Fees For Brokering Small Loans - Q3 2000

By the Division of Banks

A company would like to arrange small loans for a Massachusetts licensed finance company. The finance company is currently charging the borrower the established maximum rate of 23% as set out below. The company would like to prepare the finance company's finance contract and charge all consumers an application fee of $150, or 10% of the amount of the loan request whichever is greater. This application fee is non-refundable regardless of whether the loan does or does not close.

This company is a Massachusetts small loan licensee pursuant to Mass. Gen. Law chapter 140, section 96. The company may broker small loans in accordance with this license. Small loans arranged or made in the Commonwealth are subject to the Small Loan Rate Order set forth at 209 CMR 26.06 which provides for a maximum interest rate of 23% per annum plus administrative fee of $20 upon the granting the loan. Regardless of whether the application fee is included or excluded from the finance charge, the $150 fee would exceed the maximum allowable by the regulation.