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On October 9, Florida introduced SB 146, which amends the Florida Consumer Finance Act (CFA), and joins other states that have passed laws characterizing certain nonbanks as the “true lender” of loans made through a bank partnership and treats all payments incident to the loan as interest, even if voluntary.

SB 146 would add a new “predatory loan prevention” section to the CFA that includes an “anti-evasion” provision prohibiting a person from evading the requirements of the CFA, including by making, offering, assisting, or arranging for a loan with a higher rate or payments than authorized by the CFA, regardless of whether the payments purport to be voluntary. SB 146’s reference to “voluntary” payments would subject voluntary payments such lenders’ use of tips or other gratuities to this anti-evasion provision.

AB 146 also adds a true lender provision that codifies both a predominant economic interest test, a special prohibition applicable to bank agents and servicers, and a totality of the circumstances test. In particular, if a consumer loan’s rate exceeds Florida’s consumer usury limit, a person is deemed to be a lender if any of the following applies:

  • The person holds, acquires, or maintains, directly or indirectly, the predominant economic interest, risk, or reward in the loan.
  • The person markets, solicits, brokers, arranges, facilitates, or services loans; and holds or has the right, requirement, or first right of refusal to acquire the loans, a share of receivables, or another direct or indirect interest in the loans or loan program.
  • The totality of the circumstances indicates that the person is the lender and that the transaction is structured to evade the requirements of this chapter. Circumstances that weigh in favor of a person being a lender subject to this section include, without limitation, whether the person:
    • Indemnifies, insures, or protects an exempt entity from any costs or risks related to the loan;
    • Predominantly designs, controls, or operates the loan program;
    • Holds the trademark or intellectual property rights in the brand, underwriting system, or other core aspects of the loan program; or
    • Purports to act as an agent or a service provider or in another capacity for an exempt entity while acting directly as a lender in other states.

SB 146 provides that a loan that is made in violation of the “predatory loan prevention” section is void and unenforceable. If enacted, SB 146 would take effect on July 1, 2024.

Putting It Into Practice: SB 146 is intended to curb the use of “bank-model” lending programs where a nonbank facilitates bank loans at rates in excess of the rates permitted under the CFA. If enacted, Florida would join Connecticut, Illinois, Maine, and New Mexico in having a “true lender” law that re-characterizes certain nonbanks that act as agents or service providers to bank lenders as the lender of the loan.