Recently, the Commonwealth Court of Pennsylvania upheld the Pennsylvania Department of Banking and Securities’ (Department) enforcement action against an unlicensed internet lender and loan purchaser for alleged violations of Pennsylvania law. PA Dep’t. of Banking and Sec. v. Autoloans, LLC (Pa. Commw. Ct. Jan. 2016). The Department conducted an investigation of consumer complaints and found that in order to secure a loan with the respondents, consumers were required to (i) complete an online loan application, providing highly detailed personal information; (ii) electronically sign the loan documents and a power of attorney, which made the “lienholder the attorney-in-fact for purposes related to the motor vehicle to secure the loan”; and (iii) install a GPS tracker on the motor vehicle, as required by the contract. On June 24, 2015, the Department issued an “Order to Cease and Desist, Prohibit, Pay a Fine and Provide Restitution” (Order) against the respondents for alleged violations of the Loan Interest and Protection Law (LIPL), the Consumer Discount Company Act (CDCA), and the Pawnbrokers License Act (PLA): “[T]he Department alleged that Respondents violated the LIPL because they are not licensed in Pennsylvania or any other jurisdiction of the United States to provide loans to consumers, to engage in pawn brokering or to collect interest in excess of 6%. It further alleged that Respondents violated the CDCA and the PLA by providing loans to consumers using their motor vehicles as security without a license.” The Court granted the Department’s petition to enforce the Order, citing a 2009 case in which the Court ruled in favor of the Department’s right to enforce the LIPL and the CDCA.
Following the Court’s decision, the Department announced that, under the Order, the respondents must (i) stop making loans to Pennsylvania residents; (ii) stop collecting payments of principal or interest from Pennsylvania residents on existing loans; (iii) stop repossessing cars from Pennsylvania residents; (iv) release all liens on file at the Pennsylvania Department of Transportation; and (v) return all titles to Pennsylvania residents. In addition, the order requires that the respondents pay “a fine of $412,500 representing $2,500 for each known Pennsylvania resident.”