§24.5 - other State Laws

• Jurisdiction: Washington

§24.5 OTHER STATE LAWS

Washington state regulation of lending also concentrates heavily on residential lending. A brief description of the various state laws (and areas that are not presently regulated at the state level) is set forth below.

(1) Areas not presently regulated

The following practices are not regulated under current Washington law:

Predatory lending. Washington at present does not have a "predatory lending" law of general applicability, although certain practices that are generally considered "predatory" are prohibited by the Mortgage Broker Practices Act, Chapter 19.146 RCW, and the Consumer Loan Act, Chapter 31.04 RCW, when committed by licensees under those acts. Likewise, certain practices that generally are considered "predatory" are regulated or prohibited by SHB 2770 (Laws of 2008, ch. 108, §§1- 25), discussed in §24.5(3)(g), below; and amendments to the foreclosure statutes, discussed in Chapter 20 (Mortgages) of this deskbook, are designed in part to combat servicing practices that the legislature has deemed to be "predatory."

Prepayment fees. Except for loans made under the Consumer Loan Act, and except for the restrictions on prepayment fees in connection with variable-rate loans imposed by SHB 2770 (Laws of 2008, ch. 108, §§ 1-25), discussed below, there is no statutory prohibition or regulation of prepayment fees in Washington. Prepayment provisions will be construed against the lender, and the lender will be able to collect a charge only under circumstances expressly authorized by the loan documents. Rodgers v. Rainier Nat'l Bank, 111 Wn.2d 232, 757 P.2d 976 (1988). It is an open question in Washington whether a prepayment fee imposed after default and acceleration should be analyzed as a liquidated damages provision.

Late charges and default interest. Neither late charges nor default interest are regulated by statute in Washington, except for loans made under the Consumer Loan Act. They are subject to a liquidated damages analysis.

(2) Laws applicable to commercial loans

RCW 48.30.260, concerning property insurance, discussed in §24.5(3)(a), below, and RCW 18.140.020, concerning appraiser licensing, discussed in §24.5(3)(c), below, apply to commercial as well as residential loans.

Chapter 19.36 RCW contains a statute of frauds applicable to commercial loans. The statute applies only to commercial loans and not consumer-purpose loans. The statute provides that a credit agreement is not enforceable against the creditor unless in writing and, provided a statutory notice is included in the loan documents, the rights and obligations of the parties "shall be determined solely from the written agreement, and any prior or contemporaneous oral agreements between the parties are superseded by, merged into, and may not vary the credit agreement." RCW 19.36.110. This is the case even if there has been partial performance of the oral agreement. Id. The form of the statutory notice under RCW 19.36.140 is to be as follows: "Oral agreements or oral commitments to loan money, extend credit, or to forbear from...