RULES AND REGULATIONS
Title 10--BANKS AND BANKING
DEPARTMENT OF BANKING
[10 PA. CODE CH. 42]
Registration of Loan Brokers
[27 Pa.B. 6555] The Department of Banking (Department), under the authority contained in section 8 of the Credit Services Act (act) (73 P. S. § 2188), adopts Chapter 42 (relating to registration of loan brokers) which imposes requirements on persons acting as loan brokers in this Commonwealth.
Purpose
The purpose of the regulations is to implement the requirements of section 8 of the act which requires loan brokers, as defined in the act, who are located in or act on behalf of residents of this Commonwealth, to become registered with the Department. The regulations will enhance consumer protection by providing a means of ascertaining who is acting as a loan broker in this Commonwealth and by maintaining the names and addresses of those persons and by obtaining other relevant information about loan brokering activity conducted by those persons. This registration will enhance the Attorney General's ability to address consumer complaints by facilitating discovery and investigation of fraudulent activity and will provide an additional means for enforcement of the Unfair Trade Practices and Consumer Protection Law (73 P. S. §§ 201-1--209-6).
Explanation of Regulatory Requirements
Under the regulations, persons acting as loan brokers in this Commonwealth will be required to register with the Department and to renew that registration annually. Loan brokers will be required to submit a completed registration form to the Department which will require the applicant to provide the home and business addresses of the applicant, the nature of the loan broker's business and information relating to any legal or other enforcement actions taken against the loan broker. The Department retains the right to refuse to register an applicant as a loan broker and, accordingly, the regulations set forth the relevant factors to be utilized by the Department in deciding whether to proffer a refusal.
Entities Affected
The number of entities that will be affected by these regulations cannot be estimated at this time as this is the first registration requirement imposed on loan brokers who are not already licensed or authorized to broker a specific type of loan. These regulations will not affect the 675 first mortgage loan brokers currently licensed by the Department or the 333 secondary mortgage loan brokers currently licensed by the Department. (Statistics are as of November 30, 1995.) These regulations will also not affect any depository institutions whose deposits are insured by the Federal Deposit Insurance Corporation, the Pennsylvania Savings Association Insurance Corporation or the National Credit Union Administration. Nor will the regulations affect real estate brokers or salespersons licensed under the Real Estate Licensing and Registration Act (63 P. S. §§ 455.101--455.902), persons registered as securities broker-dealers under section 301 of the Pennsylvania Securities Act of 1972 (70 P. S. § 301) or persons exempt from this registration, persons admitted to the practice of law in this Commonwealth, nonprofit corporations or consumer reporting agencies as defined by the Fair Credit Reporting Act (15 U.S.C.A. §§ 1681--1681p).
Public Comment
The only comments received by the Department were from the Independent Regulatory Review Commission (IRRC).
Cost and Paperwork Requirements
These final-form regulations impose paperwork requirements on the Department to process the registration and renewal applications. The cost of the paperwork will be offset by the fees imposed.
These final-form regulations do not impose any paperwork requirements on political subdivisions and will not affect the costs of political subdivisions of the Commonwealth.
These final-form regulations impose a fee of $300 for registration and an additional $300 for each renewal. These regulations also impose nominal paperwork and reporting requirements on the regulated community, as loan brokers will be required to complete an annual registration or renewal registration application.
Effectiveness/Sunset Date
There is no sunset review required in the statute.
A sunset date is inapplicable as the statute imposes an ongoing requirement for registration of loan brokers and for annual renewal of those registrations.
Summary of Comments and Responses on the Proposed Rulemaking
Notice of proposed rulemaking was published at 27 Pa.B. 807 (February 15, 1997).
During the public comment period, the only written comments received by the Department were from IRRC.
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 regulations.
Regulatory Review
Under section 5(a) of the Regulatory Review Act (71 P. S. § 745.5(a)), on October 30, 1997, the Department submitted a copy of the final-form regulations to IRRC, the Chairperson of the Senate Committee on Banking and Insurance and the Chairperson of the House Committee on Business and Economic Development. In compliance with section 5(b.1) of the Regulatory Review Act, the Department also provided IRRC and the Committees with copies of the comments as well as other documentation.
