On October 9, a Florida state senator introduced SB 146, which would add a new section to the Florida Consumer Finance Act (CFA), attempting to curb evasion of the CFA. SB 146 would treat all payments incident to the loan as interest, even if voluntary, and would adopt both predominant economic interest and totality of the circumstance tests for true lender purposes. SB 146 follows other states’ attempts to address true lender issues, including legislation passed in Minnesota, discussed here, and Connecticut, discussed here.

SB 146 provides that a person must not attempt to evade CFA’s requirements, 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 express reference to “voluntary” payments seems intended to capture certain lenders’ use of tips or other gratuities, even though tips and gratuities are not enumerated in the same manner that they are in either Connecticut’s recent amendment to the Small Loan Act, discussed here, or regulatory guidance related to certain Earned Wage Access products in Maryland, discussed here.

SB 146 also takes direct aim at “bank-model” lending arrangements where a nonbank facilitates bank loans at rates in excess of the rates permitted under the CFA (covered loans). In this regard, the bill codifies both a predominant economic interest test, a special prohibition applicable to bank agents and servicers, and a totality of the circumstances test. The predominant economic interest test provides that a person will be deemed a consumer loan lender if the person directly or indirectly holds, acquires, or maintains the predominant economic interest, risk, or reward in a covered loan (even if the person does not act as agent or servicer for the actual lender or borrower). The special prohibition for agents and servicers treats the agent or servicer as the lender if it both markets, solicits, brokers, arranges, facilitates or services a covered loan and holds or has the right, requirement or right of refusal to acquire the loan, receivables or another direct or indirect interest in the loan, no matter how small and even if another party has a much larger economic stake in the loan.

A person is also a consumer loan lender if the totality of the circumstances show that the person is the lender and the transaction is “structured to evade” the requirements of the CFA. Circumstances indicating a person is the lender, include a scenario where such person:

• Indemnifies, insures or protects an exempt entity from any 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 service provider for an exempt entity while acting directly as a lender in other states.

These “bank model” provisions of SB 146 are all vulnerable to a preemption challenge under federal banking laws.

A consumer finance loan made in violation of SB 146 is void and uncollectible.

SB 146 was sent to committees for review on October 17. If passed, it will take effect on July 1, 2024.