Important Changes to the Washington State Consumer Loan Act
Posted Wednesday, April 11, 2012 by Emily C. Rao.
Recent amendments to the Washington State Consumer Loan Act (“CLA”) may have a big impact on lenders whose commercial loans are secured by a lien on the borrower’s primary residence. Under the newly amended CLA, a person in the business of making a loan primarily for business, commercial, or agricultural purposes, and which is secured by a lien on the borrower’s primary residence, must meet certain licensing and disclosure requirements set forth in the Act. The lender must first obtain a license. Then the lender must make certain disclosures, such as: an itemized estimation and explanation of all fees and costs that the borrower is required to pay in connection with obtaining a loan from the lender, and an estimate of the annual percentage rate on the loan and a disclosure of whether or not the loan contains a prepayment penalty. These disclosures must be done within three days following the receipt of a loan application. Additionally, all lenders of consumer loans secured by a lien on real property must provide the borrower with a one-page disclosure summary (e.g. fees and discount points, interest rates, broker fees).
There is an exception for lenders who are lending money to an immediate family member, or a lender that is selling his home and carrying the financing for the buyer. The Washington Department of Financial Institutions has held that these people are not subject to the licensing requirement, although they may still be subject to other requirements under the CLA.