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House Bill 557 — Payday lenders, licensing system

House Bill 557 — Payday lenders, licensing system

Parrish Miller
February 11, 2022

Bill Description: House Bill 557 would impose additional regulations on lenders. 

Rating: -1

Analyst Note: House Bill 557 shares some similarities with Senate Bill 1013 from 2021 and House Bill 400 from 2020. Even though those bills failed to become law, efforts continue to impose more regulations on lenders.

Does it give government any new, additional, or expanded power to prohibit, restrict, or regulate activities in the free market? Conversely, does it eliminate or reduce government intervention in the market?

Previous iterations of this concept attempted to change Idaho code to mandate that applicants for a "license to do business as a regulated lender" or a "payday loan license"  use the "nationwide mortgage licensing system and registry" or NMLSR.

House Bill 557 doesn't directly address the NMLSR, but it does amend multiple sections of Idaho code to require the use of "an electronic system of licensing as prescribed by the administrator." The NMLSR is a federal registry, and this language appears to give the administrator the authority to mandate its usage. The administrator referenced in this code is the director of the department of finance of the state of Idaho.


Existing law requires the administrator to consider the "financial responsibility, character, and fitness of the applicant, and of the officers and directors thereof (if the applicant is a corporation). ..." 

House Bill 557 would expand the list of those people who would have to undergo state scrutiny to include "managers, members, or other individuals in control of or with the authority to direct the affairs of the applicant."

Existing law also calls for the state to scrutinize an applicant's "competence, experience, integrity, and financial ability." If the applicant is an entity or corporation, this scrutiny is applied to "any person who is a member, partner, director, senior officer or twenty-five percent (25%) or more equity owner of the applicant."

House Bill 557 expands this list by replacing the reference to an equity owner with "other individuals in control of or with the authority to direct the affairs of the applicant."

It is not the proper role of government to use its subjective impression of the character, fitness, competence, experience, integrity, or financial ability of individuals or entities who are offering goods or services to willing customers. 

Licensing always represents government infringement on liberty, but conditioning licensing on vague concepts and subjective impressions can lead to various forms of discrimination and can deny individuals and businesses the right to engage in voluntary commerce. 


House Bill 557 amends several sections of Idaho Code to remove requirements that applicants for a "license to do business as a regulated lender" or a "payday loan license" keep on hand a certain amount of cash or other assets that could be readily converted into cash.


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