Maine Changes Consumer Loan Code to Target Loans Issued Under the Banking Partnership Model | Ballard Spahr LLP
Maine changed its Consumer Credit Code to target loans issued under a banking partnership model. The amendments include a tax evasion prevention provision that an alleged agent or service provider is deemed to be a “Lender” under Title 9-A, Article 2 of the revised Maine Bylaws. Article 2 contains an authorization requirement as well as interest and fee limits for consumer credit.
SP 205 / LD 522 A new part 7 has been added to Article 2. Part 7 contains the following essential provisions:
- Any entity covered by Article 2 (that is, entities that provide or service consumer credit) “shall not engage in any fraud, deception or pretense to circumvent the requirements of this Article, including, but not limited to … debtors, in any way obtaining a loan with a Receive a higher rate of interest, remuneration or fees than is permitted in this article. A loan granted in breach of this Part will be void and irrecoverable in terms of principal, fees, interest or fees. “
- An alleged agent or service provider for another entity exempted from Article 2 shall be deemed to be a lender under Article 2 if it (a) directly or indirectly holds, acquires or maintains the predominant economic interest in the loan; (b) markets that broker the loan; arranged or facilitated and has the right to request or pre-emptive right to purchase the loan or a claim or interest on a loan; or (c) the entirety of the circumstances indicates that the entity is the lender and the transaction is structured so that the request Article 2 is circumvented. Circumstances in which a company would be considered a lender include, among other things, if the company:
- Compensates, insures, or protects an indemnified entity for any costs or risks related to the loan
- Predominantly designs, controls or operates the loan program, or
- Pretends to act as an agent or service provider for an exempt facility while acting directly as a lender in other states.
- If a creditor violates the rules on tax evasion, the debtor is not obliged to pay the loan and can reclaim the payments made on the loan from the legal entity violating the regulations or a legal successor of this legal entity who carries out the direct collection of payments or the foreclosure Rights out of guilt.
The new Maine Tax Evasion Prevention Provision, When an Alleged Agent or Service Provider Is Considered a Lender under Article 2, pursues the Tax Evasion Prevention Provision in the United States Illinois Predatory Loan Prevention Act which came into force in March 2021.