"What? Me Worry?
State Licensing and Other Laws

That You Should Know About

...But Probably Don't"

Barry Marks

Marks & Weinberg, P. C.

205.251.8303

This handout includes excerpts from an article co-authored by Bill Phillips of Marks & Weinberg which will be published in the spring issue of the “Journal of Equipment Lease Financing” and from 50-state surveys of licensing and usury laws prepared for clients.

  1. Dodd-Frank: Effect on banks and also non-banks.As widely reported and discussed, recent federal legislation eliminated the federal preemption of state law previously enjoyed by national bank leasing subsidiaries. We expect state attorneys general and regulators to increase scrutiny of ALL equipment finance companies in several areas. Moreover, civil suits (including class actions) and defenses to enforcement based on state law are more likely to result from the legislation.
  1. These laws include licensing and usury laws, which are often interrelated.
  2. In some states, there are criminal as well as civil sanctions
  1. Cost-benefit analysis. Lessors will need to do a cost benefit analysis given the expense and financial impact of complying with state law.Consider state laws involving the following penalties:
  1. Criminal penalties, including fines and jail time
  2. Forfeiture of entire loan
  3. Forfeiture of interest only
  4. Damages, including multiples of overcharges
  5. Increased scrutiny – once you are identified as failing to have your license, what else will the state want to know about?
  1. Licensing and usury variables:
  2. Consumer v. Business
  3. Be sure it’s clear
  4. Small deals may be treated as consumer regardless of the use of the equipment –see below
  5. Criminal v. Civil
  6. Criminal Usury – Colorado, Florida
  7. Other penalties
  8. Choice of Law
  9. Legitimacy of selection – what is the relationship to the selected state?
  10. Policy/ Restatement of Conflicts of Law – A judge does not have to recognize your choice of law
  11. Washington state case
  12. Does it ever affect criminal liability?
  13. Evidence of criminal intent?
  14. Legitimacy of selection ?
  15. Forum Selection makes choice stronger
  16. Usury Savings Clause
  17. Does it have any effect on licensing?
  18. Is it evidence of bad intent?
  19. Are you willing to forego interest?
  20. Wording?
  21. Equipment Type
  22. Motor Vehicles – ELFA
  23. Leases and loans are often both covered
  24. Anti-curbstoning laws (Miss, La.) – requires a place of business in the state.
  25. Interest rate may be affected and relevant
  26. Licensing for disposal or operation of certain equipment, such as computers and hazardous waste-producing items and medical equipment
  27. Size of Transaction
  28. Considered consumer – Florida ($25,000)
  29. License required – DC ($25,000)
  30. Generally, $35,000 safe, below that…?
  31. Type of Transaction
  32. Leases generally do not have “interest”
  33. But beware fees (in loans, too)
  34. Security deposits
  35. Commitment fees, etc.
  36. Lease intended as security?
  37. Retail Installment Sales – vendor programs carry both licensing and usury implications
  38. “Purchase” or originating?
  39. Private Label?
  40. What about financing leases?
  41. Time/Price Differential
  42. Tennessee
  43. Does including this language make the transaction a retail sale for other legal purposes such as licensing and defense to hell or high water?

Selected State Laws of Note:

  1. Connecticut

Motor Vehicle Leases: Conn. Gen. Stat. § 14-15(a) provides “Any person, firm or corporation before engaging in the business of leasing or renting motor vehicles without drivers in this state and any person, firm or corporation which is the lessor of or rents any vehicle required to be registered under the provisions of section 14-15a shall make a sworn application to the Commissioner of Motor Vehicles for a license to engage in such leasing or renting.”

Installment Sale Contracts: The state requires a license to operate as a “sales finance company” Conn. Gen. Stat. § 36a-536 Under Conn. Gen. Stat. § 36a-535(2) a sales finance company is “any person engaging in this state in the business, in whole or in part, of acquiring retail installment contracts from retail sellers, or installment loan contracts from the holders thereof, by purchase, discount or pledge, or by loan or advance to the holder of either on the security thereof, or otherwise, but does not include a bank, out-of-state bank, Connecticut credit union, federal credit union, or out-of-state credit union, if so engaged.”

