Maine Amends Consumer Lending Code for Targeted Loans Using a Banking Partnership Model | Ballard Spar LLP

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Maine amended the Consumer Lending Code to target targeted loans using a banking partnership model. The amendments include a non-evasion clause whereby a prospective agent or service provider is considered a “creditor” under Section 9-A of Section 2 of the Revised Maine Charter. Article 2 contains licensing requirements as well as rate and commission limits for consumer loans.

SP 205 / LD 522 a new part 7 has been added to article 2. Part 7 contains the following key provisions:

  • Any entity falling within the scope of Article 2 (ie entities providing or servicing consumer loans) “may not use any trick, trick or pretext to evade the requirements of this Article, including but not limited to … providing, offering, helping or arranging for the debtor to obtain a loan with a higher interest rate, reimbursement or commission than permitted by this article, in any way. A loan provided in violation of this Part is null and void in respect of any principal, commission, interest or charge. “
  • A prospective agent or service provider for another person exempted from section 2 will be considered a creditor subject to section 2 if he (a) owns, acquires or maintains, directly or indirectly, a predominant economic interest in the loan, (b) the markets, brokers who arrange or facilitate a loan and have the right, demand or pre-emptive right to refuse to purchase a loan, receivable or interest on a loan, or (c) a combination of circumstances indicates that the entity is a lender and the transaction is structured to evade the requirements of article 2. Circumstances that will be relevant for an entity to be considered a creditor include, but is not limited to, when the entity:
    • Reimburses, insures or protects the exempted person against any costs or risks associated with the loan.
    • Mainly develops, monitors or manages a loan program, or
    • It is intended to act as an agent or service provider for an exempt entity, acting directly as a creditor in other states.
  • If the creditor violates the non-evasion provisions, the debtor is not obliged to repay the loan and may collect any payments made on the loan from the organization that violated the provisions or from the legal successor of the rights of that organization, which directly collects payments or enforces a right arising from debt.

Maine’s new avoidance avoidance clause regarding when a prospective agent or service provider would be considered a Section 2 creditor closely monitors the avoidance clause in Illinois Predatory Loan Prevention Act which entered into force in March 2021.

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