriate enforcement
action.
AT
RICHMOND, AUGUST 4, 2009
COMMONWEALTH
OF VIRGINIA
At the
relation of the
STATE
CORPORATION COMMISSION
CASE
NO. BFI-2009-00344
Ex Parte: In the matter of adopting
rules for the conduct of other business
in payday lending offices
ORDER TO TAKE NOTICE
Section 12.1-13 of the Code
of Virginia provides that the State Corporation Commission
("Commission") shall have the power to promulgate rules and
regulations in the enforcement and administration of all laws within its
jurisdiction. Section 6.1-458 of the Code of Virginia provides that the
Commission shall promulgate such rules and regulations as it deems appropriate
to effect the purposes of the Payday Loan Act ("Act"), § 6.1-444
et seq. of the Code of Virginia. The regulations issued by the Commission
pursuant to the Act are set forth in Title 10 of the Virginia
Administrative Code.
The Bureau of Financial
Institutions ("Bureau") has submitted to the Commission proposed
amendments to the regulation set forth at 10 VAC 5-200-100 of the
Virginia Administrative Code, entitled "Other business in payday lending
offices." The impetus for the proposed amendments was legislation enacted
during the 2009 session of the Virginia General Assembly. Chapters 784
and 860 of the 2009 Acts of Assembly provide in pertinent part that
licensed payday lenders are generally prohibited from engaging in the extension
of credit under an open-end credit or similar plan described in § 6.1-330.78
of the Code of Virginia, and third parties are generally prohibited from
engaging in the extension of credit under an open-end credit or similar plan
described in § 6.1-330.78 at any office, suite, room, or place of business
where a licensed payday lender conducts the business of making payday loans.
The legislation does not prohibit an extension of credit under an open-end
credit or similar plan if it is secured by a security interest in a motor
vehicle.
Since the legislation
enacted by the General Assembly impacts § 6.1-463 of the Code of Virginia
and 10 VAC 5-200-100, the Bureau is proposing that the Commission
modify its other business regulation by establishing a set of uniform
conditions that would be applicable to licensed payday lenders and third parties
making open-end loans secured by a security interest in a motor vehicle from
one or more payday lending offices. The Bureau is also proposing that the
Commission incorporate into its regulation the conditions that have been
attached to other types of businesses that may be conducted from payday lending
offices, such as acting as an agent of a money transmitter or providing tax
preparation services. The conditions identified in the proposed regulation are
derived from Commission orders approving the conduct of other business in
payday lending offices. If adopted by the Commission, the conditions in
the regulation would generally supersede the conditions set forth in the
approval orders that were entered by the Commission prior to the effective date
of the amended regulation.
Apart from setting forth by
regulation the conditions applicable to the conduct of other business in payday
lending offices, the Bureau is also proposing to amend
10 VAC 5-200-100 by specifying additional findings that the
Commission would need to make before approving an application to conduct other
business in a licensee's payday lending offices. The Bureau is also proposing
to expressly provide that failure to comply with applicable laws or conditions
may result in revocation of a licensee's other business authority, fines,
suspension or revocation of a payday lender's license, or other appropriate
enforcement action.
While interested persons may
submit comments on any aspect of the proposed regulation, commenters addressing
the provisions relating to open-end loans secured by a security interest in a
motor vehicle are specifically requested to submit comments on (i) whether
a licensee or third party making such loans should be required to record its
security interest with the Department of Motor Vehicles, and (ii) whether
a licensee or third party should be prohibited from entering into an open-end
credit plan secured by a prospective borrower's motor vehicle if the motor
vehicle is already subject to a purchase money security interest or other outstanding
lien.
The Commission is of the
opinion that the proposed amendments submitted by the Bureau should be
considered for adoption with an effective date of December 1, 2009.
Accordingly,
IT IS ORDERED THAT:
(1) The proposed
regulation entitled "Other business in payday lending offices," which
amends 10 VAC 5-200-100, be attached hereto and made a part hereof.
