West Virginia Law Review

Document Type

Student Note


The supervised (small) loan is just one piece in the patchwork of transactions characterized as consumer credit. It is designed to increase the availability of credit for consumers in a form attractive to legitimate lenders who are permitted to issue loans with a low ceiling on the maximum principal amount, and a high ceiling on the permissible rate of interest. The other primary feature of the supervised loan, in trade off to its exemption from general usury requirements, is comprehensive regulation. As a result, supervised loan legislation is uniformly characterized by scrupulous licensing and oversight requirements. The one source perhaps most responsible for the current disposition of the supervised loan industry is the Uniform Small Loan Act. The U.S.L.A. was the brainchild of the Russell Sage Foundation which conducted an in depth analysis on why legitimate lenders were unable to successfully compete with illegitimate lenders in the early 1900's. The Foundation's work-product, the U.S.L.A., continues to leave its mark on contemporary supervised loan legislation: relaxed usury requirements accompanied by comprehensive regulation. In West Virginia, the U.S.L.A. was adopted with slight modification in 1933. Under the Act, the licensing and supervision of the supervised loan industry was, and continues to be, vested in the Commission on Banking. Within the past decade the supervised loan industry has come to be viewed as much more than a legislative response to abuses suffered by the small borrower and small lender at the hands of the illegal lender. Supervised loans are now but one member of the overall consumer credit pool. Consequently, the supervised lender is now subject to a body of federal laws applicable to all forms of consumer credit. Many states have, correspondingly, adopted comprehensive laws regarding the availability and marketing of consumer credit. Recent federal and state legislation has, in varying degrees, recognized the consumer as an integral part of the marketplace. West Virginia followed this trend with the enactment of the West Virginia Consumer Credit and Protection Act in 1974. Article IV of the WVCCPA supersedes the U.S.L.A. in the regulation of the supervised loan industry in West Virginia. Furthermore, the WVCCPA has made substantial changes in the law of West Virginia regarding consumers' rights following default, the debt collection process, and credit terms. It is therefore surprising that such a wholesale revamping of the supervised loan and overall consumer credit laws of the state has been attended with a modicum of interpretive litigation. With this in mind, this Note will draw from the WVCCPA and all relevant federal laws in an attempt to define the legal relationship between the consumer and supervised lender in West Virginia. This analysis will focus on some of the more significant aspects of the prenegotiation, negotiation and postnegotiation stages in the execution of a supervised loan in West Virginia prior to either party's resort to judicial remedies. Moreover, particular emphasis will be placed on the wealth of relevant federal law.



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