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PAG LIN 1 1 Section 1. Section 533D.1, Code 2001, is amended to read 1 2 as follows: 1 3 533D.1 TITLE AND PURPOSE. 1 4 1. This chapter shall be known and may be cited as the 1 5 "Delayed DepositServices LicensingLoan Act". 1 6 2. The purpose of this chapter is to protect consumers who 1 7 enter into short-term loans with high rates of interest. 1 8 3. Loans made pursuant to this chapter are subject to the 1 9 Iowa consumer credit code. 1 10 4. This chapter shall be liberally construed as a consumer 1 11 protection statute in order to effectuate its purpose. 1 12 Sec. 2. Section 533D.2, Code 2001, is amended to read as 1 13 follows: 1 14 533D.2 DEFINITIONS. 1 15 For purposes of this chapter, unless the context otherwise 1 16 requires: 1 17 1. "Check" means a check, draft, share draft, or other 1 18 instrument for the payment of money. 1 19 1A. "Consumer" means any natural person who singly, or 1 20 jointly with another consumer, enters into a delayed deposit 1 21 loan. 1 22 2. "Delayed depositservices businessloan"meansincludes 1 23 any arrangement in which a personwho for a feedoes either of 1 24 the following for a fee, service charge, or other 1 25 consideration: 1 26 a. Accepts a check dated subsequent to the date it was 1 27 written and agrees to hold the check for deposit until the 1 28 date written on the check. 1 29 b. Accepts a check dated on the date it was written and 1 30 holds the check for a period of time prior to deposit or 1 31 presentment pursuant to an agreement with, or any 1 32 representation made to, the maker of the check, whether 1 33 express or implied. 1 34 2A. "Delayed deposit loan business" means a person who 1 35 makes delayed deposit loans. 2 1 2B. "Facilitator" means any person who facilitates, 2 2 enables, or acts as a conduit for another person, who is or 2 3 may be exempt from licensing, who is operating a delayed 2 4 deposit loan business. 2 5 3. "Licensee" means a person licensed to operate pursuant 2 6 to this chapter, or any facilitator. Except for section 2 7 533D.3, for purposes of this chapter, a licensee includes a 2 8 supervised financial organization as defined in section 2 9 537.1301. 2 10 4. "Person" means an individual, group of individuals, 2 11 partnership, association, corporation, or any other business 2 12 unit or legal entity. 2 13 5. "Superintendent" means the superintendent of banking. 2 14 6. "Supervised financial organization" means a person as 2 15 defined in section 537.1301, subsection 42. 2 16 Sec. 3. NEW SECTION. 533D.2A APPLICABILITY – 2 17 EXEMPTIONS. 2 18 1. IN GENERAL. Except as otherwise provided in this 2 19 section, this chapter applies to any person who, for a fee, 2 20 service charge or other consideration, accepts a check dated 2 21 on the date it was written and agrees to hold it for a period 2 22 of days prior to deposit or presentment, or accepts a check 2 23 dated subsequent to the date it was written, and agrees to 2 24 hold the check for deposit until the date written on the 2 25 check. 2 26 2. FACILITATORS. This chapter applies to any facilitator. 2 27 3. SUPERVISED FINANCIAL ORGANIZATIONS. To the extent that 2 28 supervised financial organizations are subject to federal laws 2 29 that may preempt the provisions of this chapter regarding 2 30 limitations on interest rates and fees, all other provisions 2 31 of this chapter, except the requirements for licensure in 2 32 section 533D.3, apply to supervised financial organizations. 2 33 4. EMPLOYEES. Any individual who is acting solely as an 2 34 employee of a licensee need not be separately licensed. 2 35 5. EVASION OF APPLICABILITY. This chapter shall apply to 3 1 any person who seeks to evade its applicability by any device, 3 2 subterfuge, or pretense. 3 3 Sec. 4. Section 533D.3, Code 2001, is amended to read as 3 4 follows: 3 5 533D.3 LICENSE REQUIRED – APPLICATION PROCESS – DISPLAY. 3 6 1. A person shall not operate a delayed depositservices3 7 loan business or be a facilitator in this state unless the 3 8 person is licensed by the superintendent as provided in this 3 9 chapter or unless the person is a supervised financial 3 10 organization exempt from the license requirements of this 3 11 chapter by virtue of other state or federal laws. 3 12 2. An applicant for a license shall submit an application, 3 13 under oath, to the superintendent on forms prescribed by the 3 14 superintendent. The forms shall contain such information as 3 15 the superintendent may prescribe. 3 16 3. The application required by this section shall be 3 17 submitted withbothall of the following: 3 18 a. An application fee in an amount prescribed by rule 3 19 adopted by the superintendent. 3 20 b. A license fee of two hundred fifty dollars per 3 21 location. 3 22b.c. A surety bond executed by a surety company 3 23 authorized to do business in this state in the sum of twenty- 3 24 five thousand dollars per location, which bond shall be 3 25 continuous in nature until canceled by the surety. A surety 3 26 shall provide at least thirty days' notice in writing to the 3 27 licensee and to the superintendent indicating the surety's 3 28 intent to cancel the bond and the effective date of the 3 29 cancellation. The surety bond shall be for the benefit of the 3 30 citizens of this state and shall be conditioned upon the 3 31 licensee's willingness to comply with this chapter, the 3 32 faithful performance by the licensee of the duties and 3 33 obligations pertaining to the delayed depositservicesloan 3 34 business so licensed, and the prompt payment of any judgment 3 35 recovered against the licensee. The surety's liability under 4 1 this chapter is limited to the amount of the bond regardless 4 2 of the number of years the bond is in effect. 