GENERAL LAWS
PART I. ADMINISTRATION OF THE GOVERNMENT
TITLE XX. PUBLIC SAFETY AND GOOD ORDER
CHAPTER 140. LICENSES
Section 96: Small loan business
Section 96. No person shall directly or indirectly engage in the business of making loans of six thousand dollars or less, if the amount to be paid on any such loan for interest and expenses exceeds in the aggregate an amount equivalent to twelve per cent per annum upon the sum loaned, without first obtaining from the commissioner of banks, in sections ninety-six to one hundred and fourteen, inclusive, called the commissioner, a license to carry on the said business in the town where the business is to be transacted. When an application for a loan or for an endorsement or guarantee or for the purchase of a note is made by any person within this commonwealth, and the money is advanced or the endorsement or guarantee is made or furnished by any person without this commonwealth, the transaction shall be deemed a loan made within this commonwealth, and such a loan and the parties making it shall be subject to sections ninety-six to one hundred and thirteen, inclusive. The buying or endorsing of notes or the furnishing of guarantee or security for compensation shall be considered to be engaging in the business of making small loans within said sections, but the foregoing provisions of this sentence shall not apply in the case of any transaction which involves any note or other instrument evidencing the indebtedness of a buyer to the seller of goods, services or insurance for a part or all of the purchase price; provided, however, that any advance of money by such seller or, by a person acting on his behalf for the purpose of paying an existing indebtedness of such buyer or for any other purpose shall constitute a loan of money subject to the provisions of this section. For the purposes of said sections, the amount to be paid upon any loan of six thousand dollars or less for interest or expenses shall include all sums paid or to be paid by or on behalf of the borrower for interest, brokerage, recording fees, commissions, services, extension of loan, forbearance to enforce payment, and all other sums charged against or paid or to be paid by the borrower for making or securing directly or indirectly the loan, and shall include all such sums when paid by or on behalf of or charged against the borrower for or on account of making or securing the loan, directly or indirectly, to or by any person, other than the lender, if such payment or charge was known to the lender at the time of making the loan, or might have been ascertained by reasonable inquiry. Any person directly or indirectly engaging, for a fee, commission, bonus or other consideration, in the business of negotiating, arranging, aiding or assisting the borrower or lender in procuring or making loans of six thousand dollars or less, for which the amount paid or to be paid for interest and expenses, including all amounts paid or to be paid to any other party therefor, exceeds in the aggregate an amount equivalent to twelve per cent per annum, whether such loans are actually made by such person or by another party, shall be deemed to be engaged in the business of making small loans, and shall be subject to sections ninety-six to one hundred and twelve, inclusive. If, after all deductions or payments, whether on account of interest, expenses or principal made substantially contemporaneously with the making of the loan, the amount retained by the borrower be six thousand dollars or less, the transaction shall be deemed to be a loan in the amount of the sum so retained by the borrower after such deductions or payments, notwithstanding that the loan be nominally for a greater sum.
This section shall not apply to loans that are subject to section 90A or section 28B of chapter 183.
The provisions of this section and sections ninety-six A to one hundred and fourteen A, inclusive, shall apply only to loans made primarily for personal, family or household purpose; provided, however, that the provisions of this section and said sections ninety-six A to one hundred and fourteen, inclusive, shall not apply to loans to any student, or to any parent, legal guardian or sponsor of a student, made by any nonprofit, public or independent post-secondary educational institution within the commonwealth authorized by law to grant degrees, by the commonwealth or by any agency or instrumentality thereof; and provided, further, that such institutions may not take, receive, reserve, or charge interest, expenses and other consideration for making or securing a loan of six thousand dollars or less in excess of those permitted by section one hundred, except in the event of prepayment or refinancing, in whole or in part, of any existing loans by such institution to any such student, or to any such parent, legal guardian or sponsor of a student, which refinancing or prepayment occurs within eighteen months of the date such loan was made.
Section 96A: Securities; public sale; permit, necessity, revocation
Section 96A. No security, as defined in clause (k) of section four hundred and one of chapter one hundred and ten A, issued by a person licensed under section ninety-six shall be sold or advertised for sale to the public without a permit issued by the commissioner and subject to such conditions as the commissioner shall determine. The commissioner may, after notice and hearing, revoke such permit for violation of any such condition.
