House File 2003 - Introduced
HOUSE FILE
BY HUTTER
Passed House, Date Passed Senate, Date
Vote: Ayes Nays Vote: Ayes Nays
Approved
A BILL FOR
1 An Act relating to the regulation of payday loans and lenders,
2 including the establishment of fees and civil penalties, and
3 providing for an impact study by the superintendent of
4 banking.
5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
6 TLSB 5022HH 81
7 kk/gg/14
PAG LIN
1 1 Section 1. NEW SECTION. 533E.1 TITLE.
1 2 This chapter shall be known and may be cited as the "Payday
1 3 Loan Reform Act".
1 4 Sec. 2. NEW SECTION. 533E.2 PURPOSE AND CONSTRUCTION.
1 5 The purposes of this chapter are to protect consumers who
1 6 enter into payday loans and to regulate the lenders of payday
1 7 loans. This chapter shall be construed as a consumer
1 8 protection law for all purposes. This chapter shall be
1 9 liberally construed to effectuate its purposes.
1 10 Sec. 3. NEW SECTION. 533E.3 DEFINITIONS.
1 11 For purposes of this chapter, unless the context otherwise
1 12 requires:
1 13 1. "Check" means the same as defined in section 554.3104.
1 14 2. "Commercially reasonable method of verification" means
1 15 a consumer reporting service database certified by the
1 16 superintendent pursuant to section 533E.13 as effective in
1 17 verifying that a proposed loan agreement is permissible under
1 18 this chapter.
1 19 3. "Consumer" means a natural person who, singly or
1 20 jointly with another consumer, enters into a loan.
1 21 4. "Consumer reporting service" means an entity that
1 22 provides a database certified by the superintendent pursuant
1 23 to section 533E.13.
1 24 5. "Gross monthly income" means monthly income as
1 25 demonstrated by official documentation of the income,
1 26 including, but not limited to, a pay stub or a receipt
1 27 reflecting payment of government benefits, for the period
1 28 thirty days prior to the date on which the loan is made.
1 29 6. "Lender" means a person or entity, including an
1 30 affiliate or subsidiary of a lender, that offers or makes a
1 31 payday loan, buys a whole or partial interest in a payday
1 32 loan, arranges a payday loan for a third party, or acts as an
1 33 agent for a third party in making a payday loan, regardless of
1 34 whether approval, acceptance, or ratification by the third
1 35 party is necessary to create a legal obligation for the third
2 1 party, and includes any other person or entity if the
2 2 superintendent determines that the person or entity is engaged
2 3 in a transaction that is in substance a disguised payday loan
2 4 or a subterfuge for the purpose of avoiding the requirements
2 5 of this chapter.
2 6 7. "Loan agreement" means a written agreement between a
2 7 lender and consumer to make a loan to the consumer, regardless
2 8 of whether any loan proceeds are actually paid to the consumer
2 9 on the date on which the loan agreement is made.
2 10 8. "Member of the military" means a person serving in the
2 11 armed forces of the United States, the Iowa national guard, or
2 12 any reserve component of the armed forces of the United
2 13 States. "Member of the military" includes those persons
2 14 engaged in active duty, training, or education under the
2 15 supervision of the United States preliminary to induction into
2 16 military service, or a period of active duty with this state
2 17 under Title 10 or Title 32 of the United States Code pursuant
2 18 to order of the president of the United States or the
2 19 governor.
2 20 9. "Outstanding balance" means the total amount owed by a
2 21 consumer on a loan to a lender, including all principal,
2 22 finance charges, fees, and charges of every kind.
2 23 10. "Payday loan" or "loan" means a loan with a finance
2 24 charge exceeding an annual percentage rate of thirty=six
2 25 percent and with a term that does not exceed one hundred
2 26 twenty days, including any transaction conducted via any
2 27 medium, including, but not limited to, paper, facsimile,
2 28 internet, or telephone, pursuant to which any of the following
2 29 occurs:
2 30 a. A lender accepts one or more checks dated on the date
2 31 written and agrees to hold them for a period of days before
2 32 deposit or presentment, or accepts one or more checks dated
2 33 subsequent to the date written and agrees to hold them for
2 34 deposit.
2 35 b. A lender accepts one or more authorizations to debit a
3 1 consumer's bank account.
3 2 c. A lender accepts an interest in a consumer's wages,
3 3 including, but not limited to, a wage assignment.
3 4 11. "Principal amount" means the amount received by the
3 5 consumer from the lender which is due and owing on a loan,
3 6 excluding any finance charges, interest, fees, or other loan=
3 7 related charges.
3 8 12. "Rollover" means to refinance, renew, amend, or extend
3 9 a loan beyond its original term.
3 10 13. "Superintendent" means the superintendent of banking.
3 11 Sec. 4. NEW SECTION. 533E.4 APPLICABILITY.
3 12 1. Except as otherwise provided in this section, this
3 13 chapter applies to any lender that offers or makes a payday
3 14 loan to a consumer in this state.
3 15 2. The provisions of this chapter apply to any person or
3 16 entity that seeks to evade its applicability by any device,
3 17 subterfuge, or pretense whatsoever.
3 18 3. A bank, savings and loan association, credit union,
3 19 insurance company or related corporation, licensed to do
3 20 business in this state pursuant to another chapter of this
3 21 Code, or the laws of the United States or the laws of another
3 22 state, and engaged primarily in lending or investing funds is
3 23 exempt from the provisions of this chapter.
3 24 4. A lender that is an agent for a bank, savings and loan
3 25 association, credit union, or insurance company for the
3 26 purpose of brokering, selling, or otherwise offering payday
3 27 loans made by the bank, savings and loan association, credit
3 28 union, or insurance company shall be subject to all of the
3 29 provisions of this chapter, except those provisions related to
3 30 finance charges.
3 31 Sec. 5. NEW SECTION. 533E.5 LICENSURE REQUIREMENT.
3 32 A person or entity acting as a payday lender shall be
3 33 licensed by the superintendent as provided in this chapter.
3 34 Sec. 6. NEW SECTION. 533E.6 LICENSURE == FEES.
3 35 1. An application for a license shall be in writing and in
4 1 a form prescribed by the superintendent. The superintendent
4 2 may not issue a payday loan license unless and until all of
4 3 the following findings are made:
4 4 a. That the financial responsibility, experience,
4 5 character, and general fitness of the applicant are such as to
4 6 command the confidence of the public and to warrant the belief
4 7 that the business will be operated lawfully and fairly and
4 8 within the provisions and purposes of this chapter.