4 3 4. The superintendent shall issue a license to an 4 4 applicant if the superintendent finds all of the following: 4 5 a. The experience, character, and general fitness of the 4 6 applicant and its officers, directors, shareholders, partners, 4 7 or members are such as to warrant a finding that the applicant 4 8 will conduct the delayed depositservicesloan business 4 9 honestly, fairly, and efficiently. 4 10 b. The applicant and its officers, directors, 4 11 shareholders, partners, or members have not been convicted of 4 12 a serious misdemeanor, aggravated misdemeanor, or a felony in 4 13 this state, or convicted of a crime in another jurisdiction 4 14whichthat would be a serious misdemeanor, aggravated 4 15 misdemeanor, or a felony in this state. 4 16 c. The applicant is financially responsible and will 4 17 conduct the delayed depositservicesloan business pursuant to 4 18 this chapter, chapter 537, and other applicable laws. 4 19 d. The applicant has unencumbered assets of at least 4 20 twenty-five thousand dollars per location available for 4 21 operating the delayed depositservicesloan business. 4 22 5. The superintendent shall approve or deny an application 4 23 for a license by written order not more than ninety days after 4 24 the filing of an application. An order of the superintendent 4 25 issued pursuant to this section may be appealed pursuant to 4 26 chapter 17A. 4 27 6. A license issued pursuant to this chapter shall be 4 28 conspicuously posted at the licensee's place of business. A 4 29 license shall remain in effect until the next succeeding May 4 30 1, unless earlier suspended or revoked by the superintendent. 4 31 A license shall be renewed annually by filing with the 4 32 superintendent an application for renewal containing such 4 33 information as the superintendent may require to indicate any 4 34 material change in the information contained in the original 4 35 application or succeeding renewal applications and a renewal 5 1 fee ofonetwo hundred fifty dollars. 5 2 Sec. 5. Section 533D.4, Code 2001, is amended to read as 5 3 follows: 5 4 533D.4 SURRENDER OF LICENSE. 5 5 1. A licensee may surrender a delayed depositservices5 6 loan license by delivering to the superintendent written 5 7 notice that the license is surrendered. 5 8 2. The surrender does not affect the licensee's civil or 5 9 criminal liability for acts committed prior to such surrender, 5 10 or the liability of the surety on the bond,ornor does the 5 11 surrender entitle such licensee to a return of any part of the 5 12 annual license fee. 5 13 3. The superintendent may establish procedures for the 5 14 disposition of the books, accounts, and records of the 5 15 licensee and may require such action as deemed necessary for 5 16 the protection of the makers of checkswhichthat are 5 17 outstanding at the time of surrender of the license. 5 18 Sec. 6. Section 533D.5, Code 2001, is amended to read as 5 19 follows: 5 20 533D.5 CHANGE IN CIRCUMSTANCES – NOTIFICATION OF 5 21 SUPERINTENDENT. 5 22 A licenseeis toshall notify the superintendent in writing 5 23 within thirty days of the occurrence of a material development 5 24 affecting the licensee, including, but not limited to, any of 5 25 the following: 5 26 1. Filing for bankruptcy or reorganization. 5 27 2. Reorganization of the business. 5 28 3. Commencement of license revocation or any other civil 5 29 or criminal proceedings by any other state or jurisdiction. 5 30 4. The filing of a criminal indictment or complaint 5 31 against the licensee or any of the licensee's officers, 5 32 directors, shareholders, partners, members, employees, or 5 33 agents. 5 34 5. A serious misdemeanor, aggravated misdemeanor, or a 5 35 felony conviction against the licensee or any of the 6 1 licensee's officers, directors, shareholders, partners, 6 2 members, employees, or agents. 6 3 Sec. 7. Section 533D.6, Code 2001, is amended to read as 6 4 follows: 6 5 533D.6 CONTINUED OPERATION AFTER CHANGE IN OWNERSHIP – 6 6 APPROVAL OF SUPERINTENDENT REQUIRED. 6 7 1. The prior written approval of the superintendent is 6 8 required for the continued operation of a delayed deposit 6 9servicesloan business whenever a change in control of a 6 10 licensee is proposed. 6 11 a. Control in the case of a corporation means direct or 6 12 indirect ownership of, or the right to control, ten percent or 6 13 more of the voting shares of the corporation, or the ability 6 14 of a person to elect a majority of the directors or otherwise 6 15 effect a change in policy. 6 16 b. Control in the case of any other entity means any 6 17 change in the principals of the organization, whether active 6 18 or passive. 6 19 c. The superintendent may require information deemed 6 20 necessary to determine whether a new application is required. 6 21 Costs incurred by the superintendent in investigating a change 6 22 of control request shall be paid by the person requesting such 6 23 approval. 6 24 2. A license issued pursuant to this chapter is not 6 25 transferable or assignable. 6 26 Sec. 8. Section 533D.7, Code 2001, is amended to read as 6 27 follows: 6 28 533D.7 PRINCIPAL PLACE OF BUSINESS – BRANCH OFFICES 6 29 AUTHORIZED. 6 30 1. Except as provided in subsection 2, a licensee may 6 31 operate a delayed depositservicesloan business only at an 6 32 office designated as its principal place of business in the 6 33 application. 