General Assembly>Division of Legislative Services>Publications>Session Summaries>2008>Banking and Finance


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Banking and Finance

Passed

P HB12

Payday Loan Act. Requires the State Corporation Commission, by January 1, 2009, to certify and contract with one or more third parties to develop, implement, and maintain an Internet-accessible database, and requires payday lenders to query the database prior to making any loan to determine whether the loan is permissible. Licensees are required to pay a database inquiry fee to the database provider. A payday lender is prohibited from making a payday loan to a person if the loan would cause the borrower to have more than one payday loan outstanding at the same time and from making a payday loan on the same day that the person has paid a previous payday loan. Payday lenders are permitted to charge, on any payday loan, interest at an annual rate of 36 percent, a loan fee of not more than 20 percent of the loan proceeds, and a $5 verification fee. Payday lenders are prohibited from knowingly making loans to a member of the military service or to the spouse or dependent of such person. A borrower may enter into an extended payment plan, which allows the borrower to repay the loan in at least four equal installments over a period of not less than 60 days. A borrower may not enter into more than one extended payment plan in any 12-month period. A payday loan may not be made to a borrower in an extended payment plan or within 90 days after payment of an extended payment plan. The measure provides that the fifth payday loan made to a borrower within 180 days shall either be followed by a 45-day lockout period or be made as an extended term loan, under which the loan will be repaid in four equal installments over a 60-day period and be followed by a 90-day lockout period. Other provisions (i) prohibit a lender from engaging in any unfair, misleading, deceptive, or fraudulent acts or practices in the making or collecting of a payday loan; (ii) require a lender, when collecting or attempting to collect a payday loan when the check given as security for such loan is dishonored, to comply with certain restrictions and prohibitions contained in the Fair Debt Collection Practices Act; (iii) provide that any provision of a written loan agreement that violates the Payday Loan Act is unenforceable against the borrower; and (iv) state that the provisions of the Payday Loan Act apply to Internet lenders. The measure, except the authorization to establish the database, will become effective January 1, 2009. SB 588 is identical. This bill also incorporates HB 1404, HB 730, HB 249, and HB 176.
Patron - Oder

P HB915

Credit Counseling Act; fees. Removes two of the existing factors that the State Corporation Commission is required to use when setting the annual fee assessed on licensed credit counseling agencies. The factors being removed are the total assets held in trust by a licensee for Virginia consumers and the total revenues of a licensee from Virginia consumers.
Patron - Purkey

P HB1098

Wet Settlement Act. Provides that a determination by a settlement agent that prerecordation conditions in a real estate purchase contract have been satisfied shall not control the rights and obligations of the parties under the contract.
Patron - Sickles

P HB1487

Home ownership protection. Authorizes the State Corporation Commission to impose a fine not exceeding $2,500 upon a mortgage lender or mortgage broker that is required to be licensed under the Mortgage Lender and Broker Act for violating any other law or regulation applicable to the conduct of the lender's or broker's business. The Housing Commission is directed to study all new federal legislation pertaining to mortgage lending and brokering, and to determine if the legislation requires changes to Virginia law. The measure authorizes the Commission to suspend or revoke a mortgage lender's or broker's license upon its failure promptly to pay when due reasonable fees to a licensed appraiser for appraisal services performed in connection with the origination or closing of a mortgage loan for a customer of the mortgage broker or lender. Other amendments to the Mortgage Lender and Broker Act (i) remove the element of the definition of a mortgage loan that has required the property securing the loan to be owner-occupied; (ii) require the Commission to conduct criminal background checks through the Central Criminal Records Exchange on every member, senior officer, director, and principal of a licensee; (iii) require licensees to conduct background checks on employees who may have access to or process personal identifying or financial information from a member of the public; (iv) require licensees to ensure that employees are properly trained in applicable state and federal mortgage lending laws and regulations; and (v) authorize the Attorney General to bring actions to enjoin violations of the federal Real Estate Settlement Procedures Act to the extent authorized by provisions of that Act.
Patron - Suit

P SB149

CRESPA settlement agent; surety bond. Increases the required surety bond under CRESPA from $100,000 to $200,000.
Patron - Stosch

