Signed into law by Governor Kevin Stitt on April 18, 2019, the Oklahoma Small Lenders Act restricts deferred deposit loans—also called payday loans— in which borrowers receive a small, high-interest loan and agree to pay it back upon receiving their next paycheck. These loans often lead to debt because many borrowers are unable to pay these loans back on time, leading to large interest payments.
SB 720 replaces payday loans with longer-term loans with the intent it will lead to a reduction in borrower debt. Those who provided short-term loans under the Oklahoma Deferred Deposit Lending Act can apply for a new license under the Small Lenders Act beginning January 1, 2020. All existing DDL licenses will expire on August 1, 2020.
What does the law mean for small lenders?
The Small Lenders Act creates new requirements for small lenders in the state. Lenders may not charge a periodic interest rate greater than 17% per month and maximum principal loans per borrower cannot exceed $1,500. Lenders must verify outstanding amounts by using a private database approved by the Department of Consumer Credit.
Lenders are prohibited from making a small loan if scheduled monthly payments exceed 20% of the borrower’s monthly income and must provide a written explanation of all fees and charges of the small loans to each customer.
How To Get A License Under the Small Lenders Act
To get a license under the Small Lenders Act, applicants have to meet the following requirements as determined by the Department of Consumer Credit:
- Pay $1,900 in fees for each location
- Submit an audited financial report including a balance sheet, statement of income or loss, and a statement of changes in financial position for the prior year
- Acquire a surety bond in the amount of $25,000 for each location, but no more than $200,000 for all locations under a single licensee
- Submit a criminal history record check for your directors, officers, and shareholders with at least 10% ownership in the company
Why Is A Surety Bond Required?
A surety bond is required as a means of protecting consumers from predatory practices. In the lending industry, where such practices can take place, consumers can make claims for damages if a lender violates the provisions of the Small Lenders Act. The provider of the surety bond will then pay out the money for the claim. Once the claim is settled, however, the lender is responsible for reimbursing the surety for all money paid.
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