(2) All interested
persons who desire to comment or request a hearing on the proposed regulation
shall file such comments or hearing request on or before October 30, 2009,
in writing with Joel H. Peck, Clerk, State Corporation Commission, c/o
Document Control Center, P.O. Box 2118, Richmond, Virginia 23218-2118 and
shall refer to Case No. BFI-2009-00344. Requests for a hearing shall state why
a hearing is necessary and why the issues cannot be adequately addressed in
written comments. Interested persons desiring to submit comments electronically
may do so by following the instructions available at the Commission's website,
http://www.scc.virginia.gov/case.
(3) If no written
request for a hearing on the proposed regulation is filed on or before
October 30, 2009, the Commission, upon consideration of any comments
submitted in support of or in opposition to the proposed regulation, may adopt
the proposed regulation as submitted by the Bureau.
(4) The Commission's
Division of Information Resources shall cause a copy of this Order, together
with the proposed regulation, to be forwarded to the Virginia Registrar of
Regulations for appropriate publication in the Virginia Register of Regulations
and shall make this Order and the attached proposed regulation available on the
Commission's website, http://www.scc.virginia.gov/case.
AN ATTESTED COPY hereof,
together with a copy of the proposed regulation, shall be sent by the Clerk of
the Commission to the Commission's Office of General Counsel and the
Commissioner of Financial Institutions, who shall mail a copy of this Order,
together with the proposed regulation, to all licensed payday lenders and other
interested parties designated by the Bureau.
10VAC5-200-100. Other
business in payday lending offices.
A. This section governs the
conduct of any business other than payday lending where a licensed payday
lending business is conducted. As used in this section, the term "other
business operator" refers to a licensed payday lender or third party,
including an affiliate of the licensed payday lender, who conducts or wants to
conduct other business from one or more payday lending offices.
1. Pursuant to
§ 6.1-463 of the Code of Virginia, a licensee shall not conduct the
business of making payday loans at any office, suite, room, or place of
business where any other business is solicited or conducted, except a
registered check cashing business or such other business as the commission
determines should be permitted, and subject to such conditions as the
commission deems necessary and in the public interest.
2. Notwithstanding any
provision of this section or order entered by the commission prior to December
1, 2009, the following other businesses shall not be conducted from any office,
suite, room, or place of business where a licensed payday lending business is
conducted:
a. Selling insurance or
enrolling borrowers under group insurance policies.
b. Making loans under an
open-end credit or similar plan as described in § 6.1-330.78 of the Code
of Virginia unless the loans are secured by a security interest in a motor
vehicle as this term is defined in § 46.2-100 of the Code of Virginia.
3. Pursuant to § 6.1-439 of
the Code of Virginia, no person registered or required to be registered as a
check casher under Chapter 17 (§ 6.1-432 et seq.) of Title 6.1 of the Code of
Virginia shall make loans from any location, including an office, suite, room,
or place of business where a licensed payday lending business is conducted,
unless the person is licensed under the Act and the loans are made in
accordance with the Act.
B. Upon the filing of a
written application, provision of any information relating to the
application as the Commissioner of Financial Institutions may require, and
payment of the fee required by law, and subject to approval by the
commission and the imposition of such conditions as the commission deems
necessary and in the public interest, other business may be conducted in a
location where a licensed payday lending business is conducted if the
commission determines finds that such (i) the proposed
other business is financial in nature, except the selling of insurance or
the enrolling of borrowers under group insurance policies; (ii) the
proposed other business is in the public interest; (iii) the other business
operator has the general fitness to warrant belief that the business will be
operated in accordance with law; and (iv) the applicant has been operating its
payday lending business in accordance with the Act and this chapter. The
commission shall in its discretion determine whether a proposed other business
is "financial in nature," and shall not be obliged to consider the
meaning of this term under federal law. A business is financial in nature if it
primarily deals with the offering of debt, money or credit, or services
directly related thereto.
C. Nothing contained
herein shall apply to any nonfinancial Nonfinancial other business may
be conducted pursuant to any order of the commission entered on or before
June 15, 2004. However, this subsection shall not be construed to authorize any
person to begin engaging in such other business at payday lending locations
where such other business was not conducted as of June 15, 2004.
D. Written evidence of
commission approval of each other business conducted by any payday lender
licensee an other business operator should be maintained at each
location where such other business is conducted.