6 34 a. The licensee shall maintain its books, accounts, and 6 35 records at its designated principal place of business. 7 1 b. A licensee may change the location of its designated 7 2 principal place of business with the prior written approval of 7 3 the superintendent. The superintendent shall establish forms 7 4 and procedures for determining whether the change of location 7 5 should be approved. 7 6 2. A licensee may operate branch offices only in the same 7 7 county in which the licensee's designated principal place of 7 8 business is located. The licensee may establish a branch 7 9 office, provided that the financial requirements of section 7 10 533D.3 are met with regard to the additional location, or 7 11 change the location of a branch office, with the prior written 7 12 approval of the superintendent. The superintendent shall 7 13 establish forms and procedures for determining whether the 7 14 location of a branch office should be approved. 7 15 3. A fee ofonetwo hundred fifty dollars shall be paid to 7 16 the superintendent for each request made pursuant to 7 17 subsection 1 or 2. 7 18 Sec. 9. Section 533D.8, Code 2001, is amended to read as 7 19 follows: 7 20 533D.8 OTHER BUSINESS OPERATIONS AT SAME SITE – 7 21 RESTRICTIONS. 7 22 1. A licensee may operate a delayed depositservicesloan 7 23 business at a location where any other business is operated or 7 24 in association or conjunction with any other business with the 7 25 written approval of the superintendent and consistent with 7 26 both of the following requirements: 7 27 a. The books, accounts, and records of the delayed deposit 7 28servicesloan business are kept and maintained separate and 7 29 apart from the books, accounts, and records of the other 7 30 business. 7 31 b. The other business is not of a type which would tend to 7 32 enable the concealment of acts engaged in to evade the 7 33 requirements of this chapter. If the superintendent 7 34 determines upon investigation that the other business is of a 7 35 type which would conceal such acts the superintendent shall 8 1 order the licensee to cease the operation of the delayed 8 2 depositservicesloan business at the location. 8 3 2. The department may order the licensee to cease 8 4 operations of the business if it fails to obtain written 8 5 approval of the superintendent before operating a business in 8 6 association or conjunction with services provided under this 8 7 chapter. 8 8 Sec. 10. Section 533D.9, Code 2001, is amended by striking 8 9 the section and inserting in lieu thereof the following: 8 10 533D.9 PERMITTED FEES. 8 11 A licensee shall not charge, contract for, or directly or 8 12 indirectly receive, any interest, fees, or charges, except 8 13 those specifically authorized by this section. 8 14 1. TRANSACTION FEE. A licensee shall not charge a fee in 8 15 excess of five dollars per hundred dollars of the amount 8 16 financed. However, the licensee may receive a minimum charge 8 17 of five dollars when the amount financed exceeds seventy-five 8 18 dollars, or three dollars and fifty cents when the amount 8 19 financed exceeds fifty dollars. 8 20 2. DEFAULT FEE. If the check is not negotiable on the 8 21 date agreed upon, a licensee may charge a default fee, not to 8 22 exceed fifteen dollars. Only one such fee may be collected 8 23 with respect to a check even if it has been redeposited and 8 24 returned more than once, no matter how long the check remains 8 25 unpaid. A fee charged pursuant to this subsection is a 8 26 licensee's exclusive remedy and charge for late payment or 8 27 nonpayment. 8 28 Sec. 11. NEW SECTION. 533D.9A REQUIRED DOCUMENTS AND 8 29 DISCLOSURES. 8 30 1. INFORMATION PAMPHLET PROVIDED TO ALL CONSUMERS. Before 8 31 entering into a delayed deposit loan, the licensee shall 8 32 deliver to the consumer a pamphlet prepared by the 8 33 superintendent which explains, in simple English and Spanish, 8 34 all of the consumer's rights and responsibilities in a delayed 8 35 deposit loan transaction, includes a toll-free number to the 9 1 superintendent's office to handle concerns or complaints by 9 2 consumers, and informs consumers that the superintendent's 9 3 office can provide information about whether a delayed deposit 9 4 loan businesses is licensed, whether complaints have been 9 5 filed with the superintendent, and the resolution of such 9 6 complaints. 9 7 2. LOAN DOCUMENTS. Licensees shall provide consumers with 9 8 a written agreement in clear, understandable English and the 9 9 language in which the loan was negotiated, on a form specified 9 10 or approved by the superintendent, in a form the consumer can 9 11 keep, that includes all of the following information: 9 12 a. The name, address, and telephone number of the licensee 9 13 making the delayed deposit loan, and the name and title of the 9 14 individual employee who signs the agreement on behalf of the 9 15 licensee. 9 16 b. An itemization of fees and charges to be paid by the 9 17 consumers. 9 18 c. The date on which the check will be deposited or 9 19 presented for negotiation. 9 20 d. A clear description of the consumer's payment 9 21 obligations under the transaction. 9 22 e. The default fee that the licensee will charge if the 9 23 check is not negotiable on the date agreed upon; that it may 9 24 be collected only once on a check no matter how long the check 9 25 remains unpaid; and that it is the exclusive fee and remedy 9 26 for late payment or nonpayment. 