SF 2148 (LSB 5706XS (2) 86)

SENATE FILE 2148

BY  ZAUN

A BILL FOR

An Act relating to interest rate limitations applicable to specified postsecondary educational loans, and making civil penalties applicable.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  NEW SECTION.  261F.5A  Interest rates —— limitation.
   1.  For purposes of this section, “federal prime rate” means the interest rate charged by banks on short-term business loans, as determined by the board of governors of the federal reserve system and published in the federal reserve bulletin.
   2.  Notwithstanding any provision to the contrary, the interest rate collected or imposed by a lender or lending institution on a private educational loan in this state shall not be more than three percentage points over the federal prime rate for the life of the loan.
   3.  This section shall not be interpreted to supersede, conflict with, or apply to any interest rate specifications or requirements applicable to a loan that is made, insured, or guaranteed under Tit. IV of the federal Higher Education Act of 1965, as amended, directly to a borrower solely for educational purposes or to any other loan providing for postsecondary educational expenses pursuant to a federal program.
EXPLANATION
The inclusion of this explanation does not constitute agreement with

the explanation’s substance by the members of the general assembly.
   This bill puts a limit on the interest rates of private educational loans provided to borrowers in the state. 
   The bill limits the interest rate imposed by a lender on a private educational loan to no more than three percentage points over the federal prime rate for the life of the loan. The bill defines “federal prime rate” as the rate of interest charged by banks on short-term business loans, as determined by the board of governors of the federal reserve system and published in the federal reserve bulletin. 
   The bill provides that the interest rate limitation shall not be interpreted to apply to educational loans made, insured, or guaranteed by the federal government.
   Pursuant to current Code section 261F.8, a lender or lending institution that violates a provision of Code chapter 261F is subject to a civil penalty of $5,000 per violation, in addition to other specified sanctions.