E. Except as otherwise
provided in subsection N of this section, all approved other businesses in
payday lending offices shall be conducted in accordance with the following
conditions:
1. The licensee shall not
make a payday loan to a borrower to enable the borrower to purchase or pay any
amount owed in connection with the (i) goods or services sold, or (ii) loans
offered, facilitated, or made by the other business operator at the licensee's
payday lending offices.
2. The other business
operator shall comply with all federal and state laws and regulations
applicable to its other business, including any applicable licensing
requirements.
3. The other business
operator shall not use or cause to be published any advertisement or other
information that contains any false, misleading, or deceptive statement or
representation concerning its other business, including the rates, terms, or
conditions of the products, services, or loans that it offers. The other
business operator shall not make or cause to be made any misrepresentation as
to (i) its being licensed to conduct the other business, or (ii) the extent to
which it is subject to supervision or regulation.
4. The licensee shall not
make a payday loan or vary the terms of a payday loan on the condition or
requirement that a person also (i) purchase a good or service from, or (ii)
obtain a loan from or through, the other business operator. The other business
operator shall not (a) sell its goods or services, (b) offer, facilitate, or
make loans, or (c) vary the terms of its goods, services, or loans, on the
condition or requirement that a person also obtain a payday loan from the
licensee.
5. The other business
operator shall maintain books and records for its other business separate and
apart from the licensee's payday lending business and in a different location
within the licensee's payday lending offices. The bureau shall be given access
to all such books and records and be furnished with any information and records
that it may require in order to determine compliance with all applicable conditions,
laws, and regulations.
F. If a licensee (i)
received commission authority for an other business operator to conduct
open-end credit business from the licensee's payday lending offices, or (ii)
receives commission authority for an other business operator to conduct
open-end auto title lending business from the licensee's payday lending
offices, the following additional conditions shall be applicable:
1. Any loan made by the
other business operator pursuant to an open-end credit agreement shall be secured
by a security interest in a motor vehicle, as defined in § 46.2-100 of the
Code of Virginia.
2. The licensee shall not
make a payday loan to a person if (i) the person has an outstanding open-end
loan from the other business operator, or (ii) on the same day the person
repaid or satisfied in full an open-end loan from the other business operator.
3. The other business
operator shall not make an open-end loan to a person pursuant to an open-end
credit agreement if (i) the person has an outstanding payday loan from the
licensee, or (ii) on the same day the person repaid or satisfied in full a
payday loan from the licensee.
4. The other business
operator and the licensee shall not make an open-end loan and a payday loan
contemporaneously or in response to a single request for a loan or credit.
5. The licensee and other
business operator shall provide each applicant for a payday loan or open-end
credit plan with a separate disclosure, signed by the applicant, that clearly
identifies all of the loan products available in the licensee's payday lending
offices along with the corresponding annual percentage rate, interest rate, and
other costs associated with each loan product.
G. If a licensee received or
receives commission authority for an other business operator to conduct
business as an authorized delegate or agent of a money order seller or money
transmitter from the licensee's payday lending offices, the other business
operator shall be and remain a party to a written agreement to act as an
authorized delegate or agent of a person licensed or exempt from licensing as a
money order seller or money transmitter under Chapter 12 (§ 6.1-370 et seq.) of
Title 6.1 of the Code of Virginia. The other business operator shall not
engage in money order sales or money transmission services on its own behalf or
on behalf of any person other than a licensed or exempt money order seller or
money transmitter with whom it has a written agreement.
H. If a licensee received or
receives commission authority for an other business operator to conduct the
business of (i) tax preparation and electronic tax filing services, or (ii)
facilitating third party tax preparation and electronic tax filing services,
from the licensee's payday lending offices, the following additional conditions
shall be applicable:
1. The licensee shall not
make, arrange, or broker a payday loan that is secured by an interest in a
borrower's tax refund, or in whole or in part by (i) any other assignment of
income payable to a borrower, or (ii) any assignment of an interest in a
borrower's account at a depository institution. This condition shall not be
construed to prohibit the licensee from making a payday loan that is secured
solely by a check payable to the licensee drawn on a borrower's account at a
depository institution.