The final-form regulations were deemed approved by the House and Senate Committees on November 19, 1997. IRRC met on November 20, 1997, 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 at 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 27 Pa.B. 807.
Order
The Department, acting under the authorizing statutes, orders that:
(a) The regulations of the Department, 10 Pa. Code, are amended by adding §§ 42.1--42.7 to read as set forth in Annex A.
(b) The Secretary of the Department shall submit this order 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 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 shall certify this order and Annex A and deposit them with the Legislative Reference Bureau as required by law.
(5) This order shall take effect upon publication in the Pennsylvania Bulletin.
RICHARD C. RISHEL,
Secretary(Editor's Note: For the text of the order of the Independent Regulatory Review Commission relating to this document, see 27 Pa.B. 6385 (December 6, 1997).)
Fiscal Note: Fiscal Note 3-31 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 42. REGISTRATION OF LOAN BROKERS Sec.
42.1 Definitions. 42.2 Applicability. 42.3 Registration required. 42.4 Annual renewal required. 42.5 Disapproval of registration. 42.6 Information to the Department. 42.7 Failure to register. § 42.1. Definitions.
The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise:
Act--The Credit Services Act (73 P. S. §§ 2181--2192).
Applicant--A person who, in accordance with this chapter, has submitted a registration application or renewal registration application and applicable fees to the Department in an effort to register with the Department as a loan broker.
Department--The Department of Banking of the Commonwealth.
Employe--A person who receives wages reportable under Internal Revenue Service Form W-2.
Loan broker--As defined in section 2 of the act (73 P. S. § 2182), the term includes any person who acts for or on behalf of a loan broker for the purpose of soliciting borrowers. The term does not include a person licensed or otherwise regulated by the Department as a loan broker under other statutes or licensed, regulated or exempted under other statutes, including those administered by any other agency of the Commonwealth or the United States.
Principal--An officer, director, partner, joint venturer, branch manager or other person with similar managerial or supervisory responsibilities for a loan broker.
§ 42.2. Applicability.
This chapter applies to all loan brokers who act as loan brokers in this Commonwealth or on behalf of the residents of this Commonwealth.
§ 42.3. Registration required.
(a) On or after December 20, 1997, a person may not act as a loan broker in this Commonwealth without registering with the Department.
(b) To register as a loan broker, a person shall submit to the Department:
(1) A completed registration application provided by the Department.
(2) Payment to the Department of a nonrefundable registration fee of $300.
(c) Within 60 days of receipt of a registration application, the Department will do one of the following:
(1) Notify the applicant that the application is approved and the applicant is registered as a loan broker.
(2) Under § 42.5 (relating to disapproval of registration), notify the applicant that the applicant's registration is disapproved and that the applicant is not registered as a loan broker.
(3) Notify the applicant that the registration application is incomplete and what additional information is required. In this case, the Department has 60 days from receipt of a completed registration application to notify the applicant under paragraph (1) or (2).
(d) An applicant shall be registered as a loan broker upon the Department's issuance of written notification to the applicant that the applicant has been registered by the Department as a loan broker.
(e) No abatement of the registration fee will be made for any reason, including a loan broker's initial registration period lasting for less than 1 year or the election by a loan broker to cancel its registration prior to the annual renewal date.
§ 42.4. Annual renewal required.
(a) Annually, the Department will mail to each registered loan broker an application for renewal of the loan broker's registration.
(b) On or before December 1 of each year, a loan broker shall return the following to the Department:
(1) A completed renewal registration application provided by the Department.
(2) Payment of a renewal registration fee of $300.
(c) On or before January 15 of each year, the Department will take one of the following actions with regard to renewal applications which it received on or before December 1 of the prior year:
(1) Notify the loan broker that the loan broker's registration is renewed.