4 9 b. That the applicant has submitted such other information
4 10 as the superintendent may deem necessary.
4 11 2. A license shall not be issued for longer than one year,
4 12 and shall not be renewed if the lender has substantially
4 13 violated this chapter and has not cured the violation to the
4 14 satisfaction of the superintendent.
4 15 3. A licensed lender shall appoint, in writing, the
4 16 superintendent as attorney in fact upon whom all legal process
4 17 against the lender may be served with the same legal force and
4 18 validity as if served on the lender. A copy of the written
4 19 appointment, duly certified, shall be filed in the office of
4 20 the superintendent, and a copy thereof certified by the
4 21 superintendent shall be sufficient evidence to subject a
4 22 licensed lender to jurisdiction in a court of law. The
4 23 appointment shall remain in effect while any liability remains
4 24 outstanding in this state against the lender. When a summons
4 25 is served upon the superintendent as attorney in fact for a
4 26 licensed lender, the superintendent shall immediately notify
4 27 the lender by registered mail, enclosing the summons and
4 28 specifying the hour and day of service.
4 29 4. A payday loan license shall state the address,
4 30 including city and state, at which the business is to be
4 31 conducted and shall state fully the name of the lender. The
4 32 license shall be conspicuously posted in the place of business
4 33 of the lender and shall not be transferable or assignable.
4 34 5. A lender licensed pursuant to this section shall pay an
4 35 annual license fee of one thousand dollars. If a lender fails
5 1 to renew its license each year by December 31, its license
5 2 shall automatically expire; however, the superintendent may
5 3 reinstate an expired license upon compliance by the lendor
5 4 with both of the following:
5 5 a. Payment of the annual license fee within thirty days of
5 6 the date of expiration.
5 7 b. Proof of good cause for failure to renew.
5 8 6. The superintendent shall maintain a list of lenders
5 9 licensed pursuant to this chapter that shall be available to
5 10 interested consumers, lenders, and the public. The
5 11 superintendent shall maintain a toll=free telephone number
5 12 whereby consumers may obtain information about lenders. The
5 13 superintendent shall also establish a complaint process under
5 14 which an aggrieved consumer may file a complaint against a
5 15 lender who violates any provision of this chapter.
5 16 7. When a license is denied, the superintendent shall
5 17 serve the lender with notice of the denial, including a
5 18 statement of supporting reasons, either personally, or by
5 19 certified mail, return receipt requested. Service by
5 20 certified mail shall be deemed completed when the notice is
5 21 deposited in the United States mail. A lender that is denied
5 22 a license pursuant to this section may file a written appeal
5 23 with the superintendent and request a hearing within ten days
5 24 after receiving notice of the denial. If a hearing is
5 25 requested, the superintendent shall schedule a hearing within
5 26 thirty days after the request is received unless otherwise
5 27 agreed to by the parties. The hearing shall be conducted as a
5 28 contested case proceeding pursuant to chapter 17A.
5 29 Sec. 7. NEW SECTION. 533E.7 PLACE OF BUSINESS.
5 30 1. Not more than one place of business shall be maintained
5 31 under the same license, but the superintendent may issue more
5 32 than one license to the same lender upon compliance with all
5 33 of the provisions of this chapter governing issuance of a
5 34 single license. The location of a place of business, except
5 35 those locations already in existence as of July 1, 2006, shall
6 1 not be within one mile of a facility where pari=mutuel
6 2 wagering is conducted pursuant to chapter 99D, within one mile
6 3 of a facility at which gambling is conducted pursuant to
6 4 chapter 99F, or within one mile of any state of Iowa or United
6 5 States military base or naval installation.
6 6 2. A lender shall not conduct the business of making loans
6 7 under this chapter within any office, suite, room, or place of
6 8 business in which any other business is solicited or engaged
6 9 in unless the other business is licensed by the superintendent
6 10 or, in the opinion of the superintendent, the other business
6 11 would not be contrary to the best interests of consumers and
6 12 is authorized by the superintendent in writing.
6 13 Sec. 8. NEW SECTION. 533E.8 CLOSING OF BUSINESS ==
6 14 SURRENDER OF LICENSE.
6 15 1. At least ten days before a licensed lender ceases
6 16 operations, closes the business, or files for bankruptcy, the
6 17 lender shall do all of the following:
6 18 a. Notify the superintendent of the lender's intended
6 19 action in writing.
6 20 b. Except when filing for bankruptcy, surrender the
6 21 lender's license to the superintendent for cancellation.
6 22 c. Notify the superintendent of the location where the
6 23 books, accounts, contracts, and records of the lender will be
6 24 maintained.
6 25 2. The surrender of the license shall not affect the
6 26 lender's civil or criminal liability for acts committed before
6 27 or after the surrender or entitle the lender to a return of
6 28 any part of the annual license fee.
6 29 3. The accounts, books, records, and contracts of the
6 30 lender shall be maintained and serviced by the lender, by
6 31 another lender licensed under this chapter, or by the
6 32 superintendent.
6 33 Sec. 9. NEW SECTION. 533E.9 LOAN TERMS.
6 34 1. Without affecting the right of a consumer to prepay at
6 35 any time without cost or penalty, a payday loan shall not have
7 1 a minimum term of less than thirteen days.
7 2 2. A payday loan shall not be made to a consumer if the
7 3 loan would result in the consumer being indebted to one or
7 4 more lenders for a period in excess of forty=five consecutive
7 5 days. Except as provided in section 533E.18, if a consumer
7 6 has or has had loans outstanding for a period in excess of
7 7 forty=five consecutive days, a lender shall not offer or make
7 8 a loan to the consumer for at least seven calendar days after
7 9 the date on which the outstanding balance of all payday loans
7 10 made during the forty=five=consecutive=day period is paid in
7 11 full. For purposes of this subsection, the term "consecutive
7 12 days" means a series of continuous calendar days during which
7 13 the consumer has an outstanding balance on one or more payday
7 14 loans; however, if a payday loan is made to a consumer within
7 15 six days or less after the outstanding balance of all loans is
7 16 paid in full, those days are counted as "consecutive days" for
7 17 purposes of this subsection.
7 18 3. A lender shall not make a payday loan to a consumer if
7 19 the total principal amount of the loan, when combined with the
7 20 principal amount of all of the consumer's other outstanding
7 21 payday loans, exceeds one thousand dollars or twenty=five
7 22 percent of the consumer's gross monthly income, whichever is
7 23 less.
7 24 4. A payday loan shall not be made to a consumer who has
7 25 an outstanding balance on more than one payday loan.