9 27 f. Disclosures required by section 537.3201 and the Truth 9 28 in Lending Act as defined in section 537.1302, irrespective of 9 29 whether the Truth in Lending Act applies to the particular 9 30 delayed deposit loan transaction. 9 31 g. Applicable notices pursuant to Iowa law, including, but 9 32 not limited to, that required by section 537.3203. 9 33 h. In a manner that is more conspicuous than the other 9 34 information provided in the loan document, and located 9 35 immediately preceding the signature of the consumer, the 10 1 following notice in at least fourteen point type: "You cannot 10 2 be prosecuted in criminal court to collect this loan." 10 3 3. POSTED NOTICE. Notices must be clearly and 10 4 conspicuously posted by all licensees in each location, in 10 5 English, and in any other language in which a significant 10 6 amount of delayed deposit loan transaction business is 10 7 conducted at that location, which informs consumers of the 10 8 following information: 10 9 a. Informs consumers that the licensee cannot use the 10 10 criminal process against a consumer to collect any delayed 10 11 deposit loan transaction check. 10 12 b. Informs the consumers of the schedule of all fees, 10 13 charges, interest, and penalties to be charged on delayed 10 14 deposit loan transactions. The schedule shall include an 10 15 example of the amounts that would be charged on a one hundred 10 16 dollar loan payable in fourteen and thirty days, and shall 10 17 provide the corresponding annual percentage rate. 10 18 Sec. 12. NEW SECTION. 533D.9B REQUIREMENTS AND TERMS. 10 19 1. Each delayed deposit loan must have a minimum term of 10 20 no less than two weeks for each fifty dollars owed on the 10 21 loan. 10 22 2. The maximum amount of a delayed deposit loan shall not 10 23 exceed five hundred dollars. 10 24 3. The minimum amount of a delayed deposit loan shall be 10 25 fifty dollars. 10 26 4. A consumer shall be permitted to make partial payments 10 27 on the loan at any time, without charge, in amounts equal to 10 28 no less than five dollar increments. 10 29 5. The check written by the consumer in a delayed deposit 10 30 loan must be made payable to the licensee. 10 31 6. Upon receipt of the check from the consumer for a 10 32 delayed deposit loan, the licensee must immediately stamp the 10 33 back of the check with an endorsement that states "This check 10 34 is being negotiated as part of a delayed deposit loan pursuant 10 35 to Iowa Code chapter 533D, and any holder of this check takes 11 1 it subject to all claims and defenses of the maker." 11 2 7. Any facilitator is subject to enforcement under 11 3 sections 533D.12 through 533D.15 and the civil remedies in 11 4 section 533D.15A if the person making the delayed deposit loan 11 5 fails to comply with the requirements of this chapter. 11 6 8. The licensee must provide the consumer, or each 11 7 consumer if there is more than one, with copies of the 11 8 documents described in section 533D.9A, subsection 2, prior to 11 9 the consummation of the loan. 11 10 9. The holder or assignee of any check written by a 11 11 consumer in connection with a delayed deposit loan takes the 11 12 instrument subject to all claims and defenses of the maker. 11 13 10. The licensee shall give to each person making a 11 14 payment, whether in whole or in part, a signed, dated receipt 11 15 showing the amount paid and the balance due on the loan. 11 16 Sec. 13. Section 533D.10, Code 2001, is amended to read as 11 17 follows: 11 18 533D.10 PROHIBITED ACTS BY LICENSEE. 11 19 1. A licensee shall not do any of the following: 11 20 a. Hold from any one maker more thantwo checksone check 11 21 at any one time, or otherwise make more than one delayed 11 22 deposit loan to a consumer at a time. 11 23b. Hold from any one maker a check or checks in an11 24aggregate face amount of more than five hundred dollars at any11 25one time.11 26c. Hold or agree to hold a check for more than thirty-one11 27days.11 28d.b. Require the maker to receive payment by a method 11 29whichthat causes the maker to pay additional or further fees 11 30 and charges to the licensee or another person, or otherwise 11 31 charge to cash a check representing the proceeds of the 11 32 delayed deposit loan. 11 33e.c. Repay, refinance, or otherwise consolidate a 11 34 postdated check transaction with the proceeds of another 11 35 postdated check transaction made by the same licensee. Upon 12 1 termination of a delayed deposit loan through the payment of 12 2 the consumer's check by the drawee bank, the return of a check 12 3 to a consumer who redeems it for consideration, through 12 4 expiration of maturity date, or any other method of 12 5 termination, the licensee shall not enter into another delayed 12 6 deposit loan with the same consumer for at least thirty days 12 7 thereafter; provided, that a licensee may extend the term of 12 8 the loan without charge. 12 9f.d.ReceiveContract for or receive any other charges or 12 10 fees in addition to the fees listed in section 533D.9,12 11subsections 1 and 2. This prohibition includes but is not 12 12 limited to any charges for insurance. 12 13 e. Engage in the business of delayed deposit lending 12 14 unless the superintendent has issued a valid license. 12 15 f. Use or threaten to use the criminal process in this or 12 16 any other state to collect on the delayed deposit loan. 12 17 g. Engage in unfair, deceptive, or fraudulent practices in 12 18 the advertising, making, or collecting of a delayed deposit 12 19 loan. 12 20 h. Use any device or agreement that would have the effect 12 21 of charging or collecting more fees than allowed by this 12 22 chapter, including but not limited to entering into a 12 23 different type of transaction with the consumer. 