STATE OF PENNSYLVANIA

Is a license required? Yes. The Pennsylvania Department of Banking has stated that they do not regulate loan modification, but that the state Attorney General’s Office does. There is no meaningful difference here because loan modifiers must still be licensed as if they were loan brokers.

Pennsylvania Statute 42.3.a(Attached as Schedule A) states that “(a) On or after December 20, 1997, a person may not act as a loan broker in this Commonwealth without registering with the Department.”

42.1 states that a loan broker means “any person who acts for or on behalf of a loan broker for the purpose of soliciting borrowers. The term does not include a person licensed or otherwise regulated by the Department as a loan broker under other statutes or licensed, regulated or exempted under other statutes, including those administered by any other agency of the Commonwealth or the United States.” Despite this definition, state regulators stated that this includes loan modification.

State specific loan modification law? None.
Advantages of becoming a licensed Loan Broker? None. A loan modification company must be licensed as if they were a loan broker.
Penalties for operating in the state without a license:

 

Unspecified fines and criminal penalties for operating without being registered. Section 10C of the Credit Services Act(Attached as Schedule B) states that charging an advance fee is a third degree felony.

 

Is an advanced fee permitted?

 

Section 8 of the Credit Services Act states that “(c) Prohibited acts.– No loan broker shall: (1) Assess or collect an advance fee from a borrower to provide services as a loan broker.”
Is a written agreement required? Yes. Section 6.A of the Credit Services Act states that “Every contract between the buyer and a credit services organization for the purchase of the services of the credit services organization shall be in writing”
Other noteworthy information? Chapter 42 deals with registration and has some regulation, the Credit Services Act only deals with restrictions, it has no registration component. Both apply.
Pennsylvania Statutes

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Pennsylvania Statutes Chapter 42:

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Credit Services Act:

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License application:

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SCHEDULE A

 

CHAPTER 42. REGISTRATION OF LOAN BROKERS

Sec.
42.1. Definitions.
42.2. Applicability.
42.3. Registration required.
42.4. Annual renewal required.
42.5. Disapproval of registration.
42.6. Information to the Department.
42.7. Failure to register.

Authority

The provisions of this Chapter 42 issued under section 8 of the Credit Services Act (73 P. S. § 2188), unless otherwise noted.

Source

The provisions of this Chapter 42 adopted December 19, 1997, effective December 20, 1997, 27 Pa.B. 6555, unless otherwise noted.

§ 42.1. Definitions.

The following words and terms, when used in this chapter, have the following meanings, unless the context clearly indicates otherwise:

Act—The Credit Services Act (73 P. S. § § 2181—2192).

Applicant—A person who, in accordance with this chapter, has submitted a registration application or renewal registration application and applicable fees to the Department in an effort to register with the Department as a loan broker.

Department—The Department of Banking of the Commonwealth.

Employe—A person who receives wages reportable under Internal Revenue Service Form W-2.

Loan broker—As defined in section 2 of the act (73 P. S. § 2182), the term includes any person who acts for or on behalf of a loan broker for the purpose of soliciting borrowers. The term does not include a person licensed or otherwise regulated by the Department as a loan broker under other statutes or licensed, regulated or exempted under other statutes, including those administered by any other agency of the Commonwealth or the United States.

Principal—An officer, director, partner, joint venturer, branch manager or other person with similar managerial or supervisory responsibilities for a loan broker.

§ 42.2. Applicability.

This chapter applies to all loan brokers who act as loan brokers in this Commonwealth or on behalf of the residents of this Commonwealth.

§ 42.3. Registration required.

(a) On or after December 20, 1997, a person may not act as a loan broker in this Commonwealth without registering with the Department.

(b) To register as a loan broker, a person shall submit to the Department:

(1) A completed registration application provided by the Department.

(2) Payment to the Department of a nonrefundable registration fee of $300.

(c) Within 60 days of receipt of a registration application, the Department will do one of the following:

(1) Notify the applicant that the application is approved and the applicant is registered as a loan broker.