Section 97: Regulations; preservation of records relating to compliance
Section 97. The commissioner may prescribe from time to time such rules and regulations as he deems necessary and proper for carrying out the provisions of sections ninety-six to one hundred and fourteen, inclusive, relative to the business carried on by licensees and by loan companies and associations established by special charter including, but not limited to, the granting of licenses and the renewal thereof, the conduct of examinations and investigations and the keeping of records by a licensee. Such rules and regulations may contain such classifications, differentiations or other provisions and may provide for such adjustments and exceptions for a class of transactions as, in the judgment of said commissioner, are necessary or proper to carry out the provisions of said sections ninety-six to one hundred and fourteen, inclusive, to prevent circumvention or evasion thereof or to facilitate compliance therewith. Said commissioner shall, at least once in every two calendar years and more often if he deems it necessary, examine the affairs of a licensee, company or associations and, for said purpose, shall have free access to the premises and all business records thereof. Said commissioner shall assess appropriate fees, as determined annually by the commissioner of administration pursuant to section three B of chapter seven, upon the said licensee, company or association established by special charter for any such examination, including expenses for necessary travel outside the commonwealth for the purpose of conducting such examinations. Said commissioner may cause a number of examinations of any such business records to be made by an accountant whom he may select and the cost of any such examination shall be paid by the person so examined.
A licensee, company or association established by special charter shall keep and use such business records in such form and at such location as said commissioner shall, by regulation, determine which shall enable said commissioner to ascertain the condition of the business of any such licensees, companies or associations and whether they are complying with the provisions of sections ninety-six to one hundred and fourteen, inclusive, and any rules and regulations promulgated thereunder by said commissioner and any other law, rule or regulation applicable to the conduct of the business for which it is licensed under said sections ninety-six to one hundred and fourteen, inclusive. Such regulations may contain provisions for the suspension or revocation of licenses for violations thereof and for such records to be recorded, copied or reproduced by photographic, photostatic, microfilm, microcard, miniature photographic, electronic, including, but not limited to, optical imaging or other process which accurately reproduces or forms a durable medium for reproducing the original record or document or in any other form or manner authorized by said commissioner; provided, however, that nothing in this section shall be construed to permit any such licensee to destroy original records or documents. Each such licensee, company or association shall preserve all such business records for as long a period as said commissioner shall prescribe by regulation. Notwithstanding the provisions of any general or special law or the Massachusetts Rules of Civil Procedure to the contrary, service of a subpoena for business records upon a licensee, company or association, delivered to an office of such licensee, company or association located within the commonwealth, shall be deemed to have been served at the location, whether within or outside the commonwealth, where the original business records are kept or maintained.
Section 98: Annual report; failure to file, amend; fine
Section 98. Each person required by sections ninety-six to one hundred and fourteen, inclusive, to be under the supervision of the commissioner shall annually, on or before a date to be determined by the commissioner, file a report with said commissioner containing such information as said commissioner may require concerning the business and operations during the preceding calendar year at each licensed place of business conducted by a licensee within the commonwealth. Any person neglecting to file such report or failing to amend such report within fifteen days after notice from said commissioner directing the same shall, unless such neglect or failure is due to justifiable cause and not due to wilful neglect, pay to the commonwealth fifty dollars for each day during which such neglect or failure continues.
Section 99: Examinations by commissioner; penalty
Section 99. The commissioner may summon said licensees, companies or associations, or any of their agents or employees, and such other witnesses as he deems necessary, and examine them relative to their transactions and to the condition of their business, and for that purpose may administer oaths. Whoever without justifiable cause refuses to appear and testify when so required, or obstructs the commissioner or his representatives in the performance of their duties, shall be punished by a fine of not more than five hundred dollars or by imprisonment for not more than six months, or both.
Section 100: ”Licensee” defined; investigations by regulatory board; charges; prepayments; establishment of rates; effective date of order; more than one contract
Section 100. As used in this section the term ”licensee” shall mean all persons licensed under sections ninety-six to one hundred and thirteen, inclusive.