12 24 i. Alter any information on the check or any other loan 12 25 documents. 12 26 j. In the event of default, sue on the check. All suits 12 27 arising out of default shall be brought on the written 12 28 agreement executed by the consumer in accordance with section 12 29 533D.9A, subsection 2. 12 30 k. Accepting collateral for any delayed deposit loan; or 12 31 using or attempting to use the check provided in connection 12 32 with a delayed deposit loan as security for purposes of state 12 33 or federal law. 12 34 2. For purposes of this section, "licensee" includes a 12 35 person related to the licensee by common ownership or control, 13 1 a person in whom the licensee has any financial interest, or 13 2 any employee or agent of the licensee. 13 3 Sec. 14. Section 533D.11, Code 2001, is amended to read as 13 4 follows: 13 5 533D.11 EXAMINATION OF RECORDS BY SUPERINTENDENT. 13 6 1. The superintendent shall examine the books, accounts, 13 7 and records of each licensee annually. 13 8 2. The licensee shall pay tocosts ofthe superintendent 13 9incurred inan examinationshall be paid by the licenseefee, 13 10 based on the actual cost of the examination plus the 13 11 proportionate share of administrative expenses in the 13 12 operation of the banking division of the department of 13 13 commerce attributable to the administration of this chapter as 13 14 determined by the superintendent. 13 15 3. The superintendent may examine or investigate 13 16 complaints or reports concerning alleged violations of this 13 17 chapter or any rule adopted or order issued by the 13 18 superintendent, or violations of chapter 537 or any rule 13 19 adopted or order issued by the administrator of the Iowa 13 20 consumer credit code. The superintendent may order the actual 13 21 cost of the examination or investigation to be paid by the 13 22 person who is the subject of the examination or investigation, 13 23 whether or not the alleged violator is licensed. 13 24 Sec. 15. Section 533D.12, subsection 1, paragraph a, Code 13 25 2001, is amended to read as follows: 13 26 a. A licensee or any of its officers, directors, 13 27 shareholders, partners, or members has violated this chapter 13 28 or any rule adopted or order issued by the superintendent, or 13 29 violated chapter 537 or any rule adopted or order issued by 13 30 the administrator of the Iowa consumer credit code. 13 31 Sec. 16. Section 533D.12, Code 2001, is amended by adding 13 32 the following new subsection: 13 33 NEW SUBSECTION. 3. The revocation, suspension, or 13 34 surrender of any license shall not relieve the licensee from 13 35 civil or criminal liability for acts committed prior to the 14 1 revocation, suspension, or surrender. 14 2 Sec. 17. Section 533D.13, Code 2001, is amended to read as 14 3 follows: 14 4 533D.13 CEASE AND DESIST ORDER – INJUNCTION. 14 5 1. If the superintendent believes that any person has 14 6 engaged in or is about to engage in an act or practice 14 7 constituting a violation of this chapter or any rule adopted 14 8 or order issued by the superintendent, or a violation of 14 9 chapter 537 or any rule adopted or order issued by the 14 10 administrator of the Iowa consumer credit code, the 14 11 superintendent may issue and serve on the person a cease and 14 12 desist order. 14 13 2. Upon entry of a cease and desist order, the 14 14 superintendent shall promptly notify in writing all persons to 14 15 whom the order is directed that it has been entered and the 14 16 reasons for the order. 14 17 3. Any person to whom the order is directed may request in 14 18 writing a hearing within fifteen business days after the date 14 19 of the issuance of the order. 14 20 4. Upon receipt of the written request, the matter shall 14 21 be set for hearing within fifteen business days of the receipt 14 22 by the superintendent, unless the person requesting the 14 23 hearing consents to a later date. If a hearing is not 14 24 requested within fifteen business days and none is ordered by 14 25 the superintendent, the order of the superintendent shall 14 26 automatically become final and remain in effect until modified 14 27 or vacated by the superintendent. If a hearing is requested 14 28 or ordered, the superintendent, after notice and hearing, 14 29 shall issue written findings of fact and conclusions of law 14 30 and shall affirm, vacate, or modify the order. 14 31 5. The superintendent may vacate or modify an order if the 14 32 superintendent finds that the conditionswhichthat caused its 14 33 entry have changed or that it is otherwise in the public 14 34 interest to do so. Any person aggrieved by a final order of 14 35 the superintendent may appeal the order as provided in chapter 15 1 17A. 15 2 6. If it appears that a person has engaged in or is 15 3 engaging in an act or practice in violation of this chapter or 15 4 chapter 537, the attorney general may initiate an action in 15 5 the district court to enjoin such acts or practices pursuant 15 6 to this subsection, or chapter 537, article 6, part 1, and to 15 7 enforce compliance with this chapter or chapter 537. Upon a 15 8 showing of a violation of this chapter or chapter 537, a 15 9 permanent or temporary injunction, restraining order, or writ 15 10 of mandamus shall be granted, or a receiver or conservator may 15 11 be appointed to oversee the person's assets. The attorney 15 12 general shall not be required to post a bond. 15 13 Sec. 18. Section 533D.14, subsection 1, Code 2001, is 15 14 amended to read as follows: 15 15 1. If the superintendent finds, after notice and hearing 15 16 as provided in this chapter, that a person has violated this 15 17 chapter, a rule adopted pursuant to this chapter, or an order 15 18 of the superintendent, or has violated chapter 537 or any rule 15 19 adopted or order issued by the administrator of the Iowa 15 20 consumer credit code, the superintendent may order the person 15 21 to pay an administrative fine of not more than five thousand 15 22 dollars for each violation, in addition to the costs of 15 23 investigation. 