Licensing Requirements For Out-of-State Industrial Loan Company In The Commonwealth - Q3 1999

By the Division of Banks

Mass. Gen. Laws chapter 255E, section 2 requires that any person or entity engage in the business of originating residential mortgage loans in the Commonwealth obtain a mortgage lender's license from the Division. Said section 2 exempts certain institutions including banks organized under the laws of any other state. It is the position of the Division that an industrial loan company chartered under the laws of Utah would fall within the meaning of the word "bank" in said chapter 255E and would be exempt from mortgage lender licensing in the Commonwealth.

However, originating home equity lines of credit is governed by Mass. Gen. Laws chapter 140, section 96, the Small Loan Act. Said section 96 requires any person directly or indirectly engaging in the business of making loans of $6,000.00 or less and charging interest in excess of 12% per annum to obtain a small loan license from the Division. However, section 114A of said chapter 140 contains an exemption from the small loan licensing requirement for various types of state-chartered and federally-chartered institutions. The Division has interpreted this provision to be applicable to state-chartered institutions whether chartered by the Commonwealth or another state. Accordingly, an industrial loan company chartered under the laws of Utah and insured by the FDIC is exempt from the small loan licensing requirement. Such exempt institutions are subject to the Rate Order issued under the Act.