SENATE BILL REPORT

HB 1326

This analysis was prepared by non-partisan legislative staff for the use of legislative members in their deliberations. This analysis is not a part of the legislation nor does it constitute a statement of legislative intent.

As Reported by Senate Committee On:

Financial Institutions, Housing & Insurance, April 2, 2013

Title: An act relating to making technical corrections and updating licensing and enforcement provisions of the consumer loan act.

Brief Description: Addressing the consumer loan act.

Sponsors: Representatives Ryu and Kirby; by request of Department of Financial Institutions.

Brief History: Passed House: 3/07/13, 97-0.

Committee Activity: Financial Institutions, Housing & Insurance: 3/21/13, 4/02/13 [DP].

SENATE COMMITTEE ON FINANCIAL INSTITUTIONS, HOUSING & INSURANCE

Majority Report: Do pass.

Signed by Senators Hobbs, Chair; Mullet, Vice Chair; Benton, Ranking Member; Fain, Hatfield and Nelson.

Staff: Alison Mendiola (786-7483)

Background: The Consumer Loan Act (CLA) authorizes the Department of Financial Institutions (DFI) to regulate consumer loan companies doing business in Washington. Consumer loan companies include mortgage lenders and consumer finance companies.

Powers of a CLA Licensee. A CLA licensee may:

An applicant for a license and any officers and principals of the applicant must undergo a background check. A licensee must maintain a surety bond or meet other specified financial requirements. The amount of the bond is based on the annual dollar amount of loans originated with a minimum amount of $30,000.

There are a variety of prohibited practices under CLA to ensure fair, honest, and open practices.

Summary of Bill: CLA is updated; provisions of CLA are modified to protect borrowers who obtain consumer loans; and CLA is modernized to comply with changes made at the federal level.

For example, if a person must be licensed under CLA but is not licensed, nonthird-party fees charged in connection with the origination of the residential mortgage loan must be refunded to the borrower, excluding interest charges. Fees or interest charged in the making of a nonresidential loan must be refunded to the borrower.

An exemption is eliminated that could allow payday lenders to use CLA to make illegal short-term loans.

Borrower includes a person who consults with or retains a licensee for information about obtaining a residential mortgage loan modification, regardless of whether that person actually obtains a residential mortgage loan modification.

It is clarified that the term residential loan modification services only applies to those who perform such services for compensation or gain.

The burden of demonstrating whether a person is exempt from CLA rests with the person claiming the exemption, exception, or preemption.

A CLA license expires upon the licensee's failure to comply with the annual assessment requirements. DFI must provide notice of the expiration to the address of record provided by the licensee. On the 15th day after DFI provides notice, if the assessment remains unpaid, the license expires. The licensee must receive notice prior to the expiration and have the opportunity to stop the expiration, as provided in rule.

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: This is an annual, technical clean-up bill. Specific references to federal law are modernized to comply with changes made at the federal level.

Persons Testifying: PRO: Representative Ryu, prime sponsor; Deb Bortner, DFI.