15 24 Sec. 19. Section 533D.15, Code 2001, is amended to read as 15 25 follows: 15 26 533D.15 CRIMINAL VIOLATION – OPERATION OF BUSINESS 15 27 WITHOUT LICENSE – INJUNCTION. 15 28 1. A person required to be licensed under this chapter who 15 29 operates a delayed depositservicesloan business in this 15 30 state without first obtaining a license under this chapter or 15 31 while such license is suspended or revoked by the 15 32 superintendent is guilty of a serious misdemeanor. 15 33 2. In addition to the criminal penalty provided for in 15 34this sectionsubsection 1, the superintendent may also 15 35 commence an action to enjoin the operation of the business. 16 1 Sec. 20. NEW SECTION. 533D.15A CIVIL REMEDIES. 16 2 The remedies provided herein are cumulative and apply to 16 3 licensees, facilitators, and unlicensed persons to whom this 16 4 chapter applies and who failed to obtain a license. 16 5 1. Any violation of section 714.16, subsection 2, 16 6 paragraph "a", constitutes a violation of this chapter. 16 7 2. Any violation of this chapter constitutes a violation 16 8 of section 714.16. 16 9 3. The violation of any provision of this chapter or 16 10 related regulation, or chapter 537 or related regulation 16 11 renders the delayed deposit loan void, and the person shall 16 12 have no right to collect, receive, or retain any principal, 16 13 interest, or other charges whatsoever with respect to the 16 14 loan, except where the violation occurs as a result of 16 15 accidental or bona fide error of computation and 16 16 notwithstanding the maintenance of procedures reasonably 16 17 adopted to avoid any such error. 16 18 4. A person who violates this chapter shall be liable to 16 19 the consumer for at least the following: 16 20 a. Statutory damages of one thousand dollars for each 16 21 violation. 16 22 b. Actual, consequential, and punitive damages. 16 23 c. Costs and attorney fees. 16 24 5. A consumer may sue for injunctive and other appropriate 16 25 equitable relief. 16 26 6. The consumer may bring a class action to enforce any 16 27 provision of this chapter. This right is not waivable, 16 28 directly or indirectly. 16 29 7. The remedies provided in this section are not intended 16 30 to be the exclusive remedies available to the consumer. 16 31 Sec. 21. Section 533D.16, Code 2001, is repealed. 16 32 EXPLANATION 16 33 This bill amends Code chapter 533D, regarding delayed 16 34 deposit loans, more commonly known as "payday loans". 16 35 The bill changes the title of the chapter in Code section 17 1 533D.1 to the "Delayed Deposit Loan Act", instead of the 17 2 "Delayed Deposit Services Licensing Act", to indicate clearly 17 3 that the financial transactions covered by Code chapter 533D 17 4 are loans. The bill also adds that the chapter's purpose is 17 5 to protect consumers who enter into short-term loans with high 17 6 rates of interest, and that the loans regulated under Code 17 7 chapter 533D are also subject to Code chapter 537, the Iowa 17 8 consumer credit code, except as specifically displaced by 17 9 provisions of the delayed deposit loan Act. References to 17 10 Code chapter 537 are added at numerous places in the chapter. 17 11 The bill adds several definitions to Code section 533D.2, 17 12 including "consumer", "delayed deposit loan business", 17 13 "facilitator", and "supervised financial organization". The 17 14 bill changes the existing definition for "licensee". The bill 17 15 changes the definition for the previously defined term of 17 16 "delayed deposit services business", and applies it to 17 17 "delayed deposit loan". 17 18 The bill adds new Code section 533D.2A, which addresses the 17 19 applicability of the chapter and specific exemptions. New 17 20 Code section 533D.2A states that Code chapter 533D applies to 17 21 any person who, for a fee or other consideration, accepts a 17 22 check dated on the date it was written and agrees to hold it 17 23 for a period of days prior to deposit or presentment, or 17 24 accepts a check dated subsequent to the date it was written 17 25 and agrees to hold the check for deposit until the date 17 26 written on the check. Code section 533D.2A states that the 17 27 chapter applies to any person who seeks to evade its 17 28 applicability by any device, subterfuge, or pretense. 17 29 Individual employees of a licensee acting solely as employees 17 30 do not need to be separately licensed under the chapter. 17 31 Facilitators are expressly within the applicability of the 17 32 chapter. "Facilitators" is defined in Code section 533D.2, 17 33 subsection 2B, as any person who facilitates, enables, or acts 17 34 as a conduit for another person who is or may be exempt from 17 35 licensing, who is operating a delayed deposit loan business. 