SF 418 (LSB 2322SV (3) 87)

SENATE FILE 418

BY  COMMITTEE ON COMMERCE

(SUCCESSOR TO SSB 1118)

(COMPANION TO LSB 2322HV)

A BILL FOR

An Act relating to consumer credit transactions establishing and increasing specified charges and penalties.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

    Section 1.  Section 537.2301, Code 2017, is amended by adding the following new subsection:
   NEW SUBSECTION.  2A.  A supervised loan made by a person in violation of subsection 2 shall be void and the consumer is not obligated to pay either the amount financed or the finance charge. If the consumer has paid any part of the amount financed or the finance charge, the consumer has a right to recover the payment from the person in violation of subsection 2 or from an assignee of that person’s rights who undertakes direct collection of payments or enforcement of rights arising from the debt. With respect to violations arising from loans made pursuant to open-end credit, no action pursuant to this subsection may be brought more than two years after the violation occurred. With respect to violations arising from other loans, no action pursuant to this subsection may be brought more than one year after the due date of the last scheduled payment of the agreement pursuant to which the charge was paid.
    Sec. 2.  Section 537.2501, subsection 1, paragraph f, subparagraph (1), Code 2017, is amended to read as follows:
   (1)  With respect to open-end credit pursuant to a credit card issued by the creditor which entitles the cardholder to purchase or lease goods or services from at least one hundred persons not related to the card issuer, the parties may contract for an over-limit charge up to fifteen thirty dollars if the balance of the account exceeds the credit limit established pursuant to the agreement. The over-limit charge under this paragraph shall not be assessed again in a subsequent billing cycle unless in a subsequent billing cycle the account balance has been reduced below the credit limit.
    Sec. 3.  Section 537.2501, subsection 1, paragraph g, Code 2017, is amended to read as follows:
   g.  A surcharge of not more than five percent of the amount of the face value of the payment instrument or twenty dollars, whichever is greater, for each dishonored payment instrument provided that the fee is clearly and conspicuously disclosed in the cardholder agreement. However, the amount of the surcharge shall not exceed twenty dollars unless the check, draft, or order was presented twice or the maker does not have an account with the drawee. If the check, draft, or order was presented twice or the maker does not have an account with the drawee, the amount of the surcharge shall not exceed fifty dollars as provided for in section 554.3512 for a dishonored check, draft, or order that was accepted as payment for a consumer credit transaction payment. The surcharge shall not be assessed against the maker if the reason for the dishonor of the instrument is that the maker has stopped payment pursuant to section 554.4403.
    Sec. 4.  Section 537.2501, subsection 1, Code 2017, is amended by adding the following new paragraph:
   NEW PARAGRAPH.  k.  Credit reporting charges.
    Sec. 5.  Section 537.2502, subsection 1, paragraph a, subparagraph (1), Code 2017, is amended to read as follows:
   (1)  Five percent of the unpaid amount of the installment, or a maximum of twenty thirty dollars.
    Sec. 6.  Section 537.2502, subsection 1, paragraph b, Code 2017, is amended to read as follows:
   b.  For an interest-bearing transaction, an amount not exceeding five percent of the unpaid amount of the installment, or a maximum of fifteen thirty dollars.
    Sec. 7.  Section 537.2502, subsection 4, Code 2017, is amended to read as follows:
   4.  With respect to open-end credit, the parties may contract for a delinquency charge on any payment not paid in full when due, as originally scheduled or as deferred, in an amount up to fifteen thirty dollars.
    Sec. 8.  Section 537.2510, Code 2017, is amended by adding the following new subsection:
   NEW SUBSECTION.  8.  This section does not apply to a financial institution as defined in section 537.1301.
    Sec. 9.  Section 537.5201, subsection 3, Code 2017, is amended to read as follows:
   3.  If a creditor has contracted for or received a charge in excess of that allowed by this chapter, or if a consumer is entitled to a refund and a person liable to the consumer refuses to make a refund within a reasonable time after demand, the consumer may recover from the creditor or the person liable, in an action other than a class action, the excess charge or refund and a penalty in an amount determined by the court not less than one two hundred dollars or more than one two thousand dollars. With respect to excess charges arising from sales or loans made pursuant to open-end credit, no action pursuant to this subsection may be brought more than two years after the time the excess charge was made. With respect to excess charges arising from other consumer credit transactions no action pursuant to this subsection may be brought more than one year after the due date of the last scheduled payment of the agreement pursuant to which the charge was made. For purposes of this subsection, a reasonable time is presumed to be thirty days.
    Sec. 10.  Section 537.5203, subsection 1, paragraph a, Code 2017, is amended to read as follows:
