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Pictures from the Past---Year: 2000
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Top Stories: September 15--September 19
(1) Steve Crane, CLP, Joins BSB Leasing
(2) Archives---September 15, 2010
(3) Illinois Voids Loan Because Lender Was Unlicensed
(4) Leasing 102 by Mr. Terry Winders, CLP
(5) Sales Makes it Happen by Mr. Terry Winders, CLP
(6) San Francisco Bay Area Man Convicted in Multimillion Dollar
(7) Equipment Finance Programs for Community Banks
(8) Court Gives First Data Merchant Services a Pass
(9) King Commercial Now Commercial Industrial Finance
(10) Success Leasing Salesman Sentenced for $945,200 Fraud
Decision on Leasing Programs to Promote
Choosing a type of commercial equipment lease to sell is a function of your capital base and how you expect to develop your leasing company.
By far the most profitable lease type is a “true” lease because of the tax advantages and the opportunity to make additional income from the residuals. However, the way income is determined and how you handle the difference between tax income and book income require an excellent understanding of those differences and the impact it has on capital requirements.
I often see new lessors that arrange a true lease and sell off the payment stream to a funding source and retain ownership for collecting the residuals. They think their income is the difference between the equipment cost and the funding amount, but this is very wrong. If you sold off the payment stream on a non-recourse basis, your taxable income is the “total funded amount” because you have just received all your rent in advance with none of it at risk. Uncle Sam wants an income tax on the whole amount “or” you need to find some way to be at risk for the rent like being at recourse during the term. Not a good idea.
Federal income tax requirements allow you to depreciate the first year’s MACRS allowance, but it is small compared to the total rent stream resulting in a large tax bill.
Non-tax transactions can be sold without any tax problems because even though it is on a lease agreement, it does not qualify the lessor as the equipment owner. Therefore, a new leasing operation needs to offer non-tax leases primarily and completely sell off true leases and try to retain a remarketing agreement to participate in residual or renewal income.
Municipal leases and TRAC leases are also very difficult to retain, but leases to non-profits are acceptable because if the use of the equipment is for a non-profit entity, there is no depreciation allowed and there are no tax issues.
Mr. Terry Winders, CLP, has been a teacher, consultant, expert witness for the leasing industry for thirty-five years and can be reached at firstname.lastname@example.org or 502-649-0448
Previous #102 Columns:
(This ad is a “trade” for the writing of this column. Opinions
Thirty companies missed August TARP dividend payment
By Tahir Ali and Zuhaib Gull
(Note: While $425 billion has been disbursed under TARP, according to a fact sheet released by the National Economic Council, at the date of this SNL article, $440 billion has been repaid to the Treasury, including some non-TARP funds paid by bailed-out insurance company AIG. The Treasury so far has received $29.5 billion more from banks than the $245.1 billion it paid out during the crisis. Editor)
Thirty banking institutions missed the August quarterly TARP dividend payment as required by the Capital Purchase Program, according to a Sept. 10 report from the Treasury. This was an improvement over the 40 deferrals seen in May, 48 in February and 56 in November. Missed payments fell in the latest quarter largely due to a mix of mergers, redemptions and Treasury auctions.
As of Aug. 31, the Treasury has received $12.12 billion in dividend and interest payments on securities issued under the CPP, $6.27 million of which came in August.
The Treasury sold preferred shares of six companies with outstanding dividends in its 26th round of multibank TARP auctions. Narberth, Pa.-based Royal Bancshares of Pennsylvania Inc. had accumulated $7.6 million of missed payments as of May 31. The bank's preferred stock sold at a 21% premium in the auction. The other five institutions in the auction were Vero Beach, Fla.-based Marine Bank & Trust Co., Elko New Market, Minn.-based Market Bancorp. Inc., Towson, Md.-based Maryland Financial Bank, San Mateo, Calif.-based United American Bank and Fayetteville, Ark.-based White River Bancshares Co.
Another bank, Mocksville, N.C.-based Bank of the Carolinas Corp., repurchased its TARP preferred stock for $3.3 million in July — $9.9 million less than the Treasury's initial investment in the company. The Treasury also agreed to waive any unpaid dividends on the series A preferred stock, and to cancel the warrant to purchase 475,204 shares of the company's common stock. Prior to its exit from TARP, the bank had missed 14 dividend payments, according to May's dividends and interest report.
