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Loan disclosures & state law

Question: We are interested in making loans in a neighboring state but we do not have any branches there. Are there any laws we should be concerned about? Do we have to give any special disclosures?

Answer: Federal law - and all of the compliance regulations - do not impose any special requirements on out-of-state lending. The fact that you don't have a branch in the state does not prohibit you from making the loan. However, by crossing into a new state, you should check that state's law. State laws may deal with issues ranging from usury rates to perfecting security. You need to know about property ownership law in the state.

You also need to be aware of any special consumer protection laws in the state. Many states have "mini-FTC" laws. These may prohibit certain acts or practices such as debt collection procedures or onerous contract clauses. They may also require certain affirmative acts such as disclosures.

Copyright © 2002 Compliance Action. Originally appeared in Compliance Action, Vol. 7, No. 10, 8/02

First published on 08/01/2002

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