HF 2375 (LSB 5930HV (2) 87)

HOUSE FILE 2375

BY  COMMITTEE ON COMMERCE

(SUCCESSOR TO HSB 599)

A BILL FOR

An Act relating to permissible interest rates and charges for certain loans. 
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 536.13, subsection 7, paragraph a, Code 2018, is amended to read as follows:
   a.  The superintendent may establish the maximum rate of interest or charges as permitted under this chapter for those loans with an unpaid principal balance of ten thirty thousand dollars or less. For those loans with an unpaid principal balance of over ten thirty thousand dollars, the maximum rate of interest or charges which a licensee may charge shall be the greater of the rate permitted by chapter 535 or the rate authorized for supervised financial organizations by chapter 537.
    Sec. 2.  Section 537.2401, subsection 1, Code 2018, is amended to read as follows:
   1.  Except as provided with respect to a finance charge for loans pursuant to open-end credit under section 537.2402 and loans secured by a certificate of title of a motor vehicle under section 537.2403, a lender may contract for and receive a finance charge not exceeding the maximum charge permitted by the laws of this state or of the United States for similar lenders, and, in addition, with respect to a consumer loan, a supervised financial organization or a mortgage lender may contract for and receive a finance charge, calculated according to the actuarial method, not exceeding the sum of a service charge, collected in advance and equal to the lesser of two percent of the amount financed or one hundred twenty dollars, and twenty-one percent per year on the unpaid balance of the amount financed. Except as provided in section 537.2403, this subsection does not prohibit a lender from contracting for and receiving a finance charge exceeding the sum of the authorized service charge and twenty-one percent per year on the unpaid balance of the amount financed on consumer loans if authorized by other provisions of the law.
    Sec. 3.  Section 537.2403, subsection 1, Code 2018, is amended to read as follows:
   1.  A lender shall not contract for or receive a finance charge exceeding twenty-one percent per year on the unpaid balance of the amount financed for For a loan of money secured by a certificate of title to a motor vehicle used for personal, family, or household purpose except as authorized under chapter 536 or 536A, a lender shall not contract for or receive a finance charge exceeding the sum of a service charge, collected in advance and equal to the lesser of two percent of the amount financed or one hundred twenty dollars, and twenty-one percent per year on the unpaid balance of the amount financed. A consumer who is charged a finance charge in excess of the limitation in this section may seek any remedies available pursuant to this chapter for an excess charge.
    Sec. 4.  Section 537.2501, subsection 1, Code 2018, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  l.  For an interest-bearing consumer credit transaction, a service charge in an amount not to exceed the lesser of ten percent of the amount financed or thirty dollars.
    Sec. 5.  Section 537.2510, subsection 3, paragraph a, Code 2018, is amended to read as follows:
   a.  If the prepayment is in full, the creditor may collect or retain a minimum charge not exceeding five dollars in a transaction which had an amount financed of seventy-five dollars or less, or not exceeding seven dollars and fifty cents in a transaction which had an amount financed of more than seventy-five dollars, if the minimum charge was contracted for, and the finance charge earned at the time of prepayment is less than the minimum charge contracted for.  If, however, a creditor has collected a service charge in association with an interest-bearing consumer credit transaction pursuant to section 537.2501, subsection 1, paragraph “l”, the creditor shall not collect or retain a minimum charge upon prepayment pursuant to this subsection.
    Sec. 6.  Section 537.2510, Code 2018, is amended by adding the following new subsection:
   NEW SUBSECTION.  9.  This section does not apply to a service charge collected pursuant to section 537.2501, subsection 1, paragraph “l”.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill relates to permissible interest rates and charges for certain loans.
   Current law allows the superintendent of banking to establish the maximum rate of interest or charges for regulated loans subject to Code chapter 536 with unpaid principal balances of $10,000 or less. The bill increases this amount to $30,000. For loans with unpaid principal balances in excess of $30,000 (formerly $10,000), the maximum interest rate or charges a lender may charge remains the greater of the rate permitted in Code chapter 535 or the rate authorized for supervised financial organizations in Code chapter 537. 
   Current law allows a supervised financial organization or mortgage lender to contract for and receive a finance charge not exceeding 21 percent per year on the unpaid balance of the amount financed for a consumer loan subject to Code chapter 537 that is not pursuant to open-end credit. The bill provides that such finance charge may also include a service charge, collected in advance and equal to the lesser of 2 percent of the amount financed or $120, in addition to 21 percent per year on the unpaid balance of the consumer loan. A lender may contract for and receive a finance charge in excess of this amount if authorized by other provisions of the law. Under current law, the maximum finance charge amount for a consumer loan as provided in the bill also serves as the maximum amount for interest rates on certain consumer loans made by state credit unions (Code section 533.316), the maximum finance charge amount applicable to certain supervised loans (Code section 537.2308), and the maximum finance charge applicable to certain consumer credit transactions on refinancing (Code section 537.2504) and consolidation (Code section 537.2505). 
   Additionally, current law allows a lender to contract for and receive a finance charge not exceeding 21 percent per year on the unpaid balance of the amount financed for a loan secured by a certificate of title to certain motor vehicles. The bill provides that such finance charge may also include a service charge, collected in advance and equal to the lesser of 2 percent of the amount financed or $120, in addition to 21 percent per year on the unpaid balance of the consumer loan.
   The bill authorizes a creditor to contract for and receive, for an interest-bearing consumer credit transaction, a service charge in an amount not to exceed the lesser of 10 percent of the amount financed or $30. The bill provides that if a creditor has received such a service charge, the creditor shall not collect or retain a minimum charge upon prepayment as authorized under Code section 537.2510. The bill specifies that Code section 537.2510, relating to rebate upon prepayment, does not apply to service charges collected pursuant to the bill.