§ 36a-558 — (Formerly Sec. 36-228). Prohibitions re small loans and related activities. Permitted small loan provisions. Open-end small loans. Lead generation activities.

Connecticut § 36a-558

• Jurisdiction: Connecticut
• Title 36a: The Banking Law of Connecticut
• Ch. 668: Nondepository Financial Institutions

Text

(a) Except as provided in subsection (c) of section 36a-557, no person licensed or required to be licensed under section 36a-556 shall engage in any of the activities described in subsection (a) of section 36a-556 for any small loan that contains any condition or provision inconsistent with the requirements in subsections (d) to (g), inclusive, of this section. (b) No person exempt from licensure under section 36a-557 shall engage in any of the activities described in subdivision (4), (5) or (6) of subsection (a) of section 36a-556 for any small loan made by a person who was licensed or who was required to be licensed under section 36a-556 that contains any condition or provision inconsistent with the requirements in subsections (d) to (g), inclusive, of this section. (c) (1) Except as the result of a bona fide error or as set forth in subdivision (2) of this subsection, any small loan described in subsection (a) or (b) of this section that contains any condition or provision inconsistent with the requirements in subsections (d) to (g), inclusive, of this section shall not be enforced in this state. Such small loan shall be void and no person shall have the right to collect or receive any principal, interest, charge or other consideration thereon. Any person attempting to collect or receive principal, interest, charge or other consideration on such small loan shall be subject to the provisions of section 36a-570 . (2) Subdivision (1) of this subsection shall not apply when: (A) The inconsistent condition or provision is the result of a bona fide error; or (B) the small loan was lawfully made in compliance with a validly enacted licensed loan law of another state to a borrower who was not, at the time of the making of such loan, a Connecticut borrower but who has since become a Connecticut borrower. (3) For the purposes of this subsection, the term “bona fide error” includes, but is not limited to, clerical, calculation and computer malfunction, programming and printing errors, but does not include an error of legal judgment with respect to a person's obligations under sections 36a-555 to 36a-573 , inclusive, or under regulations implemented pursuant to section 36a-573 . (d) Small loans that are the subject of the activities set forth in subsections (a) and (b) of this section shall not contain: (1) For a small loan that is under five thousand dollars, an APR that exceeds the lesser of thirty-six per cent or the maximum annual percentage rate for interest that is permitted with respect to the consumer credit extended under the Military Lending Act, 10 USC 987, as amended from time to time, or for a small loan that is between five thousand and fifty thousand dollars, an APR that exceeds twenty-five per cent; (2) For other than an open-end small loan, a provision that increases the interest rate due to payment default; (3) A payment schedule with regular periodic payments that when aggregated do not fully amortize the outstanding principal balance; (4) A payment schedule with regular periodic payments that cause the principal balance to increase; (5) A payment schedule that consolidates more than two periodic payments and pays them in advance from the proceeds, unless such payments are required to be escrowed by a governmental agency; (6) A prepayment penalty; (7) An adjustable rate provision; (8) A waiver of participation in a class action or a provision requiring a borrower, whether acting individually or on behalf of others similarly situated, to assert any claim or defense in a nonjudicial forum that: (A) Utilizes principles that are inconsistent with the law as set forth in the general statutes or common law; or (B) limits any claim or defense the borrower may have; (9) A call provision that permits the lender, in its sole discretion, to accelerate the indebtedness, except when repayment of the loan is accelerated by a bona fide default pursuant to a due-on-sale clause; (10) A security interest, except as provided in subsection (e) of this section; or (11) Fees or charges of any kind, except as expressly permitted by subsection (e) of this section. (e) Small loans as described in subsections (a) and (b) of this section may contain provisions: (1) For late fees, if: (A) Such fees are assessed after an installment remains unpaid for ten or more consecutive days, including Sundays and holidays; (B) such fees do not exceed five per cent of the outstanding installment payment, excluding any previously assessed late fees, or a total of twenty-five dollars per month, whichever is less; and (C) no interest is charged on such fees; (2) Allowing charges for a dishonored check or any other form of returned payment, provided the total fee for such returned payment shall not exceed twenty dollars; (3) Allowing for collection of deferral charges, but only upon the specific written authorization of the borrower and in a total amount not to exceed the interest due during the applicable billing cycle; (4) Allowing for the accrual of interest after the maturity date or the deferred maturity date, provided such interest shall not exceed twelve per cent per annum computed on a daily basis on the respective unpaid balances; (5) Providing for reasonable attorney's fees subject to the conditions and restrictions set forth in section 42-150aa ; (6) Including credit life insurance or credit accident and health insurance subject to the conditions and restrictions set forth in section 36a-559 ; and (7) Taking a security interest in a motor vehicle