Appurtenant to my discussion on the legality of DeFI lending platforms – found here, I have compiled a state-by-state analysis of consumer lending laws. My argument here is that DeFI lending platforms, while permissionless and peer-to-peer, still fall under state and federal regulation and would be required to obtain the requisite licenses.
| Laws of the United States |
| The United States’ Truth in Lending Act, and the implementing Regulation Z thereunder, defines a “consumer” as a “natural person to whom consumer credit if offered or extended.” 12 CFR §226.2(11). Whereas, the Act defines “consumer credit” as “credit offered or extended to a consumer primarily for personal, family or household purposes.” 12 CFR §226.2(12). Conversely, Regulation Z defines a business or commercial loan as either an “extension of credit primarily for a business, commercial or agricultural purpose,” or “extension of creditor to other than a natural person …” 12 CFR §226.3(a)(1) & (2). The United States does not have a commercial lending license requirement. |
| Alabama |
| The State of Alabama Small Loan Act requires a license to extend a loan “in amounts less than one thousand five hundred dollars ($1,500) . . .” A.S. 5-18-4(a). The State does not have a commercial lending license requirement. |
| Arkansas |
| The State of Arkansas prohibits consumer installment loans. The State does not have a commercial lending license requirement. |
| Alaska |
| The State of Alaska Small Loan Act requires a license to extend a loan “in the amount or of the value of $25,000 or less …” A.S. 06.20.010(a). The State does not have an additional commercial lending license requirement. |
| Arizona |
| The State of Arizona does not require a license to extend a loan to “a person who is not regularly engaged in the business of making consumer lender loans . . .” A.R.S. 6-602(A)(3). The State does not have a commercial lending license requirement. |
| California |
| The State of California Financing Law defines a “finance lender” as “any person who is engaged in the business of making consumer loans or making commercial loans.” Cal Civ. Code § 22009. A “commercial loan” is further defined as “a loan of a principal amount of five thousand dollars ($5,000) or more … the proceeds of which are intended by the borrower for use primarily for other than personal, family or household purposes.” |
| Colorado |
| The State of Colorado exempts loans made to a “person other than an organization” from the requirement to obtain a license. C.R.S. 5-1-301. The State does not have a commercial lending license requirement. |
| Connecticut |
| The State of Connecticut Banking Law requires a license for the extension of a loan where the “amount of value is fifteen thousand dollars or less.” Conn Gen Stat §36a-555. The State does not have an additional commercial lending license requirement. |
| Delaware |
| The State of Delaware requires a license where a party “transact[s] the business of lending money in this State” Del Law §2202. |
| Florida |
| The State of Florida Consumer Finance Act prohibits “consumer finance loans” in an amount less than $25,000 without a license. F.R.S. 516.02(1). The State does not have a commercial lending license requirement. |
| Georgia |
| The State of Georgia Industrial Loan Acts prohibits loans in an amount less than $3,000 without a license. Ga. Code § 7-3-8. The State does not a commercial lending license requirement. |
| Hawaii |
| The State of Hawaii prohibits consumer installment loans. The State does not have a commercial lending license requirement. |
| Illinois |
| The State of Illinois Consumer Installment Loan Act requires a license for “making loans in a principal amount not exceeding $40,000” Ill Rev. Stat. 205 ILCS 670/1. The State does not have an additional commercial lending license requirement. |
| Indiana |
| The State of Indiana Uniform Consumer Credit Code requires a license for loans in an amount “not more than five hundred fifty dollars …” IC 24-4.5-7-104. The State does not have a commercial lending license requirement. |
| Idaho |
| The State of Idaho prohibits consumer installment loans. The State does not have a commercial lending license requirement. |
| Iowa |
| The State of Iowa Regulated Loan Act requires a license for loans “in the amount or of the value of twenty-five thousand dollars…” ICA 536.1. The State does not have an additional commercial lending license requirement. |
| Kentucky |
| The State of Kentucky Financial Services Code requires a license for loans “in the amount or of the value of fifteen thousand dollars ($15,000) or less…” KRS 286.4-420. The State does not have an additional commercial lending license requirement. |