(2) Under § 42.5 (relating to disapproval of registration), notify the applicant that the applicant’s registration is disapproved and that the applicant is not registered as a loan broker.

(3) Notify the applicant that the registration application is incomplete and what additional information is required. In this case, the Department has 60 days from receipt of a completed registration application to notify the applicant under paragraph (1) or (2).

(d) An applicant shall be registered as a loan broker upon the Department’s issuance of written notification to the applicant that the applicant has been registered by the Department as a loan broker.

(e) No abatement of the registration fee will be made for any reason, including a loan broker’s initial registration period lasting for less than 1 year or the election by a loan broker to cancel its registration prior to the annual renewal date.

§ 42.4. Annual renewal required.

(a) Annually, the Department will mail to each registered loan broker an application for renewal of the loan broker’s registration.

(b) On or before December 1 of each year, a loan broker shall return the following to the Department:

(1) A completed renewal registration application provided by the Department.

(2) Payment of a renewal registration fee of $300.

(c) On or before January 15 of each year, the Department will take one of the following actions with regard to renewal applications which it received on or before December 1 of the prior year:

(1) Notify the loan broker that the loan broker’s registration is renewed.

(2) Under § 42.5 (relating to disapproval of registration), notify the loan broker that the loan broker’s renewal registration is rejected and that the loan broker is no longer registered as a loan broker.

(3) Notify the loan broker that the registration application was incomplete and that additional information is required. In this case, the Department has 30 days from receipt of a completed registration application to notify the loan broker under paragraph (1) or (2).

(d) A loan broker who fails to return to the Department by December 1 of each year a completed renewal registration application provided by the Department and payment of a renewal registration fee of $300 will be subject to a late fee of $100 upon submission to the Department of a renewal registration application.

(e) The renewal registration shall be effective from February 1 or upon the Department’s issuance of written notification to the applicant that the applicant has been registered by the Department as a loan broker, whichever is later, through January 31 of the following year.

§ 42.5. Disapproval of registration.

(a) The Department may refuse to register or renew the registration of an applicant. Notifications of refusal by the Department to register or renew the registration of an applicant shall include the reason for the refusal. In determining whether to refuse to register or renew the registration of an applicant, the Department will weigh all relevant factors including the following:

(1) Whether the applicant has properly and fully completed the registration application or the registration renewal application.

(2) Whether the applicant has supplied false information or made a material misstatement to the Department.

(3) Whether the applicant or any principal or employe of the applicant has violated the act.

(4) Whether the applicant or any principal or employe of the applicant is subject to an administrative order issued by an agency of the Commonwealth, another state or the United States, which supervises or regulates any financial industry, including the lender, broker of loans, securities, annuities, insurance and tax industries.

(5) Whether the applicant, any principal of the applicant or any organization with which the applicant or any principal of the applicant was associated as an officer, director or principal, has applied to any state or to the Federal government for a license or authority to broker loans or to lend money and had the application for a license rejected, and the reasons for the rejection.

(6) Whether the applicant, any principal of the applicant or any organization with which the applicant or any principal of the applicant was associated as an officer, director or principal, which was licensed or authorized by any state or the Federal government to broker loans or to lend money, had the license suspended, canceled or revoked.

(7) Whether the applicant or any principal or employe of the applicant has ever pleaded guilty, pleaded nolo contendere or has ever been found guilty by a judge or jury for violation of any state or Federal law involving financial crimes, including those involving lending, brokering of loans, securities, annuities, insurance and tax matters.

(8) Whether the applicant or any principal or employe of the applicant is subject to a civil or criminal proceeding by any state or Federal agency involving any financial matter, including lending, brokering loans, securities, insurance and tax matters.

(b) The applicant for an initial or renewal registration whose application is disapproved by the Department may appeal the disapproval through the administrative hearing process contained under 1 Pa. Code Part II (relating to General Rules of Administrative Practice and Procedure).

Cross References

This section cited in 10 Pa. Code § 42.3 (relating to registration required); 10 Pa. Code § 42.4 (relating to annual renewal required); and 10 Pa. Code § 42.6 (relating to information to the Department).