The small loans regulatory board shall investigate from time to time the economic conditions and other factors relating to and affecting the business of making loans under sections ninety-six to one hundred and thirteen, inclusive, and shall ascertain all pertinent facts necessary to determine what maximum rate of charge should be permitted. Upon the basis of such ascertained facts, the board shall determine and establish by regulation or order a maximum rate of charge in connection with such loans which will induce efficiently managed commercial capital to be invested in such business in sufficient amounts to make available adequate credit facilities to individuals seeking such loans at reasonable rates, and which will afford those engaged in such business a fair and reasonable return upon the assets. Such maximum rate of charge established by the board may be the aggregate of two or more different maximum rates applicable to different portions of the unpaid principal balance, so that as the size of the loan or the unpaid principal balance increases the aggregate rate decreases. The board may reestablish the maximum monthly rate of charge from time to time on the basis of changed conditions and facts. When the board establishes a maximum rate of charge it shall also by order permit licensees to precompute the monthly rate of charge contracted for on scheduled unpaid principal balances of loans contracted to be repaid in substantially equal and consecutive monthly installments of principal and charges combined with such installments applied to the unpaid balance of principal and the precomputed charge combined, subject to such provisions as the board shall by order prescribe for a refund or credit in the event of prepayment and for extension and default charges in the event of an extension or default. Such refund or credit shall be computed on a method which is at least as favorable to the borrower as the actuarial method, so-called. If the prepayment is made other than on an installment due date, it shall be deemed to have been made on the first installment due date if the payment is before that date, and in any other case it shall be deemed to have been made on the next preceding or next succeeding installment due date, whichever is nearer to the date of prepayment. Where the amount of the credit for anticipation of payment is less than one dollar, no refund need be made. The details of application and the rules for a fraction of a month or partial prepayments shall be subject to the order of the board.
Before establishing or reestablishing the maximum rate of charge, the board shall give reasonable notice by mail of its intention to all licensees and shall give such licensees an opportunity to be heard thereon and to introduce evidence with respect thereto. Any order which the board may make establishing or reestablishing the maximum rate of charge after such hearing shall contain the effective date thereof, which shall be not less than sixty days after notice of the establishing of such new rates as given by mail to each licensee. An order of the board establishing or reestablishing the maximum rate of charge shall not apply to loans made prior to its effective date. Within the authority conferred by this section, the board shall be subject to all pertinent provisions of chapter thirty A.
The total amount to be collected on any loan by a licensee for interest, expenses and other considerations shall not, in the aggregate, exceed an amount equivalent to the maximum monthly rate computed on unpaid principal balances of the amount actually received by the borrower except that the lawful fees actually paid out by the lender to a public officer for filing, recording, releasing or discharging any instrument securing the loan may be charged to and collected from the borrower when the loan is made or at any time thereafter and may be collected in such manner as is authorized by the board in connection with loans on which charges are precomputed as heretofore provided, but such interest shall not exceed twelve per cent per annum or the original rate of interest on the note evidencing the loan, whichever is less, after the termination of one year after maturity of the loan. No licensee shall wilfully permit any person, or any husband and wife jointly or severally, to be obligated, either directly or contingently to such licensee, under more than one contract of loan at the same time for the purpose of obtaining a higher rate of charge than would otherwise be permitted by this section on a single loan contract. No licensee or company or association to which sections ninety-six to one hundred and thirteen, inclusive, apply shall charge or receive upon any loans more than the maximum rate of charge permitted by this section. No charge, bonus, fee, expense or demand of any nature whatsoever, except as herein provided, shall be made upon loans to which said sections relate; provided, however, that a licensee may, if the loan agreement so provides, assess and collect a charge, not to exceed ten dollars, for any check, draft or order for the payment of money submitted in accordance with said agreement which is returned unpaid or not honored by a bank or other depository.
Section 100A: Repealed, 1975, 401, Sec. 2.
Section 101: Term of license; contents; posting
Section 101. Licenses granted by the commissioner shall be for a period of one year from October first. Each license shall plainly state the name of the licensee, and the city or town, with the name of the street, and the number, if any, of the place where the business is to be carried on, and shall be posted in a conspicuous place in the office where the business is transacted.