| Kansas |
| The State of Kansas Uniform Consumer Credit Code requires a license for making a “consumer loan” which is defined as “the debt is incurred primarily for a personal, family or household purpose” K.S.A. 16a-1-301. The State does not have an additional commercial lending license requirement. |
| Louisiana |
| The State of Louisiana Consumer Credit Law specifically exempts from a license requirement any “credit transactions involving extensions of credit for business, commercial, or agricultural purposes. . .” La R.S. §§ 9:3510. The State does not have an additional commercial lending license requirement. |
| Maine |
| The State of Maine Consumer Credit Code specifically exempts from a license requirement any extensions of credit “primarily business, commercial or agricultural purposes . . .” 9 M.R.S. 1-101. The State does not have an additional commercial lending license requirement. |
| Maryland |
| The State of Maryland Consumer Loan Law specifically exempts from a license requirement any extension of credit “which does not exceed $6,000 . . .” Md. Code. Ann. 12-302. The State does not have an additional commercial lending license requirement. |
| Massachusetts |
| The State of Massachusetts Small Loan Action exempts from a license requirement any extension of credit “which does not exceed $6,000 . . .” Mass. Gen. Laws Ann ch. 140 96. The State does not have an additional commercial lending license requirement. |
| Michigan |
| The State of Michigan Regulatory Loan Act requires a license only for loans “made by a licensee to an individual for personal, family, or household use . . .” MCL 493.1. The State does not have an additional commercial lending license requirement. |
| Minnesota |
| The State of Minnesota Regulated Loan Act requires a license to “engage in the business of making loans of money, credit, goods or things in action, in an amount or of a value not exceeding [$100,000] . . .” Minn. Stat. 56.01. The State does not have an additional commercial lending license requirement. |
| Mississippi |
| The State of Mississippi “Small Loan Regulatory Law and Small Loan Privilege Tax Law does not apply to persons engaged in the business of extending credit to borrowers primarily for business or commercial purposes . ..” Miss. Code Ann. § 75-67-129. The State does not have an additional commercial lending license requirement. |
| Missouri |
| The State of Missouri Consumer Loan Act specifically exempts from a license “loans to corporations . . .” Mo. Rev. Stat 408.100. The State does not have an additional commercial lending license requirement. |
| Montana |
| The State of Montana Consumer Loan Act prohibits extending “consumer loans” without a license where a “consumer loan” is defined as “credit offered or extended to an individual primarily for personal, family or household purposes …” §32-5-103 MCA. The State does not have an additional commercial lending license requirement. |
| Nebraska |
| The State of Nebraska does not have a commercial lending license requirement. |
| Nevada |
| The State of Nevada Installment Loan and Finance Act requires a license for the extension of an “installment loan.” N.R.S. 675.035 |
| New Jersey |
| The State of New Jersey does not have a commercial lending license requirement. |
| New Hampshire |
| The State of New Hampshire Installment Loan Act requires a license for the making of loans “in the amount of $10,000 or less . . .” NH Rev Stat 399:A-1. The State does not have an additional commercial lending license requirement. |
| New Mexico |
| The State of New Mexico Small Loan Act requires a license for the making of loan in the amount of “five thousand dollars ($5,000) or less . . .” NMSA 58-15-3. The State does not have an additional commercial lending license requirement. |
| New York |
| The New York Banking Law requires a license for the making of a loan in the amount of “less than $50,000 if for commercial use . . .” N.Y. Banking Law § 340-342. The State does not have an additional commercial lending license requirement. |
| North Carolina |
| The State of North Carolina Consumer Finance Act requires a license for the making of a loan in the amount of “fifteen thousand dollars ($15,000) or less . . .” G.S. §53-166. The State does not have an additional commercial lending license requirement. |
| North Dakota |
| The State of North Dakota prohibits consumer installment loans. The State does not have a commercial lending license requirement. |
| Ohio |
| The State of Ohio Short Term Loan Act does not impose a license requirement for the making of a loan in the amount of of “five thousand dollars or less . . .” Ohio Rev. Code §1321.02. The State does not have an additional commercial lending license requirement. |