(2) Under § 42.5 (relating to disapproval of registration), notify the loan broker that the loan broker's renewal registration is rejected and that the loan broker is no longer registered as a loan broker.
(3) Notify the loan broker that the registration application was incomplete and that additional information is required. In this case, the Department has 30 days from receipt of a completed registration application to notify the loan broker under paragraph (1) or (2).
(d) A loan broker who fails to return to the Department by December 1 of each year a completed renewal registration application provided by the Department and payment of a renewal registration fee of $300 will be subject to a late fee of $100 upon submission to the Department of a renewal registration application.
(e) The renewal registration shall be effective from February 1 or upon the Department's issuance of written notification to the applicant that the applicant has been registered by the Department as a loan broker, whichever is later, through January 31 of the following year.
§ 42.5. Disapproval of registration.
(a) The Department may refuse to register or renew the registration of an applicant. Notifications of refusal by the Department to register or renew the registration of an applicant shall include the reason for the refusal. In determining whether to refuse to register or renew the registration of an applicant, the Department will weigh all relevant factors including the following:
(1) Whether the applicant has properly and fully completed the registration application or the registration renewal application.
(2) Whether the applicant has supplied false information or made a material misstatement to the Department.
(3) Whether the applicant or any principal or employe of the applicant has violated the act.
(4) Whether the applicant or any principal or employe of the applicant is subject to an administrative order issued by an agency of the Commonwealth, another state or the United States, which supervises or regulates any financial industry, including the lender, broker of loans, securities, annuities, insurance and tax industries.
(5) Whether the applicant, any principal of the applicant or any organization with which the applicant or any principal of the applicant was associated as an officer, director or principal, has applied to any state or to the Federal government for a license or authority to broker loans or to lend money and had the application for a license rejected, and the reasons for the rejection.
(6) Whether the applicant, any principal of the applicant or any organization with which the applicant or any principal of the applicant was associated as an officer, director or principal, which was licensed or authorized by any state or the Federal government to broker loans or to lend money, had the license suspended, canceled or revoked.
(7) Whether the applicant or any principal or employe of the applicant has ever pleaded guilty, pleaded nolo contendere or has ever been found guilty by a judge or jury for violation of any state or Federal law involving financial crimes, including those involving lending, brokering of loans, securities, annuities, insurance and tax matters.
(8) Whether the applicant or any principal or employe of the applicant is subject to a civil or criminal proceeding by any state or Federal agency involving any financial matter, including lending, brokering loans, securities, insurance and tax matters.
(b) The applicant for an initial or renewal registration whose application is disapproved by the Department may appeal the disapproval through the administrative hearing process contained under 1 Pa. Code Part II (relating to General Rules of Administrative Practice and Procedure).
§ 42.6. Information to the Department
(a) In completing the registration application or renewal registration application, the applicant shall provide the Department with the following information:
(1) The name, address and telephone number of the applicant.
(2) The address at which the applicant acts or intends to act as a loan broker.
(3) The names and addresses of all agents and employes of the loan broker who act or will act as a loan broker on behalf of the loan broker.
(4) The names and addresses of all loan brokers or lenders on whose behalf the applicant acts or will act.
(5) The names and addresses of all principals of the applicant.
(6) A copy of its articles of incorporation or fictitious name filing to the extent applicable to the applicant.
(7) Other information required by the Department consistent with § 42.5(a) (relating to disapproval of registration) and related matters.
(b) A loan broker shall inform the Department within 15-calendar days of any change in address of the loan broker office, changes in ownership, principals and employes of the loan broker. The broker shall include background information regarding new owners, principals or employes of the loan broker consistent with § 42.5(a)(4)--(8), which information also is required by the Department to be provided by the loan broker in a registration application or renewal registration application.
§ 42.7. Failure to register.
A person who acts or holds himself out as a loan broker and is not registered with the Department under this chapter is in violation of the Unfair Trade Practices and Consumer Protection Law (73 P. S. §§ 201-1--209-6.)
[Pa.B. Doc. No. 97-2033. Filed for public inspection December 19, 1997, 9:00 a.m.]
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