An Act To Establish Consumer Protections and Regulations for Deferred Deposit Loans
Maine Legislature, Session 122, LD 0788
Committee: Business, Research and Economic Development
Sponsors: DUPLESSIE, SULLIV AN, PERRY, TARDY, DAVIS, TURNER

Legislative Document 
No. 788 
H.P.565 
House of Representatives, February 15,2005 
An Act To Establish Consumer Protections and Regulations for 
Deferred Deposit Loans 
Reference to the Committee on Business, Research and Economic Development suggested 
and ordered printed. 
Presented by Representative DUPLESSIE of Westbrook. 
Cosponsored by Senator SULLIV AN of York and 
'I?'/~ 1/1. 7J2u£~ 
Mll.LICENT M. MacFARLAND 
Clerk 
Representatives: PERRY of Calais, TARDY of Newport, Senators: DAVIS of Piscataquis, 
TURNER of Cumberland. 
Printed on recycled paper 
Be it enacted by the People of the State of Maine as follows: 
Sec. 1. 32 MRSA c. 80·B is enacted to read: 
CHAPTER 80-B 
DEFERRED DEPOSIT LOAN ACT 
§6185. 
Short title 
This chapter may be known and cited as "the Deferred Deposit 
Loan Act." 
§6186. 
Definitions 
As 
used 
in this 
chapter. 
unless 
the 
context otherwise 
indicates, the following terms have the following meanings. 
1. 
Administrator. 
"Administrator" means the Director of 
the Office of Consumer Credit Regulation within the Department of 
Professional and Financial Regulation. 
2. 
Consumer. 
"Consumer" 
means 
a 
person other 
than 
an 
organization who is the buyer, lessee or debtor to whom credit is 
granted in a deferred deposit loan transaction. 
3. 
Deferred deposit loan. 
"Deferred deposit loan" means a 
transaction when a lender, for a fee, does the following: 
A. 
Accepts a dated instrument from a consumer; 
B. 
Agrees to hold the dated instrument for a period of time 
prior to negotiation or deposit of the dated instrument; and 
C. 
Pays to the consumer, credits to the consumer's account 
or pays to another person on the consumer's behalf the 
amount of the dated instrument, 
less charges 
authorized 
under section 6193. 
4. 
Instrument. 
"Instrument" 
means 
a 
personal 
check or 
authorization to transfer or withdraw 
funds 
from 
an 
account 
signed by the consumer and made payable to a person subject to 
this chapter. 
5. 
Lender. 
"Lender" means any person who offers or makes a 
deferred deposit loan, who arranges a deferred deposit loan for a 
3rd party or who acts as an agent for a 3rd party, regardless of 
whether the 3rd party is exempt from licensing under this chapter 
or whether approval, acceptance or ratification by the 3rd party 
is necessary to create 
a 
legal obligation for 
a 
3rd party. 
Page l-LR149l(1) 
.. 
"Lender" includes, but is not limited to, a supervised lender as 
defined 
in Title 
A, 
section 
301, 
subsection 
and 
a 
supervised 
financial 
organization 
as 
defined 
in Title 
9-A, 
section 
1-301, 
subsection 
38-A. 
Notwithstanding 
that 
a 
supervised lender or supervised financial organization may be 
exempt from this chapter's license and fee requirements under 
federal law, all other applicable provisions apply to both a 
deferred deposit loan and a lend~ 
6. 
Person. 
"Person" means an individual or an organization. 
7. 
Renewal. 
"Renewal" means any deferred deposit loan when 
the loan is not paid in full and the lender agrees to allow the 
consumer to pay the fee only for a new deferred deposit loan. 
§6l87. 
License requirements 
1. 
Licen~~enewal. 
A lender 
may 
not 
engage in the 
business of making deferred deposit loans without obtaining a 
license from the administrator as provided in this chapter. 
A 
license may not be transferred or assigned. 
A license issued 
under this chapter expires on December 31st of the year approved. 
An annual license application must be mailed by December 1st of 
each year for the following year. 
2. 
Application. 
An application for an initial license or 
renewal under this chapter must be made in writing in the form 
and manner approved by the administrator. 
The application must 
include the following information: 
A. 
The name and address of the license applicant and, if 
the applicant is a corporation, limited liability company or 
partnership, the name and address of each officer, director, 
registered agent or principal member of the corporation, 
limited liability company or partnership; and 
B. 
The 
physical 
location and 
address of each business 
office to be licensed. 
The application may also in~lude any Qther information concerning 
the 
financial 
responsibility, 
background, 
experience 
and 
activities of the applicant required by the administrator. 
3. 
Fee&. 
The initial gpplication for 
a 
license may be 
filed at any time and must include a fee of $500. 
