Maine changed its consumer credit code to target loans made under a banking partnership model. The changes include an anti-avoidance provision under which a purported agent or service provider is considered a “lender” subject to Title 9-A, Section 2 of the Revised Bylaws of Maine. Section 2 contains a licensing requirement and rate and charge limits for consumer loans.
SP 205 / LD 522 added a new Part 7 to Clause 2. Part 7 contains the following key provisions:
- Any entity covered by Article 2 (i.e. entities which grant or manage consumer loans) “may not engage in any device, subterfuge or pretext to evade the requirements of this article, including including, but not limited to … debtor to obtain a loan with a higher rate of interest, consideration or charges than those permitted by this section by any method. A loan made in violation of this Part is void and irrecoverable with respect to principal, costs, interest or charges. ”
- A purported agent or service provider of another entity exempt from Article 2 will be considered a lender subject to Article 2 if (a) holds, acquires or maintains, directly or indirectly, the predominant economic interest in the loan, (b) markets, brokers, arranges or facilitates the loan and holds the right, requirement or right of first refusal to purchase the loan or a claim or interest on the loan, or (c) all of the circumstances indicate that the entity is the lender and the transaction is structured so as to escape the requirement of Article 2. Circumstances that would favor an entity considered to be the lender include, without s ” limit it, when the entity:
- Compensates, insures or protects an exempt entity for all costs or risks associated with the loan
- Primarily designs, controls or operates the loan program, or
- Aims to act as an agent or service provider for an exempt entity while acting directly as a lender in other states.
- If a creditor violates the anti-avoidance provisions, the debtor is not obligated to pay the loan and may recover all payments made on the loan from the entity violating the provisions or from an assignee of the rights of that entity who undertakes the direct collection of payments or the enforcement of rights arising from the debt.
Maine’s new anti-evasion provision regarding when an alleged agent or service provider will be considered a section 2 lender closely follows the anti-evasion provision in the Illinois Predatory Loan Prevention Act which entered into force in March 2021.