Assignee On A Supervised Loan Under K.S.A. 16a-2-301(2) Must Be Licensed In Order To Collect
05/23/08
Supervised lender made 2nd mortgage loan to homeowners. After homeowners defaulted, supervised lender assigned the note. New note holder was not a supervised lender licensed by the State of Kansas pursuant to the Kansas Uniform Consumer Credit Code (K.S.A. 16a-1-101, et seq. (KUCCC)). Thereafter, negotiations occurred between homeowners, 1st and 2nd note holders and IRS. After homeowners failed to fully perform agreement between all the parties, 2nd note holder filed suit to foreclose its mortgage. Trial court found 2nd note holder was an unlicensed supervised lender and therefore prohibited from collecting on the loan and foreclosing on the mortgage.
One of the underlying purposes of the KUCCC is to protect consumer buyers, lessees, and borrowers against unfair practices by some suppliers of consumer credit, having due regard for the interest of legitimate and scrupulous creditors. As a consumer loan, original 2nd mortgage lender’s loan was governed by the KUCCC. The loan was a “supervised loan” because it was a consumer loan with an annual percentage rate exceeding 12%. KUCCC further provides that only licensed supervised financial organizations may be in the business of taking assignments of and undertaking direct collection of payments from or enforcement of rights against debtors arising from supervised loans. Therefore, the district court properly interpreted K.S.A. 16a-2-301(2) to provide that assignee of a supervised loan had no authority to collect on the supervised loan or to enforce its terms by failing to become licensed under the KUCCC.
Independent Financial, Inc. vs. Wanna, Docket No. 98,761 (Ks.Ct.App. May 23, 2008).
For more general information, visit Community Banking.
Back to News
At Swanson Midgley, we listen to our clients' needs in order to help them plan for the future and achieve their goals.
