Senate Bill Report — SB 6025, Protecting Consumers From Predatory Loans, with Testimony (as of January 16, 2024)
Summary
Senate Bill Report on SB 6025, as of January 16, 2024, an act relating to protecting consumers from predatory loans, with a Staff Summary of Public Testimony. The bill expands the definition of the term loan in the Consumer Loan Act and makes any attempt to evade the act a violation. Testimony in favor says the definition of a loan needs to keep up with new lending products created by fintech companies. Testimony against, from an earned wage access company, says those advances are not loans, and other testimony says Earned Wage Access is not a loan. Persons testifying include Senator Derek Stanford, Prime Sponsor.
Summary drafted by a model from the document's text below and checked by script against that text before publication. It is a navigation aid, not a reading of what the document proves. Where AI is used
- Issuer
- Congressional materials
- Document type
- Report
- Date
- 2024-01-18
- Case
- 2024 01 18 A31645 D265057 Bill Report 6025 Sbr Bfgt Ta 24
Cite this document
“Senate Bill Report — SB 6025, Protecting Consumers From Predatory Loans, with Testimony (as of January 16, 2024).”
Original at app.leg.wa.gov, dated 2024-01-18. Archived at Pandemic Darlings, https://pandemicdarlings.com/source-documents/2024-01-18-2024-01-18-a31645-d265057-bill-report-6025-sbr-bfgt-ta-24/
, SHA-256 16157a077379c92938d052c169f6713899792fdf7668ac22b1987641e23e8692.Full text
SENATE BILL REPORT
SB 6025
As of January 16, 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.
Staff Summary of Public Testimony: PRO: The definition of a loan needs to keep up
with new lending products that are being created by fintech companies. There are entities
using various schemes to evade regulation under Washington's consumer loan laws. Utah
has no usury limits, and these fintech companies are using these banks to offer high interest
loans. This act will protect our most vulnerable population. The interest rates on some of
these unregulated products can ultimately add up to well over 100 percent. These entities
need to be regulated and play by the same rules that other entities do. Earned Wage Access
(EWA) companies share fundamental similarities with payday products. This bill does not
prevent EWA's from existing in Washington- it just makes them subject to regulation.
CON: We are an earned wage access company. We do payday advances for low fees.
These aren't loans because they have a legal right to this money. Earned Wage Access is a
high quality alternative to a loan. 30 percent of consumers in Washington State have
difficulty accessing the banking system. In Illinois, many people's financial well-being got
worse after the bill that SB 6025 is modeled after passed. This definition of loan will
reduce access to credit, rather than promote it.
OTHER: This can help manage employee finances. Placing restrictions on EWA
companies is problematic. Legislation should legitimize this benefit and be focused in on
how EWA's work. EWA products are not a loan- they make earned but not paid wages
available to our customers. Earned Wage Access is not a loan. This would adversely
impact the hundreds of Washington employers that offer EWA to their employees. Some
states are passing EWA specific legislation. We are in support of regulation, but we want
one that is in line with how EWA's work. More than 250,000 employees in Washington
have used EWA products. EWA's don't charge interest or late fees. The risk is only on the
employer not making payroll. There are ways we can work together, but we have concerns
about EWA products being included in the definition of loan. EWAs prevent consumers
from taking out high interest loans.
Persons Testifying: PRO: Senator Derek Stanford, Prime Sponsor; Lauren Saunders; Sam
Leonard, Northwest Consumer Law Center; Julia Kellison.
CON: Matt Pierce, Immediate; Joe Rubin, Opportunity Financial; Phil Goldfeder, American
Fintech Council.
OTHER: Alice Jacobsohn, PayrollOrg; Brian Tate, Innovative Payments Association; Drew
Bouton, Washington State Department of Financial Institutions; Ali Higgs, Washington
State Department of Financial Institutions; Molly Jones, Payactiv; Ryan Naples, DailyPay;
Angelena Bradfield.
Persons Signed In To Testify But Not Testifying: No one.
Senate Bill Report -3- SB 6025
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- SHA-256
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- Original
- app.leg.wa.gov