Kansas Supervised Lender Licensing
DBA International originally issued a member alert in 2009 regarding the licensing of debt buyers that purchased supervised loans in Kansas.
Kansas Attorney General Derek Schmidt has issued an opinion (Attorney General Opinion No. 2012-11) which emphasizes the requirement for licensure of assignees of supervised loans under the Kansas Uniform Consumer Credit Code. Kansas defines a supervised loan as a consumer loan, including a loan made pursuant to open end credit, with respect to which the annual percentage rate exceeds 12%.
In this important opinion, the Kansas Attorney General addressed the law of assignment and its relevance to the determination of the real party in interest for purposes of wage garnishment authority (Kansas prohibits wage garnishment on assigned accounts). The opinion made the distinction between “assignment” and “placement” and determined that under Kansas law, “assignment passes all of the assignor’s title or interest to the assignee, and divests the assignor of all right of control over the subject matter of the assignment.” Thus, an assignment was distinguished from mere “placement” for the purposes of collection, where no true assignment has been made since the creditor retains title and control of the debt.
The opinion is significant because in addition to clarifying the laws of assignment, the Attorney General went on to warn that a collection agent or agency “holding the legal interest of a consumer debt assigned by a creditor has no authority to collect that debt or enforce its terms unless licensed under K.S.A. 2011 Supp. 16a-2-301(1) (a) -(b) even though such collection agent or agency may qualify as the real party in interest….”
The opinion further highlights the Attorney General’s interest in those entities that are engaging in the practice of issuing wage garnishment on assigned accounts. It would be reasonable to assume that the Attorney General will be taking an active role in enforcement against those violating the anti-wage garnishment provision.
DBA International has also recently learned that the Kansas Office of the State Banking Commissioner – Division of Consumer and Mortgage Lending (OSBC) has issued investigatory letters to debt buyers that are not licensed or have failed to file the required notification in the state, as well as added a new disclosure requirement for new applicants and for renewing licensees, compelling the disclosure of names and contact information for any parties to whom the applicant or licensee has sold or assigned any Kansas supervised loans. The OSBC publishes lists of licensed and unlicensed entities on its website and has advised that new applicants and existing licensees making or taking assignment of supervised loans should ensure that the other parties to the transaction are licensed and have filed the proper notification and fees, or the new applicant / licensee may be liable for additional fees owed by the other unlicensed/unregistered party.
DBA International advises its members to review their operations and licensing status for compliance with Kansas supervised lending licensing and notification laws in light of the recent Attorney General opinion coupled with the increased investigative activities and additional disclosure requirements from the OSBC.
A copy of the opinion can be found at: http://ksag.washburnlaw.edu/opinions/2012/2012-011.pdf