P SB158

Wet settlement act; lender's disclosure of appraisal information. Requires any lender providing a loan secured by a first mortgage on real estate containing not more than four residential dwelling units to disclose on the settlement statement any fee charged to the borrower for an appraisal and any fee charged to the borrower for a valuation or opinion of value prepared using an automated or other mechanism prepared by a person who is not licensed as an appraiser.
Patron - McEachin

P SB588

Payday Loan Act. Requires the State Corporation Commission, by January 1, 2009, to certify and contract with one or more third parties to develop, implement, and maintain an Internet-accessible database, and requires payday lenders to query the database prior to making any loan to determine whether the loan is permissible. Licensees are required to pay a database inquiry fee to the database provider. A payday lender is prohibited from making a payday loan to a person if the loan would cause the borrower to have more than one payday loan outstanding at the same time and from making a payday loan on the same day that the person has paid a previous payday loan. Payday lenders are permitted to charge, on any payday loan, interest at an annual rate of 36 percent, a loan fee of not more than 20 percent of the loan proceeds, and a $5 verification fee. Payday lenders are prohibited from knowingly making loans to a member of the military service or to the spouse or dependent of such person. A borrower may enter into an extended payment plan, which allows the borrower to repay the loan in at least four equal installments over a period of not less than 60 days. A borrower may not enter into more than one extended payment plan in any 12-month period. A payday loan may not be made to a borrower in an extended payment plan or within 90 days after payment of an extended payment plan. The measure provides that the fifth payday loan made to a borrower within 180 days shall either be followed by a 45-day lockout period or be made as an extended term loan, under which the loan will be repaid in four equal installments over a 60-day period and be followed by a 90-day lockout period. Other provisions (i) prohibit a lender from engaging in any unfair, misleading, deceptive, or fraudulent acts or practices in the making or collecting of a payday loan; (ii) require a lender, when collecting or attempting to collect a payday loan when the check given as security for such loan is dishonored, to comply with certain restrictions and prohibitions contained in the Fair Debt Collection Practices Act; (iii) provide that any provision of a written loan agreement that violates the Payday Loan Act is unenforceable against the borrower; and (iv) state that the provisions of the Payday Loan Act apply to Internet lenders. The measure, except the authorization to establish the database, will become effective January 1, 2009. HB 12 is identical.
Patron - Puckett

Failed

F HB156

Mortgage loans; legal presence; penalty. Makes it unlawful for any person to make a loan secured by a mortgage or deed of trust on real estate located in the Commonwealth to an individual unless the individual, prior to settlement, has provided evidence of legal presence. The lender is further required to keep copies of the evidence of legal presence for at least three years. Violators are subject to a fine of not more than $10,000.
Patron - Nichols

F HB176

Payday Loan Act; database. Requires the State Corporation Commission, by January 1, 2009, to certify and contract with one or more third parties to develop, implement, and maintain an Internet-accessible database, and requires payday lenders to query the database prior to making any loan to determine whether an applicant is eligible for the loan. Fifty cents may be charged to defray the costs of using the database. The proceeds from the fees shall be used only for the payment of the expenses of the administration of the Payday Loan Act and of the performance of other functions of the Bureau of Financial Institutions. This bill was incorporated into HB 12.
Patron - Ware, O.

F HB189

Payday lending; power of localities to regulate. Authorizes each locality to establish (i) a maximum annual interest rate for payday loans made within its jurisdiction and (ii) the maximum number of payday loans that payday lenders operating within its jurisdiction may, in a calendar year, make to a borrower residing in the locality. References in the Payday Loan Act to the fee that may be charged on such loans are revised to refer to the interest that may be charged.
Patron - Marshall, R.G.

F HB249

Payday lending charges. Establishes a maximum annual interest rate for payday loans of 36 percent. In addition, the measure requires each prospective borrower to acknowledge in writing that he has received and read a copy of the most recent version of the State Corporation Commission's Consumer Guide to Payday Lending before entering into a payday loan. This bill was incorporated into HB 12.
Patron - O'Bannon

F HB730

Payday Loan Act. Repeals the Payday Loan Act effective July 1, 2010. This bill was incorporated into HB 12.
Patron - McClellan

F HB804

Consumer Real Estate Settlement Protection Act; interest on escrow accounts. Allows a settlement agent who is not an attorney to retain a portion of the interest received on funds deposited in connection with any escrow, settlement, or closing if (i) the settlement agent retains an amount not to exceed 10 percent of the interest earned on such deposits and (ii) the remainder of such interest is paid to the Department of Housing and Community Development to be used to support the statewide homeless intervention program administered by the Department.
Patron - Englin