As part of its acquisition of Mobile, Ala.-based BCB Holding Co. Inc., Hattiesburg, Miss.-based First Bancshares Inc. redeemed the preferred stock that BCB Holding issued to the Treasury under TARP for approximately $2.1 million. Prior to the redemption, BCB Holding had 13 payments outstanding.
In connection to the acquisition of Garland, Texas-based Central Bancorp Inc., Los Angeles-based Hanmi Financial Corp. agreed to buy all of Central Bancorp's TARP preferred stock from the Treasury for $23.6 million and settle all dues from deferred dividends on Aug. 29. Before the agreement, Central Bancorp Inc. had noncurrent dividends of $4 million and had missed dividend payments on 13 occasions.
The TARP preferred stock of Minneapolis-based Private Bancorp. Inc. was retired after Grand Forks, N.D.-based Alerus Financial Corp. acquired the company in June. All of the company's 15 missed payments, in addition to the initial TARP investment, were paid off in full, according to the Treasury's Sept. 5 transactions' report. Houston-based Farmers & Merchants Bancshares Inc. paid off two of its seven missed payments, according to the Treasury's August dividends and interest report. Noncurrent cumulative dividends at the bank now stand at $709,500.
Kingman, Ariz.-based Community Bancshares Inc. was new to the missed payment list. The bank paid only half of its $102,020 dividend due in August, based on the Treasury's dividends and interest report. Community Bancshares has paid a total of $981,159 in dividends since it started participating in the Capital Purchase Program.
Twenty-nine of the 30 companies that missed the August dividend payments have also missed at least five others in the past. Ten of these institutions have agreed to have a Treasury observer assigned and attend board meetings, while two have denied that request. Under the terms of the CPP, the Treasury has the right to elect up to two directors to the board of any institution that misses six dividend payments.
In addition, there were three companies that missed six or more TARP interest payments as of Aug. 31. Collectively, the 32 companies that missed six TARP dividend or interest payments have amassed more than $72 million in noncurrent payments. Of this amount, $41.8 million is cumulative dividends, $19.2 million is noncumulative dividends and $11.4 million is accrued interest.
Westminster, Calif.-based Saigon National Bank leads all other CPP participants with 23 missed payments to the Treasury. The company has refused to have a Treasury observer attend its board meetings and has noncurrent dividends worth $507,258, according to the Treasury's August dividends and interest report. There are two banks that have missed payments 22 times, while one other has deferred 21 payments as of August.
Doral, Fla.-based U.S. Century Bank has the highest amount of noncurrent dividends to the Treasury among all CPP participants, at $13 million. However, the bank's dividends are noncumulative. The company has missed payments to the Treasury 19 times as of the end of August.
Louisville, Ky.-based Porter Bancorp Inc. owes the Treasury the most in cumulative noncurrent TARP dividends among all other banks under the CPP. The bank's dues total nearly $6 million with 12 missed payments, based on the August dividends and interest report.
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“An Executive Briefing”
Question: I want to apply to a specific position. Do you have any advice on how my paperwork (resume) can stand out from other applicants?
Answer: A general resume can have its drawbacks. It may be too general to relate your qualifications to a particular position. If you know the specific requirements of a position, adding an Executive Briefing/Executive Summary to your resume can quickly and impressively line the requirements up with your qualifications and skills in a tangible form.
This summary will ensure that each resume you send addresses the job’s specific needs and will increase your chances of obtaining an interview with the company. Sent with a resume it provides a comprehensive picture of a thorough professional, plus a personalized, fast and easy-to read synopsis that details exactly how you will succeed.
Career Crossroads Previous Columns
October 10-11th, Next CLP Exam
As noted in Emily Fitzgerald’s column above, it makes a difference
The Institute for Leasing Professionals 2 day program is a comprehensive education program designed by equipment leasing and financing professionals. It is a 16-module course that covers the most important subjects in the equipment leasing and financing profession.
New York Business Man $146 Million Bank Fraud Scheme
Selim “Sam” Zherka, 46, of Somers, New York, was indicted by a federal grand jury in White Plains, Westchester County, New York, for submitting multiple false loan applications to banks, tax fraud, wire fraud, and witness tampering. He is the owner of two strip clubs in Manhattan, a “modest real estate empire,” and the publisher of “The Westchester Guardian,” a free weekly newspaper.