7 26 5. A lender shall not charge more than fifteen dollars and
7 27 fifty cents per one hundred dollars loaned on any payday loan
7 28 over the term of the loan. Except as provided in section
7 29 533E.15, this charge is considered fully earned as of the date
7 30 on which the loan is made.
7 31 6. A lender shall not take or attempt to take an interest
7 32 in any of the consumer's personal property to secure a payday
7 33 loan.
7 34 7. A consumer has the right to redeem a check or any other
7 35 item described in the definition of a payday loan under
8 1 section 533E.3 issued in connection with a payday loan from
8 2 the lender holding the check or other item at any time before
8 3 the payday loan becomes payable by paying the full amount of
8 4 the check or other item.
8 5 Sec. 10. NEW SECTION. 533E.10 WAGE ASSIGNMENTS.
8 6 A payday loan that is a transaction in which the lender
8 7 accepts a wage assignment shall meet the requirements of this
8 8 chapter, section 539.4, and section 537.3305, and be revocable
8 9 at will by the consumer. A violation of this section
8 10 constitutes a material violation of this chapter.
8 11 Sec. 11. NEW SECTION. 533E.11 PERMITTED FEES.
8 12 1. If there are insufficient funds to pay a check, debit,
8 13 or any other item described in the definition of a payday loan
8 14 under section 533E.3 on the day of presentment and only after
8 15 the lender has incurred an expense, a lender may charge a fee
8 16 not to exceed the amount permitted pursuant to section
8 17 537.2501, subsection 1, paragraph "g". Only one such fee may
8 18 be collected by the lender with respect to a particular check,
8 19 debit, or item even if it has been deposited and returned more
8 20 than once. A lender shall present the check, debit, or other
8 21 item described in the definition of a payday loan under
8 22 section 533E.3 for payment not more than twice. A fee charged
8 23 under this subsection is a lender's exclusive charge for late
8 24 payment.
8 25 2. Except for the finance charges described in section
8 26 533E.9 and as specifically allowed by this section, a lender
8 27 may not impose on a consumer any additional finance charges,
8 28 interest, fees, or charges of any sort for any purpose.
8 29 Sec. 12. NEW SECTION. 533E.12 VERIFICATION OF DATABASES
8 30 == CONFIDENTIALITY.
8 31 1. Before entering into a loan agreement with a consumer,
8 32 a lender shall use a commercially reasonable method of
8 33 verification to verify that the proposed loan agreement is
8 34 permissible under this chapter.
8 35 2. The superintendent shall certify that one or more
9 1 consumer reporting service databases are commercially
9 2 reasonable methods of verification pursuant to section
9 3 533E.13.
9 4 3. A lender may rely on the information provided by a
9 5 certified consumer reporting service database as accurate and
9 6 is not subject to any administrative penalty or liability as a
9 7 result of relying on inaccurate information obtained through
9 8 the commercially reasonable method of verification.
9 9 4. A lender shall update the certified consumer reporting
9 10 service databases by inputting all information required by the
9 11 superintendent in the following manner:
9 12 a. On the same day that a payday loan is made.
9 13 b. On the same day that a consumer elects a repayment
9 14 plan, as provided in section 533E.18.
9 15 c. On the same day that a consumer's payday loan is paid
9 16 in full.
9 17 5. A consumer reporting service shall indemnify lenders
9 18 against all claims and actions arising from illegal, willful,
9 19 or wanton acts on the part of the consumer reporting service
9 20 when the lender is utilizing the service's database as a
9 21 commercially reasonable method of verification.
9 22 6. Except as otherwise provided in this chapter, all
9 23 personally identifiable information regarding any consumer
9 24 obtained through verification is confidential and shall not be
9 25 subject to disclosure under chapter 22.
9 26 7. Notwithstanding any other provision of law to the
9 27 contrary, a consumer seeking a payday loan may make a direct
9 28 inquiry to a consumer reporting service to request a more
9 29 detailed explanation of the basis for a determination that the
9 30 consumer is ineligible for a new payday loan.
9 31 Sec. 13. NEW SECTION. 533E.13 APPLICATION FOR
9 32 CERTIFICATION OF VERIFICATION METHOD == REQUIREMENTS == FEES.
9 33 1. A consumer reporting service shall submit an
9 34 application to the superintendent for certification of the
9 35 service's database as a commercially reasonable method of
10 1 verification that a proposed loan agreement is permissible
10 2 under this chapter pursuant to section 533E.12.
10 3 2. Each application for certification shall be accompanied
10 4 by a nonrefundable investigation fee of two thousand five
10 5 hundred dollars and an initial certification fee of one
10 6 thousand dollars.
10 7 3. Each application for certification shall certify that
10 8 the consumer reporting service database complies with all of
10 9 the following requirements:
10 10 a. Provides real=time access through an internet
10 11 connection or, if real=time access through an internet
10 12 connection becomes unavailable to lenders due to a consumer
10 13 reporting service's technical problems incurred by the
10 14 consumer reporting service, through alternative verification
10 15 mechanisms, including, but not limited to, verification by
10 16 telephone.
10 17 b. Is accessible to the superintendent and to lenders in
10 18 order to ensure compliance with this chapter and in order to
10 19 provide any other information that the superintendent deems
10 20 necessary.
10 21 c. Requires lenders to input all information required by
10 22 the superintendent.
10 23 d. Maintains a real=time copy of the required reporting
10 24 information that shall be available to the superintendent at
10 25 all times and shall be the property of the superintendent.
10 26 e. Provides lenders only with a statement that a consumer
10 27 is eligible or ineligible for a new payday loan and a
10 28 description of the reason for the determination.
10 29 f. Contains safeguards to ensure that all information
10 30 contained in the database regarding consumers is kept
10 31 confidential.
10 32 4. Each application for certification by a consumer
10 33 reporting service under this chapter shall be accompanied by a
10 34 surety bond acceptable to the superintendent in the amount of
10 35 one million dollars. The surety bond shall be in a form
11 1 satisfactory to the superintendent and shall run to the state
11 2 for the benefit of any claimants against the consumer
11 3 reporting service to secure the faithful performance of its
11 4 obligations under this chapter. The aggregate liability of
11 5 the surety may exceed the principal sum of the bond.
11 6 Claimants against the consumer reporting service may
11 7 themselves bring suit directly on the surety bond or the
11 8 superintendent may bring suit on behalf of claimants, either
11 9 in one action or in successive actions.
