SENATE FILE 113

BY  BOLKCOM, DVORSKY, HOGG, SENG, HATCH, HORN, DEARDEN, FRAISE, BLACK, KIBBIE, BEALL, QUIRMBACH, RAGAN, WILHELM, JOCHUM, and DANIELSON

A BILL FOR

An Act modifying provisions relating to the regulation of delayed deposit services businesses, providing penalties, and including effective date provisions.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

   Section 1.  Section 533D.2, subsection 2, unnumbered paragraph 1, Code 2011, is amended to read as follows:
   “Delayed deposit services business” means a person who for a fee finance charge does either of the following:
   Sec. 2.  Section 533D.2, Code 2011, is amended by adding the following new subsection:
   NEW SUBSECTION.  2A.  “Finance charge” means all charges payable directly or indirectly as a condition of a delayed deposit service transaction, including interest, fees, service charges, renewal charges, credit insurance premiums, and any ancillary product sold in connection with a delayed deposit service transaction.
   Sec. 3.  Section 533D.9, Code 2011, is amended to read as follows:
   533D.9Fee Finance charge restriction —— required disclosure.
   1.  A licensee shall not charge a fee in excess of fifteen dollars on the first one hundred dollars on the face amount of a check or more than ten dollars on subsequent one hundred dollar increments on apply a finance charge in excess of an amount equal to thirty-six percent per annum, as computed pursuant to the federal Truth in Lending Act, times the face amount of the check for services provided by the licensee, or pro rata for any portion of one hundred dollars face value.
   2.  A licensee shall give to the maker of the check, at the time any delayed deposit service transaction is made, or if there are two or more makers, to one of them, notice written in clear, understandable language disclosing all of the following:
   a.  The fee finance charge to be charged imposed for the transaction.
   b.  The annual percentage rate as computed pursuant to the federal Truth in Lending Act.
   c.  The date on which the check will be deposited or presented for negotiation.
   d.  Any penalty, not to exceed fifteen dollars, which the licensee will charge if the check is not negotiable on the date agreed upon. A penalty to be charged pursuant to this section shall only be collected by the licensee once on a check no matter how long the check remains unpaid. A penalty to be charged pursuant to this section is a licensee’s exclusive remedy and if a licensee charges a penalty pursuant to this section no other penalties under this chapter or any other provision apply.
   3.  In addition to the notice required by subsection 2, every licensee shall conspicuously display a schedule of all fees, finance charges, and penalties for all services provided by the licensee authorized by this section. The notice shall be posted at the office and every branch office of the licensee.
   Sec. 4.  Section 533D.10, subsection 1, paragraphs d and f, Code 2011, are amended to read as follows:
   d.  Require the maker to receive payment by a method which causes the maker to pay additional or further fees and finance charges to the licensee or another person.
   f.  Receive or apply any other finance charges or fees penalties in addition to the fees those listed in section 533D.9, subsections 1 and 2.
   Sec. 5.  Section 533D.10, subsection 1, Code 2011, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  g.  Engage in any device or subterfuge intended to evade the requirements of this chapter, including but not limited to assisting a maker of a check in entering into a delayed deposit service transaction at a rate of interest prohibited pursuant to the laws of this state, entering into transactions disguised as personal property sales and leaseback transactions, or disguising amounts received pursuant to a transaction as cash rebates for the pretextual installment sale of goods or services, or assisting a maker of a check in entering into a transaction through the mail, telephone, internet, or any other electronic means, regardless of whether the licensee has a physical location in this state.
   Sec. 6.  Section 533D.10, Code 2011, is amended by adding the following new subsection:
   NEW SUBSECTION.  3.  A delayed deposit service transaction made in violation of this chapter may not be enforced against a maker of a check. A delayed deposit service transaction made in violation of this chapter is void, and the licensee does not have the right to collect, receive, or retain any payments, interest, or finance charges from the maker of the check.
   Sec. 7.  Section 533D.12, subsection 2, paragraph d, Code 2011, is amended by striking the paragraph.
   Sec. 8.  Section 533D.12, Code 2011, is amended by adding the following new subsection:
   NEW SUBSECTION.  7.  A violation of this chapter is a violation of section 714.16, subsection 2, paragraph “a”. The provisions of section 714.16, including but not limited to provisions relating to investigation, injunctive relief, and penalties, shall apply to this chapter unless more prescriptive and stringent provisions are otherwise specified in this chapter.
   Sec. 9.  EFFECTIVE UPON ENACTMENT.  This Act, being deemed of immediate importance, takes effect upon enactment.
EXPLANATION
   This bill modifies provisions relating to the regulation of delayed deposit services businesses.
   The bill deletes current provisions prohibiting delayed deposit services licensees from charging a fee in excess of $15 on the first $100 on the face amount of a check or more than $10 on subsequent $100 increments on the face amount of the check for services provided by the licensee. The bill substitutes a provision prohibiting imposition of a finance charge in excess of 36 percent per annum as computed pursuant to the federal Truth in Lending Act, times the face amount of the check. The bill defines “finance charge” to mean all charges payable directly or indirectly as a condition of a delayed deposit service transaction, including interest, fees, service charges, renewal charges, credit insurance premiums, and any ancillary product sold in connection with a delayed deposit service transaction.
   The bill provides, with respect to prohibited acts by a licensee, that a licensee may not engage in any device or subterfuge intended to evade the requirements of Code chapter 533D, including but not limited to assisting a maker of a check in entering into a delayed deposit service transaction at a rate of interest prohibited pursuant to Iowa law, entering into transactions disguised as personal property sales and leaseback transactions, or disguising amounts received pursuant to a transaction as cash rebates for the pretextual installment sale of goods or services, or assisting a maker of a check in entering into a transaction through the mail, telephone, internet, or any other electronic means, regardless of whether the licensee has a physical location in this state. The bill additionally provides that a delayed deposit service transaction entered into which violates the Code chapter may not be enforced with respect to a maker of a check, that any payment made or collected in connection therewith is void, and that the licensee does not have the right to collect, receive, or retain any payments, interest, or finance charges.
   Further, the bill deletes a penalty provision authorizing the superintendent of banking to impose a civil penalty not to exceed $5,000 per violation. The bill states that a violation of the Code chapter constitutes a consumer fraud pursuant to the provisions of Code section 714.16, and that the applicable provisions relating to investigation, injunctive relief, and penalties shall apply to Code chapter 533D unless more prescriptive and stringent provisions are otherwise specified in the Code chapter. The primary effect of this change is to make violations subject to a civil penalty pursuant to Code section 714.16, subsection 7, in an amount not to exceed $40,000 per violation, and in addition a civil penalty of not more than $5,000 for each day of intentional violation of a temporary restraining order, preliminary injunction, or permanent injunction. 
   The bill takes effect upon enactment.