The brief filed by the prosecutors contended that the former owner of Cheetah’s Gentleman’s Club in Manhattan had accused Mr. Zherka of “shaking him down” and of trying to take over the club by brute force. (Mr. Zherka now owns the club, which is on West 43rd Street.) It also said a prisoner at Sing Sing Prison had told the authorities that Mr. Zherka was part of “an Albanian crew” that distributed narcotics in Queens.
“Zherka is charged with falsifying information on commercial loan applications submitted to North Fork Bank - later purchased by TARP recipient Capital One - to fraudulently obtain more than $36.5 million in loans from the bank,” said Christy Romero, Special Inspector General for the Troubled Asset Relief Program (SIGTARP).
The brief also said “The Westchester Guardian” published a banner-headlined story in March calling a group of federal prosecutors “unethical and corrupt hypocrites” and identifying the towns in which they lived and their birthdays — which the brief said constituted “not-so-veiled threats.”
According to the Indictment, from November 2005 through 2008, Mr. Zherka obtained loans totaling more than $146 million in loans from three banks – North Fork Bank (now Capital One), Sovereign Bank (now Santander), and Signature Bank – for the purchase and/or refinancing of apartment house complexes in New England, Tennessee, New Jersey, and New York by lying about the purchase prices of the real estate he was acquiring, the amount of the down payments he was making toward the purchases in question, his assets, his income, his tax returns, and the nature and circumstances of a 2000 court judgment against him for assault and breach of contract (which, to date, he has not paid).
Additionally, the Indictment charges Mr. Zherka with engaging in a decade-long tax fraud scheme. The Indictment alleges that Mr. Zherka repeatedly submitted fraudulent tax returns to the IRS that overstated depreciation expenses and understated his capital gains on tax returns for the real estate holding companies in which he was a partner and which, in turn, owned the above apartment house complexes, thereby reducing their tax liabilities. The Indictment also charges that Mr. Zherka obstructed the IRS by, among other means, failing to file personal tax returns for over a decade.
U.S. Attorney Pheet Bharara stated: “Selim Zherka, while running his various businesses, allegedly engaged in a string of crimes. Zherka, the owner of commercial real estate and other businesses, stands accused of filing multiple false bank loan applications, engaging in tax fraud, and witness tampering. He is also charged with defrauding a businessman of his right to collect a court judgment against Zherka for assault and breach of contract.”
This case is being prosecuted by the U.S. Attorney’s Office for the Southern District of New York, White Plains Division. Assistant United States Attorneys Elliott B. Jacobson and Perry A. Carbone are in charge of the prosecution. The case is being investigated by SIGTARP, the FBI, and the IRS.
If convicted on the charges in the Indictment, Mr. Zherka faces the following maximum penalties: for each of the 11 counts of submitting a false loan application with which he is charged, 30 years in prison and a $1 million fine or twice the gross gain or loss resulting from the crime; for the count of wire fraud and the count of witness tampering, 20 years in prison and a $250,000 fine or twice the gross gain or loss resulting from the crime on each count; for the count of conspiracy to obstruct the IRS and violate tax laws, five years in prison and a $250,000 fine or twice the gain or loss resulting from the crime; and for each of the 10 counts of making/subscribing to false returns, the 10 counts of aiding/assisting in the preparation of false tax returns, and the count of attempting to interfere with the administration Internal Revenue laws, three years in prison and a $250,000 fine or twice the gross gain or loss resulting from the crime. Additionally, he faces potential criminal forfeitures totaling $146 million, restitution, and the costs of prosecution. The statutory maximum sentences are prescribed by Congress and are provided here for informational purposes only, as any sentencing of the defendant and any forfeiture would be determined by the Court.
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$2 Trillion in Idle Savings Accounts
The Federal Open Market Committee stated that the economy is growing only moderately, but it did not say that nearly $2 trillion that normally be used to stimulate the economy is sitting idle in bank accounts.