11 10 a. The surety bond shall remain in effect until
11 11 cancellation, which may occur only after ninety days' written
11 12 notice to the superintendent. Cancellation shall not affect
11 13 any liability incurred or accrued during the ninety=day
11 14 period.
11 15 b. The surety bond shall remain in place for five years
11 16 after the consumer reporting service ceases operation in this
11 17 state.
11 18 c. The surety bond proceeds and any cash or other
11 19 collateral posted as security by a consumer reporting service
11 20 shall be deemed by operation of law to be held in trust for
11 21 any claimants under this chapter in the event of the
11 22 bankruptcy of the consumer reporting service.
11 23 d. To the extent that any indemnity or civil penalty
11 24 exceeds the amount of the surety bond described under this
11 25 section, the consumer reporting service shall be liable for
11 26 that amount.
11 27 5. Each consumer reporting service providing a certified
11 28 database shall have at all times a net worth of not less than
11 29 one million dollars calculated in accordance with generally
11 30 accepted accounting principles.
11 31 6. Upon certifying that a consumer reporting service
11 32 database is a commercially reasonable method of verification,
11 33 the superintendent shall provide reasonable notice to all
11 34 licensed lenders identifying the consumer reporting service
11 35 database as a commercially reasonable method of verification.
12 1 7. On or before March 1 of each year, each consumer
12 2 reporting service with a certified database under this section
12 3 shall pay to the superintendent a certification fee in the
12 4 amount of one thousand dollars.
12 5 Sec. 14. NEW SECTION. 533E.14 REQUIRED DISCLOSURES ==
12 6 LOAN AGREEMENT.
12 7 1. Before a payday loan is made, a lender shall deliver to
12 8 the consumer a pamphlet prepared by the superintendent that
12 9 does all of the following:
12 10 a. Explains, in simple English and Spanish, all of the
12 11 consumer's rights and responsibilities in a payday loan
12 12 transaction.
12 13 b. Includes a toll=free telephone number to the
12 14 superintendent's office to handle concerns or provide
12 15 information about whether a lender is licensed, whether
12 16 complaints have been filed with the superintendent, and the
12 17 resolution of those complaints.
12 18 c. Provides information regarding the availability of debt
12 19 management services.
12 20 2. A lender shall provide a consumer with a written loan
12 21 agreement that may be kept by the consumer. The written loan
12 22 agreement shall include all of the following information in
12 23 English and in the language in which the loan was negotiated:
12 24 a. The name and address of the lender making the payday
12 25 loan and the name and title of the individual employee who
12 26 signs the agreement on behalf of the lender.
12 27 b. Disclosures required by the federal Truth in Lending
12 28 Act as defined by section 537.1302.
12 29 c. A clear description of the consumer's payment
12 30 obligations under the loan.
12 31 d. The following statement, in at least fourteen point
12 32 bold type: "You cannot be prosecuted in criminal court to
12 33 collect this loan." The information required to be disclosed
12 34 under this paragraph shall be conspicuously disclosed in the
12 35 loan agreement and shall be located immediately preceding the
13 1 signature of the consumer.
13 2 e. The following statement, in at least fourteen point
13 3 bold type:
13 4 "WARNING: This loan is not intended to meet long=term
13 5 financial needs. This loan should be used only to meet short=
13 6 term cash needs. The cost of your loan may be higher than
13 7 loans offered by other lending institutions. This loan is
13 8 regulated by the Superintendent of Banking for the State of
13 9 Iowa."
13 10 3. The following notices in English and Spanish shall be
13 11 conspicuously posted by a lender in each location of a place
13 12 of business providing payday loans:
13 13 a. A notice that informs consumers that the lender cannot
13 14 use the criminal process against a consumer to collect any
13 15 payday loan.
13 16 b. The schedule of all finance charges to be charged on
13 17 loans with an example of the amounts that would be charged on
13 18 a one hundred dollar loan payable in thirteen days and a four
13 19 hundred dollar loan payable in thirty days, giving the
13 20 corresponding annual percentage rate.
13 21 c. In one=inch bold type, a notice to the public in the
13 22 lending area of each place of business containing the
13 23 following statement:
13 24 "WARNING: A payday loan is not intended to meet long=term
13 25 financial needs. A payday loan should be used only to meet
13 26 short=term cash needs. The cost of a payday loan may be
13 27 higher than loans offered by other lending institutions.
13 28 Payday loans are regulated by the Superintendent of Banking
13 29 for the State of Iowa."
13 30 d. In one=inch bold type, a notice to the public in the
13 31 lending area of each business location containing the
13 32 following statement:
13 33 "INTEREST=FREE REPAYMENT PLAN: If you still owe on one or
13 34 more payday loans after thirty=five days, you are entitled to
13 35 enter into a repayment plan. The repayment plan will give you
14 1 at least fifty=five days to repay your loan in installments
14 2 with no additional finance charges, interest, fees, or other
14 3 charges of any kind."
14 4 4. At the time a payday loan is made, the lender shall
14 5 provide the consumer with a separate written notice signed by
14 6 the consumer of the consumer's right to request a repayment
14 7 plan. The written notice shall comply with the requirements
14 8 of subsection 6.
14 9 5. The loan agreement shall include the following language
14 10 in at least fourteen point bold type:
14 11 "IF YOU STILL OWE ON ONE OR MORE PAYDAY LOANS AFTER THIRTY=
14 12 FIVE DAYS, YOU ARE ENTITLED TO ENTER INTO A REPAYMENT PLAN.
14 13 THE REPAYMENT PLAN WILL GIVE YOU AT LEAST FIFTY=FIVE DAYS TO
14 14 REPAY YOUR LOAN IN INSTALLMENTS WITH NO ADDITIONAL FINANCE
14 15 CHARGES, INTEREST, FEES, OR OTHER CHARGES OF ANY KIND."
14 16 6. At the time a payday loan is made, on the first page of
14 17 the loan agreement and in a separate document signed by the
14 18 consumer, the following shall be inserted in at least fourteen
14 19 point bold type:
14 20 "I UNDERSTAND THAT IF I STILL OWE ON ONE OR MORE PAYDAY
14 21 LOANS AFTER THIRTY=FIVE DAYS, I AM ENTITLED TO ENTER INTO A
14 22 REPAYMENT PLAN THAT WILL GIVE ME AT LEAST FIFTY=FIVE DAYS TO
14 23 REPAY THE LOAN IN INSTALLMENTS WITH NO ADDITIONAL FINANCE
14 24 CHARGES, INTEREST, FEES, OR OTHER CHARGES OF ANY KIND."