in connection with a closed-end small loan made solely for the purchase or refinancing of such motor vehicle, provided the APR of such loan shall not exceed the rates indicated for the respective classifications of motor vehicles as follows: (A) New motor vehicles, fifteen per cent; (B) used motor vehicles of a model designated by the manufacturer by a year not more than two years prior to the year in which the sale is made, seventeen per cent; and (C) used motor vehicles of a model designated by the manufacturer by a year more than two years prior to the year in which the sale is made, nineteen per cent. (f) Open-end small loans as described in subsections (a) and (b) of this section shall, in addition to the requirements set forth in subsections (d) and (e) of this section: (1) Not provide for an advance of money exceeding at any one time an unpaid principal of fifty thousand dollars; (2) Provide for payments and credits to be made to the same borrower's account from which advances, interests, charges and costs on such loan are debited; (3) Provide for interest to be computed on any unpaid principal balance of the account in each billing cycle by one of the following methods: (A) By converting the APR to a daily rate and multiplying such daily rate by the daily unpaid principal balance of the account, in which case the daily rate is determined by dividing the APR by three hundred sixty-five; or (B) by converting the APR to a monthly rate and multiplying the monthly rate by the average daily unpaid principal balance of the account in the billing cycle, in which case (i) the monthly rate is determined by dividing the APR by twelve, and (ii) the average daily unpaid principal balance is the sum of the amount unpaid each day during the cycle divided by the number of days in the cycle. In either of such computations, the billing cycle shall be monthly and the unpaid principal balance on any day shall be determined by adding to any balance unpaid as of the beginning of such day all advances and other permissible amounts charged to the borrower and deducting all payments and other credits made or received that day; (4) Not compound interest or charges by adding any unpaid interest or charges authorized by sections 36a-555 to 36a-573 , inclusive, to the unpaid principal balance of the borrower's account; or (5) Not include any other fees or charges of any kind, except as expressly permitted by subsection (g) of this section. (g) Open-end small loans as described in subsections (a) and (b) of this section, in addition to the requirements set forth in subsections (d) to (f), inclusive, of this section, may: (1) Provide for an annual fee for the privileges made available to the borrower under the open-end loan agreement, provided such annual fee shall not exceed fifty dollars; and (2) Include credit life insurance or credit accident and health insurance, subject to the conditions and restrictions set forth in section 36a-559 . (h) No person licensed or required to be licensed under sections 36a-555 to 36a-573 , inclusive, who is engaged in generating leads shall in connection with lead generation activities: (1) Initiate any outbound telephone call using an automatic telephone dialing system or an artificial or prerecorded voice without the prior express written consent of the recipient; (2) Fail to transmit or cause to transmit the lead generator's name and telephone number to any caller identification service in use by a consumer; (3) Initiate an outbound telephone call to a consumer's residence between nine o'clock p.m. and eight o'clock a.m. local time at the consumer's location; (4) Fail to clearly and conspicuously identify the lead generator and the purpose of the contact in its written and oral communications with a consumer; (5) Fail to provide the ability to opt out of any unsolicited advertisement communicated to a consumer via an electronic mail address; (6) Initiate an unsolicited advertisement via electronic mail to a consumer more than ten business days after the receipt of a request from such consumer to opt out of such unsolicited advertisements; (7) Use a subject heading or electronic mail address in a commercial electronic mail message that would likely mislead a recipient, acting reasonably under the circumstances, about a material fact regarding the sender, contents or subject matter of the message; (8) Sell, lease, exchange or otherwise transfer or release the electronic mail address or telephone number of a consumer who has requested to be opted out of future solicitations; (9) Collect, buy, lease, exchange or otherwise transfer or receive an individual's Social Security number or bank account number; (10) Use information from a trigger lead to solicit consumers who have opted out of firm offers of credit under the federal Fair Credit Reporting Act; (11) Initiate a telephone call to a consumer who has placed his or her contact information on a federal or state Do Not Call list, unless the consumer has provided express written consent; (12) Represent to the public, through advertising or other means of communicating or providing information, including, but not limited to, the use of business cards or stationery, brochures, signs or other promotional items, that such lead generator can or will perform any other activity requiring licensure under this title, unless such lead generator is duly licensed to perform such other activity or exempt from such licensure requirements; (13) Refer applicants to, or receive a fee from, any person who is required to be licensed under this title, but was not so licensed as of the time of the performance of such lead generator's services; or (14) Assist or aid and abet any person in the conduct of business requiring licensure under this title when such person does not hold the license required.