SAN RAFAEL, Calif. -The U.S. economy is "short" $2 trillion. This money is sitting idle in bank accounts instead of stimulating the economy with consumer spending and investments. In the five years since the end of the Great Recession, consumers incrementally increased bank savings by about $2 trillion relative to GDP compared to the five years prior to the Great Recession. As a result, bank savings, as percentage of GDP, grew from 45.5 percent prior to the recession to 54.7 percent after the recession - an incremental increase of nearly $2 trillion.
When the amount of bank savings, as percentage of GDP, is growing, it means that less money is available for spending and investment. Since nearly 80 percent of the economy, or GDP, is made up of consumer spending and investments, the economy stagnates when consumers divert more of their disposable income to bank savings. Had consumers kept their bank savings at the same pace as they did prior to the Great Recession, the U.S. economy, or GDP, should have been nearly $2 trillion bigger today - $19 trillion as oppose to about $17 trillion currently.
In order for the economy to pick up steam, the $2 trillion in excess savings needs to be diverted back to spending and investment, which will bring the amount of bank savings to its pre-recession level of about 45 percent of GDP. However, for this to happened, consumers need to have a lower level of money anxiety. Prior to the Great Recession, the five-year average for the Money Anxiety Index stood at 58.6 - 13 points lower than its current level of 71.6.
(Leasing News provides this ad as a trade for investigations
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Loan/Lease Regulations --- Update
While there is a conception that equipment leasing is not licensed, it is not quite true. Most states have license requirements, and all have issues on usury, requiring a sales/use tax permit, corporation filing to do business in a state, as well as many states have personal property license requirements from the owner of the equipment.
It is true that there are no state or national associations that regulate the industry as banks and other financial institutions or accountants, attorneys, realtors, to name a few. The closest may be the Certified Leasing Professional Foundation where they are 215 individuals that have passed a test, an annual test, and abide by a set of rules and regulations.
In most states, banks are not required to have a leasing license as well as manufacturers. Banks are generally exempt because they are regulated by the FDIC.
The common thread among licensing statutes is that if the entity which should otherwise have a license, is licensed by another government agency (real estate brokers is one example), then no license is required.
An expert on this who has won cases against company’s not licensed in California, notably CMC Commercial Credit, Tom McCurnin, Barton, Klugman & Oetting, Los Angeles, California told Leasing News: “A property owner can sell his property on credit without a license or without usury issues. Its called the Time Price Doctrine or Time Price Differential.
“CIT on the other hand doesn't own the stuff and is therefore making a loan and is required to have a license.
“A gray area might be for the leasing company to buy the stuff and have it shipped to them, and they, in turn re-ships to the customer. May not be required to have a license. Simple invoices and drop shipping probably would not pass muster.”
Captive Lessors are required to have a license, and all those that I checked do, such as Dell, who also sells other products than the ones they manufacture.
And while there are financial institutions that also have a bank, such as CIT, they hold a license.
In California, those engaged in true leases, such as Mar Vista, address, do not need to be licensed, but everyone who is involved in “capital leases” with a bargain purchase option, particularly a dollar, are required to be licensed. Without it, they may not accept a commission, engage with a licensed financial institution, and may find their leases in court dismissed for lack of a license. While the fines are not very much, the clout comes in immediate suspension from doing business in California, and while a hearing may be required or filed by an attorney, they may not engage in business during this time.
“NO BROKERAGE COMMISSIONS TO UNLICENSED BROKERS. California Administrative Code Title 10 §1451.”
Commissions may not be paid to unlicensed brokers. There are companies who use other companies’ documents and therefore believe they do not need to be licensed. This may be accurate in dealing with a bank, but not with another licensed financial institution or financial institution out of state that is not licensed in California.
If you are registered by license as a broker, lender, lessor in states that require it, you do not need a city business license (in most states). Cities that require a business license, also require a business license if you work out of your residence. Many cities now are using Schedule C from tax returns, such as in San Jose, California, to catch those without a city license, and they will go back several years as well as a fine, so best to get a license now in case they check your city.
While not all states require a lender's license, many require a license to accept a deposit or advance rental. And remember, a capital lease may be considered a loan as it is with the IRS in many states. If the state requires a license, and your company is not licensed, the transaction may be subject to usury laws.
46 states do not require the lessor to notify the lessee regarding the end of the original term of the lease and can invoke an Evergreen clause, except in these states that do require notification and if not, can void the residual as well as bring on a fine or worse, depending on the number of such transactions and complaints received.
