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									                      UNOFFICIAL COPY – AMENDED TO REFLECT 2005-2006 LAW CHANGES



02                DEPARTMENT OF PROFESSIONAL AND FINANCIAL REGULATION

030                OFFICE OF CONSUMER CREDIT REGULATION

Chapter 350 - Loan Brokers


SUMMARY:          Public Law 1989, Chapter 70, "An Act Relating to Credit Services Organizations (now “Loan
                  Brokers”)" was enacted April 28, 1989, and took effect September 30, 1989. It added an Article X to
                  the Consumer Credit Code, and regulated the practices of 1) arrangers of credit, or loan brokers, and
                  2) credit repair services or "credit clinics," by requiring registration (now licensing), bonding, escrowing
                  of customer funds and other consumer protections. This Rule, promulgated pursuant to the
                  provisions of the Act, delineates appropriate practices and procedures to be followed by those
                  businesses. Statutory changes in 2001 clarified requirements applicable to supervised lenders acting
                  as loan brokers, expanded the definition of loan broker to include those paid by a source other than
                  the consumer, and added several exclusions to the definition of loan broker. Additional law changes in
                  2005 amended the name “credit service organizations” to “loan broker”, increased the bond amount
                  from $10,000 to $25,000, and required registration of individual Loan Officers employed by loan
                  brokers. This unofficial draft reflects those statutory changes.



                                                           CONTENTS


§1.               AUTHORITY


§2.               DEFINITIONS AND EXCLUSIONS


§3.               REQUIREMENTS AND PROCEDURES FOR LICENSING OF LOAN BROKERS


§4.               REQUIREMENTS AND PROCEDURES FOR OPERATION OF LOAN BROKERS


§5.               EXAMINATIONS AND INVESTIGATIONS


BASIS STATEMENT


RESPONSES TO PUBLIC COMMENTS

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EFFECTIVE DATE

§1.      AUTHORITY

         This Rule is adopted in accordance with the following statutory authority:

                  A.       9-A M.R.S.A. §6-104(1) (E); and

                  B.       9-A M.R.S.A. §10-305.

§2.      DEFINITIONS AND EXCLUSIONS

         As used in this Rule, unless the context otherwise indicates, the following terms have the following meanings:

         A.       "Loan Broker."

                  1.      “Loan broker” means any person who, with respect to the extension of consumer credit by
                  others, provides or offers to provide, in return for the separate payment of money or other valuable
                  consideration, any of the following services:

                           (a)      Improving a consumer's credit record, history or rating;

                           (b)      Arranging for or obtaining an extension of credit for a consumer; or

                           (c)      Providing advice or assistance to a consumer with respect to subparagraph (a) or (b).

                  2.       “Loan broker” does not include:

(1) A supervised financial organization;


(2) A supervised lender other than a supervised financial organization, except that, with respect to any transaction in
which a supervised lender other than a supervised financial organization is acting solely as a loan broker, section 10-
302 applies;


(3) A person licensed by the Real Estate Commission to the extent that the person is engaged in activities regulated
by that commission;


(4) A person currently admitted to the practice of law in this State;


(5) Any nonprofit organization exempt from taxation under the United States Internal Revenue Code, Section 501(c)(3)
to the extent that the organization's activities are consistent with those set forth in its application for tax exemption to
the Internal Revenue Service;


(6) A consumer reporting agency, as defined in the Fair Credit Reporting Act, Title 10, chapter 210;

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(7) An affiliate of a supervised lender when the affiliate provides services described in paragraph A, subparagraph (1),
(2) or (3) for or on behalf of that supervised lender and when the affiliate is not compensated by the consumer for
those services;


(8) An employee of a supervised lender or an employee of an affiliate of a supervised lender when the employee
provides services described in paragraph A, subparagraph (1), (2) or (3) for or on behalf of that supervised lender or
affiliate and when the employee or the affiliate is not compensated by the consumer for those services;


(9) A person paid by a supervised lender or a consumer to document a loan, attend or conduct a loan closing,
disburse loan proceeds or record or file loan documents;


(10) A person who performs marketing services for a creditor, such as a telemarketer, an advertising agency or a
mailing house, when the person is not compensated by the consumer for those services;


(11) A seller of consumer goods or services that provides services described in paragraph A, subparagraph (1), (2) or
(3) in connection with a sale or proposed sale of consumer goods or services by that seller when the seller is not
compensated by a consumer for those services; or


(12) An employee of a seller of consumer goods or services that provides services described in paragraph A,
subparagraph (1), (2) or (3) in connection with a sale or proposed sale of consumer goods or services by that seller
when the employee or seller is not compensated by a consumer for those services.

For the purposes of this paragraph, "affiliate" has the same meaning as defined in Title 9-B, section 131,
Subsection 1-A.