Section 102: Fees; more than one business; multi-state licensing system
Section 102. Each application for a license shall be accompanied by an investigation fee, the amount of which shall be determined annually by the commissioner of administration under the provision of section three B of chapter seven for the filing thereof. The amount of the fees for all licenses granted under section ninety-six and the relocation investigation fee referred to hereunder shall be determined pursuant to the aforementioned chapter seven provision, and if an applicant desires to carry on business at more than one place he shall procure a license for each place where the business is to be conducted.
Any change of location of an office of a licensee shall require the prior approval of the commissioner. Such request for relocation shall be in writing setting forth the reason or reasons for the request, and shall be accompanied by a relocation investigation fee.
The commissioner may participate in a multi-state licensing system for the sharing of regulatory information and for the licensing and application, by electronic or other means, of entities engaged, directly or indirectly, in the business of making small loans of not more than $6,000. The commissioner may establish requirements for participation by an applicant in a multi-state licensing system which may vary from the provisions of this section and sections 97 and 101. The commissioner may require a background investigation of each applicant for a small loan license by means of fingerprint and state and national criminal history record checks by the department of criminal justice information services pursuant to section 172 of chapter 6 and the Federal Bureau of Investigation. If the applicant is a partnership, association, corporation or other form of business organization, the commissioner may require a background investigation for each member, director and principal officer of the applicant and any individual acting as a manager of an office location. The applicant shall pay directly to the multi-state licensing system any additional fees relating to participation in the multi-state licensing system.
Section 103: Penalties; voidable loans
Section 103. Whoever, being duly licensed as provided in section ninety-six, violates any provision of sections ninety-seven, ninety-eight, one hundred and one, one hundred and two, one hundred and four or one hundred and nine, or any regulation, rule or order made by the commissioner under sections ninety-seven or one hundred and six, shall be punished by a fine of not more than five hundred dollars, and his license may be suspended or revoked by the commissioner.
Whoever, being so licensed, violates the provisions of section one hundred shall be punished by a fine of not more than one thousand dollars or by imprisonment for not more than one year, or both, and his license may be suspended or revoked by the commissioner. Any loan made by any person so licensed in violation of said section one hundred may be declared void by the supreme judicial or superior court in equity upon petition by the person to whom the loan was made.
Section 104: Applicant’s statement; power of attorney; changes in names, addresses or personnel; revocation of license
Section 104. A license under section ninety-six shall not be granted until the applicant has filed with the commissioner a statement on oath, which in the case of a corporation or association may be made by the president or agent thereof in charge of the business, stating the place in the town where the business is to be carried on, the name and the private and business address of the applicant, and in the case of a corporation the state under the laws of which it is organized, and the name and private address of the clerk or secretary and of the agent or other officer having charge of its proposed business, nor until the applicant, unless excused by the commissioner, files with him a power of attorney, appointing a person satisfactory to the commissioner to be his attorney, upon whom all lawful process may be served in any action or proceeding arising under sections ninety-six to one hundred and twelve, inclusive, with the same effect as if served upon the licensee. If any change occurs in the name or address of a licensee or of the clerk, secretary or agent aforesaid of any licensed corporation, or in the place where the licensed business is carried on, or in the membership of any partnership licensed under said sections, a true and full statement of such change, sworn to in the manner required by this section in the case of the original statement, shall forthwith be filed with the commissioner, who may after a hearing revoke the license.
Section 105: Repealed, 1969, 221.
Section 106: Illegal interest; order of commissioner; recovery in action or suit; costs
Section 106. If a greater rate of interest or amount for expenses than is allowed under sections ninety-six to one hundred and eleven, inclusive, has been paid on any loan to which said sections apply, the person who paid it may file a complaint with the commissioner, who may, after a hearing, order such excess amounts refunded, or may make such other order as he may deem necessary. The filing of the complaint and the decision of the commissioner shall not affect the right of the complainant under section one hundred and three, who may, in an action of contract or suit in equity, recover back the amount of the unlawful interest or expenses, with twice the legal costs, if such action or suit is brought within two years after the time of payment.
