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Home›Albania Lending›Maine Passes Bank-Type Lending Legislation

Maine Passes Bank-Type Lending Legislation

By Blake G. Keller
August 6, 2021
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For at least 20 years, Maine has capped interest rates for most unsecured closed-end loans at 30% for loans of $ 2,000 or less, and 18% for loans of $ 4,000 or less. more. See, for example, 9-A MRSA Sec. 2-401.

Following Illinois’ lead, Maine has now passed legislation to bypass the federal pre-emption of these limits for bank loans.

What happened

Much of the same text as the Illinois bill we previously reported on (and now law), Maine law claims to subject an entity to its interest rate caps if the entity “owns, acquires or maintains, directly or indirectly, the predominant economic interest in the loan”, “markets, negotiates, arranges or facilitates the loan and holds the right, requirement or first right of refusal to purchase the loan or a claim or interest on the loan, ”or“ all of the circumstances ”otherwise indicate an attempt to evade the interest rate cap. The set of circumstances test aims to determine whether the terms of the agreement provide for compensation for an otherwise exempt entity (such as a domestic bank), whether the non-exempt entity primarily designed, controlled or operated the loan, and whether the non-exempt entity lends directly in other states.

As in Illinois, transactions that violate the interest rate cap are declared “nil and uncollectible,” including principal. Maine law previously provided simply for a waiver of fees and a portion of finance charges in the event of a violation. The law also specifies that the loan cannot be returned for collection or reported as past due.

A similar bill is pending in New Mexico (HB 149 and SB 66).

Why is this important

Consumer advocates have aggressively promoted this type of “reverse preemption” legislation, which indirectly attacks the federal lending powers of banks by purporting to regulate their marketers and service agents. It remains to be seen whether the courts will find the bet effective or not. Stay tuned!


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