F HB1097

Mortgage Lender and Broker Act. Requires mortgage lenders and brokers required to be licensed under the Mortgage Lender and Broker Act to make a reasonable and good faith determination based on verified and documented information that a borrower has a reasonable ability to repay a nonqualified mortgage loan. The measure prohibits a mortgage lender from compensating a mortgage broker based on the terms of a nonqualified mortgage loan. The fine or penalty that may be imposed by the State Corporation Commission for a violation of either of these provisions is $5,000; for other violations of the Act, the maximum fine remains $2,500. Finally, the measure requires the employees of a mortgage lender or broker who originates mortgage loans to be registered with the Commissioner of the Bureau of Financial Institutions. Applicants for registration will be required to submit to a criminal background check and to satisfy training standards and education requirements. The employee registration provisions will become effective January 1, 2009.
Patron - Sickles

F HB1103

Payday Loan Act. Requires the State Corporation Commission, by January 1, 2009, to contract with a third party to develop, implement, and maintain an Internet-accessible database, and requires payday lenders to query the database prior to making any loan to determine whether an applicant is ineligible for the loan. The measure also (i) caps the maximum amount of a payday loan at the lesser of 25% of the borrower's gross monthly income or $1,000, or $500 if it is a second payday loan; (ii) requires the lender to keep records of the pay stubs used in determining gross monthly income; (iii) limits a borrower to having no more than two payday loans outstanding at any time; (iv) allows borrowers to enter into a 60-day, interest-free payment plan on a second payday loan; (v) increases the minimum term of a payday loan from seven to 14 days; (vi) requires a one day waiting period between the repayment of a loan and making a new loan; (vii) clarifies and expands the disclosure requirements for borrower's right to cancel or rescind a payday loan by 5:00 pm of the business day following the date a loan is made; (viii) assesses licensees a fee of $1 per payday loan to defray the costs of the database; (ix) requires lender to distribute the State Corporation Commission's Consumer Guide to Payday Lending to loan applicants; (x) requires lenders to notify a borrower by telephone call prior to depositing a check given as security for a payday loan; (xi) prohibits lenders from knowingly making loans to a member of the military service or to the spouse of such person; (xii) prohibits a lender from engaging in any unfair, misleading, deceptive, or fraudulent acts or practices in the making or collecting of a payday loan; (xiii) requires a lender, when collecting or attempting to collect a payday loan when the check given as security for such loan is dishonored, to comply with certain restrictions and prohibitions contained in the Fair Debt Collection Practices Act; (xiv) provides that any provision of a written loan agreement that violates the Payday Loan Act is unenforceable against the borrower; (xv) states that the provisions of the Payday Loan Act apply to Internet lenders; and (xvi) allows licensees to secure payday loans with the borrower's electronic debit authorization or wire transfer authorizations.
Patron - Sickles

F HB1264

Consumer Real Estate Settlement Protection Act. Allows a person who has been convicted of a felony involving fraud, deceit or misrepresentation to be employed by a settlement agent and assist in the performance of escrow, closing or settlement services involving the receipt or disbursement of funds if he works under the direct supervision of a licensed attorney.
Patron - Hall

F HB1351

Payday Loan Act. Requires the State Corporation Commission, by July 1, 2009, to certify and contract with one or more third parties to develop, implement, and maintain an Internet-accessible database, and requires payday lenders to query the database prior to making any loan to determine whether an applicant is eligible for the loan. A payday lender is prohibited from making a payday loan if the loan would cause the borrower to have more than two payday loans outstanding at the same time. Payday lenders are prohibited from knowingly making loans to a member of the military service or to the spouse or dependent of such person. A borrower may enter into an extended payment plan to repay any payday loan, provided that it may do so with any lender not more frequently than once every 12 months. An extended payment plan allows the borrower to repay the loan in at least two equal installments over 60 days. A payday loan may not be made to a borrower in an extended payment plan. Other provisions (i) prohibit a lender from engaging in any unfair, misleading, deceptive, or fraudulent acts or practices in the making or collecting of a payday loan; (ii) require a lender, when collecting or attempting to collect a payday loan, to comply with certain restrictions and prohibitions contained in the Fair Debt Collection Practices Act; (iii) provide that any provision of a written loan agreement that violates the Payday Loan Act is unenforceable against the borrower; (iv) state that the provisions of the Payday Loan Act apply to Internet lenders; (v) allow licensees to secure payday loans with the borrower's electronic debit authorization; (vi) prohibit a lender from filing or initiating a legal proceeding against a borrower until 60 days after the date of default on a payday loan; and (vii) prohibit a lender from making a payday loan to a borrower on the same day that the borrower pays or otherwise satisfies a previous payday loan.
Patron - Ware, R.L.

