SENATE BILL REPORT

SSB 5468

As Amended by House, April 8, 2009

Title: An act relating to permitting an exemption for nonprofit housing organizations from the consumer loan act.

Brief Description: Permitting an exemption for nonprofit housing organizations from the consumer loan act.

Sponsors: Senate Committee on Financial Institutions, Housing & Insurance (originally sponsored by Senators Honeyford, McCaslin, Kilmer, King, Delvin, Jacobsen, Berkey and Shin).

Brief History:

Committee Activity: Financial Institutions, Housing & Insurance: 2/04/09, 2/10/09 [DPS].

Passed Senate: 3/06/09, 45-0.Passed House: 4/08/09, 95-0.

Majority Report: That Substitute Senate Bill No. 5468 be substituted therefor, and the substitute bill do pass.

Signed by Senators Berkey, Chair; Hobbs, Vice Chair; Benton, Ranking Minority Member; Franklin, McDermott, Parlette and Schoesler.

Staff: Philip Brady (786-7460)

Background: The Consumer Lending Act (CLA) was first passed in 1991 in order to protect Washington consumers from high-interest lenders. It was a combination of the Consumer Finance Act and the Industrial Loan Act, and has been amended several times. Under the CLA, a person or business is not permitted to engage in the business of making secured or unsecured loans without a license from the Department of Financial Institutions (DFI). This does not apply if the person is a bank, savings bank, trust company, savings and loan, credit union, or credit card company, or making a loan under the chapter dealing with retail installment sales of goods and services.

Persons licensed by DFI to make loans are subject to a number of restrictions on predatory or fraudulent behavior, must possess a surety bond, must provide DFI with particular information, and are subject to monitoring and regulation by DFI.

Summary of Substitute Bill: Nonprofit housing organizations or persons making loans under state, federal, or private housing programs are exempt from the CLA. Lenders and loans are only exempt if the primary purpose of the lending program is to assistant low-income borrowers purchasing or repairing a home, or for development of low-income housing.

Appropriation: None.

Fiscal Note: Available.

Committee/Commission/Task Force Created: No.

Effective Date: Ninety days after adjournment of session in which bill is passed.

Staff Summary of Public Testimony: PRO: The CLA used to apply to loans at interest rates above 12 percent. When the cap was removed, nonprofits that charge little or no interest fell under the CLA, which hurt their ability to function. Habitat for Humanity might still be subject to the CLA since they don’t use federal or state funds, so that ought to be addressed. Fourteen or 15 entities would be helped by the bill.

Persons Testifying: PRO: Kim Herman, Housing Finance Commission; Deb Bortner, DFI; Alan Trunnell, Community Frameworks.

House Amendment(s): The exemption to the CLA is limited to nonprofit housing organizations that are funded by federal and state programs.