Section 107: Security interest, pledge or wage assignment; discharge by payment or tender; future advances; damages for neglect or refusal
Section 107. If a loan to which sections ninety-six to one hundred and eleven, inclusive, apply is secured by a security interest or pledge of personal property or by an assignment of wages, the security interest, unless it secures future advances, shall be discharged, the pledge restored or the assignment released upon payment or tender of the amount legally due under said sections. If such security interest secures future advances, it need not be discharged except at the borrower’s written request and shall be discharged upon such request unless such future advances have been made. Such payment or tender may be made by the debtor, by any person duly authorized by him or by any person having an interest in the property subject to the security interest pledged or in the wages assigned. Whoever refuses or neglects to discharge a security interest as aforesaid, release an assignment or restore a pledge to the party entitled to receive the same, after payment of the debt secured thereby or the tender of the amount due thereon as aforesaid, shall be liable in tort to the borrower for all damages thereby sustained by him.
Section 108: Assignment or order for wages or salary; validity; requisites
Section 108. An assignment of or order for wages or salary to which sections ninety-six to one hundred and fourteen A, inclusive, apply, shall not be valid unless it states with substantial accuracy the actual amount of the loan, the time for which the loan is made, the rate of interest to be paid, and the expense of making and securing the loan, if any.
Section 109: Receipt; part payment
Section 109. If a payment is made on account of a loan to which sections ninety-six to one hundred and eleven, inclusive, apply, the person who receives the payment, or his principal, shall, when the payment is taken, give to the person paying a receipt setting forth the amount then paid and the amount previously paid, and identifying the loan, note, mortgage or assignment to which it is to be applied.
Section 110: Business without license; penalty; validity of transactions; evidence
Section 110. Whoever, not being duly licensed as provided in section ninety-six on his own account or on account of any other person not so licensed, engages in or carries on, directly or indirectly, either separately or in connection with or as a part of any other business, the business of making loans or buying notes or furnishing endorsements or guarantees, to which sections ninety-six to one hundred and eleven, inclusive, apply, shall be punished by imprisonment in the state prison for not more than ten years or in a jail or house of correction for not more than two and one half years, or by a fine of not more than ten thousand dollars, or by both such fine and imprisonment. Any loan made or note purchased or endorsement or guarantee furnished by an unlicensed person in violation of said sections shall be void. In any judicial proceedings under said sections the fact that the defendant has made or assisted in the making of two or more loans of six thousand dollars or less, upon which there has directly or indirectly been paid or charged, for interest, brokerage, recording fees, commissions, services, extension of loan, forbearance to enforce payment or other expenses, a sum which exceeds in the aggregate an amount equivalent to twelve per cent per annum upon the amount actually received by the borrower, whether such sum has been paid to or charged by the defendant or paid to or charged by any other person, shall be prima facie evidence that the defendant has engaged in and carried on the business of making loans to which sections ninety-six to one hundred and twelve, inclusive, apply.
Section 111: Rate of interest in absence of agreement
Section 111. Sections ninety-six to one hundred and eleven, inclusive, shall not affect so much of section three of chapter one hundred and seven as provides that, if there is no agreement for a different rate, the interest on money shall be at the rate of six dollars upon each one hundred dollars for a year.
Section 112: Duties of police
Section 112. The state police and the police of the cities or towns shall carry out the directions of the commissioner in enforcing sections ninety-six to one hundred and thirteen, inclusive, and any regulations made by him.
Section 113: Disposal of returns made to commissioner
Section 113. Returns made to the commissioner under section ninety-eight may be destroyed or disposed of by his order after the lapse of three years from the date of their receipt, and any proceeds received in the course of their disposal shall be paid to the commonwealth.
Section 114: Companies, associations and societies; necessity of license
Section 114. Loan companies and loan associations established by special charter, and fraternal mutual benefit societies the membership of which is limited to the employees of any one person and which make loans to its members only, shall be subject to the supervision of the commissioner, but need not procure a license.