14 25 Sec. 15. NEW SECTION. 533E.15 RIGHT TO CANCEL FUTURE
14 26 PAYMENT OBLIGATIONS.
14 27 A consumer may cancel future payment obligations on a
14 28 payday loan, without cost or finance charges, no later than
14 29 the end of the second business day immediately following the
14 30 day on which the payday loan agreement was executed. To
14 31 cancel future payment obligations on a payday loan, the
14 32 consumer shall inform the lender in writing that the consumer
14 33 wants to cancel the future payment obligations on the payday
14 34 loan and shall return the uncashed proceeds, check or cash, in
14 35 an amount equal to the principal amount of the loan.
15 1 Sec. 16. NEW SECTION. 533E.16 ROLLOVERS PROHIBITED.
15 2 Rollover of a payday loan by any lender is prohibited.
15 3 This section does not prohibit entering into a repayment plan,
15 4 as provided in section 533E.18.
15 5 Sec. 17. NEW SECTION. 533E.17 PROCEEDS AND PAYMENTS.
15 6 1. A lender may issue the proceeds of a loan in the form
15 7 of a check drawn on the lender's bank account, in cash, by
15 8 money order, by debit card, or by electronic funds transfer.
15 9 When the proceeds are issued in the form of a check drawn on
15 10 the lender's bank account, by money order, or by electronic
15 11 funds transfer, the lender may not charge a fee for cashing
15 12 the check, money order, or electronic funds transfer. When
15 13 the proceeds are issued in cash, the lender shall provide the
15 14 consumer with written verification of the cash transaction and
15 15 shall maintain a record of the transaction for at least three
15 16 years.
15 17 2. After each payment made in full or in part on any loan,
15 18 the lender shall give the consumer making the payment either a
15 19 signed, dated receipt or a signed, computer=generated receipt
15 20 showing the amount paid and the balance due on the loan.
15 21 3. Before a loan is made, the lender shall provide the
15 22 consumer, or each consumer if there is more than one, with a
15 23 copy of the loan documents described in section 533E.14.
15 24 4. The holder or assignee of any loan agreement or of any
15 25 check written by a consumer in connection with a payday loan
15 26 takes the loan agreement or check subject to all claims and
15 27 defenses of the consumer against the maker.
15 28 5. Upon receipt of a check from a consumer for a loan, the
15 29 lender shall immediately stamp the back of the check with an
15 30 endorsement that states: "This check is being negotiated as
15 31 part of a loan under the Payday Loan Reform Act, and any
15 32 holder of this check takes it subject to all claims and
15 33 defenses of the maker."
15 34 6. Loan payments may be electronically debited from a
15 35 consumer's bank account. Except as may be provided by federal
16 1 law, the lender shall obtain prior written approval from the
16 2 consumer for such transactions.
16 3 7. A consumer may prepay on a loan in increments of five
16 4 dollars or more at any time without cost or penalty.
16 5 8. A loan is made on the date on which a loan agreement is
16 6 signed by both parties, regardless of whether the lender gives
16 7 any money to the consumer on that date.
16 8 Sec. 18. NEW SECTION. 533E.18 REPAYMENT PLAN.
16 9 1. If a consumer has or has had one or more payday loans
16 10 outstanding for thirty=five consecutive days, any payday loan
16 11 outstanding on the thirty=fifth consecutive day shall be
16 12 payable under the terms of a repayment plan as provided for in
16 13 this section, if the consumer requests the repayment plan. As
16 14 to any loan that becomes eligible for a repayment plan under
16 15 this subsection, the consumer has until twenty=eight days
16 16 after the default date of the loan to request a repayment
16 17 plan. Within forty=eight hours after the request for a
16 18 repayment plan is made, the lender shall prepare the repayment
16 19 plan agreement and both parties shall execute the agreement.
16 20 Execution of the repayment plan agreement shall be made in the
16 21 same manner in which the loan was made and shall be evidenced
16 22 in writing.
16 23 2. The terms of the repayment plan for a payday loan shall
16 24 include all of the following:
16 25 a. The lender may not impose any charge on the consumer
16 26 for requesting or using a repayment plan. Performance of the
16 27 terms of the repayment plan extinguishes the consumer's
16 28 obligation on the loan.
16 29 b. The lender shall not charge the consumer any finance
16 30 charges, interest, fees, or other charges of any kind, except
16 31 a fee for insufficient funds, as provided in section 533E.11.
16 32 c. The consumer shall be allowed to repay the loan in at
16 33 least four equal installments with at least thirteen days
16 34 between installments, provided that the term of the repayment
16 35 plan does not exceed ninety days. The first payment under the
17 1 repayment plan shall not be due before at least thirteen days
17 2 after the repayment plan is signed by both parties. The
17 3 consumer may prepay the amount due under the repayment plan at
17 4 any time, without charge or penalty.
17 5 d. The length of time between installments may be extended
17 6 by the parties so long as the total period of repayment does
17 7 not exceed ninety days. Any such modification shall be in
17 8 writing and signed by both parties.
17 9 3. Notwithstanding any provision of law to the contrary, a
17 10 lender shall not make a payday loan to a consumer who has a
17 11 payday loan outstanding under a repayment plan and for at
17 12 least fourteen days after the outstanding balance of the loan
17 13 under the repayment plan and the outstanding balance of all
17 14 other payday loans outstanding during the term of the
17 15 repayment plan are paid in full.
17 16 4. A lender shall not accept postdated checks for payments
17 17 under a repayment plan.
17 18 5. Notwithstanding any provision of law to the contrary, a
17 19 lender may voluntarily agree to enter into a repayment plan
17 20 with a consumer at any time. If a consumer is eligible for a
17 21 repayment plan under subsection 1, any repayment agreement
17 22 constitutes a repayment plan under this section and all
17 23 provisions of this section apply to that agreement.
17 24 Sec. 19. NEW SECTION. 533E.19 DEFAULT.
17 25 1. No legal proceeding of any kind, including, but not
17 26 limited to, a lawsuit or arbitration, may be filed or
17 27 initiated against a consumer to collect on a payday loan until
17 28 twenty=eight days after the default date of the loan, or, in
17 29 the case of a payday loan under a repayment plan, for twenty=
17 30 eight days after the default date under the terms of the
17 31 repayment plan.
17 32 2. Upon and after default, a lender shall not charge the
17 33 consumer any finance charges, interest, fees, or charges of
17 34 any kind, other than the insufficient fund fee described in
17 35 section 533E.11.