Legislative History

(1949 Rev., S. 5938; 1949, S. 2754d; March, 1958, P.A. 27, S. 47; P.A. 88-150, S. 3; P.A. 92-89, S. 5, 20; P.A. 94-104, S. 2; 94-122, S. 338, 340; P.A. 96-71, S. 6, 8; P.A. 02-111, S. 37; P.A. 04-69, S. 20; P.A. 05-46, S. 7; P.A. 16-65, S. 22; P.A. 17-233, S. 13, 14; P.A. 18-173, S. 96; P.A. 23-126, S. 4.) History: P.A. 88-150 specified that the license fee is nonrefundable and added the provision re expiration of licenses on June thirtieth; P.A. 92-89 increased the license fees from $200 to $400; P.A. 94-104 changed the license renewal deadline from June twentieth to June first, added a $100 late fee and added a $100 processing fee for a person whose license expired within 60 days of his application; P.A. 94-122 made technical changes, effective January 1, 1995; Sec. 36-228 transferred to Sec. 36a-558 in 1995; P.A. 96-71 amended Subsec. (a) to delete “nonrefundable” modifying “license fee” and added Subsec. (b) to make all fees required by this section nonrefundable, effective July 1, 1996; P.A. 02-111 amended Subsec. (a) by providing that license fee for “small loan lender” license is $800, provided if application is filed not earlier than one year before the expiration date of license, fee is $400, by adding provision re license that is renewed effective July 1, 2003, shall expire on September 30, 2005, by adding provisions re expiration of license at the close of business on September thirtieth of the odd-numbered year following its issuance, renewal fee of $800 and exceptions for licenses that expire on June 30, 2003, and by making conforming and technical changes; P.A. 04-69 inserted new Subsec. (b), requiring commissioner to automatically suspend license or renewal license if commissioner determines that a check filed to pay fee has been dishonored and requiring commissioner to give notice of the automatic suspension pending proceedings for revocation or refusal to renew and an opportunity for a hearing in accordance with Sec. 36a-51, and redesignated existing Subsec. (b) as Subsec. (c); P.A. 05-46 amended Subsec. (a) to provide that renewal application filed with commissioner after September first, accompanied by late fee, shall be deemed to be timely and sufficient for purposes of Sec. 4-182(b); P.A. 16-65 replaced former provisions with new Subsecs. (a) to (h) re small loan prohibitions and permitted provisions, open-end small loans and lead generation activities, effective July 1, 2016; P.A. 17-233 amended Subsec. (d) by deleting provision re calculation under Military Lending Act in Subdiv. (1), and adding “payment” in Subdiv. (2), and amended Subsec. (e)(1)(B) by deleting “the lesser of”; P.A. 18-173 amended Subsec. (d)(1) by adding “lesser of thirty-six per cent or the”; P.A. 23-126 amended Subsec. (d)(1) by making technical changes and changing “fifteen” to “fifty”, amended Subsec. (e)(6) by making a technical change and amended Subsec. (f)(1) by changing “fifteen” to “fifty”.