States who require notification:
Alaska: Money Service License
Arizona: All "advance fee loan brokers" must register annually with the state. Includes "commitment fees." Stiff penalty and on line form for a complaint for the state to investigate. Arizona Revised Statutes, sec. 06-1303-1310 (1996)
Arkansas: All brokers of "a loan of money, a credit card or a line of credit" may not assess or collect an advance fee. In addition, all brokers must register with the Securities Commissioner, post a surety bond of $25.000 and have a net worth of $25,000.
California: "In addition to the lending authority provided by the law, the California Finance Lenders Law provides limited brokering authority. A "broker" is defined in the law as "any person engaged in the business of negotiating or performing any act as broker in connection with loans*made by a finance lender." Brokers licensed under this law may only broker loans to lenders that hold a California Finance Lenders license."
Florida: Brokers of a "loan of money, a credit card, line of credit or related guarantee, enhancement or collateral of any nature" may not assess or collect an advance fee.
Georgia: A broker of "loans of money, a credit card, a line of credit or related guarantee, enhancement or collateral of any kind or nature" may not assess or collect an advance fee unless such fee is for "actual services necessary to apply for the loan." Official Code of Georgia Annotated, sec. 7- 7-1 (1992)
Idaho: No fee may be collected unless a loan is actually made.
Illinois: Code, 815 ILCS 175/15-5.03 Under the Act, a" loan broker" means any person who, in return for a fee from any person, promises to procure a loan for any person or assist any person in procuring a loan from any third party, or who promises to consider whether or not to make a loan to any person. 815ILCS 175/15-5- 15(a) specifically excluded from the application of the Act, however, are (1) any bank …regulated by any service loans for the Federal National Mortgage Association… (3) any insurance producer or company authorized to do business in [Illinois], (4) any person arranging financing for the sale of the person's product, (note that this exception does not apply to any person selling someone else's product and only applies to "the" person's product, implying the exception is for the owner of the product arranging for financing), (5) any person authorized to conduct business under the Residential Mortgage License Act of 1987 and (6) any person authorized to do business in [Illinois] and regulated by the Department of Financial Institutions or the Office of Banks and Real Estate. "In the event that the Act is violated by the broker, the Secretary of State is empowered by the statute to make investigations and examinations, suspend or revoke the broker's approval, subpoena witnesses, compel the production of books and records, order depositions and obtain temporary restraining orders and injunctions against the broker. In the vent that a violate is found, the Secretary of State may impose a fine in the amount of $10,000 for each violation and the broker shall be liable to any person damaged in the amount of tactual damages plus attorneys’ fees." This appears as standard language on most states.
Iowa: A broker of loans of "money or property" may not assess or collect an advance fee except for a "bona fide third-party fee" and a broker must obtain a bond or establish a trust account and file required documents with the Commissioner or Insurance.
Kansas : Broker is not exempt. Discounter or Lessor is exempt: " 'Creditor' means any person to whom a loan is initially payable on the face of the note or contract evidencing the loan" is exempt. Anyone who earns a fee or accept a deposit, except a bank, financial institution, discounter or lessor, must be registered.
Kentucky: Brokers of "a loan of money, a credit card, a line of credit or related guarantee, enhancement or collateral of any kind or nature" may not assess or collect an advance fee.
Louisiana: A broker of loans of "money or property…whether such agreement is styled as a loan, a lease or otherwise" must obtain a surety bond or establish a trust account in the amount of $25,000. A broker may not collect an advance fee but may collect an "advance expense deposit for commercial loans" only for actual expenses incurred in obtaining the loan. Louisiana Revised Statutes Annotated, sec. 9:3574 (1993); Louisiana Revised Statutes Annotated, Sec. 51:1910 (1992)
Non-Louisiana leasing companies, with or without offices in the state, must qualify to do business in Louisiana, and are subject to payment of state and local occupational license fees. See: Collector of Revenues v Wells Fargo Leasing Corp., 393 So.2d 1255 (La. App. 1981). Common misunderstanding of Louisiana law. Motor vehicle lessors, with or without offices in Louisiana, additionally are required to be licensed by the Louisiana Motor Vehicle Commission in order to lease a motor vehicle in the state. (La. R.S. 32:1254(N)) Common misunderstanding of Louisiana law.