§ 42.6. Information to the Department

(a) In completing the registration application or renewal registration application, the applicant shall provide the Department with the following information:

(1) The name, address and telephone number of the applicant.

(2) The address at which the applicant acts or intends to act as a loan broker.

(3) The names and addresses of all agents and employes of the loan broker who act or will act as a loan broker on behalf of the loan broker.

(4) The names and addresses of all loan brokers or lenders on whose behalf the applicant acts or will act.

(5) The names and addresses of all principals of the applicant.

(6) A copy of its articles of incorporation or fictitious name filing to the extent applicable to the applicant.

(7) Other information required by the Department consistent with § 42.5(a) (relating to disapproval of registration) and related matters.

(b) A loan broker shall inform the Department within 15-calendar days of any change in address of the loan broker office, changes in ownership, principals and employes of the loan broker. The broker shall include background information regarding new owners, principals or employes of the loan broker consistent with § 42.5(a)(4)—(8), which information also is required by the Department to be provided by the loan broker in a registration application or renewal registration application.

§ 42.7. Failure to register.

A person who acts or holds himself out as a loan broker and is not registered with the Department under this chapter is in violation of the Unfair Trade Practices and Consumer Protection Law (73 P. S. § § 201-1—209-6.).

 

SCHEDULE B

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CREDIT SERVICES ACT

Act of 1992, P.L. 1144, No. 150

AN ACT

Regulating credit services; prohibiting certain activities; providing for certain information to be given

to buyers, for the contents of contracts and for enforcement; prohibiting advance fees by loan brokers;

and providing penalties.

TABLE OF CONTENTS

Section 1. Short title.

Section 2. Definitions.

Section 3. Prohibited activities.

Section 4. Information sheet.

Section 5. Contents of information sheet.

Section 6. Contract.

Section 7. Surety bond.

Section 8. Restrictions on loan brokers.

Section 9. Waivers and burden of proof.

Section 10. Enforcement.

Section 11. Damages.

Section 12. Construction of act.

Section 13. Effective date.

The General Assembly of the Commonwealth of Pennsylvania hereby enacts as follows:

Section 1. Short title.

This act shall be known and may be cited as the Credit Services Act.

Section 2. Definitions.

The following words and phrases when used in this act shall have the meanings given to them in this

section unless the context clearly indicates otherwise:

“Advance fee.” Any funds or consideration assessed or collected prior to closing of a loan by a loan

broker.

“Borrower.” A person obtaining or desiring to obtain a loan of money, a credit card or line of credit

for personal, family or household purposes.

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“Buyer.” A natural person who is solicited to purchase or who purchases the services of a credit

services organization.

“Credit services organization.”

(1) A person who, with respect to the extension of credit by others, sells, provides or performs

or represents that he or she can or will sell, provide or perform any of the following services

in return for the payment of money or other valuable consideration:

(i) Improving a buyer’s credit record, history or rating.

(ii) Obtaining an extension of credit for a buyer.

(iii) Providing advice or assistance to a buyer with regard to either subparagraph (i) or (ii).

(2) The term shall not include any of the following:

(i) Any person organized, chartered or holding a license or authorization certificate to

make loans or extensions of credit pursuant to the laws of the Commonwealth or the

United States who is subject to regulation and supervision by an official or agency of

the Commonwealth or the United States.

(ii) Any bank, bank and trust company, trust company, savings bank, Federal savings and

loan association or savings bank located in this Commonwealth or savings association

or any subsidiary or affiliate of such institution whose deposits are eligible for

insurance by the Federal Deposit Insurance Corporation, the Savings Association

Insurance Fund of the Federal Deposit Insurance Corporation or the Pennsylvania

Savings Association Insurance Corporation.

(iii) Any nonprofit organization exempt from taxation under section 501(c)(3) of the

Internal Revenue Code of 1954 (68A Stat. 3, 26 U.S.C. ‘ 1 et seq.).

(iv) Any person licensed as a real estate broker where the person is acting within the

course and scope of that license.

(v) Any person admitted to practice law in this Commonwealth where the person renders

services within the course of such practice.