   a.  Twice the amount of the finance charge in connection with the transaction, but the liability pursuant to this paragraph shall be not less than one two hundred dollars or more than one two thousand dollars.
    Sec. 11.  Section 537.6113, subsection 2, Code 2017, is amended to read as follows:
   2.  The administrator may bring a civil action against a person to recover a civil penalty of no more than five ten thousand dollars for repeatedly and intentionally violating this chapter. No civil penalty pursuant to this subsection may be imposed for violations of this chapter occurring more than two years before the action is brought or for making unconscionable agreements or engaging in a course of fraudulent or unconscionable conduct.
    Sec. 12.  Section 537.6203, subsections 1 and 4, Code 2017, are amended to read as follows:
   1.  A person required to file notification shall pay to the administrator an annual fee of ten fifty dollars. The fee shall be paid with the filing of the first notification and on or before January 31 of each succeeding year.
   4.  In addition to the penalties provided by section 537.6113, subsection 3, the administrator may collect a charge, established by rule, not exceeding twenty-five seventy-five dollars from each person required to pay fees under this section who fails to pay the fees in full within thirty days after they are due.
EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
   This bill establishes and increases specified charges and penalties relating to consumer credit transactions.
   Current Code section 537.2301 authorizes certain persons to make supervised loans. The bill provides that a supervised loan made by a person in violation of Code section 537.2301(2) is void and the consumer is not obligated to pay the amount financed or the finance charge. A consumer who has already paid any part of such amount or charge may recover the payment. With respect to violations arising from loans made pursuant to open-end credit, no action may be brought pursuant to the bill more than two years after the violation occurred. With respect to violations arising from other loans, no action may be brought pursuant to the bill more than one year after the due date of the last scheduled payment of the agreement for which the charge was paid. 
   Current Code section 537.2501 sets forth the charges that a creditor may receive in addition to a finance charge. The bill increases the over-limit charge the parties to an open-end credit pursuant to a credit card transaction may contract for from up to $15 to a maximum of $30. The bill modifies the surcharge in Code section 537.2501(1)(g) to authorize a surcharge for a dishonored check, draft, or order not to exceed $30 as provided for in Code section 554.3512. The bill also provides that a creditor may receive credit reporting charges. 
   Current Code section 537.2502 allows the parties in certain consumer credit transactions to contract for delinquency charges. For a precomputed consumer credit transaction, the maximum delinquency charge is increased from the greater of 5 percent of the unpaid installment or $20, to the greater of 5 percent of the unpaid installment or $30, or the deferral charge amount. For an interest-bearing consumer credit transaction, the maximum delinquency charge is increased from 5 percent of the unpaid installment or $15, to 5 percent of the unpaid installment or $30. For an open-credit arrangement, the maximum delinquency charge is increased from $15 to $30. 
   Current Code section 537.2510 requires creditors to rebate certain amounts to consumers upon the prepayment of precomputed consumer credit transactions. The bill provides that Code section 537.2510 does not apply to financial institutions as defined in Code section 537.1301. This would include banks, savings and loan associations, or state banks incorporated under state or federal law, and credit unions organized under state or federal law.
   Current Code section 537.5201 sets forth the remedies available to consumers for violations of Code chapter 537. The bill increases the penalty a creditor must pay for contracting for or receiving a charge in excess of that allowed by Code chapter 537 from not less than $100 or more than $1,000, to not less than $200 or more than $2,000. 
   Current Code section 537.5203 sets forth the civil liability of a creditor who fails to disclose information to a person entitled to the information under Code chapter 537. The bill increases the amount a creditor is liable to such person from not less than $100 or more than $1,000 to not less than $200 or more than $2,000. 
   Current Code section 537.6113 allows the attorney general to bring civil actions to recover moneys under Code chapter 537. The bill increases the civil penalty the attorney general may recover from a person for repeated and intentional violations of Code chapter 537 from no more than $5,000 to no more than $10,000. 
   Current Code section 537.6203 sets forth various fees and charges for persons required to file notification pursuant to Code chapter 537. The bill increases the annual fee for a person required to file notification from $10 to $50. The bill also increases the late charge for failure to pay a fee within 30 days that it is due from no more than $25 per person to no more than $75 per person.