Maine: No license required: "the regulation of commercial loan brokers does not fall under the jurisdiction of the Maine Bureau of Consumer Credit Protection. Transactions involving two businesses are legal/contractual in nature. Therefore, disputes involving a commercial loan between a business and commercial loan provider or broker must be settled in the court system."
Maryland: Lending threshold is $6,000 or less, so now need for license if over
Massachusetts: Lending threshold is $6,000 or less, so now need for license if over this dollar amount.
Minnesota: Money Transfer License
Mississippi: A broker or loans of money may not assess or collect an advance fee and can be fined up to $5,000 for each violation. Mississippi Code Annotated, sec. 81-19-17 (1997)
Missouri: A broker of loans of "money or property" may not assess or collect an advance fee. Missouri Revised Statues, sec. 367 300 (19920
Nebraska: A broker of loans of money may not assess or collect an advance fee. Nebraska Revised Statutes, sec. 45-189 (1993)
Nevada: Foreign Corporations Foreign corporations engaged in activities in Nevada are subject to the provisions of Chapter 80 of the Nevada Revised Statutes. Specifically, NRS 80.010 through 80.055 set forth the requirements for a foreign corporation to qualify to do business in Nevada. Of primary importance are the statutes that establish (a) the filing requirements to qualify to do business (NRS 80.010); (b) the activities in which a foreign corporation may engage that do not constitute “doing business” so as to require qualification (NRS 80.015); and (c) the penalties to which a foreign corporation will be subject for failing to comply with the qualification provisions (NRS 80.055). The penalties for failure to comply with the qualification statutes include a fine (capped at $10,000) and/or denial of the right to maintain a court action. However, failure to comply will not impair the validity of contracts entered into by a foreign corporation nor prevent such corporation from defending itself in court. Foreign LLCs Foreign LLCs engaged in activities in Nevada are subject to the provisions of Chapter 86 of the Nevada Revised Statutes, specifically NRS 86.543 through 86.549. Foreign LLCs seeking to operate in Nevada must comply with the initial filing and registration requirements in NRS 86.544, and annual filing requirements of NRS 86.5461. The LLC must also maintain certain records, such as a list of current members and managers, in accordance with NRS 86.54615. Additionally, NRS 86.5483 lists the activities which do not constitute “doing business” in Nevada for purposes of the Chapter. Foreign LLCs that fail to comply with the Chapter risk penalties similar to those facing a non-compliant foreign corporation. Those penalties are outlined in NRS 86.548.
New Jersey: Brokers of "loans of money" may not assess or collect an advance fee.
Although New Jersey does not require a lessor to obtain a license to conduct a leasing business in the state, the New Jersey Corporation Business Activities Report Act requires foreign corporations to register with the state. See N.J. STAT. ANN. 14A:13-14. In particular, foreign corporations must file a Notice of Business Activities Report with New Jersey's Department of Taxation. Activities that trigger the requirement of a report include: (a) maintaining an office or other place of business in New Jersey; (b) maintaining personnel in New Jersey, even if the personnel is not regularly stationed in the state; (c) owing or maintaining real or tangible personal property directly used by the corporation in New Jersey; (d) owning or maintaining tangible and/or property in New Jersey used by others; (e) receiving payments from residents in New Jersey, or businesses located in New Jersey, that are greater than $25,000.00; (f) deriving any income from any source or sources within New Jersey; or (g) conducting or engaging in any other activity, property or interrelationships with New Jersey as may be designated by the Director of the Division of Taxation. See N.J.S.A. 14A:13-15. Corporations not required to file a report are those which either received a certificate of authority to do business, or filed a timely tax return under the Corporation Business Tax Act, or Corporation Income Tax Act. See N.J. STAT. ANN. 14A:13-16. Reports must be filed annually by April 15th.
