Washington State Department of Financial Institutions

Consumer Loan Act FAQs

Answers to frequently asked questions regarding the Consumer Loan Act RCW 31.04 (CLA).

Terminology

MBPA - Mortgage Broker Practices Act RCW 19.146
CLA - Consumer Loan Act RCW 31.04


1) If a CLA company has a branch with an MBPA license, can the branch charge a broker fee on the loans the CLA company makes? Are the loans brokered by the branch excluded from the CLA company’s annual assessment?

No and No. When a CLA company licenses a branch that branch comes under the CLA company’s bond and the branch is considered part of the CLA company. Under RCW 31.04.105(4) a CLA company may not receive compensation as a mortgage broker in connection with any loan made by the licensee. The branch with an MBPA license will not be considered both a separate entity and the branch of a CLA company.

When a CLA company licenses a branch and the branch holds an MBPA license under a separate entity the CLA company cannot claim an exclusion from the annual assessment for the loans brokered under the MBPA license held by a separate entity. A CLA company can only exclude from the annual assessment loans brokered under an MBPA license held in the name of the CLA company.


2) Who can broker reverse mortgages in Washington?

License holders under both the CLA and MBPA can broker reverse mortgages.


3) What activities can a licensed mortgage broker engage in under the MBPA without triggering the license requirements of the CLA?

Broker – assisting borrowers, or holding yourself out as able to assist borrowers, in obtaining a residential mortgage loan. Loans close in the name of the lender.

Table Fund – "Table-funding" means a settlement at which a mortgage loan is funded by a contemporaneous advance of loan funds and an assignment of the loan to the person advancing the funds. The mortgage broker originates the loan and closes the loan in its own name but the funds are provided at the settlement by a lender to whom the closed loan is assigned. The mortgage broker does not own the loan at the end of the settlement. See also WAC 208-660-006.


4) What loan types are considered exempt from the CLA?

Business, commercial, agriculture, and organizational purpose lending is exempt from the CLA. See the Fair Debt Collection Practices Act, 15 U.S.C. Sec. 1603 (Truth in Lending), and Regulation Z that implements the act at 12 C.F.R. Part 226.3, for a description of each of these loan types.


5) Do Check Cashers and Sellers licensed under chapter 31.45 RCW have to license under the CLA?

No. Licensees under the Check Cashers and Sellers Act, chapter 31.45 RCW, do not need a license under the CLA.


6) Am I exempt from the MBPA  or CLA if I am approved by Fannie or Freddie?

No. Due to the changes brought about by SB 6471 (chapter 78, Laws of 2008), your approval by Fannie or Freddie does not exempt you from the licensing requirements of the MBPA or CLA for your brokering or lending activities. As a licensed mortgage broker you may act as a broker, table funder, or non-delegated correspondent. As a licensee under the CLA, you may fund loans with interest rates of no more than 25 percent, you may broker loans to other lenders, and you may purchase loans on the secondary market.


7) If I make a loan to a borrower in the form of a check, can I charge a fee to cash the check for them?

No. The CLA does not allow you or your affiliates to charge the borrower a fee for cashing a check that is the proceeds of a loan you made to the borrower. If you also hold a licensee under the Check Cashers and Sellers Act, that act also prohibits you from charging the borrower a fee to cash the check you gave them for the small loan. See WAC 208-630-551.

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