  1. Florida

Loans: The definition of a “consumer finance loan” in Florida includes any loan for an amount less than $25,000 at a rate of interest greater than 18% per year. Fla. Stat. § 516.01(2). An entity may not make such loans without a license. Id. § 516.02(1). There are no licensing requirements for commercial lenders making commercial loans in amounts exceeding $25,000. The Florida licensing authority is the Office of Financial Regulation. We contacted the OFR office and the representative confirmed that the licensing requirements for “consumer finance loans” applies to all loans under $25,000 including commercial loans. Violation of this licensing statute is a misdemeanor in the first degree punishable by up to one year in prison and a fine of $1,000. Fla. Stat. §§ 516.19, 775.082, 775.083

Installment Sale Contracts: In order to originate or purchase installment sale contracts in Florida a lender must a Sales Finance Company license. Fla. Stat. § 520.52(1) provides “[a] person may not engage in the business of a sales finance company or operate a branch of such business without a license as provided in this section; however, a bank, trust company, savings and loan association, or credit union authorized to do business in this state is not required to obtain a license under this part.” A sales finance company is defined as “a person engaged in the business of purchasing retail installment contracts from one or more sellers. The term includes, but is not limited to, a bank or trust company, if so engaged. The term does not include the pledge of an aggregate number of such contracts to secure a bona fide loan thereon.” Fla. Stat. § 520.02Any person who engages in the business of a sales finance company without obtaining a license is guilty of a misdemeanor of the first degree, punishable by up to one year in prison and a fine of $1,000.Fla. Stat. § 520.57, 775.082, 775.083

See:

Usury: In general, the maximum rate of interest is 18% simple interest. Fla. Stat. §§ 687.02 687.03(1). If the loan is for an amount in excess of $500,000, the maximum rate of interest is 25%. Any person charging an interest rate exceeding 25% is guilty of usury misdemeanor and exceeding 45%, usury felony). Id. §§ 687.02(1), 687.03(1), 687.071(2), 687.071(3).

  1. Nevada

Loans: Nev. Rev. Stat. § 675.060(1) states that “[n]o person may engage in the business of lending in this state without first having obtained a license from the commissioner for each office or other place of business at which the person engages in such business.” A person is considered to be engaging in business within the state if he “[s]olicits loans in this state or makes loans to persons in this state.” Id. 675.060 (2)(a). The statue includes the following in its explanation of “engaging in the business of lending in this State”: solicits loans in this State or makes loans to persons in this State, unless there are isolated, incidental or occasional transactions.” NRS 675.040 provides for exemptions to the provisions of that chapter of the statues including banks.[1] It does not specifically exempt subsidiaries of banks. “Any person and the several members, officers, directors, agents and employees thereof who violate or participate in the violation of any provision of NRS 675.060 are guilty of a misdemeanor.” NRS. § 675.470. This license is called the Installment Loan Company License and is obtained from the Nevada Department of Commerce & Industry – Financial Institutions Division.

  1. New York

Loans: If an entity charges, contracts for, or receives a greater rate of interest than the lender would otherwise be permitted to charge under state usury law on a business purpose loan for $50,000 or less, a lending license is required. A lending license is not required if the lender charges a rate of interest that is within the statutory maximum amount under otherwise applicable state usury law. N.Y. Banking Law § 340. The basic usury rate is 16% per annum although it is higher for loans in excess of $250,000. Licensing provision is applicable to persons or entities that solicit loans in the amounts prescribed above within New York and, in connection with such solicitation, make loans to individuals that reside in New York.

Usury: The maximum rate of interest in New York is 16%, except where indicated otherwise in the laws of the state. N.Y. Gen. Oblig. §5-501(1) and N.Y. Banking Law §14-a.[2] For loansfor an amount exceeding $250,000, the maximum rate of interest is 25%, and a rate exceeding that amount is subject to criminal penalties. N.Y. Gen. Oblig. Law § 5-501(6) (a) and N.Y. Penal Law §§ 190.40 and 190.42. If a loan or forbearance is in the amount of $2,500,000 or more, there is no limitation on the maximum rate of interest, and the criminal usury provisions of the Penal Law do not apply. N.Y. Gen. Oblig. Law § 5-501(6) (b) and N.Y. Penal Law §§ 190.40 and 190.42.