New Mexico: New Mexico currently requires Brokers/Lessors to register for Licensing under the NM Mortgage loan Company or Loan Broker Act with the Financial Institutions Division of the State of New Mexico. Banks with Brick and Mortar within the State of New Mexico are exempt. Prior to licensing applicants must submit the Following:
North Carolina: A broker of "loans of money or property…whether such agreement is styled as a loan, a lease or otherwise" must obtain a surety bond or establish a trust account in the amount of $25,000 and obtain a license. North Carolina General Statutes, sec. 66-106 (1992)
North Dakota: Brokers may not accept an advance fee unless the broker is licensed. North Dakota Century Code, 13-04. 1-09.1 (1993) Ohio: Department of Commerce, Division of Financial Institutions
(Certificate to engage in the business of a credit services organization in accordance with the provisions of Sections 4712.01 to 4712.14 of the revised code of Ohio, subject to all the provisions thereof and to the regulations of the division.) Ohio Department of Taxation requires a "Vendor's License" under provision 5739.17 of the Revised Code (...is hereby authorized to sell tangible personal property and selected services at the retail location specified below.) This also makes the lessor responsible for all taxes with penalties for not doing so.
Ohio: Ohio law provides that no person may engage in the business of lending money, credit, or choses in action in amounts of $5,000 or less, or exact, contract for, or receive, directly or indirectly, on or in connection with any such loan, any interest and charges that in the aggregate are greater than the interest and charges that the lender would be permitted to charge for a loan of money if the lender were not a licensee, without first having obtained a license from the Division of Financial Institutions. O.R.C. 1321.02. This rule is applied to any person, who by any device, subterfuge, or pretense, charges, contracts for, or receives greater interest, consideration, or charges than that authorized by such provision for any such loan or use of money or for any such loan, use, or sale of credit, or who for a fee or any manner of compensation arranges or offers to find or arrange for another person to make any such loan, use, or sale of credit. O.R.C. 1321.02.
Rhode Island: Any person who acts as a lender, loan broker, mortgage loan originator, or provides debt-management services must be licensed. R.I. Gen Laws § 19-14-2(a). The licensing requirement applies to each employee of a lender or loan broker. R.I. Gen Laws § 19-14-2(b). No lender or loan broker may permit an employee to act as a mortgage loan originator if that employee is not licensed. R.I. Gen Laws § 19-14-2(b) R.I. Gen. Laws § 19-14-2 (2012) No person engaged in the business of making or brokering loans shall accept applications from any lender, loan broker, or mortgage loan originator who is required to be licensed but is not licensed. R.I. Gen Laws § 19-14-2(d). There is an exemption from the licensing requirement for a person who makes not more than 6 loans in the state within a 12-month period. R.I. Gen Laws § 19-14.1-10. Persons lending money without a license are guilty of a misdemeanor and can be fined not more than $1,000, or imprisoned for not more than 1 year, or both; each violation constitutes a separate offense. R.I. Gen Laws § 19-14-26.
South Carolina: A broker of "a loan of money, a credit card, a line of credit or related guarantee, enhancement or collateral of any kind or nature" may not assess or collect an advance fee. South Carolina Code Annotated, sec. 34-36-10 91992)
Vermont: Commercial Loans
Ontario, Canada: General Requirements: 1. Branch Operation If a foreign corporation wants to carry on business via a branch operation, without a Canadian corporate entity, it may have to obtain a provincial license in each province in which it intends to carry on business. Pursuant to the Ontario Extra-Provincial Corporations Act R.S.O. 1990 c. E.27 ("EPCA"), a class 3 extra-provincial corporation (a corporation that has been incorporated or continued under the laws of a jurisdiction outside Canada) is prohibited from carrying on business in Ontario without a license under the Act [s. 4(2)]. Failure to comply with this licensing requirement can lead to a maximum fine of $2,000 for a person and $25,000 for a corporation [s. 20(1)]. Directors, officers and any person acting as a representative of the corporation can be fined up to $2,000 for authorizing, permitting or acquiescing to an offence by the corporation [s. 20(2)]. For the purposes of the EPCA, an extra-provincial business is considered to be "carrying on business in Ontario" if: a. It has a resident agent, representative, warehouse, office or place where it carries on its business in Ontario; b. It holds an interest, otherwise than by way of security in real property situate in Ontario; or c. It otherwise carries on business in Ontario [s. 1(2)]. This last category is a catchall. Recent case law in the area stresses that it is very much a fact-specific analysis hinging on the extent to which business is actually conducted in Ontario. 2. Incorporation: a foreign corporation can also choose to incorporate a subsidiary, either federally or provincially. If a subsidiary is incorporated provincially in Ontario, it may have to obtain an extra-provincial license to carry on business in other provinces. An Ontario-incorporated company does not have to obtain a license to carry on business in Quebec but does have to make annual information filings. 3. Bank Act If the financing company is a bank and intends to carry on business in Canada, it must obtain appropriate approval under the Bank Act 1991 c. 46. Whether an entity will be considered a bank under the Bank Act needs to be reviewed on a case-by-case basis, as there are a number of relevant factors.
