Wisconsin Expands Scope of Consumer Loan Licensing Provisions

In addition to the states that, similar to Washington, have adopted “true lender” provisions, several states have recently enacted changes to their consumer loan licensing laws that expand the scope of the licensing obligation to sweep additional parties participating in the origination, servicing, and sale of non-mortgage consumer loans under the scope of the state consumer loan licensing law. Wisconsin is set to follow this trend now that Governor Tony Evers has signed Senate Bill 668 into law.

The Wisconsin Licensed Lenders Law has required a license for nonbank lenders to make consumer loans of $25,000 or less that bear interest and finance charges that exceed 18% APR. Senate Bill 668 amends the Licensed Lenders Law to extend the licensing obligation to:

• Any person that purchases a consumer loan of $25,000 or less with APR exceeding 18%, even if the loan was originally made by a bank or other entity exempt from licensing under the law; and
• Servicers that directly collect payments from or enforce rights against customers related to those loans.

Senate Bill 668 also adopts a new exemption from licensing for any person who lends against or purchases consumer loans (or any portion of the outstanding balance of these loans) in connection with a securitization or other investment or financing transaction provided that the loans are serviced by a person licensed under the Licensed Lenders Law, and the books and records for the loans are maintained by a licensee. The exemption does not require that a licensee be the party that directly services the loans; instead, the licensee may contract with a subservicer without losing the benefit of the exemption.

In addition to amending the Licensed Lenders Law, Senate Bill 668 also amends several other Wisconsin consumer credit licensing laws. Highlights include the bill:

• Providing for the transition of licensed lender, payday loan, motor vehicle sales finance company, adjustment service company, collection agency, and community currency exchange licenses to the Nationwide Multistate Licensing and Registry (NMLS).
• Amending the Wisconsin Collection Agencies Act to incorporate an express exemption from collection agency licensing for licensed mortgage bankers operating in accordance with Wisconsin’s mortgage licensing law.
• Also amending the Collection Agencies Act to require licensed Wisconsin collection agencies to maintain a separate branch license for each place of business from which the licensee’s collectors engage in collection activity (other than the employee’s residence, provided that no physical records are maintained at the employee’s residence and the collection agency does not hold out the employee’s residence as an office of the collection agency to the public).

Senate Bill 668 provides that it will take effect on January 1, 2025. Companies engaged in consumer finance activity in Wisconsin should review whether Senate Bill 668 requires them to obtain a license or, if an existing licensee, to transition the license to the NMLS.