(vi) Any broker-dealer registered with the Securities and Exchange Commission or the

Commodity Futures Trading Commission where the broker-dealer is acting within the

course and scope of such regulation.

(vii) Any consumer reporting agency as defined in the Fair Credit Reporting Act (Public

Law 91-508, 15 U.S.C. ‘ 1681 et seq.).

“Extension of credit.” The right to defer payment of debt or to incur debt and defer its payment,

offered or granted primarily for personal, family or household purposes.

“Loan broker.”

(1) A person who:

(i) For or in expectation of a consideration fee arranges or attempts to arrange or offers

to fund a loan of money, a credit card or line of credit for personal, family or

household purposes.

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(ii) For or in expectation of a consideration fee assists or advises a borrower in obtaining

or attempting to obtain a loan of money, a credit card, a line of credit or related

guarantee, enhancement or collateral of any kind or nature.

(iii) Acts for or on behalf of a loan broker for the purpose of soliciting borrowers.

(iv) Holds himself out as a loan broker.

(2) The term shall not include:

(i) Any person organized, chartered, exempt from licensure under statute or holding a

license or authorization certificate to make loans or provide credit pursuant to the

laws of the Commonwealth or the United States who is subject to regulation and

supervision by an official or agency of the Commonwealth or the United States.

(ii) Any bank, bank and trust company, trust company, savings bank, Federal savings and

loan association or savings bank located in this Commonwealth, or savings association

or any subsidiary or affiliate of such institution, whose deposits are eligible for

insurance by the Federal Deposit Insurance Corporation, the Savings Association

Insurance Fund of the Federal Deposit Insurance Corporation or the Pennsylvania

Savings Association Insurance Corporation.

(iii) Any person licensed as a mortgage broker under the act of December 22, 1989

(P.L.687, No.90), known as the Mortgage Bankers and Brokers Act.

(iv) Any person who is not required to obtain a license as a mortgage banker by reason

of the exceptions contained in section 3(b) of the Mortgage Bankers and Brokers Act.

(v) Any person licensed as a real estate broker where the person is acting within the

course and scope of that license.

(vi) Any person admitted to practice law in this Commonwealth where the person renders

services within the course of such practice.

(vii) Any broker-dealer registered with the Securities and Exchange Commission or the

Commodity Futures Trading Commission where the broker-dealer is acting within the

course and scope of such regulation.

“Principal.” Any officer, director, partner, joint venturer, branch manager or other person with similar

managerial or supervisory responsibilities for a loan broker.

Section 3. Prohibited activities.

A credit services organization and its salespersons, agents and representatives who sell or attempt to

sell the services of a credit services organization shall not do any of the following:

(1) Charge or receive any money or other valuable consideration prior to full and complete

performance of the services the credit services organization has agreed to perform for or on

behalf of the buyer unless the credit services organization has, in conformity with section 7,

either obtained a surety bond issued by a surety company admitted to do business in this

Commonwealth or established a trust account at a bank, bank and trust company, trust

company, savings bank, Federal savings and loan association or savings bank located in this

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Commonwealth or savings association or any subsidiary or affiliate of such institution whose

deposits are eligible for insurance by the Federal Deposit Insurance Corporation, the Savings

Association Insurance Fund of the Federal Deposit Insurance Corporation or the Pennsylvania

Savings Association Insurance Corporation. If a credit services organization has obtained a

surety bond or established a trust account, the salesperson, agents and representatives who

sell the services of such organization shall not be required to obtain the surety bond or

establish the trust account provided for by this act.

(2) Charge or receive any money or other valuable consideration solely for referral of the buyer to a

retail seller who will or may extend credit to the buyer if the credit which is or will be extended to

the buyer is upon substantially the same terms as those available to the general public.

(3) Make or counsel or advise any buyer to make any statement which is untrue or misleading and

which is known, or which by the exercise of reasonable care should be known, to be untrue

or misleading, to a consumer credit reporting agency or to any person who has extended

credit to a buyer or to whom a buyer is applying for an extension of credit with respect to a

buyer’s creditworthiness, credit standing or credit capacity.

