Pennsylvania Enacts Changes to Banking Laws

by Ballard Spahr LLP

Significant changes to Pennsylvania banking laws will take effect on December 24, 2012, as a result of three bills, known as the “Banking Law Modernization Package,” signed into law by Governor Tom Corbett. According to a letter dated November 14, 2012, from the Secretary of the Pennsylvania Department of Banking and Securities (Department) to Pennsylvania-chartered financial institutions, the goal “was to update, simplify and modernize” the state’s banking laws and “to reduce regulatory burden at the state level where possible given the increased regulatory demands of the federal [Dodd-Frank Act.]”  Highlights are described below.

Act 170 (H.B. 2368). Amendments to the Pennsylvania Banking Code of 1965 include:

  • Various sections dealing with lending authority are deleted, including Section 322 (known as the “Simplification and Availability of Bank Credit Act”), which substantially liberalized rate and fee authority for consumer loans when it was added to the Code in 1994. In place of those sections, Sections 303 and 506 are amended to deregulate interest rates on all direct and indirect, open-end and closed-end, consumer and commercial loans made by a bank or savings bank to an individual, a partnership, a limited liability company, or an unincorporated association. The new provisions improve on Section 322’s broad fee authority by eliminating any limit on late charge amounts (although a 15-day grace period is still required).

    Like Section 322, amended Section 303 provides that the section “shall govern” all direct and indirect loans. We expect that, as the Department did with Section 322, it will interpret such language to provide optional authority under which banks can make seller-assisted loans without compliance with Pennsylvania’s Goods and Services Installment Sales Act (GSISA) or Home Improvement Finance Act (HIFA).

    Also like Section 322, amended Section 303 contains specific requirements for closed-end motor vehicle loans made by banks through dealers acting as intermediaries. The Department had interpreted Section 322 to authorize banks to make dealer-assisted direct motor vehicle loans without compliance with Pennsylvania’s Motor Vehicle Sales Finance Act (MVFSA). We expect the Department to interpret Section 303 similarly. But we also expect that the Department will continue to require compliance with the MVFSA, GSISA or HIFA in bank transactions structured as the purchase of an installment sales contract from a seller or dealer.
  • The threshold for when state-chartered banks must seek approval for investments in bank premises and fixed assets is increased to more than 100% (from more than 25%) of capital, surplus, undivided profits and capital securities.
  • To satisfy Dodd-Frank requirements for engaging in derivative transactions, credit exposure from such transactions is added to the categories of indebtedness covered by the Code's limits on indebtedness to one customer.
  • The restriction limiting the number of beneficiaries on a deposit account to two is removed.
  • New prohibitions on persons who may serve as a bank director are added.
  • Engaging in unlawful banking or trust activity is deemed a felony rather than a misdemeanor, and penalties are significantly increased.

Act 171 of 2012 (H.B. 2369). Amendments to the Department of Banking and Securities Code include:

  • Limits on disclosure of formal enforcement actions against institutions are changed to permit the Department to disclose such actions. (According to the Secretary's letter, this will also allow institutions “to disclose the actions as necessary to the public as well as bank vendors, such as auditors, without requesting Department approval.”)
  • Subsidiaries of regulated institutions are added to the entities over which the Department has supervisory and enforcement authority.
  • The Department is authorized to assess civil penalties of up to $25,000 for each violation against an institution or institution-related individuals for a violation of any law or order or any unsafe and unsound practice or breach of fiduciary duty.
  • New provisions are added addressing the authority of the Pennsylvania Attorney General and other state agencies to undertake administrative proceedings and initiate lawsuits against state and federally-chartered institutions.

Act 172 (H.B. 2370). Amendments to the Loan Interest and Protection Law (the general usury law also known as Act 6) include:

  • Certain of the disclosure requirements for variable rate mortgage loans are removed.
  • Banks and savings banks are expressly allowed to take advantage of the deregulated rates permitted by the Banking Code.