F HB1377

Payday lending charges. Establishes a maximum annual interest rate for payday loans of 36 percent.
Patron - Morrissey

F HB1404

Payday loans; interest cap. Limits the interest that may be charged on a payday loan to a maximum rate of 36 percent annually. This bill was incorporated into HB 12.
Patron - Jones, D.C.

F HB1495

Real estate lending practices. Prohibits the assessment of a prepayment penalty on a loan secured by a mortgage or deed of trust on an owner-occupied home more than two years after the origination date of the loan. A prepayment penalty provision that contravenes requirements applicable to such loans shall be unenforceable. The measure also amends the Mortgage Lender and Broker Act to prohibit mortgage brokers from receiving compensation that is based on or varies with the terms of a mortgage loan, and to prohibit mortgage lenders and brokers from paying compensation to any person for placing a borrower in a mortgage loan, if the compensation is based on, or varies with, the terms of the mortgage loan.
Patron - Jones, D.C.

F HB1505

Payday Loan Act; database. Requires the State Corporation Commission, by January 1, 2009, to certify and contract with one or more third parties to develop, implement, and maintain an Internet-accessible database, and requires payday lenders to query the database prior to making any loan to determine whether an applicant is eligible for the loan. A fee of not more than $1 may be charged to defray the costs of using the database. The database provider will own the information contained in the database and be responsible for protecting the confidentiality and security of information in the database. The proceeds from the fees shall be used only for the payment of the expenses of the administration of the Payday Loan Act and of the performance of other functions of the Bureau of Financial Institutions.
Patron - Nixon

F SB24

Payday lending charges. Establishes a maximum annual interest rate for payday loans of 36 percent. References in the Payday Loan Act to the fee that may be charged on such loans are revised to refer to the interest that may be charged.
Patron - Reynolds

F SB25

Payday Loan Act. Repeals the Payday Loan Act effective July 1, 2008.
Patron - Reynolds

F SB156

Payday Loan Act. Repeals the Payday Loan Act effective July 1, 2010.
Patron - McEachin

F SB238

Payday lending charges. Establishes a maximum interest rate for payday loans of 36 percent annually.
Patron - Locke

F SB278

Payday Loan Act. Repeals the Payday Loan Act effective January 1, 2009.
Patron - Locke

F SB279

Payday lending charges. Establishes a maximum annual interest rate for payday loans of 36%.
Patron - Miller, J.C.

F SB565

Motor vehicle equity loans; penalties. Regulates motor vehicle equity loans, which are closed-end loans secured by an interest in a motor vehicle. The measure caps the interest on such loans at 20 percent per month for the first two months and three percent per month for the balance of the term. If such a loan is repaid in full within 48 hours, the loan shall not bear interest. The maximum term of such a loan is 12 months. The maximum amount of a motor vehicle equity loan is 50 percent of the value of the motor vehicle. Lenders are required to be licensed with the State Corporation Commission. A violation of the measure is a prohibited practice under the Consumer Protection Act. Violators are subject to civil and criminal penalties. Making unlicensed motor vehicle equity loans, or arranging or brokering motor vehicle equity loans, is punishable as a Class 1 misdemeanor.
Patron - Obenshain

F SB670

Payday lending charges. Establishes a maximum annual interest rate for payday loans of 36 percent. References in the Payday Loan Act to the fee that may be charged on such loans are revised to refer to the interest that may be charged.
Patron - McEachin

F SB694

Payday loans; collection practices. Prohibits a payday lender, when collecting a payday loan, from (i) engaging in any conduct the natural consequence of which is to harass, oppress, or abuse any person in connection with the collection of a debt, (ii) using any false, deceptive, or misleading representation or means in connection with the collection of a debt, and (iii) using unfair or unconscionable means to collect or attempt to collect any debt.
Patron - McEachin