For the purposes of this paragraph, "affiliate" has the same meaning as defined in Title 9-B, section 131, subsection 1-
A.


         B.      "Bona fide 3rd-party fee" means a verifiable fee paid to a 3rd party for a credit report, appraisal,
         investigation, title examination or survey. No other fees shall be considered bona fide 3rd-party fees. In
         addition, no fee shall be considered a bona fide 3rd-party if it is paid to an entity with which the loan broker
         shares a cross-ownership or a common financial interest.


         C.     "Administrator" means the Director of the Office of Consumer Credit Regulation or the Director’s
         designee.

         D.       "OCCR” means the Office of Consumer Credit Regulation.

§3.      REQUIREMENTS AND PROCEDURES FOR LICENSING OF LOAN BROKERS

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         A.       Application for Initial Licensing. Prior to commencing business at any time, an applicant for initial
         licensing as a loan broker shall submit for approval a completed "License Application for Loan Broker”
         package (supplied to the applicant by the OCCR) consisting of the following items:

                  1.       A completed application form:

                  2.       A duly executed surety bond in the amount of $25,000;

                  3.      A copy, completed so as to reflect a hypothetical transaction, of the written agreement used
                  by the company which satisfies the requirements of 9-A M.R.S.A. §10-301 (see subsection 4(B) of this
                  Rule);

                  4.      A copy, completed so as to reflect a hypothetical transaction, of the written disclosure of
                  material consumer protections used by the company which satisfies the requirements of 9-A M.R.S.A.
                  §10-303 (see subsection 4(C) of this Rule); and

                  5.      A check, made payable to Treasurer, State of Maine," in the amount of $400.00. [Note:
                  Applicants for initial licensing who apply after October 1 of any year shall pay a reduced fee of
                  $200.00 for the period between the date of application, and January 31st of the following year.]

         B.      Application for Renewal. On or before January 31st of the year following its initial licensing an
         applicant for renewal as a loan broker shall submit for approval the following:

                  1.       A completed renewal form (supplied to the applicant by the OCCR);

                  2.       A completed Bond Confirmation indicating that the initial $25,000 bond continues in force or,
                           if there has been a change in bonding companies since the last license was issued, a duly
                           executed bond meeting the specific requirements of paragraph 3(A)(2) of this Rule [initial
                           licensing bond];

                  3.       A copy, completed so as to reflect a hypothetical transaction, of the written disclosure of
                           material consumer protections used by the company which satisfies the requirements of 9-A
                           M.R.S.A. §10-303 (see subsection 4(C) of this Rule);

                  4.       A copy, completed so as to reflect a hypothetical transaction, of the written disclosure of
                           material consumer protections used by the company which satisfies the requirements of 9-A
                           M.R.S.A. §10-303 (see subsection 4(C) of this Rule); and,

                  5.       A check, made payable to "Treasurer, State of Maine," in the amount $200.00 for each
                           licensed location (main office and branches).


         C.      Consideration of Application. The following shall govern consideration by OCCR of initial and
         renewal applications:

                  1.       Pursuant to 9-A M.R.S.A. §10-201, the administrator may refuse an initial or renewal
                           application if it contain erroneous or incomplete information. A person who engages or
                           continues in the business of a loan broker after notification of such refusal is in violation of 9-

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                           A M.R.S.A. §10-201, and is subject to the remedies and penalties set forth in 9-A M.R.S.A.
                           §10-401. Notice of such refusal shall be deemed received by the loan broker on the 3rd
                           calendar day after mailing by regular mail to the address provided on the application.

                  2.       Any applicant for licensure or renewal who voluntarily withdraws a submitted application shall
                           forfeit the licensure or renewal.

                  3.       Any applicant who, after notification of refusal by the administrator of an application due to
                           incomplete or erroneous information, fails within 90 days of such notification to complete or
                           correct the information, shall forfeit the license, and bond confirmation.

§4.      REQUIREMENTS AND PROCEDURES FOR OPERATION OF LOAN BROKERS

         A.       Escrow of Funds. Each loan broker shall place fees from consumers, other than bona fide 3rd party
         fees, in an escrow account with a financial institution in this State, separate from any operating accounts of
         the business, pending completion of services offered. With respect to loan brokers offering to arrange for or
         obtain extensions of credit for consumers, or provide advice or assistance therefore, "completion of services
         offered" means procurement of credit under the terms agreed to by the parties.

         Each loan broker shall maintain in its files in this State, for two (2) years after completion of services offered, a
         written accounting, including written receipts from payees, for all bona fide 3rd-party fees not placed in
         escrow. The accounting records and receipts shall be made available to the OCCR upon request as part of
         any examination or investigation.

         Bona fide 3rd-party fees may be excluded from escrowing requirements only if the transaction between the
         loan broker and the payee is an "arm's length" transaction, in which no cross-ownership or common financial
         interest exists between the two entities.

