Citations Affected: IC 23-2.
Synopsis: Loan brokers and broker dealers. Provides that a
correspondent of loans guaranteed by the United States Department of
Veterans Affairs is not exempt from the statute that regulates loan
brokers. Increases the cost of loan broker registration from $100 to
$200. Requires the securities commissioner to retain the initial or
renewal application fee paid for any license application that is
withdrawn or denied. Creates the loan broker regulation account in the
state general fund. Provides that all of the fees and funds, other than the
costs of investigations and civil penalties recovered under the loan
broker statute, must be used for the regulation of loan brokers. Provides
that the anti-fraud provisions of the loan broker laws apply to registered
and unregistered loan brokers.
Effective: July 1, 2001.
January 22, 2001, read first time and referred to Committee on Commerce and Consumer
Affairs.
February 8, 2001, amended, reported favorably _ Do Pass.
A BILL FOR AN ACT to amend the Indiana Code concerning
business and other associations.
SECTION 1. IC 23-2-5-3, AS AMENDED BY P.L.14-2000,
SECTION 52, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2001]: Sec. 3. (a) As used in this chapter, "certificate of
registration" means a certificate issued by the commissioner
authorizing an individual to engage in origination activities on behalf
of a licensee.
(b) As used in this chapter, "creditor" means a person:
(1) that loans funds of the person in connection with a loan; and
(2) to whom the loan is initially payable on the face of the note or
contract evidencing the loan.
(c) As used in this chapter, "license" means a license issued by the
commissioner authorizing a person to engage in the loan brokerage
business.
(d) As used in this chapter, "licensee" means a person that is issued
a license under this chapter.
(e) As used in this chapter, "loan broker" means any person who, in
return for any consideration from any person, promises to procure a
loan for any person or assist any person in procuring a loan from any
third party, or who promises to consider whether or not to make a loan
to any person. "Loan broker" does not include:
(1) any bank, savings bank, trust company, savings association,
credit union, or any other financial institution that is:
(A) regulated by any agency of the United States or any state;
and
(B) regularly actively engaged in the business of making
consumer loans that are not secured by real estate or taking
assignment of consumer sales contracts that are not secured by
real estate;
(2) any person authorized to sell and service loans for the Federal
National Mortgage Association or the Federal Home Loan
Mortgage Corporation, issue securities backed by the Government
National Mortgage Association, make loans insured by the United
States Department of Housing and Urban Development, make
loans guaranteed by act as a supervised lender, nonsupervised
lender, or nonsupervised automatic lender of the United States
Department of Veterans Affairs, or act as a correspondent of loans
insured by the United States Department of Housing and Urban
Development; or guaranteed by the United States Department of
Veterans Affairs;
(3) any insurance company; or
(4) any person arranging financing for the sale of the person's
product.
(f) As used in this chapter, "loan brokerage business" means a
person acting as a loan broker.
(g) As used in this chapter, "origination activities" means
establishing the terms or conditions of a loan with a borrower or
prospective borrower.
(h) As used in this chapter, "person" means an individual, a
partnership, a trust, a corporation, a limited liability company, a limited
liability partnership, a sole proprietorship, a joint venture, a joint stock
company, or another group or entity, however organized.
(i) As used in this chapter, "registrant" means an individual who is
registered to engage in origination activities under this chapter.
(j) As used in this chapter, "ultimate equitable owner" means a
person who, directly or indirectly, owns or controls any ownership
interest in a person, regardless of whether the person owns or controls
the ownership interest through one (1) or more other persons or one (1)
or more proxies, powers of attorney, or variances.
SECTION 2. IC 23-2-5-5, AS AMENDED BY P.L.230-1999,
SECTION 3, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2001]: Sec. 5. (a) An application for license or renewal of a
license must contain:
(1) consent to service of process under subsection (e);
(2) evidence of the bond required in subsection (b);
(3) an initial application fee of two hundred dollars ($200);
(4) an affidavit affirming that none of the applicant's ultimate
equitable owners, directors, managers, or officers have been
convicted, in any jurisdiction, of an offense involving fraud or
deception that is punishable by at least one (1) year of
imprisonment, unless waived by the commissioner under
subsection (f);
(5) evidence that the applicant, if the applicant is an individual,
has completed the education requirements under section 21 of this
chapter;
(6) a registration form setting forth the name, home address, home
telephone number, and Social Security number of each employee
or prospective employee of the applicant who is or who will be
engaged in origination activities; and
(7) evidence that the license applicant's proposed registrants have
completed the education requirements of section 21 of this
chapter.