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Sample of Usury Laws in United States
These states are particularly troublesome where usury
California: Willful violation of the finance lender licensing laws is punishable by a fine of up to $10,000 and imprisonment for up to one year. Violators can be subject to a civil penalty of $2,500 per violation.
Colorado: Charging over 45% interest is a felony and carries a minimum one year prison sentence and a fine of $1,000.00.
Florida: Charging an interest rate exceeding 25% is a second degree misdemeanor and charging an interest rate exceeding 45% is a third degree felony.
Kentucky: Failure to obtain the loan license when necessary is a misdemeanor. The statute also provides that any loan contract made in violation of this statute shall be void and the lender shall have no right to collect any principal, charges or recompense whatsoever.”
Maryland: Failure to obtain a required lending license is a misdemeanor subject to fines and/or imprisonment not exceeding 3 years.
Massachusetts: The criminal usury rate is 20%. Violation of the criminal usury statute is punished by imprisonment in the state prison for not more than ten years or by a fine of not more than ten thousand dollars, or by both such fine and imprisonment.
Michigan: Any person guilty of criminal usury may be imprisoned for up to 5 years and/or fined up to $10,000.00. Possession of usurious loan records may also result in imprisonment and a fine. If the borrower is a “business entity” but the lender is not a bank, credit union or similar institution, the maximum interest rate is 25% and that rate is subject to criminal penalties.
Minnesota: Any person who violates the loan licensing statute is guilty of a “gross misdemeanor” and loans made without a license are void. The borrower is not liable to pay any amount under the loan and can obtain a refund of any money paid on the loan.
Montana: Persons who fail to obtain a necessary license for the purchase of installment sale contracts are guilty of a misdemeanor and punishable by a fine and/or imprisonment.
New Jersey: In addition to its civil usury rates New Jersey’s criminal usury rates are: (a) 50% for to loans to corporations, limited liability companies and limited liability partnerships; and (b) 30% to other borrowers Violation of criminal usury laws subjects the lending party to criminal usury liability and a fine up to $250,000.
Rhode Island: The maximum interest rate any entity may charge may not exceed the greater of 21% per annum or 9% above a published index. Violation of the usury statute can result in forfeiture of the entire principal and interest and imprisonment for not more than five years.
Tennessee: Tennessee’s usury rate is a variable published “formula rate”. The willful collection of usury is a misdemeanor punishable by up to eleven (11) months, twenty-nine (29) days in jail or a fine not to exceed two thousand five hundred dollars ($2,500), or both.
State usury and licensing laws differ significantly from state to state. These are just a few examples. Your transactions may not be impacted by the laws referenced above even if you have customers in these states. Factors include your type of financing product, interest rate, type of customers, size of transactions, collateral and whether you are a bank, credit union, unaffiliated financing company or broker.
It is important to understand the risks as well as the rewards of entering into a transaction in a new state.
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This Day in History
1554 - Spanish explorer Francisco Vásquez, his health badly deteriorated from injuries and the toll of his strenuous travels, dies. He never found the fabled cities of gold that he had sought for decades. A quarter-century earlier, Coronado had explored much of the southwestern United States, leading his force of 300 Spaniards and 800 Indians northward from Mexico in search of the Seven Cities of Cíbola that were rumored to have walls made of gold and treasure houses filled with priceless gems. Arriving in the region that today straddles the border between New Mexico and Arizona, Coronado did actually find Cíbola. But after winning a brief battle against the native defenders, Coronado discovered he had conquered only a modest Zuni village built with walls of adobe mud, not gold. While he never found the golden cities he sought, Coronado did succeed in giving the Spanish and the rest of the world their first fairly accurate understanding of the inhabitants and geography of the southern half of the present United States.
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