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PA Bulletin, Doc. No. 98-922

RULES AND REGULATIONS

Title 10--BANKS AND BANKING

DEPARTMENT OF BANKING

[10 PA. CODE CH. 41]

Consumer Discount Companies

[28 Pa.B. 2687]

   The Department of Banking (Department), under the authority contained in section 12 of the Consumer Discount Company Act (CDCA) (7 P. S. § 6212) amends the regulations to the CDCA codified in Chapter 41 (relating to consumer discount companies). The amendments implement the act of July 2, 1996 (P. L. 490, No. 80) (Act 80).

Purpose

   The purpose of the 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.'' The amendments remove the discrepancy between the CDCA and Chapter 41 as a result of the amendments to the CDCA in Act 80. Thus, the amendments make technical changes to Chapter 41. The amendments change ''$15,000'' to ''$25,000'' in several different provisions of the regulations. Additionally, the 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.

Entities Affected

   The final-form regulations will affect 76 licensed consumer discount companies in this Commonwealth, as well as any State or Federally-chartered banks or savings associations which originate loans under the CDCA. The final-form regulations also conform to the liberalized statutory requirements under which a licensed consumer discount company can extend credit to a consumer.

Public Comment

   Written comments received by the Department were from the Independent Regulatory Review Commission (IRRC); J. W. Fleetwood, Vice President, Central Credit Fund, Inc.; Matthew Conlon, PHEA; James Novinger, Secretary/Treasurer, Jador, Inc.; and Linda S. Davis, Vice President and Deputy General Counsel, Commercial Credit.

Cost and Paperwork Requirements

   These final-form regulations will impose no additional paperwork or costs to the Commonwealth, the Department or a political subdivision of this Commonwealth. The final-form regulations also will not impose additional costs or paperwork requirements upon the regulated community.

Effective/Sunset Date

   The effective date is July 6, 1998.

   There is no sunset date applicable to the regulations.

Summary of Comments and Responses on the Proposed Rulemaking

   Notice of proposed rulemaking was published at 28 Pa.B. 44 (January 3, 1998).

   The Department considered the written comments received in formulating the final-form regulations. The Department has completed a review of the comments and has prepared a Comment and Response Document that addresses each comment on the proposed amendments which is available from the Department.

Regulatory Review

   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 the proposed rulemaking to IRRC and the Chairpersons of the House Committee for Business and Economic Development and the Senate Committee on Banking and Insurance. In compliance with section 5(c) of the Regulatory Review Act, the Department also provided IRRC and the Committees with copies of the comments as well as other documentation. In preparing these final-form regulations, the Department has considered the comments received from IRRC.

   Under section 5.1(d) of the Regulatory Review Act (71 P. S. § 745.5a(d)), the final-form regulations were deemed approved by the House and Senate Committees on May 4, 1998. Under section 5.1(e) of the Regulatory Review Act, IRRC met on May 7, 1998, and approved the final-form regulations.

Findings

   The Department finds that:

   (1)  Public notice of proposed rulemaking was given under sections 201 and 202 of the act of July 31, 1968 (P. L. 769, No. 240) (45 P. S. §§ 1201 and 1202) and regulations promulgated thereunder in 1 Pa. Code §§ 7.1 and 7.2.

   (2)  A public comment period was provided as required by law, and all comments were considered.

   (3)  These final-form regulations do not enlarge the purpose of the proposal published at 28 Pa.B. 44 (January 3, 1998).

Order

   The Department, acting under the authorizing statutes, orders that:

   (a)  The regulations of the Department, 10 Pa. Code Chapter 41, are amendmed by amending § 41.3 to read as set forth at 28 Pa.B. 44 (January 3, 1998) and by amending § 41.2 to read as set forth in Annex A.

   (b)  The Secretary of the Department shall submit this order, 28 Pa.B. 44 and Annex A to the Office of General Counsel and the Office of the Attorney General for review and approval as to legality and form, as required by law.

   (c)  The Secretary of the Department shall submit this order, 28 Pa.B. 44 and Annex A to IRRC and the Senate Committee on Banking and Insurance and House Committee on Business and Economic Development as required by the Regulatory Review Act.

   (d)  The Secretary of the Department of Banking shall certify this order, 28 Pa.B. 44 and Annex A and deposit them with the Legislative Reference Bureau, as required by law.

   (e)  This order shall take effect July 6, 1998.

RICHARD C. RISHEL,   
Secretary

   (Editor's Note: For the text of the order of the Independent Regulatory Review Commission relating to this document, see 28 Pa.B. 2463 (May 23, 1998).)

   Fiscal Note: Fiscal Note 3-36 remains valid for the final adoption of the subject regulations.

Annex A

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 following the final public dissemination of the advertising and shall make the advertising available upon request for inspection by the Administrator.

   (b)  The Administrator will prohibit the use of advertising matter by a licensee which, in his opinion, is false, misleading or deceptive or encourages the purchase of debt instruments from a licensee or its affiliates when the licensee knows or has reason to know that the debt instrument may not be paid at maturity. A licensee referring to payments on loans in an advertisement shall specify the amounts of the payments and the number of payments or period of time required to discharge the obligation.

   (c)  A licensee may not use the term ''legal rates'' in an advertisement, nor may similar phrases be used in an advertisement wherein the use might mislead the public into believing that the rate charged is the legal rate established by section 202 of the act of January 30, 1974 (P. L. 13, No. 6) (41 P. S. § 202). A licensee may not use the phrases ''low rates,'' ''lower rates,'' ''lowest rate in the city'' or other similar phrases unless the licensee is able to substantiate the statements to the satisfaction of the Department, upon request.

   (d)  Advertisements of a licensee shall be limited to the business contemplated by the act, except that a licensee may combine an advertisement of that business with an advertisement of another leading business if the advertisement clearly distinguishes the amounts of loans or the types of transactions offered by the respective businesses. The charges applicable to each type of loan or transaction shall be shown when reference is made to rates charged in combined advertising.

   (e)  On direct loans referred to licensees by dealers or merchants in which a part of the loan is paid to dealers or merchants in payment for goods or services, as authorized by a consumer, the Administrator reserves the right to ascertain whether the selling price of the goods or services is reasonable in order to detect the concealment of illegal commissions, fees or other charges to a consumer. A licensee who knowingly participates in the granting or solicitation of loans embodying illegal fees or in the granting or solicitation of loans where consumers are induced by a person to purchase merchandise to obtain a loan shall refund the charges to the consumer and shall be subject to the penal provisions of the act and revocation of license.

[Pa.B. Doc. No. 98-922. Filed for public inspection June 12, 1998, 9:00 a.m.]


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