| Oklahoma |
| The State of Oklahoma Uniform Consumer Credit Code does not require a license for making loans “incurred primarily for a personal, family or household purpose . . .” Ok. Stat. Ann. §14A-3-104. The State does not have an additional commercial lending license requirement. |
| Oregon |
| The State of Oregon Consumer Finance Act does not require a license to extend a “consumer finance loan” which is defined as a “loan or line of credit that is unsecured or secured by personal or real property…” 54 Or. Rev. Stat. §725.010. The State does not have an additional commercial lending license requirement |
| Pennsylvania |
| The State of Pennsylvania does not have a commercial lending license requirement. |
| Rhode Island |
| The State of Rhode Island does not have a commercial lending license requirement. |
| South Carolina |
| The State of South Carolina Consumer Protection Code does not require a license to extend a “consumer loan” which is defined as a “debt incurred primarily for a personal, family or household purpose.” S.C. Code Ann. 37-3-104. The State does not have a commercial lending license requirement. |
| South Dakota |
| The State of South Dakota requires a license to engage in the “business of lending money,” which includes the “originating, selling, servicing, acquiring or purchasing of a loan involving a borrower who is a person …” SDCL 54-4-36. The definition, however, does not include the “sale of assets to a purchaser . . .” Id. The State does not have a commercial lending license requirement. |
| Tennessee |
| The State of Tennessee does not have a commercial lending license requirement. |
| Texas |
| The Texas Finance Code requires a license only where the loan is made for “primarily for personal, family, or household use . . .” Tex. Bus & Com Code 342.005. The State does not have an additional commercial lending license requirement. |
| Utah |
| The Utah Consumer Credit Code specifically exempts loans made “primarily for business, commercial, or agricultural purposes. . .” Utah Code Ann. §70C-1-202. The State does not have an additional commercial lending license requirement. |
| Vermont |
| The State of Vermont Licensed Lender Law requires a license to “ engage in the business of making loans of money, credit, goods, or things in action and charge, contract for, or receive on any such loan interest, a finance charge, discount, or consideration therefor . .” Vt. Stat. Ann. 2200 |
| Virginia |
| The State of Virginia Consumer Finance Act prohibits making loans to “individuals for personal, family, household or other nonbusiness purposes . . .” without a license. Va. Code Ann 6.2-1501. The State does not have a commercial lending license requirement. |
| Washington |
| The State of Washington Consumer Loan Act specifically exempts “any person making a loan primarily for business, commercial, or agricultural purposes . . .” R.C.W. 31.04.025. The State does not have a commercial lending license requirement. |
| West Virginia |
| The State of West Virginia Consumer Credit and Protection Act prohibits making loans to a “consumer” without a license. WV Code §46A-4-102. The State does not have a commercial lending license requirement. |
| Wisconsin |
| The State of Wisconsin Consumer Act specifically exempts making loans for “personal, family or household purposes . . .” from a license requirement. Wis. Stat. 421.301. The State does not have an additional commercial lending license requirement. |
| Wyoming |
| The State of Wyoming Consumer Credit Code specifically exempts specifically exempts from a license requirements loans not made “primarily for a personal, family or household purpose . . .” Wyo. Stat Ann. 40-14-204. The State does not have an additional commercial lending license requirement. |
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A former professional rugby player, Adam S. Tracy brings over twenty years’ experience as an attorney, consultant and dealmaker with a particular focus on cryptocurrency, digital products, payments and immersive corporate structures. As an accomplished executive and advisor to high risk merchants and stakeholders, Adam has proven himself as a results oriented, decisive leader with proven success advising early market entrants, technology adapters, as well as established participants across a wide range of verticals. Adam Tracy’s attack-first personality allows him to excel in dynamic, demanding environments including complex corporate negotiations, distressed environments and regulatory investigations.
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