Section 114A: Exceptions; restrictions; voidable loans; composite rates; determination of maximum rate
Section 114A. Trust companies, savings banks, co-operative banks, savings and loan associations, credit unions, national banking associations, federal savings banks and federal savings and loan associations or federal credit unions or any subsidiary of the foregoing shall not be subject to the provisions of sections ninety-six to one hundred and fourteen, inclusive; provided, that such institutions may not take, receive, reserve or charge interest, expenses and other considerations for making or securing a loan of six thousand dollars or less in excess of those permitted by section one hundred. Any loan of six thousand dollars or less made by any trust company, savings bank, co-operative bank, savings and loan association, credit union, national banking association or federal savings and loan association on which charges for interest, expenses and other considerations exceed those permitted by section one hundred may be declared void by the supreme judicial or superior court in equity upon petition by the person to whom the loan was made, and any such trust company, bank, association or credit union making such loan shall be subject to a fine of not more than five hundred dollars. This section shall not be construed as preventing a rate of charge for interest, expenses and other consideration on one or more portions of a loan in excess of the permitted maximum rate of charge applicable to said portion or portions, provided, that the composite rate of charge on the whole loan produces an amount equal to or less than that which would be produced were said maximum rate of charge applied to said loan. Extension, default or deferment charges shall not be deemed to be interest, expenses and other considerations in determining the maximum rate of charge that may be taken, received, reserved or charged for said loan.
Section 114B: Finance charges on open end credit accounts; maximum rates; computation
Section 114B. Notwithstanding the provisions of sections ninety A, one hundred, and one hundred and fourteen A, a creditor may charge a daily, monthly or other periodic rate of finance charge on loans made pursuant to any open-end credit plan as defined by section one of chapter one hundred and forty D, equivalent to but not in excess of eighteen percent determined in accordance with paragraph (2) of subsection (a) of section five of said chapter one hundred and forty D; provided, however, that no finance or other charge shall begin to accrue until the date upon which payment has been made by the creditor on any transaction under any such open-end credit plan; and, provided further, that if the index rate for any calendar quarter, as hereinafter determined, exceeds eighteen percent, the creditor may, during such calendar quarter, charge such daily, monthly or other periodic rate or rates as may be established by such creditor. The commissioner of banks shall determine as of the computation dates of December first, March first, June first and September first of each year, and not later than one business day after each such computation date, the index rate for the succeeding calendar quarter beginning January first, April first, July first and October first, respectively. The index rate determined on each computation date for the following calendar quarter shall be the number determined by doubling the average of the rates established and announced, as the auction average on a discount basis, for United States Treasury bills with maturities of ninety-one days at the auctions held during the three calendar months preceding the computation date. At the option of the creditor, the periodic rate that a creditor charges on an account may be adjusted to reflect a change in the index rate either on the first day of the respective calendar quarter or on the first day of the first billing cycle of the account immediately following such date; provided, however, that any limitation on finance charges imposed under this section shall remain in effect for three months from the date so chosen. A finance charge not in excess of fifty cents for a monthly or longer billing cycle or the pro rata part of fifty cents for a billing cycle shorter than monthly may be assessed if the finance charge otherwise assessable is less than fifty cents. For the purpose of this section, a billing cycle shall be considered to be monthly if the billing dates are on the same day of each month or do not vary by more than four days therefrom. A creditor may, pursuant to an open-end credit plan, charge, receive and collect a delinquency charge on any payment not paid in full within fifteen days of its due date in an amount equal to ten percent of the outstanding balance or ten dollars, whichever is less; provided, however, that no such delinquency charges shall be charged, received or collected unless the creditor, at least thirty days prior thereto, shall have mailed a notice informing its borrowers of the change in terms of such plan providing for the charging, receiving and collecting of a delinquency charge and disclosing the amount of such delinquency charge that may be imposed as part of said open-end credit plan.
In addition to disclosures of such rate required by chapter one hundred and forty D, the commissioner of banks shall have the authority to promulgate regulations requiring additional disclosures by creditors concerning periodic rate, other costs of credit, and any other additional features of the agreement.
A finance charge imposed on a transaction subject to this section but not subject to the provisions of the first paragraph of section twenty of chapter one hundred and forty D shall be computed on (i) the previous balance after deducting all payments on account received by the creditor during the cycle and all credits to the account during the cycle applicable to any transaction reflected in the previous balance; or (ii) the average daily balance determined by adding the daily balances on the account for each day in the billing cycle and dividing the total by the number of days in the billing cycle; or (iii) daily balances. Any such delinquency charge shall not be included in the computation of said finance charge.