18 1 3. Notwithstanding whether a loan is or has been in
18 2 default, once the loan becomes subject to a repayment plan,
18 3 the loan shall not be construed to be in default until the
18 4 default date provided under the terms of the repayment plan.
18 5 Sec. 20. NEW SECTION. 533E.20 PRACTICES CONCERNING
18 6 MEMBERS OF THE MILITARY.
18 7 1. A lender may not garnish the wages or salary of a
18 8 consumer who is a member of the military.
18 9 2. In addition to any rights and obligations provided
18 10 under the federal Servicemembers Civil Relief Act, 50 U.S.C.
18 11 App. 501 et seq., a lender shall suspend and defer collection
18 12 activity against a consumer who is a member of the military
18 13 and who has been deployed to a combat or combat support
18 14 posting for the duration of the deployment.
18 15 3. A lender may not knowingly contact the military chain
18 16 of command of a consumer who is a member of the military in an
18 17 effort to collect on a payday loan.
18 18 4. A lender shall honor the terms of any repayment plan
18 19 entered into with any consumer, including a repayment
18 20 agreement negotiated through military counselors or third=
18 21 party credit counselors.
18 22 Sec. 21. NEW SECTION. 533E.21 RECORDKEEPING AND
18 23 REPORTING REQUIREMENTS == CIVIL PENALTY.
18 24 1. A lender shall keep and use books, accounts, records,
18 25 and loan documents that will enable the superintendent to
18 26 determine if the lender is complying with the provisions of
18 27 this chapter and shall maintain any other records as required
18 28 by the superintendent. The superintendent shall have the
18 29 authority to conduct examinations of the books, accounts,
18 30 records, and loan documents at any time.
18 31 2. A lender shall collect and maintain all of the
18 32 following information:
18 33 a. The total number of payday loans made during the
18 34 preceding calendar year.
18 35 b. The total number of payday loans outstanding as of
19 1 December 31 of the preceding calendar year.
19 2 c. The minimum, maximum, and average dollar amount of
19 3 payday loans made during the preceding calendar year.
19 4 d. The average annual percentage rate and the average term
19 5 of payday loans made during the preceding calendar year.
19 6 e. The total number of payday loans paid in full, the
19 7 total number of loans that went into default, and the total
19 8 number of loans written off during the preceding calendar
19 9 year.
19 10 3. The information required to be collected and maintained
19 11 pursuant to subsection 2 shall be annually reported to the
19 12 superintendent in detail and under appropriate headings. The
19 13 report shall be verified by the oath or affirmation of the
19 14 owner, manager, or president of the lender. The report shall
19 15 be filed with the superintendent no later than March 1 of the
19 16 year following the year for which the report discloses the
19 17 information specified in subsection 2. The superintendent may
19 18 impose upon a lender a civil penalty of twenty=five dollars
19 19 per day for each day beyond the filing deadline that the
19 20 report is not filed.
19 21 4. The superintendent shall publish a biennial report that
19 22 contains a compilation of aggregate data concerning the payday
19 23 lending industry and shall make the report available to the
19 24 governor, the general assembly, and the general public.
19 25 Sec. 22. NEW SECTION. 533E.22 ADVERTISING.
19 26 1. Advertising for loans transacted under this chapter may
19 27 not be false, misleading, or deceptive. Payday loan
19 28 advertising, if it states a rate or amount of charge for a
19 29 loan, shall state the rate as an annual percentage rate. A
19 30 lender shall not advertise in any manner so as to indicate or
19 31 imply that its rates or charges for loans are in any way
19 32 recommended, approved, set, or established by the state of
19 33 Iowa or by this chapter.
19 34 2. If any advertisement to which this section applies
19 35 states the amount of any installment payment, the dollar
20 1 amount of any finance charge, or the number of installments or
20 2 the period of repayment, then the advertisement shall state
20 3 all of the following:
20 4 a. The amount of the loan.
20 5 b. The number, amount, and due dates or period of payments
20 6 scheduled to repay the indebtedness if the credit is extended.
20 7 c. The finance charge expressed as an annual percentage
20 8 rate.
20 9 Sec. 23. NEW SECTION. 533E.23 PROHIBITED ACTS.
20 10 A lender making payday loans shall not commit, or have
20 11 committed on behalf of the lender, any of the following acts:
20 12 1. Threaten to use or use the criminal process in this or
20 13 any other state to collect on a loan.
20 14 2. Use any device or agreement that would have the effect
20 15 of charging or collecting more fees or charges than allowed by
20 16 this chapter, including, but not limited to, entering into a
20 17 different type of transaction with the consumer.
20 18 3. Engage in unfair, deceptive, or fraudulent practices in
20 19 the making or collecting of a payday loan.
20 20 4. Use or attempt to use a check provided by the consumer
20 21 in a payday loan as collateral for a transaction not related
20 22 to the payday loan.
20 23 5. Knowingly accept payment in whole or in part on a
20 24 payday loan through the proceeds of another payday loan
20 25 provided by any lender.
20 26 6. Knowingly accept any security, other than that
20 27 specified in the definition of a payday loan in section
20 28 533E.3, for a payday loan.
20 29 7. Charge any fees or charges other than those
20 30 specifically authorized by this chapter.
20 31 8. Threaten to take any action against a consumer that is
20 32 prohibited by this chapter or make any misleading or deceptive
20 33 statements regarding a payday loan or any consequences
20 34 thereof.
20 35 9. Make a misrepresentation of a material fact in
21 1 obtaining or attempting to obtain a license under this
21 2 chapter.
21 3 10. Include any of the following provisions in a loan
21 4 agreement required by section 533E.14, subsection 2:
21 5 a. A confession of judgment clause.
21 6 b. A waiver of the right to a jury trial, if applicable,
21 7 in any action brought by or against a consumer, unless the
21 8 waiver is included in an arbitration clause that is not
21 9 prohibited under paragraph "c".
21 10 c. A mandatory arbitration clause that is oppressive,
21 11 unfair, unconscionable, or substantially in derogation of the
21 12 rights of consumers.
21 13 d. A provision in which the consumer agrees not to assert
21 14 any claim or defense arising out of the contract.
21 15 11. Sell insurance of any kind whether or not sold in
21 16 connection with the making or collecting of a payday loan.
21 17 12. Take any power of attorney.
21 18 13. Take any security interest in real estate.
21 19 14. Collect a delinquency or collection charge on any
21 20 installment regardless of the period in which it remains in
21 21 default.
21 22 15. Collect treble damages on an amount owing from a
21 23 payday loan.