F SB709

Mortgage lenders and brokers. Prohibits any mortgage lender or broker that is required to be licensed under the Mortgage Lender and Broker Act from making a mortgage loan to, or negotiating, placing or finding a mortgage loan for, a borrower if it is more expensive than another mortgage loan with identical terms that the lender or broker markets or offers and for which the borrower qualifies.
Patron - Martin

Carried Over

C HB279

Small Estate Act. Updates certain banking and fiduciary statutes to make them consistent with the changes made to the Code under the Small Estate Act (promulgated in 2006), namely raising the qualifying amount from $15,000 to $50,000.
Patron - Watts

C HB1091

Subprime adjustable mortgage loans; escrowing taxes and insurance. Requires certain lenders that make a subprime adjustable rate mortgage loan to a borrower to collect and hold in escrow periodic payments for real estate taxes and insurance premiums.
Patron - Sickles

C HB1093

Low-document, no-document and stated income mortgages. Prohibits certain lenders from making a low-document, no-document, or stated-document mortgage loan unless the lender has obtained detailed documentation of all sources of income claimed by the borrower in the loan application, or corroborated the claimed income by independent verification, and determined, that a reasonable creditor would believe at the time the loan is closed that the borrower will be able to make the scheduled payments associated with the loan.
Patron - Sickles

C SB157

Mortgage Lender and Broker Act; duties to borrowers. Establishes a fiduciary duty of mortgage brokers to borrowers. Mortgage brokers are required to act in the borrower's best interest and with the utmost good faith. Mortgage brokers have the duties (i) to disclose all material information that might reasonably affect the borrower's rights, interests, or ability to receive the intended benefit from the loan, including the total compensation that the mortgage broker would receive from any of the loan options presented to the borrower, and (ii) to make reasonable efforts to secure or obtain a mortgage loan that is in the best interest of the borrower. Mortgage lenders are required to act in good faith and deal fairly in any transaction, practice or course of business in connection with a mortgage loan, and to make reasonable efforts to make a mortgage loan that is reasonably advantageous to the borrower. In addition, mortgage brokers and lenders are required to safeguard and account for any money handled for a borrower, follow reasonable and lawful instructions from the borrower, and use reasonable skill, care, and diligence.
Patron - McEachin

C SB258

Mortgage lending practices; penalty. Prohibits any (i) mortgage lender or broker, (ii) person required to be licensed under the Mortgage Lender and Broker Act, and (iii) person exempt from the licensing requirements of the Mortgage Lender and Broker Act, other than a state or federally chartered bank, savings institution, or chartered credit union, or person making, providing, or arranging a mortgage loan originated or purchased by an agency of the Commonwealth or a locality, from arranging special mortgages unless the borrower has obtained a written certification from an authorized independent loan counselor on the advisability of the loan transaction. A special mortgage is a residential mortgage loan originated, subsidized, or guaranteed by or through an agency of the Commonwealth, a locality, or a nonprofit organization that has one or more nonstandard payment terms which substantially benefit the borrower. Such persons are also prohibited from (a) entering into subprime loans containing a provision requiring or permitting the imposition of a prepayment penalty or charge in the event the loan is prepaid and (b) making, providing, or arranging for a residential mortgage loan, other than a reverse mortgage, if the borrower's compliance with any repayment option will result in negative amortization during any six-month period. The measure expressly gives borrowers a private cause of action, in which they may seek recovery of damages, statutory damages equal to the amount of all lender fees included in the amount of the principal of the mortgage loan, punitive damages, costs, and reasonable attorney fees. Finally, the measure makes it unlawful to knowingly make or cause to be made any deliberate and material misstatement, misrepresentation, or omission during the mortgage lending process with the intention that it be relied on by a mortgage lender, borrower, or any other party to the mortgage lending process; to knowingly use or facilitate the use of any deliberate and material misstatement, misrepresentation, or omission, knowing the same to contain a material misstatement, misrepresentation, or omission, during the mortgage lending process with the intention that it be relied on by a mortgage lender, borrower, or any other party to the mortgage lending process. Violations are to be punishable as a Class 1 misdemeanor or, if a financial loss of greater than $200 results, a Class 6 felony. Second or subsequent convictions are punishable as a Class 6 felony. Violators shall also be required to pay restitution.
Patron - Deeds

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General Assembly>Division of Legislative Services>Publications>Session Summaries>2008>Banking and Finance

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