Senate Bill Report — SB 6025, Protecting Consumers From Predatory Loans (as of January 15, 2024)

Summary

Senate Bill Report on SB 6025, as of January 15, 2024, an act relating to protecting consumers from predatory loans, sponsored by Senators Stanford, Dhingra, Frame, Hasegawa, Kuderer, Nguyen, Saldaña, Trudeau, Valdez and Wilson, C. The bill expands the definition of the term loan in the Consumer Loan Act to include money or credit exchanged for a borrower's agreement to terms such as finance charges, interest or other charges, conditions, or other considerations. It makes any attempt to evade the provisions of the Consumer Loan Act a violation of the act. The committee activity is dated 1/16/24, and the effective date is ninety days after adjournment of the session in which the bill is passed.

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Full text

                            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, Saldaña, 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.




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

Senate Bill Report                              -1-                                             SB 6025
     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.



Senate Bill Report                              -2-                                         SB 6025
     Creates Committee/Commission/Task Force that includes Legislative members: No.

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




Senate Bill Report                            -3-                                        SB 6025


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