Wyoming and Maine Issue New Licensing Requirements Potentially Impacting Passive Loan Investors

Wyoming and Maine recently amended their laws related to licensure requirements for consumer lending:

• In July, Wyoming adopted House Bill 0008 (HB 0008), which amends provisions of the Wyoming Uniform Consumer Credit Code (the Code) to require a person to be licensed to engage in the business of sales financing, making consumer loans, or taking assignments of non-servicing rights.  As a result, passive investor purchasers of consumer loans, for example, will likely need to be licensed going-forward.

• In August, Maine enacted S.P. 205/L.D. 522, which prohibits certain actions in the making of consumer loans to protect consumers from predatory, fraudulent lending practices (we previously discussed the new law in an earlier Consumer Finance & FinTech Blog post here).  The new anti-evasion provision of the new law provides that a person is a lender subject to, among other things, licensing requirements if the person (i) “holds, acquires or maintains, directly or indirectly, the predominant economic interest in the loan”; (ii) “markets, brokers, arranges or facilitates the loan and holds the right, requirement or first right of refusal to purchase the loan or a receivable or interest in the loan”; or (iii) “[t]he totality of the circumstances indicate that the person is the lender and the transaction is structured to evade the requirements of this Article.”  Here, again, the breadth of the new law likely reaches passive investors in consumer loans.

Putting It Into Practice:  While changes to licensing requirements in Wyoming and Maine may not correlate to a nationwide trend, persons investing in consumer loan portfolios should take note.