OAR 137-020-0250: Loan Brokers and Misleading Activities

(1) Definitions: As used in this rule: (a) The definitions of terms set forth in ORS 646.605 are applicable; (b) “Advance Fee” means any consideration which is assessed or collected, prior to the closing of a loan, by a loan broker and includes, but is not limited to, payments to information providers as defined under ORS 759.700 et seq.; (c) “Advertise” means any form of solicitation including but not limited to newspaper, radio and television advertisements; (d) “Borrower” means a person obtaining or attempting to obtain a loan of money or a line of credit for personal use; (e) “Loan Broker” means any person who: (A) For or in expectation of consideration arranges or attempts to arrange or offers to find a loan of money or a line of credit; (B) For or in expectation of consideration assists or advises a borrower in obtaining or attempting to obtain a loan of money, a line of credit, or related guarantee, enhancement, or collateral of any kind or nature; or (C) Acts for or on behalf of a loan broker for the purpose of soliciting borrowers; (D) “Loan broker” does not include: (i) Any person making a direct loan to a consumer; (ii) Any bank or savings and loan association, trust company, building and loan association, credit union, mutual bank and savings bank, consumer finance company, securities broker-dealer, real estate broker or salesperson, attorney, Federal Housing Administration or Veterans’ Administration approved lender, mortgage broker or lender, or insurance company, provided that the person excepted is licensed by or approved by and subject to regulation or supervision of any agency of the United States or this state and is acting within the scope of the license or approval; and also excepting subsidiaries of licensed or chartered consumer finance companies, banks, credit unions, savings and loan associations; (iii) Mortgage brokers exempt from licensing under ORS Chapter 59 or as defined in ORS 59.015(10); (iv) Mortgage bankers as defined in ORS 59.015(9); (v) A person making a retail installment sales; (vi) Any person who has a contractual correspondent agreement with any qualified lender to deliver first or second mortgages secured by real estate; and (vii) Any employee of the above exempted persons. (f) “Principal” means any officer, director, partner, joint venturer, branch manager, or other person with similar managerial or supervisory responsibilities for a loan broker; (g) “Qualified Lender” means any bank or savings and loan association, trust company, building and loan association, credit union, consumer finance company, retail installment sales company, Federal Housing Administration or Veterans’ Administration approved lender or person who has available through a state or federally regulated financial institution $250,000 which the person has agreed to use to finance loans and who has executed a written contract with a loan broker according to this rule. (2) It is unfair or deceptive in trade or commerce for a loan broker to charge an advance fee unless the loan broker: (a) Prior to accepting any advance fees, provides to the prospective borrower a written contract which includes: (A) The names of the loan broker and any parent organizations under which the parent organization is doing business; (B) The length of time the loan broker has been in business; (C) A full and detailed description of the actual services that the loan broker will perform for the prospective borrower; (D) The number of contracts that the loan broker has entered into in the past 12 months; (E) The number of loans that have been made to consumers through contracts with the loan broker in the past 12 months and the dollar amount of those loans; (F) The name of the bank into which the borrower’s advance fees will be deposited; (G) Information concerning who the advance fees are paid to and for what service; (H) The names of the qualified lenders that are providing loans to the loan broker’s customers and the criteria that the qualified lenders are using to determine whether to make a loan to prospective borrowers referred to them by the broker; and (I) A provision outlining the refund requirement set forth in subsection (3)(a) of this rule. (b) Has a written contract from a qualified lender agreeing to accept or reject a loan within the time specified in this rule and agreeing to make a loan if an individual meets specified criteria set forth in the contract; (c) Notifies the borrower within 14 days of receipt of the application whether the loan has been accepted or rejected and provides the loan within seven days of acceptance; (d) Provides to the borrower, upon request, all correspondence and written materials with the qualified lender concerning the loan application; (e) Submits the borrower’s application within five days of receiving the application to a qualified lender with whom the loan broker has a written contract; (f) Place any advance fees in an escrow account; and (g) Complies with the provisions of section (3) of this rule. (3) It is unfair and deceptive in trade or commerce for a loan broker to: (a) Fail to refund within 48 hours of rejecting a loan the advance fees paid; (b) Advertise or represents that all or most borrowers will qualify for a loan or that persons with bad credit histories or no credit histories will qualify for a loan; (c) Fail to substantiate to the Oregon Department of Justice, within 14 days of a request, representations made regarding any offer to obtain a loan; (d) Spend any advance fees until the loan has been granted; and (e) Advertise loan brokering services without disclosing as a part of that advertisement: (A) Any material restrictions regarding obtaining a loan; (B) The qualified lenders who will provide the loans; (C) The dollar amount of loans which the loan broker has obtained for borrowers; (D) The cost of the service; and (E) The maximum period of time the loan broker will take to obtain a written commitment from a qualified lender to loan money.