On June 29, Connecticut’s Governor, Ned Lamont, signed a bill, SB 1033, described as “Various Revisions to the Banking Statutes” into law. The changes brought by the new bill include an increase of the small loan limit to $50,000, an expansion of the Small Loan Act (SLA) licensure duties, a codified method for establishing the “true lender” under SLA terms, and a broader interpretation of a small loan.
Previously, the small loan limit was set at $15,000. The new law has more than tripled that amount, allowing for greater financial flexibility for both lenders and borrowers. Potentially, this increase will make small loans more attractive to those in need of larger amounts of instant funding.
The bill also extends the SLA’s scope to cover brokering and facilitating activities. The activities included under this broader remit have yet to be specified, but it’s expected that this addition will help streamline the small loan process.
Another significant implication of the new bill is the introduction of a “predominant economic interest test”. This is a tool to establish the “true lender” under the SLA. The introduction of this test will likely add greater transparency and accountability to the small loan process.
The fourth change brought about by SB 1033 is an expanded definition of “small loan”. Before the enactment of the bill, the term “small loan” only applied to certain types of loans. Now, it encompasses a wider range of financial agreements.
These alterations made by Governor Lamont sign indicate a move toward more inclusive and accessible banking regulations, seeking to manage and mitigate the potential risks and exploitation within the small loan arena.
Also noteworthy is the Connecticut Department of Banking’s recent issuance of guidance that ranges the Small Loan Act to cover earned wage access products. This can be construed as an attempt at making wage access products more inclusive and efficient.
For a more detailed examination of the bill and its implications, one can refer to this detailed analysis provided by Troutman Pepper, a leading U.S. law firm specializing in transformative transactions, litigation, and governmental regulatory matters.