HARRISBURG, Pa. — Secretary of Banking Steve Kaplan announced this week that Internet payday lenders and other out-of-state companies that make consumer loans to Pennsylvania residents will need to be licensed by Feb. 1, 2009.

“Pennsylvania consumers should be protected by Pennsylvania laws regardless of where the company they're doing business with is located, whether it's down the street, in another state or on a Web site,” said Kaplan. “This new approach addresses the rising prevalence of Internet- based lending activity, especially internet payday lending, which has left Pennsylvania consumers vulnerable to practices that our laws were intended to prohibit.”

The Department of Banking had previously interpreted the state's Consumer Discount Company Act, to apply only to companies with a physical location or employees in the commonwealth. As a result, companies in other states were able to make loans to Pennsylvania consumers via the Internet or mail under terms that would not comply with Pennsylvania law.

The department's new position states that the CDCA applies to any company that lends to Pennsylvania consumers. The CDCA limits the interest and fees a non-bank company can charge for non-mortgage loans of $25,000 or less. If companies do not obtain a license from the Department of Banking by Feb. 1, they face fines and penalties, said Kaplan.