18 1 To the extent that supervised financial organizations are 18 2 subject to federal law that may preempt the provisions of the 18 3 delayed deposit loan Act regarding limitations on interest 18 4 rates and fees, all other provisions of Code chapter 533D, 18 5 except the licensure requirements in Code section 533D.3, 18 6 apply to supervised financial organizations. "Supervised 18 7 financial organizations" is defined in Code section 533D.2, 18 8 subsection 2A, by reference to Code section 537.1301, 18 9 subsection 42, as any person, other than an insurance company 18 10 or other organization primarily engaged in an insurance 18 11 business, which is organized, chartered, or holding an 18 12 authorization certificate pursuant to Code chapter 524, 533, 18 13 or 534, or pursuant to the laws of any other state or of the 18 14 United States which authorizes the person to make loans and to 18 15 receive deposits, including a savings, share, certificate, or 18 16 deposit account, and which is subject to supervision by an 18 17 official or agency of this state, such other state, or of the 18 18 United States. In conjunction, current Code section 533D.16, 18 19 which provides that Code chapter 533D is not applicable to 18 20 state and federal banks, savings and loan associations, credit 18 21 unions, or industrial loan companies, is repealed. 18 22 The bill amends Code section 533D.3 regarding the license 18 23 application process. The bill adds a license fee of $250 per 18 24 location, separate from the application fee. The bill 18 25 requires that the license applicant, officers, directors, 18 26 shareholders, partners, or members have not been convicted of 18 27 a serious misdemeanor, aggravated misdemeanor, or a felony, 18 28 rather than the previous requirement of no prior felonies. 18 29 The bill requires the applicant to have unencumbered assets of 18 30 at least $25,000 per location available for operating the 18 31 business, not $25,000 total. The bill changes the renewal fee 18 32 to $250, from $100. Changes in terminology, including the 18 33 added concepts of facilitators and supervised financial 18 34 organizations, are also made in the Code section. 18 35 The bill changes Code section 533D.5 to require the 19 1 licensee to notify the superintendent in writing within 30 19 2 days when a serious misdemeanor, aggravated misdemeanor, or a 19 3 felony conviction is entered against the licensee, or any 19 4 officer, director, shareholder, partner, member, employee, or 19 5 agent, rather than the previous requirement of notification of 19 6 only a felony conviction. 19 7 The bill changes the fee in Code section 533D.7 to $250, an 19 8 increase from $150, for a change in the designated principal 19 9 place of business, or establishment or change of location of a 19 10 branch office. 19 11 The bill inserts new language regarding fees in Code 19 12 section 533D.9. A licensee may only charge the fees allowed 19 13 in that Code section. The allowable transaction fee is $5 per 19 14 $100 of the amount financed, or a minimum charge of $5 when 19 15 the amount financed exceeds $75, or $3.50 when the amount 19 16 financed exceeds $50. The previous fee allowed was $15 on the 19 17 first $100 financed, and $10 for subsequent $100 increments. 19 18 The default fee that may be charged if the check is not 19 19 negotiable on the date agreed upon is no more than $15. It 19 20 may be charged once, no matter how many times the check is 19 21 redeposited and returned. This fee is the licensee's 19 22 exclusive remedy for late payment and nonpayment. This fee 19 23 and language are similar to that in the current Code. 19 24 Provisions regarding disclosure of terms in current Code 19 25 section 533D.9 are deleted, and addressed separately in new 19 26 Code section 533D.9A. 19 27 New Code section 533D.9A sets forth the disclosure 19 28 requirements for delayed deposit loan transactions, including: 19 29 (1) an information pamphlet must be furnished to all consumers 19 30 before entering into a loan, that conveys, in English and 19 31 Spanish, all of the consumer's rights and responsibilities, 19 32 including a toll-free telephone number to the banking division 19 33 for questions, concerns, or complaints; (2) loan documents 19 34 written in simple English that include an itemization of fees 19 35 and charges, the date the check will be deposited or 20 1 presented, a clear description of the payment obligations, the 20 2 default fee, and the limitations upon the licensee in charging 20 3 it, disclosures required under the Iowa consumer credit code 20 4 and the federal Truth in Lending Act, and a notice in at least 20 5 14 point type that states: "You cannot be prosecuted in 20 6 criminal court to collect this loan."; (3) posted notices that 20 7 inform consumers of the schedule of all fees, charges, 20 8 interest, and penalties, and that the criminal process cannot 20 9 be used to collect any deferred deposit transaction checks. 