SENATE BILL REPORT
SB 6025
As of January 15, 2024
Title: An act relating to protecting consumers from predatory loans.
Brief Description: Protecting consumers from predatory loans.
Sponsors: Senators Stanford, Dhingra, Frame, Hasegawa, Kuderer, Nguyen, Salda?a, Trudeau, Valdez and Wilson, C..
Brief History:
Committee Activity: Business, Financial Services, Gaming & Trade: 1/16/24.
Brief Summary of Bill
  • Expands the definition of the term loan in the Consumer Loan Act.
  • Makes any attempt to evade the provisions of the Consumer Loan Act a violation of the act.
SENATE COMMITTEE ON BUSINESS, FINANCIAL SERVICES, GAMING & TRADE
Staff: Clint McCarthy (786-7319)
Background:

The Consumer Loan Act. The Consumer Loan Act (CLA) regulates consumer loans in Washington by providing various requirements for lenders and protections for borrowers. The CLA authorizes the Department of Financial Institutions to regulate consumer loan companies doing business in Washington. The CLA is applicable to each loan made to a resident of Washington by a licensee. 

 

The Definition of a Loan. Under the CLA, the term loan is currently defined as a sum of money lent at interest or for a fee or other charges and includes both open-end and closed-end loan transactions.

 

Applicability of the Consumer Loan Act. The CLA is applicable to each loan made to a resident of Washington by a licensee and subject to its authority and restrictions.  There are a number of entities exempt from the CLA, some of which include:

  • pawnbrokers;
  • retail installment sales of goods and services;
  • check cashers or sellers; and
  • various federal government loan programs.

 

Violations of the Consumer Loan Act. The CLA has a number of violations listed in statute.  Some of which include:

  • employing a scheme to defraud or mislead any lender or person;
  • obtain property by fraud or misrepresentation;
  • engage in any unfair or deceptive practice towards any person;
  • soliciting or entering into a contract where a borrower has to pay a fee or commission when the borrower does not obtain a loan;
  • soliciting rates, points, or finance terms that are not available at the time of advertisement; and
  • failing to make disclosures to loan applicants as required.

 

Engaging in any device, subterfuge, or pretense to evade the requirements of the CLA in order to circumvent CLA requirements is not explicitly referenced as a violation of the CLA.
Summary of Bill:

Expands the Definition of Loans. The term loan is expanded to include money or credit to a borrower in exchange for a borrower to agree to a set of terms including, but not limited to:

  • finance charges;
  • interest or other charges;
  • conditions; or
  • other considerations.

 

The term continues to include open-end and closed-end credit.  The term also includes any transaction conducted via any medium. Any transaction under the term loan is subject to the CLA.

 

Anti-Evasion Provisions in the Consumer Loan Act. Individuals attempting to evade the requirements of the CLA through any device, subterfuge, or pretense to make, offer, or assist a borrower obtain a loan with a greater rate of interest, consideration, or charge is in violation of the CLA.
Appropriation: None.
Fiscal Note: Not requested.
Creates Committee/Commission/Task Force that includes Legislative members: No.
Effective Date: Ninety days after adjournment of session in which bill is passed.