PA Internet Lending from Out of State Companies

I know there are many people who call me an idiot and stupid and etc because of what I post about the laws of Pennsylvania. It's recently come to my attention that a recent user here didn't like my advice and is now bashing me because of it. Besides having emails from the guy in charge of regulating these companies for PA saying it's the truth, it's also posted on PA's website.

So - I'm posting the letter posted on the Pennsylvania Dept of Banking's website. This letter can be found by going to the Pennsylvania Dept of Banking website, clicking on "Laws and Regulations", then interpretive letters, then Consumer Discount Company Act. It is called "Internet Consumer Lending-Out of State Company".

[quote]
Re: Internet Consumer Lending Activity

Dear:

This is in response to your letter to the Department of Banking (the “Department”) in which you request
the Department’s confirmation that [redacted] (the “Company”), a Delaware limited liability company, is
not required to obtain a license under the Consumer Discount Company Act (“CDCA”), 7 P.S. § 6201 et
seq., in order to make consumer loans via the internet to residents of Pennsylvania.

You indicate in your letter that, within 12 months, the Company intends to make consumer loans via the
internet to Pennsylvania residents that will have a minimum amount of $10,000 at initial interest rates of 5
to 7%, based upon current interest rates. Interest rates on the loans will either be variable or fixed, as
selected by the borrower prior to the date the loan is made. The loans will be unsecured and have
repayment terms that range from a minimum term of one year to a maximum term of 30 years. The
Company does not and will not have any offices, equipment or personnel located within Pennsylvania.

Section 3 of the CDCA provides in pertinent part that:
[o]n and after the effective date of this act, no person shall engage or continue to engage in
this Commonwealth, either as principal, employe, agent or broker, in the business of
negotiating or making loans or advances of money on credit, in the amount or value of
twenty-five thousand dollars ($ 25,000) or less, and charge, collect, contract for or receive
interest, discount, bonus, fees, fines, commissions, charges, or other considerations which
aggregate in excess of the interest that the lender would otherwise be permitted by law to
charge if not licensed under this act on the amount actually loaned or advanced, or on the
unpaid principal balances when the contract is payable by stated installments except a
domestic business corporation organized under or existing by virtue of the Business
Corporation Law of this Commonwealth, after first obtaining a license from the Secretary of
Banking of the Commonwealth of Pennsylvania in accordance with the provisions of this act.
7 P.S. § 6203.A (emphasis added).
Since the Company will not have any offices of any kind in
Pennsylvania or people physically present in Pennsylvania acting as principal, employee, agent or broker
as those terms are contemplated in Section 3 of the CDCA, the Company is not “in this Commonwealth”
as that term is used in Section 3 of the CDCA.

Therefore, it is the position of the Department that the Company is not required to obtain a license under the CDCA in order to originate unsecured consumer
loans via the internet to Pennsylvania residents. This position is conditioned upon the Company being
licensed or otherwise authorized under the Company’s home state law to engage in this type of lending
activity.

It is recommended that you refer to the Department’s website at banking.state.pa.us under the tabs
“Interpretation of Laws- Interpretive Letters- Consumer Discount Company Act” for redacted copies of
prior consistent interpretive letters that may address aspects of the Company’s proposed internet lending
activities.

This letter states the Department’s position regarding the applicability of the CDCA to the activity you
propose in this letter, and does not opine on any other relevant state or federal laws, such as the applicable
laws of the Company’s home state.

The Department’s analysis is based upon the facts as stated in this letter. Any change in the facts could
result in an amendment or reversal of the Department’s position. This letter has been authorized by the
appropriate Department personnel and constitutes a duly authorized statement of the Department’s position
regarding the issues discussed herein. This letter may not be relied upon or construed as constituting legal
advice.

Please do not hesitate to contact me if you have any further questions regarding this matter.

Sincerely,
Carter D. Frantz
Deputy Chief Counsel
cc: Timothy J. Blase
Director, Bureau of Supervision and Enforcement
David H. Bleicken
Director, Bureau of Licensing, Investigations and Consumer Affairs
James R. Keiser
Administrator, Nondepository Financial Institutions
Gazala Merchant
Chief, Licensing Division[/quote]