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This opinion was issued during the fourth quarter of 1999.
Purchasing motor vehicle and non-motor vehicle installment contracts raises licensing issues under Massachusetts General Law 255B and 255D, respectively. When a company purchases defaulted motor vehicle and non-motor vehicle installment contracts, the company is purchasing the right to collect the deficiency owed to the original seller, and not the original amount owed on the installment contract. Therefore, the company need not obtain a license under the said chapters 255B and 255D. However, if the company were to purchase the original obligation, said chapters would apply.
Additionally, Massachusetts General Laws 140, sections 96-114, inclusive, the "Small Loans Act," requires entities to be licensed by the Commissioner of Banks if they are engaged, directly or indirectly, in the business of making loans of $6,000.00 or less and the interest and expenses paid on the loan exceed in the aggregate 12% per annum in the loan amount. Where a debtor is offered a credit card with the settlement amount as his/her balance and as payments are received the debtor acquires credit on the account that can be used for purchases or cash advances, and the company owns all receivables generated by the program, it is the position of the Division that such an arrangement constitutes the direct or indirect extension of credit. The Division would consider the company as engaging in the business of making small loans where the amount of extended credit is $6,000.00 or less and the interest and expenses paid on the loan exceed in the aggregate 12% per annum, of the loan amount. Accordingly, the company would need to be licensed as a small loan company to offer the credit program.