21 24 16. Refuse, or intentionally delay or inhibit, a
21 25 consumer's right to enter into a repayment plan pursuant to
21 26 this chapter.
21 27 17. Charge for, or attempt to collect, attorney fees,
21 28 court costs, or arbitration costs incurred in connection with
21 29 the collection of a payday loan.
21 30 18. Make a loan in violation of this chapter.
21 31 19. Violate any other provision of this chapter.
21 32 Sec. 24. NEW SECTION. 533E.24 ENFORCEMENT AND REMEDIES
21 33 == CIVIL PENALTY == LICENSE REVOCATION.
21 34 1. The remedies provided in this chapter are cumulative
21 35 and apply to persons or entities subject to this chapter.
22 1 2. Any material violation of this chapter, including the
22 2 commission of an act prohibited under section 533E.23,
22 3 constitutes an unfair or deceptive practice in violation of
22 4 section 714.16, subsection 2, paragraph "a".
22 5 3. If any provision of the written loan agreement
22 6 described in section 533E.14, subsection 2, violates this
22 7 chapter, then that provision is unenforceable against the
22 8 consumer.
22 9 4. a. The superintendent may issue a cease and desist
22 10 order to any lender or other person providing payday loans
22 11 without a license issued pursuant to this chapter, when in the
22 12 opinion of the superintendent the lender or other person is
22 13 violating or is about to violate any provision of this chapter
22 14 or any rule or requirement imposed in writing by the
22 15 superintendent as a condition of granting any authorization
22 16 permitted by this chapter. The cease and desist order
22 17 permitted by this subsection may be issued prior to a hearing.
22 18 b. The superintendent shall serve notice of an order to
22 19 cease and desist, including, but not limited to, a statement
22 20 of the reasons for the order, either personally or by
22 21 certified mail, return receipt requested. Service by
22 22 certified mail shall be deemed completed when the notice is
22 23 deposited in the United States mail.
22 24 c. Within ten days of service of the cease and desist
22 25 order, the lender or other person may request a hearing in
22 26 writing. The superintendent shall schedule a hearing within
22 27 thirty days after the request for a hearing unless otherwise
22 28 agreed to by the parties.
22 29 d. If it is determined that the superintendent had the
22 30 authority to issue the cease and desist order, the
22 31 superintendent may issue such orders as may be reasonably
22 32 necessary to correct, eliminate, or remedy the conduct.
22 33 e. The powers vested in the superintendent pursuant to
22 34 this subsection are additional to any and all other powers and
22 35 remedies vested in the superintendent by law, and nothing in
23 1 this subsection shall be construed as requiring that the
23 2 superintendent shall employ the power conferred in this
23 3 subsection instead of or as a condition precedent to the
23 4 exercise of any other power or remedy vested in the
23 5 superintendent.
23 6 5. a. The superintendent may, after ten days' notice by
23 7 registered mail to the lender at the address set forth in the
23 8 license stating the violation, issue a civil penalty against
23 9 the lender in an amount not exceeding ten thousand dollars per
23 10 violation, or revoke or suspend any license issued under this
23 11 chapter after finding any of the following:
23 12 (1) The lender has failed to comply with any provision of
23 13 this chapter or any order, decision, finding, rule,
23 14 regulation, or direction of the superintendent lawfully made
23 15 pursuant to the authority of this chapter.
23 16 (2) Any fact or condition exists which, if it had existed
23 17 at the time of the original application for the license,
23 18 clearly would have warranted the superintendent in refusing to
23 19 issue the license.
23 20 b. The superintendent may take action under this
23 21 subsection against only the particular person or licensee with
23 22 respect to whom grounds for the fine, revocation, or
23 23 suspension occur or exist. However, if the superintendent
23 24 finds that grounds for action are of general application to
23 25 all places of business or to more than one place of business
23 26 of the lender, the superintendent shall take action against
23 27 every person or licensee to whom the grounds apply.
23 28 c. A revocation, suspension, or surrender of any license
23 29 shall not impair or affect the obligation of any preexisting
23 30 lawful contract between the lender and any obligor.
23 31 d. The superintendent may issue a new license to a lender
23 32 whose license has been revoked when facts or conditions which
23 33 clearly would have warranted the superintendent in originally
23 34 refusing to issue the license no longer exist.
23 35 e. In every case in which a license is suspended or
24 1 revoked or an application for a license or renewal of a
24 2 license is denied, the superintendent shall serve the lender
24 3 with notice of the suspension, revocation, or denial,
24 4 including a statement of supporting reasons, either
24 5 personally, or by certified mail, return receipt requested.
24 6 Service by certified mail shall be deemed completed when the
24 7 notice is deposited in the United States mail.
24 8 f. An order assessing a civil penalty, an order revoking
24 9 or suspending a license, or an order denying renewal of a
24 10 license shall take effect upon service of the order unless the
24 11 lender files a written appeal and requests a hearing within
24 12 ten days after the date of service. In the event a hearing is
24 13 requested, the order shall be stayed until a final
24 14 administrative order is entered. If the lender requests a
24 15 hearing, the superintendent shall schedule a hearing within
24 16 thirty days after the request for a hearing is received unless
24 17 otherwise agreed to by the parties. The hearing shall be
24 18 conducted as a contested case proceeding pursuant to chapter
24 19 17A. The costs of any hearing conducted pursuant to this
24 20 section shall be paid by the lender.
24 21 6. The reasonable expenses of an examination or hearing by
24 22 the superintendent under any provision of this chapter shall
24 23 be borne by the lender.
24 24 Sec. 25. NEW SECTION. 533E.25 POSTING OF BOND.
24 25 1. A lender engaged in making payday loans under this
24 26 chapter shall post a bond to the superintendent in the amount
24 27 of fifty thousand dollars for each place of business where
24 28 loans are provided, up to a maximum bond amount of five
24 29 hundred thousand dollars.
24 30 2. A bond posted under subsection 1 shall continue in
24 31 effect for the period of licensure and for three additional
24 32 years if the bond is still available. The bond shall be
24 33 available to pay damages to consumers harmed by violations of
24 34 this chapter and for penalties incurred for violations of this
24 35 chapter.
25 1 3. The superintendent may require a lender to file a bond
25 2 in an additional sum if the superintendent determines it to be
25 3 necessary. The bond shall not be for an amount more than the
25 4 total outstanding liabilities of the lender.
25 5 Sec. 26. NEW SECTION. 533E.26 REPORTING OF VIOLATIONS.
25 6 The superintendent shall report to the attorney general all
25 7 material violations of this chapter for enforcement assistance
25 8 by the attorney general.