The license 
fee 
is 
not 
refundable 
in 
any 
event 
and is 
not 
abated 
by 
surrender, suspension or revocation of the license. 
The fee for 
a renewal of a license is $250. 
4. 
Qualifications. 
Upon the filing of an application, the 
administrator 
must 
determine 
whether 
the 
applicant 
and 
its 
members, officers, directors or principals have the financial 
responsibility, 
character, 
experience 
and 
general 
fitness 
to 
engage in the business of making deferred deposit loans in a fair 
and efficient manner in accordance with the public interest and 
the applicable law. 
If the administrator fails to make such a 
determination under this subsection, the administrator may not 
issue a license and shall notify the applicant in writing of the 
reasons for the denial. 
5. 
Investigation~. 
Prior 
to 
issuing 
a 
license, 
the 
administrator may make such investigations as the administrator 
determines necessary to verify that the applicant for a license 
has complied with the applicable provisions of this chapter. 
6. 
Display of licenses. 
A license must be prominently 
displayed in each business location of the lender. 
1. 
Additional offices or relocations. 
A lender may not 
open an additional office or relocate any office without prior 
approval of the administrator. 
An application for approval must 
be 
made 
in writing in the 
form 
and manner 
approved by the 
administrator and must include a fee of $150. 
The administrator 
shall approve the additional office or relocation unless the 
administrator finds that the lender does not have the required 
assets or has not conducted business in accordance with this 
chapter. 
Unless 
the 
administrator 
mails 
a 
notice 
denying 
approval within 30 days of receiving the request, the application 
is 
approved. 
The 
lender 
shall give written notice 
to 
the 
administrator within 
days 
of 
commencing 
business 
at 
the 
additional or relocated office. 
8. 
Notification of closing. 
A lender shall notify the 
administrator in writing within 10 days of the closing of any 
business office and provide any other information related to the 
closing required by the administrator. 
§6l88. 
Surety bond 
Each license application must be accompanied by evidence of 
a surety bond in the aggregate amount of $10,000 per business 
office, 
not 
to 
exceed 
a 
total 
of 
$50,000, 
to 
run 
to 
the 
administrator for use by the administrator and any person or 
persons who may have a cause of action against a lender. 
The 
terms of the bond must run concurrently with the period of time 
during 
which 
the 
license 
is 
in effect. 
The 
bond 
must 
be 
conditioned on the applicant or lender performing all written 
agreements with consumers, accurately accounting for all funds 
received 
and operating the business 
in accordance with this 
chapter and other applicable laws. 
~6189. Retention of books. accounts and records 
A lender shall maintain all books, 
accounts 
and records 
necessary 
to 
determine 
the 
lender's 
compliance 
with 
this 
chapter. 
Books, accounts and records related to making deferred 
deposit loans must be maintained apart and separate from other 
books, accounts and records of the lender. 
Books, accounts and 
records must be retained for at least 3 years after final payment 
on any deferred deposit loan. 
§6190. 
Reporting requirements 
1. 
Annual report. 
A lender shall annually on or before 
March 31st submit a written report to the administrator wi.th 
information required by the administrator concerning the deferred 
@posit loans issued during the preceding calendar year. 
The 
report must be submitted in the form and manner required b:r" the 
administrator. 
2. 
Other reporting. 
Within 15 days of the event, a lender 
shall notify the administrator of any of the following events and 
describe 
the 
expected 
impact 
of 
the 
event 
on 
the 
business 
operations of the lender: 
A. 
The filing of bankruptcy, reorganization or receivership 
proceedings by or against the lender; 
B. 
Any regulatory or administrative proceedings instituted 
by any governmental authority involving the lender; 
C. 
Any felony indictments of the lender or its directors, 
officers, members, principals or partners; or 
D. 
Any felony convictions of the lender or its directors, 
officers, members, principals or partners. 
§6191. 
Examinations 
1. 
Examination. 
The administrator may examine the books, 
accounts 
and records of 
a 
lender and make investigations to 
determine 
compliance with this chapter. 
At 
a 
minimum, 
the 
administrator 
shall 
conduct 
an 
examination 
of 
each 
lender 
licensed under this chapter at least once every 3 years. 
2. 
Expenses. 
The ex~nses of the administrator necessarily 
incurred in the examination or investigation of a 
lender are 
chargeable to the lender. 
§6192. 
Requirements and disclosures for deferred deposit loan 
agreements 
A lender shall comply with the following requirements of 
this section. 
1. 
Written loan agregme~_Each deferred deposit loan must 
be evidenced by a written loan agreement that is signed and dated 
by the consumer and an authorized representative of the lender on 
the 
same 
day 
the 
loan is 
made 
and 
disbursed. 