         B.       Requirement for Written Agreement. Each agreement between a consumer and a loan broker shall
         be in writing, dated, signed by the consumer and shall include the following:

                  1.     A full and detailed description of the services to be performed for the consumer, including all
                  guarantees and all promises of full or partial refund of fees paid, whether or not services are
                  completed, and the term for which the agreement shall remain in effect before return of the fees for
                  nonperformance can be required by the consumer;


                  2.    The terms and conditions of payment, including the total of all payments to be made by the
                  consumer for the service, whether to the loan broker or to some other person; and

                  3.       The following notice:

                  NOTICE TO CONSUMER: Do not sign this agreement before you read it. You are entitled to a
                  copy of this agreement.

                  Each loan broker shall maintain in its files in this State, for two (2) years after completion of services
                  offered, a true and complete signed copy of the written agreement. The copy shall be made available
                  to the OCCR upon request as part of any examination or investigation.



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         C.      Requirement for Written Disclosure. Before any agreement is entered into, or before any money is
         paid by a consumer, which ever occurs first, the loan broker shall provide the consumer with written disclosure
         of material consumer protections, including the following:

                  1.       The requirement for a written, signed agreement between the parties.

                  2.      The requirement that all fees from the consumer, other than bona fide 3rd-party fees, be
                  placed in an escrow account; and

                  3.        The existence and purpose of the surety bond on file with the State, and the procedure for
                  instituting an action against the bond.

         Each loan broker shall maintain in its files in this State, for two (2) years after completion of services offered,
         proof of receipt by the consumer of the written disclosure of material consumer protections. This proof of
         receipt shall be made available to the OCCR upon request as part of any examination or investigation.

         D.       Advertising.

                  1.      No loan broker may engage in this State in false or misleading advertising concerning the
                  terms and conditions of any services or assistance offered.

                  2.      This section imposes no liability on the owner or personnel of any medium in which an
                  advertisement appears or through which it is disseminated.

                  3.     Upon request and submission of proposed advertising by a loan broker, the administrator
                  may review said advertising for compliance with those standards.

         E.      Model forms. The Administrator may draft model forms for the Written Agreement (subsection B,
         above) and the Written Disclosure (subsection C, above) to facilitate compliance with the requirements of the
         statute and this Rule. If such model forms are drafted, any forms used by loan brokers that are in
         substantially identical format will comply with those subsections.

§5.      EXAMINATIONS AND INVESTIGATIONS

        Pursuant to 9-A M.R.S.A. §6-106, the Administrator or the examination staff of the OCCR may conduct
examinations or investigations of all aspects of the operation of loan brokers. Expenses incurred in the examination
are chargeable to the loan brokers.

BASIS STATEMENT: This regulation implements Article X ("Loan Brokers") of the Maine Consumer Credit Code, by
providing guidance to those companies wishing to do business as "arrangers of credit" or "credit repair services." The
statute requires each such business to conform to various procedural requirements, including establishment of an
escrow account and posting of a consumer protection bond. This rule addresses those requirements in detail.

RESPONSES TO PUBLIC COMMENTS

        The OCCR received several written comments addressing the proposed rule. No public hearing was
requested or held.




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         1.      One commenter asked that the escrow account requirement be waived if the written contract with the
         consumer specifies that funds paid to the Loan Broker are non-refundable. The OCCR has not adopted this
         suggestion. The reason for the requirement is to ensure that those funds have not been expended, and are
         available to be reimbursed to a consumer who could demonstrate, for example, that loan broker had made
         absolutely no effort to perform services on behalf of the consumer.

         2.       On a similar issue, one commenter asked whether an escrow account is required if no money
         whatsoever is taken from a consumer prior to completion of services offered. If no funds are accepted from
         the consumer, and so long as any 3rd-party fees are provided by the consumer directly to the bona fide 3rd
         party, no funds would require escrowing and such account need not be established.

         3.      One commenter suggested that the definition of "bona fide 3rd-party fee" (§2[B] of the rule) be
         supplemented by adding the requirement found in §4(A) of the rule, that any payment for services to a 3rd
         party be an “arms-length" transaction. That suggestion has been incorporated into this final version by
         expanding the definition of "bona fide 3rd-party fee."

         4.       In response to a comment, §3(A)(4) of the rule has been amended to clarify that a complete
         application package submitted to the OCCR must include copies of the actual agreement and disclosure
         forms which the loan broker will use in its transactions with consumers. These forms must be filled out so as
         to reflect a hypothetical transaction, in order to provide an accurate representation of the appearance and
         completeness of the forms as they will be presented to consumers.


EFFECTIVE DATE: December 18, 1989/ Unofficially modified February 22, 2006




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