SF 132 (LSB 1615XS (3) 85)

SENATE FILE 132

BY  PETERSEN, SENG, DVORSKY, BEALL, RAGAN, HATCH, BOLKCOM, QUIRMBACH, and MATHIS

A BILL FOR

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

    Section 1.  Section 533D.9, subsection 2, paragraph b, Code 2013, is amended to read as follows:
   b.  The annual percentage rate as computed pursuant to the federal Truth in Lending Act.

The annual percentage rate shall not exceed thirty-six percent, as computed pursuant to the federal Truth in Lending Act, unless a licensee makes an election and submits to the indebtedness limitations and electronic database reporting requirements specified in section 533D.10A.
    Sec. 2.  Section 533D.9, subsection 2, Code 2013, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  e.  That the licensee cannot initiate debt collection procedures, civil court proceedings, or arbitration to collect an unpaid check unless the licensee has provided the maker of the check the opportunity to repay the obligation without any additional charges, other than the penalty provided in paragraph “d” of this subsection, in biweekly payments of not more than ten percent of the face of the check until the debt is paid in full. Additionally, that during this repayment period the licensee may not transfer or sell the debt owing on the unpaid check, and the loan shall not be considered to be in default. Further, that the maker of the check’s failure to make a biweekly payment under this paragraph shall place the loan in default and the licensee may, after proper notice, exercise rights against the maker under the law.
    Sec. 3.  Section 533D.10, subsection 1, Code 2013, is amended to read as follows:
   1.  A licensee shall not do any of the following:
   a.  Hold from any one maker more than two checks at any one time.
   b.  Hold from any one maker a check or checks in an aggregate face amount of more than five hundred dollars at any one time.
   c.  Hold or agree to hold a check for more
 
less than thirty-one
 
fourteen days.
   d.  Require the maker to receive payment by a method which causes the maker to pay additional or further fees and charges to the licensee or another person.
   e.  Repay, refinance, or otherwise consolidate a postdated check transaction with the proceeds of another postdated check transaction made by the same licensee.

