Nebraska Governor, Jim Pillen, signed into law Legislative Bill 92 on June 6, 2023, which amended the Nebraska Installment Loan Act (the “Act”) effective June 7, 2023 (the “Effective Date”).  As amended, the licensing requirement under the Act includes “any person that is not a financial institution who, at or after the time a loan [of $25,000 or less with rates exceeding the Nebraska general usury limit] is made by a financial institution, markets, owns in whole or in part, holds, acquires, services, or otherwise participates in such loan.”  The term “financial institution” is broadly defined to include all federally insured depository institutions.

Accordingly, on and after the Effective Date, marketers, servicers, and purchasers of such loans or limited interests in such loans are required to hold a Nebraska Installment Loan License.  The measure is aimed ensuring consumer protection, fair lending practices, and transparency in Nebraska’s loan industry, and is particularly aimed at further regulating the activities non-bank partners in bank partnerships.

Specifically, the amended Act requires the following entities to obtain an Installment Loan Company License:

• Marketers: Any individual or entity engaged in marketing or soliciting loan products , including companies involved in advertising, lead generation, or non-bank partners in bank partnerships referring loans to their bank partners.
• Servicers: Entities responsible for collecting loan payments, handling customer inquiries, and managing loan accounts.  Importantly, the licensing process for servicer involves meeting specific criteria set by regulatory authorities, including financial stability and compliance with servicing standards.
• Purchasers of Bank Loans, Participation Interests, or Other Limited Interests Therein: Entities that purchase covered loans, participation interests, or other limited interests in such loans, including non-bank partners that purchase such loans or interests therein from their bank partners.  Be advised that this differs from other state measures, such as New Mexico’s amended Small Loan Act, that are aimed at licensing persons that hold the “predominant economic interest” in covered loans.

All licensees, including the above-described entities, will be obligated to comply with state and federal laws and regulations governing the industry, including the Truth in Lending Act/Regulation Z, Fair Debt Collection Practice Act/Regulation F, and other relevant state and Federal consumer protection laws and regulations.  Licensees will be subject to periodic reporting and auditing to ensure ongoing compliance with licensing requirements and regulatory standards.

Nebraska joins a growing number of states, including Connecticut and Minnesota, that are seeking to further regulate bank partnerships.  Entities engaged in any business activities covered in Legislative Bill 92 are encouraged to promptly apply for this license and consult the bill’s full text to determine how such changes will affect their business operations.

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