The written 
agreement must contain the name of the consumer, the transaction 
date and the amount of the instrument. 
The agreement must also 
establish a date not less than 7 days or more than 40 days after 
the loan transaction date when the instrument may be deposited or 
negotiated by the lender. 
The lender shall give a duplicate of 
the original loan agreement to the consumer at the time of the 
transaction. 
2. 
Required disclosures. 
The 
loan agreement 
must 
also 
disclose the following to the consumer: 
A. 
The principal amount of the loan; 
B. 
Any fees charged; 
C. 
The annual percentage rate determined in accordance with 
Federal Reserve Board Regulation Z; 
D. 
Evidence of receipt from the consumer of a check dated 
the same date as the loan to be used as security for the 
loan or evidence of authorization to withdraw or transfer 
funds from the consumer's account for the benefit of the 
lender; 
E. 
An agreement by the lender not to present the check for 
payment or deposit until a specified maturity date; and 
F. 
A description of the consumer's right to cancel the loan 
transaction at any time before the close of business on the 
next business day following the transaction by repaying to 
the lender the amount advanced to the consumer. 
§§193. 
Authorized charges to consume~ 
A lender 
consumer in 
deposit loan. 
may charge the 
conjunction with 
rollowing 
making or 
fees or charges to 
a 
arranging 
a 
deferred 
1. 
Administrative f.ee. 
A lender may charge as a fee for 
each loan an amount that does not exceed 7.5~ of the total amount 
of loan proceeds advanced to the consumer. 
.. 
2. 
Dishonored instrument charge. 
If an instrument held by 
a lender as a result of a deferred deposit loan is returned to 
the 
lender 
from 
a 
financial institution due 
to insufficient 
funds, 
a closed account or stop payment order, the lender may 
contract for and collect a returned instrument charge, not to 
exceed $25. The charge under this subsection is not permitted if 
the instrument dishonored by a financial institution or a stop 
payment order is placed by the consumer due to forgery or theft 
of the instrument. This subsection does not prohibit a lender 
from also exercising all civil means authorized by law to collect 
the face value of the instrument and any costs or attorney's fees 
awarded by a court and incurred as a result of the dishonored 
instrument. 
except that an award of attorney's fees 
may 
not 
exceed the total amount of the deferred deposit loan. 
For 
t~urposes of this section, "financial institution" 
has the same meaning as in Title 9-B, section 131, subsection 17. 
§6l94. 
Prohibited practices 
A lender may not engage in any of the following business 
practices. 
=l~. __ ~P~r~ohib~ clauses. 
A 
lender 
may 
not 
obtain 
any 
agreement from the consumer: 
A. 
Giving the lender or any 3rd party a power of attorney 
or authority to confess judgment for the consumer; 
B. 
Authorizing the lender or any 3rd party to bring suit 
against the consumer in a court outside this State; or 
C. 
Waiving any right granted to the consumer under this 
chapter. 
2. 
Renewal. 
A lender may not renew the Same loan more than 
twice. 
3. 
Postdated instrument. 
A 
lender 
may 
not 
reguire or 
accept a postdated instrument as security for or in payment of a 
loan. 
4. 
Obligation on more than one loan. 
A lender may not 
cause a consumer to be obligated on more than one loan at any 
time 
for 
the 
purpose 
of 
increasing charges 
payable 
by 
the 
consumer. 
5. 
Other securit-y. 
A lender may not take an interest in 
any property other than an instrument as security for a loan. 
6. 
Prescribed terms. 
A lender may not make 
a deferred 
deposit loan with a term of less than 7 days or more than 40 days. 
• 
Maximum loan amount. 
A lender may not lend an amount 
greater than $700 or 
25% 
of 
the gross monthly 
income of 
a 
consumer, 
whichever is less, 
and the amount financed may not 
exceed $700 at any time. 
8. 
Maximum amount of instrument. 
An instrument held as a 
result of a deferred deposit loan may not exceed $822.50. 
9. 
Treatment of Armed Forces pe~sonnel. 
A lender may not 
engaae in any of the following activities with respect to a 
deferred deposit loan issued to a consumer who is a member of the 
Armed Forces of the United States called to active duty: 
A. 
The garnishment of wages or salary for repayment of a 
B. 
The initiation of any collection activity during the 
period of active duty; and 
C. 
Any communication wi th the mi Ii tary chain of command 
with regard to a loan issued to a member of the Armed Forces 
of the United States. 
A lender must comply with the terms of any repayment agreement 
negotiated through a military counselor on behalf of a consumer 
who is a member of the Armed Forces of the United States and 
called to active d~ 
§6195. 