(4) Make or use any untrue or misleading representations in the offer or sale of the services of

a credit services organization or engage directly or indirectly in any act, practice or course of

business which operates or would operate as a fraud or deception upon any person in

connection with the offer or sale of the services of a credit services organization.

(5) Make or use an advertisement which guarantees that the buyer will obtain credit.

Section 4. Information sheet.

Prior to the execution of a contract or agreement between the buyer and a credit services organization or

prior to the receipt by the credit services organization of any money or other valuable consideration,

whichever occurs first, the credit services organization shall provide the buyer a statement in writing

containing all the information required by section 5. The credit services organization shall maintain on file

or microfilm for a period of three years an exact copy of the information sheet, personally signed by the

buyer, acknowledging receipt of a copy of the information sheet.

Section 5. Contents of information sheet.

The information sheet shall include all of the following:

(1) A complete and accurate statement of the buyer’s right to review any file on the buyer maintained

by any consumer credit reporting agency and the right of the buyer to receive a copy of that file.

The information sheet shall include the statement that a copy of the buyer’s file will be furnished

by the consumer credit reporting agency, and the approximate price the buyer will be charged by

the credit reporting agency for a copy of the file. The information sheet shall also include a

statement that information in a consumer’s credit file will be provided free of charge by the

consumer credit reporting agency to the consumer by telephone after written request within 30

days of the consumer’s receiving a denial of credit notice.

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(2) A complete and accurate statement of the buyer’s right to dispute the completeness or

accuracy of any item contained in any file on the buyer maintained by any consumer credit

reporting agency.

(3) A complete and detailed description of the services to be performed by the credit services

organization for or on behalf of the buyer and the total amount the buyer will have to pay or

become obligated to pay for the services.

(4) If the credit services organization is required to obtain a surety bond or establish a trust

account pursuant to section 3, a statement setting forth both of the following:

(i) The buyer’s right to proceed against the bond or trust account under the circumstances

and in the manner set forth in section 7.

(ii) The name and address of the surety company which issued the bond or the name and

address of the depository and the trustee and the account number of the trust account.

Section 6. Contract.

(a) Contents.– Every contract between the buyer and a credit services organization for the

purchase of the services of the credit services organization shall be in writing, shall be dated,

shall be signed by the buyer and shall include all of the following:

(1) A conspicuous statement in size equal to 10-point bold type or the size type used for

the contract provisions, whichever is larger, in immediate proximity to the space

reserved for the signature of the buyer, as follows:

You, the buyer, may cancel this contract at any time

prior to 12 midnight of the fifth day after the date of

the transaction. See the attached notice of cancellation

form for an explanation of this right.

(2) The terms and conditions of payment, including the total of all payments to be made

by the buyer, whether to the credit services organization or to some other person.

(3) A full and detailed description of the services to be performed by the credit services

organization for the buyer, including all guarantees and all promises of full or partial

refunds, and the estimated date by which such services are to be performed or

estimated length of time for performing such services.

(4) The credit services organization’s principal business address and the name and address

of its agent, other than the Secretary of the Commonwealth, authorized to receive

service of process.

(b) Copy.– A copy of the fully completed contract and all other documents the credit services

organization requires the buyer to sign shall be given to the buyer at the time they are signed.

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(c) Notice of cancellation.– The contract shall be accompanied by a completed form in duplicate,

captioned “Notice of Cancellation,” which shall be attached to the contract and easily

detachable and which shall contain, in at least 10-point type, the following statement written

in the same language as used in the contract:

Notice of Cancellation

You may cancel this contract without any penalty or obligation within

five days from the date the contract is signed.

If you cancel, any payment made by you under this contract will be

returned within 15 days following receipt by the seller of your

cancellation notice.

To cancel this contract, mail or deliver a signed and dated copy of this

cancellation notice or any other written notice to (name of seller) at

……………………………………………………………………………………………..

.

(address of seller) (place of business)

not later than 12 midnight (date).

I hereby cancel this transaction.

……………………………………………………………………………………………..