Interest charged on loans or forbearances made to corporations for business or commercial purposes in the amount of $100,000 or more and secured in compliance with the UCC Article 9 is not subject to any limitations or criminal usury law, if on the date when the interest is charged or accrued, such interest is not greater than 8 percentage points above the prime rate. N.Y. Gen. Oblig. Law § 5-526. Corporations and limited liability companies cannot assert a defense of usury N.Y. Gen. Oblig. Law §5-521(1) & N.Y. Limited Liability Company Law §1104. but they may assert the defense of criminal usury if the rate exceed the criminal usury rate. N.Y. Penal Law § 190.40.

In short: The civil usury rate is 16% but corporations and limited liability companies cannot plead a usury defense if the rate is above 16% and below 25%. The criminal usury rate is 25%. However, for personal property-secured loans to corporations the usury rate is the greater of 25% or 8% above the prime rate.

New York lenders and those choosing to apply New York law should also note that under New York law, ausurious note is void and the lender forfeits theentire loan balance. Gen.Oblig. §5-511(1).

BARRY S. MARKS

Marks & Weinberg, P.C.

Barry S. Marks has concentrated his practice in the areas of equipment leasing and commercial lending and finance since 1977 and is a Certified Lease Professional (CLP).

Legal PublicationsAuthor - Chapters in Matthew Bender's Equipment Leasing and the Practicing Law Institute's Equipment Leasing - Leveraged Leasing treatises. Co-Author - Power Tools for Successful Leasing; Technology Leasing: A Lessee Toolkit;Power Tools for Small Ticket Leasing (all from Leasing Power Tools Press and on Amazon.com).

Professional Honors & ActivitiesListed in The Best Lawyers in America® since 2005; Best Lawyers in Alabama and Alabama Super Lawyers; Director Emeritus, National Association of Equipment Leasing Brokers; Boards of Editors, Journal of Equipment Lease and Financing and LJN (formerly Leader's) Equipment Leasing Newsletter; Past Member, Legal Committee of the Equipment Leasing and Finance Association; Bill Granieri Award for Education in Equipment Leasing (1999); Member, Alabama State Bar, The Florida Bar and State Bar of Georgia.Certified Lease Professional (CLP).

EducationEmoryUniversity, B.A., 1974, magnacum laude;University of Florida, J.D., 1976, with high honors; EmoryUniversity, LLM. (Taxation), 1985.

PersonalWhen he is not working, Barry finds time to write poetry and the occasional short story. He is a past president of the Alabama State Poetry Society and was Alabama’s Poet of the Year in 1999. Barry has published two books of poetry, Possible Crocodilesis available at and Sounding, poems dealing with grief and survival, is available at Both are on Amazon.com.

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[1]675.040. Applicability of chapter; exemptions.

This chapter does not apply to:

1. Except as otherwise provided in NRS 675.035, a person doing business under the authority of any law of this State or of the United States relating to banks, national banking associations, savings banks, trust companies, savings and loan associations, credit unions, development corporations, mortgage brokers, mortgage bankers, thrift companies, pawnbrokers or insurance companies.

2. A real estate investment trust, as defined in 26 U.S.C. § 856.

3. An employee benefit plan, as defined in 29 U.S.C. § 1002(3), if the loan is made directly from money in the plan by the plan's trustee.

4. An attorney at law rendering services in the performance of his or her duties as an attorney at law if the loan is secured by real property.

5. A real estate broker rendering services in the performance of his or her duties as a real estate broker if the loan is secured by real property.

6. Except as otherwise provided in this subsection, any firm or corporation:

(a) Whose principal purpose or activity is lending money on real property which is secured by a mortgage;

(b) Approved by the Federal National Mortgage Association as a seller or servicer; and

(c) Approved by the Department of Housing and Urban Development and the Department of Veterans Affairs.

7. A person who provides money for investment in loans secured by a lien on real property, on his or her own account.

8. A seller of real property who offers credit secured by a mortgage of the property sold.

9. A person holding a nonrestricted state gaming license issued pursuant to the provisions of chapter 463 of NRS.

10. A person licensed to do business pursuant to chapter 604A of NRS with regard to those services regulated pursuant to chapter 604A of NRS.

[2] Interest rate includes any and all amounts paid or payable, directly or indirectly, by any person, to or for the account of the lender in consideration for the making of a loan or forbearance. Id. N.Y. Banking Law § 14a.