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Opinion Summary of Selected Opinion 00-140

Date: 12/10/2000
Organization: Division of Banks
Docket Number: 00-140

This opinion was issued during the 4th quarter of 2000.

Table of Contents

Authority to do business in the Commonwealth by a Utah chartered loan corporation

A Utah chartered industrial loan corporation which is regulated by the Utah Department of Financial Institutions and whose deposits are insured by the Federal Deposit Insurance Corporation.(FDIC) is authorized to use the word "bank" in its name and has all the powers of a commercial bank except it cannot offer commercial checking accounts if it has more than $100 million in assets. It operates like any banking institution except for the absence of a local retail branch network. The loan corporation will not have a physical presence in the Commonwealth and all transactions with Massachusetts's residents will be offered via Internet or by mail. The activities to be conducted by the corporation will primarily include purchasing retail installments sales contracts, originating consumer loans, establishing interest-bearing checking accounts accepting deposits for savings accounts, offering certificates of deposit (CD's ) and issuing credit cards. All deposits and withdrawals from savings and checking accounts and CD's will be done via direct deposit or mail.

M.G.L.c.167 section 37 provides, in part, that a foreign corporation shall not solicit or receive deposits or transit any business whatsoever in the manner described I chapter 167, 167C through 167G, and 168 through 172(the Commonwealth's banking statutes, unless authorized to do so under the laws of the Commonwealth. Said section 37 also provides that such a corporation may not make use of any sign at the place where its business is transacted or use any written or printed materials having thereon any name or other words indicating that such a place or office is a bank. Additionally, the statute prohibits a foreign corporation from transacting business under any name or title which contains the word bank.

The loan corporation will not have a physical office in the state. Rather, it proposes to engage in the originating of loans, the purchasing of retail installment contracts, and accepting deposits at an out-of-state location via the Internet or by mail. The corporation is seeking to do business pursuant to applicable corporate statutes under the jurisdiction of the Commonwealth's Office of the Secretary of State. It is the position of the Division that the prohibition set forth in M.G.L chapter 167, section 37 are not applicable to these circumstances.

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