Ballard Spahr’s Consumer Financial Services Group is nationally recognized for its guidance in structuring and documenting new consumer financial services products, its experience with the full range of federal and state consumer credit laws, and its skill in litigation defense and avoidance. For more information, please contact CFS Practice Leader Alan S. Kaplinsky at 215.864.8544 or, CFS Practice Leader Jeremy T. Rosenblum at 215.864.8505 or, John L. Culhane, Jr., at 215.864.8535 or, or Mark J. Furletti at 215.864.8138 or

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

© Ballard Spahr LLP | Attorney Advertising

Written by:

Ballard Spahr LLP

Ballard Spahr LLP on:

Readers' Choice 2017
Reporters on Deadline

"My best business intelligence, in one easy email…"

Your first step to building a free, personalized, morning email brief covering pertinent authors and topics on JD Supra:
Sign up using*

Already signed up? Log in here

*By using the service, you signify your acceptance of JD Supra's Privacy Policy.
Custom Email Digest
Privacy Policy (Updated: October 8, 2015):

JD Supra provides users with access to its legal industry publishing services (the "Service") through its website (the "Website") as well as through other sources. Our policies with regard to data collection and use of personal information of users of the Service, regardless of the manner in which users access the Service, and visitors to the Website are set forth in this statement ("Policy"). By using the Service, you signify your acceptance of this Policy.

Information Collection and Use by JD Supra

JD Supra collects users' names, companies, titles, e-mail address and industry. JD Supra also tracks the pages that users visit, logs IP addresses and aggregates non-personally identifiable user data and browser type. This data is gathered using cookies and other technologies.

The information and data collected is used to authenticate users and to send notifications relating to the Service, including email alerts to which users have subscribed; to manage the Service and Website, to improve the Service and to customize the user's experience. This information is also provided to the authors of the content to give them insight into their readership and help them to improve their content, so that it is most useful for our users.

JD Supra does not sell, rent or otherwise provide your details to third parties, other than to the authors of the content on JD Supra.

If you prefer not to enable cookies, you may change your browser settings to disable cookies; however, please note that rejecting cookies while visiting the Website may result in certain parts of the Website not operating correctly or as efficiently as if cookies were allowed.

Email Choice/Opt-out

Users who opt in to receive emails may choose to no longer receive e-mail updates and newsletters by selecting the "opt-out of future email" option in the email they receive from JD Supra or in their JD Supra account management screen.


JD Supra takes reasonable precautions to insure that user information is kept private. We restrict access to user information to those individuals who reasonably need access to perform their job functions, such as our third party email service, customer service personnel and technical staff. However, please note that no method of transmitting or storing data is completely secure and we cannot guarantee the security of user information. Unauthorized entry or use, hardware or software failure, and other factors may compromise the security of user information at any time.

If you have reason to believe that your interaction with us is no longer secure, you must immediately notify us of the problem by contacting us at In the unlikely event that we believe that the security of your user information in our possession or control may have been compromised, we may seek to notify you of that development and, if so, will endeavor to do so as promptly as practicable under the circumstances.

Sharing and Disclosure of Information JD Supra Collects

Except as otherwise described in this privacy statement, JD Supra will not disclose personal information to any third party unless we believe that disclosure is necessary to: (1) comply with applicable laws; (2) respond to governmental inquiries or requests; (3) comply with valid legal process; (4) protect the rights, privacy, safety or property of JD Supra, users of the Service, Website visitors or the public; (5) permit us to pursue available remedies or limit the damages that we may sustain; and (6) enforce our Terms & Conditions of Use.

In the event there is a change in the corporate structure of JD Supra such as, but not limited to, merger, consolidation, sale, liquidation or transfer of substantial assets, JD Supra may, in its sole discretion, transfer, sell or assign information collected on and through the Service to one or more affiliated or unaffiliated third parties.

Links to Other Websites

This Website and the Service may contain links to other websites. The operator of such other websites may collect information about you, including through cookies or other technologies. If you are using the Service through the Website and link to another site, you will leave the Website and this Policy will not apply to your use of and activity on those other sites. We encourage you to read the legal notices posted on those sites, including their privacy policies. We shall have no responsibility or liability for your visitation to, and the data collection and use practices of, such other sites. This Policy applies solely to the information collected in connection with your use of this Website and does not apply to any practices conducted offline or in connection with any other websites.

Changes in Our Privacy Policy

We reserve the right to change this Policy at any time. Please refer to the date at the top of this page to determine when this Policy was last revised. Any changes to our privacy policy will become effective upon posting of the revised policy on the Website. By continuing to use the Service or Website following such changes, you will be deemed to have agreed to such changes. If you do not agree with the terms of this Policy, as it may be amended from time to time, in whole or part, please do not continue using the Service or the Website.

Contacting JD Supra

If you have any questions about this privacy statement, the practices of this site, your dealings with this Web site, or if you would like to change any of the information you have provided to us, please contact us at:

- hide
*With LinkedIn, you don't need to create a separate login to manage your free JD Supra account, and we can make suggestions based on your needs and interests. We will not post anything on LinkedIn in your name. Or, sign up using your email address.