20 10 The bill adds new Code section 533D.9B regarding the 20 11 requirements and terms of the delayed deposit loans. The 20 12 maximum amount of a delayed deposit loan is $500, the minimum 20 13 is $50. Each delayed deposit loan must have a minimum term of 20 14 no less than two weeks for each $50 owed. The consumer may 20 15 make partial payments on the loan at any time, in at least $5 20 16 increments. The check received by the licensee must 20 17 immediately be stamped with an endorsement that states the 20 18 check is being negotiated pursuant to Code chapter 533D, and 20 19 any holder of the check takes it subject to all claims and 20 20 defenses of the maker, and Code section 533D.9B states that 20 21 any holder or assignee takes the instrument subject to all 20 22 claims and defenses of the maker. The licensee must give the 20 23 consumer copies of all documents required by Code section 20 24 533D.9A, and a signed, dated receipt each time a payment is 20 25 made, showing the amount paid and the balance due on the loan. 20 26 The bill amends Code section 533D.10, regarding prohibited 20 27 acts by licensees, which for purposes of this section includes 20 28 any person related to the licensee by common ownership or 20 29 control, a person in whom the licensee has any financial 20 30 interest, or any employee or agent of the licensee. The bill 20 31 prohibits a licensee from the following: (1) holding more 20 32 than one check from any one maker at any time, or otherwise 20 33 making more than one loan to a consumer at a time, rather than 20 34 the current Code language that allows a licensee to hold no 20 35 more than two checks at one time from a single maker; (2) 21 1 requiring a maker to receive payment by a method that causes 21 2 the maker to pay additional fees and charges to the licensee 21 3 or another person; (3) repaying, refinancing, or otherwise 21 4 consolidating a postdated check transaction with the proceeds 21 5 of another postdated check transaction made by the licensee, 21 6 including the addition in the bill of a 30-day prohibition on 21 7 the licensee entering into another transaction with the same 21 8 consumer upon repayment of the loan; (4) contracting for or 21 9 receiving any charges or fees other than the transaction fee 21 10 and default fee permitted under Code section 533.9; (5) 21 11 engaging in the business of delayed deposit lending without a 21 12 license; (6) using or threatening to use the criminal process 21 13 to collect on a delayed deposit loan; (7) engaging in unfair, 21 14 deceptive, or fraudulent practices in advertising, making or 21 15 collecting a loan; (8) using any device or agreement that 21 16 would have the effect of charging or collecting more fees than 21 17 allowed by Code chapter 533D; (9) altering any information on 21 18 the check or loan documents; (10) suing on the check in the 21 19 event of default; and (11) accepting collateral for any 21 20 delayed deposit loan, or using or attempting to use the check 21 21 given for the delayed deposit transaction as security for 21 22 purposes of state or federal law. 21 23 The bill amends Code section 533D.11 to require the 21 24 licensee to pay an examination fee that is based not only on 21 25 the actual costs of the examination as allowed in current Code 21 26 language, but also on a proportionate share of the 21 27 administrative expenses of the banking division attributable 21 28 to the administration of Code chapter 533D. The bill also 21 29 permits the superintendent to investigate not only alleged 21 30 violations of Code chapter 533D, but also of Code chapter 537, 21 31 and related administrative rules or orders. 21 32 The bill amends Code section 533D.12 to allow the 21 33 superintendent to revoke a license when a licensee or any of 21 34 its officers, directors, shareholders, partners, or members 21 35 has violated not only Code chapter 533D or a related 22 1 administrative rule or order, but also Code chapter 537 and a 22 2 related administrative rule or order. A new subsection is 22 3 added to specify that revocation, suspension, or surrender of 22 4 the license does not relieve the licensee from civil or 22 5 criminal liability for acts committed prior to the revocation, 22 6 suspension, or surrender. 22 7 The bill amends Code section 533D.12 to allow the 22 8 superintendent to seek a cease and desist order, and the 22 9 attorney general to seek injunctive relief, not only for 22 10 alleged violations of Code chapter 533D, but also for Code 22 11 chapter 537 and related administrative rules or orders. The 22 12 bill amends Code section 533D.14 to allow the superintendent 22 13 to impose administrative fines for violations of Code chapter 22 14 537, as well as Code chapter 533D. 22 15 The bill adds Code section 533D.15A to provide civil 22 16 remedies. Code section 533D.15A provides that violations of 22 17 Code chapter 533D constitute a violation of Code section 22 18 714.16, and violations of Code section 714.16, subsection 2, 22 19 paragraph "a", regarding deceptive acts constituting consumer 22 20 frauds constitute a violation of Code chapter 533D. A 22 21 violation of Code chapter 533D or chapter 537, or any related 22 22 regulations, renders the loan void, and the person shall have 22 23 no right to collect or retain principal, interest, or other 22 24 charges. A person who violates Code chapter 533D is liable 22 25 for the following: (1) statutory damages of $1,000 per 22 26 violation; (2) actual, consequential, and punitive damages; 22 27 and (3) costs and attorney fees. A consumer may also seek 22 28 injunctive or other equitable relief, or may pursue a class 22 29 action. 22 30 The following sections contain technical changes only: 22 31 Code section 533D.4, regarding the surrender of license; Code 22 32 section 533D.6, regarding operation after change in ownership; 22 33 Code section 533D.8, regarding restrictions on operating other 22 34 businesses at the same site; and Code section 533D.15, 22 35 regarding criminal violations for operating without a license. 23 1 LSB 2376XS 79 23 2 jj/cls/14
Text: SF00273 Text: SF00275 Text: SF00200 - SF00299 Text: SF Index Bills and Amendments: General Index Bill History: General Index
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