A licensee may not enter into another transaction with the maker of a check if the licensee presently has a transaction outstanding with the maker or if the maker had a previous transaction with the licensee within two days of the new transaction, unless the licensee has provided the following notice both verbally and in writing, and the maker has acknowledged receipt of the notice with a signature and date:
   Notice to Borrower
   (1)  The licensee may not repay, refinance, or otherwise consolidate a postdated check transaction with the proceeds of another postdated check transaction made by the same licensee.
   (2)  While a licensee may charge a penalty if a check is not negotiable on the date agreed upon, the penalty shall not exceed fifteen dollars. This penalty shall only be collected by the licensee once on a check no matter how long that check remains unpaid. This penalty is the only additional charge a lender may charge you (the borrower) when a check is not negotiable on the date agreed upon.
   (3)  If your check is not negotiable on the date agreed upon, the licensee must provide you (the borrower) the opportunity to repay the obligation without any additional charges, other than the penalty described above, in biweekly payments of not more than ten percent of the face of the check until the debt is paid in full.
   By signing and dating this notice, you acknowledge the statements above, but yet still desire to obtain another loan with the licensee.
   Borrower(s) signature:Date:
   Borrower(s) signature:Date:
   f.  Receive any other charges or fees in addition to the fees listed in section 533D.9, subsections 1 and 2.
   g.  Initiate debt collection procedures, civil court proceedings, or civil or private arbitration proceedings to collect an unpaid check unless the licensee has provided the maker the opportunity to repay the obligation without any additional charges, other than the penalty provided in section 533D.9, subsection 2, paragraph “d”, in biweekly payments of not more than ten percent of the face of the check until the debt is paid in full. During this repayment period the licensee may not transfer or sell the debt owing on the unpaid check, and the loan shall not be considered to be in default. The failure of the maker of the check to make a biweekly payment as required shall place the loan in default and the licensee may, after proper notice, exercise rights against the maker under the law.
    Sec. 4.  NEW SECTION.  533D.10A  Alternative annual percentage rate —— indebtedness limitation —— electronic database.
   1.  A licensee may elect to impose an annual percentage rate, as computed pursuant to the federal Truth in Lending Act, that exceeds thirty-six percent by filing with the superintendent a written notice of intent. An election pursuant to this section shall apply to all transactions entered into by the licensee. A licensee having made an election pursuant to this section who desires to discontinue imposition of an alternative interest rate and consents to imposition of the thirty-six percent annual percentage rate otherwise applicable under this chapter, or a licensee previously imposing an annual percentage rate not exceeding thirty-six percent who desires to make an election pursuant to this subsection, may submit a request to the superintendent, not more than once a year.
   2.  A licensee electing to impose an alternative annual percentage rate pursuant to this section shall be prohibited from entering into a delayed deposit services transaction which will cause the maker of the check, when all other delayed deposit services transactions entered into with any licensee involving the maker of the check are accounted for, and when the term of the transaction is aggregated with the other transactions, to be indebted for a period exceeding ninety days during the preceding twelve-month period. For purposes of this subsection, if the maker of the check has entered into more than one delayed deposit services transaction with the same or another licensee, and the periods during which the transactions are outstanding overlap, each day of each respective transaction shall be counted in satisfying the ninety-day restriction. For purposes of this subsection, if a maker of a check is making biweekly payments during a repayment period as provided in section 533D.9, subsection 2, paragraph “e”, the repayment period shall not be counted in satisfying the ninety-day restriction.
   3.
  a.  Each licensee making an election pursuant to this section shall, by October 1, 2013, subscribe to, report to, and utilize an electronic database tracking service to be developed or selected pursuant to rules adopted by the banking division of the department of commerce, that permits the licensee to determine whether a maker of a check has an outstanding unpaid check or debit authorization that is, or reasonably appears to be, connected to a delayed deposit services transaction. Each licensee shall require a maker of a check to sign a written declaration confirming that, pursuant to section 533D.10A, subsection 2, the maker of the check is eligible to enter into a delayed deposit services transaction.
   b.  Records of a licensee and the electronic database tracking service shall be subject to review and examination by the division to determine whether the licensee is in compliance with this section and other applicable provisions of this chapter.
   c.  Information, records, and documents obtained in the performance of the review and examination, including the amount of any outstanding unpaid check or debit authorization and the identity of the maker of the check, are confidential and shall not be disclosed by the division and are not subject to subpoena. Such information, records, and documents do not constitute a public record under chapter 22. The superintendent may disclose such information to representatives of other state or federal regulatory authorities and may release summary complaint information so long as the information does not specifically identify the complainant. The superintendent may also provide this information to the attorney general for purposes of enforcing this chapter.
    Sec. 5.  EFFECTIVE DATE.  The following provision or provisions of this Act take effect October 1, 2013:
   1.  The section of this Act enacting section 533D.10A, subsection 2.
EXPLANATION
   This bill relates to specified aspects of the regulation of delayed deposit services businesses.
   The bill provides that the annual percentage rate applicable to delayed deposit services transactions shall not exceed 36 percent, as computed pursuant to the federal Truth in Lending Act, unless a licensee elects to impose an alternative higher rate. This is the same percentage rate limitation imposed as a restriction or safeguard for military personnel pursuant to 10 U.S.C. 49 § 987. Such an election shall make requirements regarding indebtedness limitations and electronic database reporting requirements specified in a subsequent section of the bill applicable.
   The bill provides that a licensee must disclose to the maker of a check that the licensee cannot initiate debt collection procedures, civil court proceedings, or arbitration to collect an unpaid check unless the licensee has provided the maker of a check the opportunity to repay the obligation without any charges, other than the current $15 penalty, in biweekly payments of not more than 10 percent of the face of the check until the debt is paid in full. The bill adds that during this repayment period the licensee cannot sell or transfer the debt owing on the unpaid check and the loan shall not be considered to be in default. However, if the maker of the check fails to honor the repayment obligation, the bill provides that the loan shall be placed in default. The bill makes the failure to conform with these provisions a prohibited act on the part of the licensee, which could subject the licensee to disciplinary action as specified in Code section 533D.12.
   Additionally, the bill changes a current provision that prohibits a licensee from holding or agreeing to hold a check for more than 31 days to a modified provision that the licensee cannot hold or agree to hold a check for less than 14 days. The bill also prohibits a licensee from entering into another transaction with the maker of a check who already has a transaction outstanding with the licensee or from entering into a new transaction within two days of the conclusion of the previous transaction, unless the maker acknowledges in writing specified restrictions relating to successive transactions, applicable penalties, and the opportunity to repay the obligation in installments in the event the check is not negotiable.
   As previously indicated, the bill authorizes a licensee to impose an annual percentage rate which exceeds 36 percent by filing with the superintendent of banking a written notice of intent. If this election is made, it shall apply to all transactions entered into by the licensee. The bill provides that a licensee may discontinue imposition of an alternative interest rate and consent to imposition of the 36 percent rate otherwise applicable, and a licensee previously imposing the 36 percent rate may elect to impose the alternative rate, by submitting a request to the superintendent no more often than annually.
   The bill provides that a licensee electing to impose an alternative annual percentage rate shall be prohibited from entering into a delayed deposit services transaction that results in the maker of the check being indebted to the licensee, or when aggregated with other delayed deposit services business licensees, for longer than a 90-day period during the preceding 12 months. This provision of the bill takes effect October 1, 2013. Further, the bill requires a licensee making the election, by October 1, 2013, to subscribe to, report to, and utilize an electronic database tracking service developed or selected by the banking division of the department of commerce to monitor the number of transactions entered into by a maker of a check for purposes of complying with this provision. The bill states that licensee records and the database shall be subject to review and examination by the division, and provides that information, records, and documents obtained by the division in the performance of such a review or examination shall be considered confidential.
   A violation of the bill’s provisions will subject a licensee to existing penalty provisions in Code chapter 533D, including possible license suspension or revocation, a civil penalty in an amount not to exceed $5,000, an administrative fine in an amount not to exceed $5,000, and the criminal penalty of a serious misdemeanor punishable by confinement for no more than one year and a fine of at least $315 but not more than $1,875.