I received the following response from Representative John Pallone:
Quick Note: The links provided in Mr. Pallone's email do not work. I've posted functioning links at the bottom of this post.
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Sent: Wednesday, September 17, 2008 2:18:43 PM
Subject: PA Laws on prosper.com website
As per your request for the Pennsylvania laws or regulations that were cited as reasons for prosper.com to discontinue accepting lender registrations, I have the following information. According to the Pennsylvania Department of Banking, entities providing loans in Pennsylvania, such as those offered on prosper.com, are limited to charging an interest rate no higher than 6%. This maximum rate is mentioned in two separate Pennsylvania laws: The Loan Interest and Protection Law (Act 6 of 1974) http://ldp.legis.state.pa.us/WU01/LI/LI/US/1974/0/0006..HTM and The Consumer Discount Company Act (Act 66 of 1937) http://ldp.legis.state.pa.us/WU01/LI/LI/US/1937/0/0066..HTM.
I hope this information is helpful.
Legislative Office for Research Liaison
PA House of Representatives
House Box 202218
Harrisburg PA 17120-2218
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Well, first off, I just want to say thank you to Rep. Pallone for his quick response, and for directing us towards the governing legislation.
So he points out,
"According to the Pennsylvania Department of Banking, entities providing loans in Pennsylvania, such as those offered on prosper.com, are limited to charging an interest rate no higher than 6%."
Now I'm not an attorney, or anything like that, BUT the obvious seems to jump off the page, execute an inward flying somersault, land on my face, and squirm around a little bit. Here's what's obvious:
Prosper Lenders are not "PROVIDING" loans!
Loan's are "Assigned" to Prosper Lenders.
The loans are "provided" by WebBank, of Salt Lake City Utah.
Prosper Lenders, take a look at one of your Promissory Notes.
Section 15 states:
"Governing Law. This Note is governed by federal law and, to the extent that state law applies, the laws of the State of Utah."
Needless to say this is quite a stretch on the part of Pennsylvania.
Does this mean that no resident of Pennsylvania can purchase an existing note, of any kind, from anyone, or any bank that has an interest rate of greater than 6%? I don't know the answer to that, but I can't imagine that's the case.
What in the world is PA trying to do?! I really don't get it. I wonder if Pennsylvania wouldn't mind stepping in and blocking the 18% collection fee that the Department of Education allows their private collection agencies to collect on student loans that go into default. - I Doubt it!
I will be posting more responses as I receive them.
Updated:
The Loan Interest and Protection Law (Act 6 of 1974)
The Consumer Discount Company Act (Act 66 of 1937)
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2 comments:
This makes no sense.
Are Pennsylvania investors not allowed to attend tax lien auctions in other states and bid on tax lien certificates with higher than 6% rates?
If that's allowed, then why couldn't they purchase loans from Utah-based WebBank?
Dan - Thank you for your comment.
I couldn't agree more the questions you pose.
This absolutely makes no sense!
It makes no sense to me, to you, and I'm sure it's safe to chance that it makes no sense to all Pennsylvania Prosper Lenders.
It's a pretty flimsy ledge the Pennsylvania Securities Commission is standing on.
I've begun to contact State Representatives and what I'm discovering so far is that no one seems to have a clue of what's going on.
I'm going to remain optimistic that our representatives will see just how feeble this discrimination is and act on our behalf.
Thanks again.
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