(b) A licensee must maintain a bond satisfactory to the
commissioner in the amount of fifty thousand dollars ($50,000), which
shall be in favor of the state and shall secure payment of damages to
any person aggrieved by any violation of this chapter by the licensee.
(c) The commissioner shall issue a license to an applicant that meets
the licensure requirements of this chapter. Whenever the registration
provisions of this chapter have been complied with, the commissioner
shall issue a certificate of registration authorizing the registrant to
engage in origination activities.
(d) Licenses issued by the commissioner before January 1, 2001,
shall be valid, and renewal of such licenses shall not be required until
January 1, 2001. Individuals engaging in origination activities for a
licensee before January 1, 2001, shall not be required to apply for and
receive a certificate of registration until January 1, 2001. Except as
otherwise provided in this subsection, licenses and certificates of
registration issued by the commissioner are valid until January 1 of the
second year after issuance. The education requirements of section 21
of this chapter shall first apply to applicants for issuance or renewal of
licenses or registrations effective as of January 1, 2001.
(e) Every applicant for licensure or for renewal of a license shall file
with the commissioner, in such form as the commissioner by rule or
order prescribes, an irrevocable consent appointing the secretary of
state to be the applicant's agent to receive service of any lawful process
in any noncriminal suit, action, or proceeding against the applicant
arising from the violation of any provision of this chapter. Service shall
be made in accordance with the Indiana Rules of Trial Procedure.
(f) Upon good cause shown, the commissioner may waive the
requirements of subsection (a)(4) for one (1) or more of an applicant's
ultimate equitable owners, directors, managers, or officers.
(g) Whenever an initial or renewal application for license is
denied or withdrawn, the commissioner shall retain the initial or
renewal application fee paid.
SECTION 3. IC 23-2-5-6, AS AMENDED BY P.L.230-1999,
SECTION 4, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2001]: Sec. 6. (a) A licensee may not continue engaging in the
loan brokerage business unless the licensee's license is renewed
biennially. A registrant may not continue engaging in origination
activities unless the registrant's certificate of registration is renewed
biennially. A licensee shall renew its license and the certificates of
registration of its registrant employees by filing with the commissioner,
at least thirty (30) days before the expiration of the registration, an
application containing any information the commissioner may require
to indicate any material change from the information contained in the
applicant's original application or any previous application.
(b) The fee for renewal of a registration is one hundred dollars
($100) per year, to be paid biennially when an application for renewal
is filed.
SECTION 4. IC 23-2-5-7 IS AMENDED TO READ AS FOLLOWS
[EFFECTIVE JULY 1, 2001]: Sec. 7. (a) The loan broker regulation
account is created in the state general fund. The money in the loan
broker regulation account may be used only for the regulation of
loan brokers under this chapter. The loan broker regulation
account shall be administered by the treasurer of state. The money
in the loan broker regulation account does not revert to any other
account within the state general fund at the end of a state fiscal
year.
(b) Except as provided in subsection (c), all fees and funds
accruing from the administration of this chapter shall be accounted for
by the commissioner and shall be deposited with the treasurer of state
who shall deposit them in the loan broker regulation account in the
state general fund.
(c) All expenses incurred in the administration of this chapter shall
be paid from appropriations made from the state general fund.
However, costs of investigations and civil penalties recovered under
this chapter shall be deposited in the securities division enforcement
account created under IC 23-2-1-15. The funds in the securities
division enforcement account shall be available, with the approval of
the state budget agency, to augment and supplement the funds
appropriated for the administration of this chapter.
SECTION 5. IC 23-2-5-20, AS AMENDED BY P.L.230-1999,
SECTION 12, IS AMENDED TO READ AS FOLLOWS [EFFECTIVE
JULY 1, 2001]: Sec. 20. A licensee or registrant person shall not, in
connection with a contract for the services of a loan broker, either
directly or indirectly, do any of the following:
(1) Employ any device, scheme, or artifice to defraud.
(2) Make any untrue statements of a material fact or omit to state
a material fact necessary in order to make the statements made, in
the light of circumstances under which they are made, not
misleading.
(3) Engage in any act, practice, or course of business that operates
or would operate as a fraud or deceit upon any person.
(4) Collect or solicit any consideration, except a bona fide third
party fee, in connection with a loan until the loan has been closed.