2. The other business
operator shall not engage in the business of (i) accepting funds for
transmission to the Internal Revenue Service or other government
instrumentalities, or (ii) receiving tax refunds for delivery to individuals,
unless licensed or exempt from licensing under Chapter 12 (§ 6.1-370 et
seq.) of Title 6.1 of the Code of Virginia.
I. If a licensee received or
receives commission authority for an other business operator to conduct the
business of facilitating or arranging tax refund anticipation loans or tax
refund payments from the licensee's payday lending offices, the following
additional conditions shall be applicable:
1. The other business
operator shall not facilitate or arrange a tax refund anticipation loan or tax
refund payment to enable a person to pay any amount owed to the licensee as a
result of a payday loan transaction.
2. The other business
operator and the licensee shall not facilitate or arrange a tax refund
anticipation loan or tax refund payment and make a payday loan
contemporaneously or in response to a single request for a loan or credit.
3. The licensee shall not
make, arrange, or broker a payday loan that is secured by an interest in a
borrower's tax refund, or in whole or in part by (i) any other assignment of
income payable to a borrower, or (ii) any assignment of an interest in a
borrower's account at a depository institution. This condition shall not
be construed to prohibit the licensee from making a payday loan that is secured
solely by a check payable to the licensee drawn on a borrower's account at a
depository institution.
4. The other business
operator shall not engage in the business of receiving tax refunds or tax
refund payments for delivery to individuals unless licensed or exempt from licensing
under Chapter 12 (§ 6.1-370 et seq.) of Title 6.1 of the Code of Virginia.
5. The licensee and other
business operator shall provide each applicant for a payday loan or tax refund
anticipation loan with a separate disclosure, signed by the applicant, that
clearly identifies all of the loan products available in the licensee's payday
lending offices along with the corresponding annual percentage rate, interest
rate, and other costs associated with each loan product.
J. If a licensee received or
receives commission authority for an other business operator to conduct a
consumer finance business from the licensee's payday lending offices, the
following additional conditions shall be applicable:
1. The licensee shall not
make a payday loan to a person if (i) the person has an outstanding consumer
finance loan from the other business operator, or (ii) on the same day the
person repaid or satisfied in full a consumer finance loan from the other
business operator.
2. The other business
operator shall not make a consumer finance loan to a person if (i) the person
has an outstanding payday loan from the licensee, or (ii) on the same day the
person repaid or satisfied in full a payday loan from the licensee.
3. The licensee and other
business operator shall not make a payday loan and a consumer finance loan
contemporaneously or in response to a single request for a loan or credit.
4. The licensee and other
business operator shall provide each applicant for a payday loan or consumer
finance loan with a separate disclosure, signed by the applicant, that clearly
identifies all of the loan products available in the licensee's payday lending
offices along with the corresponding annual percentage rate, interest rate, and
other costs associated with each loan product.
K. If a licensee received or
receives commission authority for an other business operator to conduct the
business of operating an automated teller machine from the licensee's payday
lending offices, the other business operator shall not charge a fee or receive
other compensation in connection with the use of its automated teller machine
by a person when the person is withdrawing funds in order to make a payment on
a payday loan from the licensee.
L. The commission may impose
any additional conditions upon the conduct of other business in payday lending
offices that it deems necessary and in the public interest.
M. Except as otherwise
provided in subsection N of this section, the conditions set forth or referred
to in subsections E through L of this section shall supersede the conditions
set forth in the commission's approval orders entered prior to December 1,
2009.
N. If prior to December 1,
2009, a licensee received commission authority for an other business operator
to conduct a business not identified in subsections F through K of this
section, the conditions that were imposed by the commission at the time of the
approval shall remain in full force and effect.
O. Failure by a licensee or
other business operator to comply with any provision of this section or any
condition imposed by the commission, or failure by a licensee to comply with
the Act, this chapter, or any other law or regulation applicable to the conduct
of the licensee's business, may result in the revocation of the authority to
conduct other business, fines, license suspension, license revocation, or other
appropriate enforcement action.
VA.R. Doc. No. R09-2079;
Filed August 10, 2009, 8:59 a.m.