(purchaser’s signature) (date)

(d) Effect of breach.– The seller’s breach of a contract under this act or of any obligation arising

therefrom shall constitute a violation of this act.

Section 7. Surety bond.

If a credit services organization is required to obtain a surety bond or establish a trust account

pursuant to section 3, the following procedures shall be applicable:

(1) If a bond is obtained, a copy of it shall be filed with the Department of State. If a trust

account is maintained, notification of the depository, the trustee and the account

number shall be filed with the Department of State.

(2) The bond or trust account required shall be in favor of the Commonwealth for the

benefit of any person who is damaged by any violation of this act. The bond or trust

account shall also be in favor of any person damaged by such practices.

(3) Any person claiming against the bond or trust account for a violation of this act may

maintain an action at law against the credit services organization and against the

surety or trustee. The surety or trustee shall be liable only for actual damages and not

the punitive damages permitted under section 11. The aggregate liability of the surety

or trustee to all persons damaged by a credit services organization’s violation of this

act shall in no event exceed the amount of the trust account or bond.

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(4) The bond or the trust account shall be in an amount equal to 5% of the total amount

of the fees charged buyers by the credit services organization under the contracts

entered into between the credit services organization and such buyers during the

previous 12 months, but in no case shall the bond be less than $5,000 nor more than

$25,000. The amount required shall be adjusted once a year, no later than the tenth

day of the first month of the credit services organization’s fiscal year.

Section 8. Restrictions on loan brokers.

(a) Registration requirement.– Loan brokers shall be registered with the Department of Banking

pursuant to regulations promulgated by the department.

(b) Registration fee.– Loan brokers seeking to be registered by the department shall pay to the

department an annual registration fee of $300.

(c) Prohibited acts.– No loan broker shall:

(1) Assess or collect an advance fee from a borrower to provide services as a loan broker.

(2) Make or use any false or misleading representations or omit any material fact in the

offer or sale of the services of a loan broker or engage directly or indirectly in any act

that operates or would operate as fraud or deception upon any person in connection

with the offer or sale of services of a loan broker, notwithstanding the absence of

reliance by the buyer.

(3) Make or use any false or deceptive representation in its business dealings with a State

agency or conceal a material fact from a State agency.

(d) Responsibility of principal.– Each principal of a loan broker may be held responsible for the

actions of a loan broker, including its agents or employees in the course of business of the

loan broker.

Section 9. Waivers and burden of proof.

(a) Waiver.– Any waiver by a buyer or borrower of the provisions of this act shall be deemed

contrary to public policy and shall be void and unenforceable. Any attempt by a credit

services organization or a loan broker to have a buyer or borrower waive rights given by this

act shall constitute a violation of this act.

(b) Burden of proof.– In any proceeding involving this act, the burden of proving an exemption

or an exception from a definition is upon the person claiming it.

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Section 10. Enforcement.

(a) Unfair trade practice.– A violation of any provision of this act shall be deemed to be a

violation of the act of December 17, 1968 (P.L.1224, No.387), known as the Unfair Trade

Practices and Consumer Protection Law.

(b) Criminal offense.– Any person who violates section 8(c) commits a felony of the third degree.

Section 11. Damages.

Any buyer or borrower injured by a violation of this act or by the credit services organization’s or loan

broker’s breach of a contract subject to this act may bring an action for recovery of damages.

Judgment shall be entered for actual damages, but in no case less than the amount paid by the buyer

or borrower to the credit services organization or loan broker, plus reasonable attorney fees and

costs. An award, if the trial court deems it proper, may be entered for punitive damages.

Section 12. Construction of act.

(a) Act not exclusive.– The provisions of this act are not exclusive and do not relieve the parties

or the contracts subject thereto from compliance with any other applicable provision of law.

(b) Remedies cumulative.– The remedies provided in this act for violation of any section of this

act shall be in addition to any other procedures or remedies for any violation or conduct

provided for in any other law.

Section 13. Effective date.

This act shall take effect as follows:

(1) This section and sections 2, 8 and 10(b) shall take effect immediately.

(2) The remainder of this act shall take effect in six months.


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