Consumer rights 
1. 
Criminal liability. 
A consumer is not subject to any 
criminal 
liability or 
penalty 
for 
entering into 
a 
deferred 
deposi t 
loan agreement in the event the instrument held by the 
lender is dishonored unless the consumer's account on which the 
instrument is drawn was closed before the specified maturity date 
in the loan agreement. 
2. 
Right of rescission. 
A consumer 
has 
the 
right to 
rescind a deferred deposit loan on or before the close of the 
next business day following the transaction date of the loan by 
repaying to the lender the amount advanced to the consumer. 
§6196. 
Suspension or revocation of licenses 
After notice and hearing, the administrator may suspend or 
revoke a lender's license if the admin~ator finds that: 
• 
1. 
Grounds for denial. 
A fact or condition exists that, if 
it had existed at the 
time when the lender applied for its 
license, would have been grounds for denying the application; 
2. 
Violation. 
The lender knowingly violates a provision of 
this 
chapter 
or 
a 
rule 
or 
order 
validly 
adopted 
by 
the 
administrator under authQ£ity of this subchapter or violates any 
other law or rule applicable to the lender's conduct; 
3. 
Conviction; judgment. The lender has been convicted of a 
felony 
or 
subject 
to 
a 
court 
judgment 
involving 
fraud, 
misrepresentation or deceit; 
4. 
Federal; 
other 
state 
order. 
A 
federal 
or 
state 
administrative order has been entered against the lender for a 
violation of federal law or rule or another state's law or rule; 
5. 
Failure to perform written agreements. 
The lender has 
failed 
to 
conduct 
its 
business 
in 
accordance 
with 
written 
agreements with consumers; 
6. 
Refusal of examination. 
The lender refuses to permi t 
the 
administrator 
to 
make 
an 
examination 
or 
investigation 
authorized by this chapter; 
1. 
Failure to respond. 
The lender fails to promptly and 
adequately 
respond 
to 
communications 
or 
orders 
from 
the 
administrator; or 
8. 
Failure to report; make payments. 
The lender willfully 
fails to make a report or fails to pay any fees required by this 
chapter. 
For purposes of this section, acts of any officer, director, 
member, principal or partner are deemed acts of the lender. 
§6191. 
Administrative enforcement orders 
After notice and hearing, the administrator may order any 
person to cease and desist from engaging in violations of this 
chapter. 
The administrator may also order affirmative action 
designed to correct past or future violations of this chapter. 
Any hearing held under this subsection must be conducted in 
accordance 
with 
the 
procedures 
of 
the 
Maine 
Administrative 
Procedure Act, Title 5, chapter 375, subchapter 4. 
A respondent 
aggrieved by an order of the administrator may obtain judicial 
review of 
the order 
and 
the 
administrator may, 
through the 
Attorney General, obtain an order of the court for enforcement of 
its order in the Superior Court. 
The proceedings for review or 
enforcement must be initiated and conducted in accordance with 
the Maine Administrative Procedure Act, Title 5, chapter 375, 
subchapter 7. 
§6198. 
Violations; civil penalties 
The administrator, througp the Attorney General, may bring a 
civil action against a person to recover a civil penalty for 
knowingly violating this chapter and if the court finds that the 
defendant has engaged in a knowing violation of this chapter or a 
violation of an assurance of discontinuance, it may assess a 
civil penalty of not more than $1,000. 
For the purposes of this 
.s.~tion, each separate violation may be s~t to the penalty 
permitted under this section, 
and, 
for violations of section 
6194, each deferred deposit lQan made or arranged in violation of 
that section constitutes a separate violation. 
§6199. 
Rules 
The 
administrator 
shall 
adopt 
rules 
to 
implement 
the 
provisions Qf this chapter as necessary. 
Rules adQpted pursuant 
to this chapter are routine technical rules as defined in Title 
5, chapter 375, subchapter 2-A. 
SUMMARY 
This bill establishes a regulatory mechanism for deferred 
deposit 
loans. 
The 
bill 
designates 
the 
Department 
of 
Professional and Financial Regulation, Office of Consumer Credit 
Regulation as the regulator of lenders making deferred deposit 
loans. 
It 
sets 
forth 
necessary 
licensing, 
fees 
and 
bond 
requirements for lenders. 
The bill also sets out requirements 
for lender reporting and examination of these lenders. 
The 
bill 
specifically 
provides 
a 
number 
of 
consumer 
protections, 
including the disclosure requirements for written 
lQan 
agreements, 
maximum 
loan 
amounts, 
limitations 
on 
fees 
charged 
to 
consumers, 
maximum 
and 
minimum 
terms 
for 
loan 
agreements and requirements for collection practices. 
•