On June 29, Connecticut Governor Ned Lamont signed SB 1033, An Act Concerning Various Revisions to the Banking Statutes, into law. As discussed here, with this bill, Connecticut joins several other states that have set strict rate caps on consumer loans, including Illinois, New Mexico, Colorado, and California, and those that expressly provide for a predominant economic interest test for true lender purposes. The law will take effect on October 1, 2023.
Among other things, the bill: 1) raises the small loan limit from $15,000 to $50,000; 2) expands the Small Loan Act (SLA) licensure requirement to cover certain brokering and facilitating activities; 3) codifies a predominant economic interest test in the SLA; 4) broadens the definition of small loan to include income sharing agreements (ISAs), refund anticipation loans, and pension advances; 5) limits the Annual Percentage Rate (APR) on loans of $5,000 to $50,000 to 25%; 6) redefines APR as an all-in APR calculated pursuant to the federal Military Lending Act (MLA); and 7) defines finance charge more broadly.
Notable changes from the legislation introduced in February include:
- GAP Waivers. The final law no longer allows consumers to cancel these agreements for full refunds or credits to balances owed upon cancellation.
- Capital and Surplus Requirements. The final law applies a “capital and surplus” calculation to certain investment decision making of Connecticut banks (i.e., liabilities of borrowers, debt and equity securities, debt and equity mutual funds, social purpose investments, savings banks life insurance, mortgage lending, and real estate for the banks’ business).