25 9 Sec. 27. NEW SECTION. 533E.27 DEPOSIT OF FEES AND
25 10 PENALTIES.
25 11 All fees and civil penalties collected pursuant to this
25 12 chapter shall be deposited in the general fund.
25 13 Sec. 28. NEW SECTION. 533E.28 RULEMAKING.
25 14 The superintendent may make and enforce such reasonable
25 15 rules, orders, decisions, and findings as the administration
25 16 and enforcement of the provisions of this chapter require, and
25 17 as are not inconsistent with this chapter.
25 18 Sec. 29. NEW SECTION. 533E.29 JUDICIAL REVIEW.
25 19 All final administrative orders of the superintendent under
25 20 this chapter are subject to judicial review pursuant to
25 21 chapter 17A and any rules adopted pursuant thereto.
25 22 Sec. 30. NEW SECTION. 533E.30 NO WAIVERS.
25 23 There shall be no waiver of any provision of this chapter.
25 24 Sec. 31. NEW SECTION. 533E.31 SUPERIORITY OF ACT.
25 25 To the extent this chapter conflicts with any other state
25 26 financial regulation laws, this chapter is superior and
25 27 supersedes those laws for the purposes of regulating payday
25 28 loans in this state, provided that nothing in this chapter
25 29 shall apply to any lender that is a bank, savings and loan
25 30 association, credit union, or insurance company organized,
25 31 chartered, or holding a certificate of authority to do
25 32 business under the laws of this state or any other state or
25 33 under the laws of the United States.
25 34 Sec. 32. NEW SECTION. 533E.32 SEVERABILITY.
25 35 The provisions of this chapter are severable under section
26 1 4.12.
26 2 Sec. 33. Section 524.211, subsections 2 and 4, Code 2005,
26 3 are amended to read as follows:
26 4 2. The superintendent, general counsel, examiners, and
26 5 other employees assigned to the finance bureau of the banking
26 6 division are prohibited from obtaining a loan of money or
26 7 property from a person or entity licensed pursuant to chapter
26 8 533A, 533D 533E, 536, or 536A, or a person or entity
26 9 affiliated with such licensee.
26 10 4. Examiners and other employees assigned to the bank
26 11 bureau of the banking division who have credit relations with
26 12 a person or entity licensed pursuant to chapter 533A, 533D
26 13 533E, 536, or 536A, or with a person or entity affiliated with
26 14 such licensee, are prohibited from participating in decisions,
26 15 oversight, and official review of matters concerning the
26 16 regulation of the licensee.
26 17 Sec. 34. Section 533C.103, subsection 11, Code 2005, is
26 18 amended by striking the subsection and inserting in lieu
26 19 thereof the following:
26 20 11. A payday loan lender licensed pursuant to chapter
26 21 533E.
26 22 Sec. 35. Section 537.7102, subsection 3, Code 2005, is
26 23 amended to read as follows:
26 24 3. "Debt" means an actual or alleged obligation arising
26 25 out of a consumer credit transaction, consumer rental purchase
26 26 agreement, or a transaction which would have been a consumer
26 27 credit transaction either if a finance charge was made, if the
26 28 obligation was not payable in installments, if a lease was for
26 29 a term of four months or less, or if a lease was of an
26 30 interest in land. A debt includes a check as defined in
26 31 section 554.3104 given in a transaction in connection with a
26 32 consumer rental purchase agreement, in a transaction which was
26 33 a consumer credit sale or in a transaction which would have
26 34 been a consumer credit sale if credit was granted and if a
26 35 finance charge was made, or in a transaction regulated under
27 1 chapter 533D 533E.
27 2 Sec. 36. Chapter 533D, Code 2005, is repealed.
27 3 Sec. 37. TRANSITION PROVISIONS.
27 4 1. A person or entity acting as a payday lender who is
27 5 licensed pursuant to chapter 533D, Code 2005, need not comply
27 6 with section 533E.5 until the superintendent of banking takes
27 7 action on the lender's application for a payday loan license.
27 8 The application shall be submitted to the superintendent by
27 9 December 31, 2006. If the application is not submitted by
27 10 December 31, 2006, the person or entity acting as a payday
27 11 lender is subject to section 533E.5.
27 12 2. As soon as practicable, the superintendent shall
27 13 promulgate reasonable rules regarding the issuance of payday
27 14 loans by banks, savings and loan associations, credit unions,
27 15 and insurance companies. Such rules shall be consistent with
27 16 this Act and shall be limited in scope to the actual products
27 17 and services offered by lenders governed by this Act.
27 18 3. a. Prior to December 31, 2006, the superintendent
27 19 shall certify that one or more consumer reporting service
27 20 databases are commercially reasonable methods of verification
27 21 as provided in this Act. Upon certifying that a consumer
27 22 reporting service database is a commercially reasonable method
27 23 of verification, the superintendent shall provide reasonable
27 24 notice to all licensed lenders identifying the commercially
27 25 reasonable methods of verification that are available.
27 26 b. Prior to the certification of a consumer reporting
27 27 service database by the superintendent, a lender may use any
27 28 reasonably reliable written verification by the consumer
27 29 concerning all of the following:
27 30 (1) Whether the consumer has any outstanding payday loans.
27 31 (2) The principal amount of those outstanding payday
27 32 loans.
27 33 (3) Whether any payday loans have been paid in full by the
27 34 consumer in the preceding seven days.
27 35 c. Within fourteen days after certification of at least
28 1 one commercially reasonable method of verification by the
28 2 superintendent, paragraph "b" shall not apply and the lender
28 3 shall comply with section 533E.11.
28 4 4. Payday loans outstanding on but executed prior to July
28 5 1, 2006, shall be enforceable upon the agreed terms of the
28 6 loan and the requirements of chapter 533D, Code 2005, until
28 7 the term of the loan expires and shall not be renewed or
28 8 extended.
28 9 Sec. 38. PAYDAY LOAN STUDY.
28 10 1. The superintendent of banking shall, over a three=year
28 11 period, conduct a study of the payday loan industry to
28 12 determine the impact and effectiveness of this Act. The
28 13 superintendent shall report its findings to the general
28 14 assembly by November 1, 2009. The study shall determine the
28 15 effect of this Act on the protection of consumers in this
28 16 state and on the fair and reasonable regulation of the payday
28 17 loan industry.
28 18 2. The study shall include, but shall not be limited to,
28 19 an analysis of the ability of the industry to use private
28 20 reporting tools that ensure substantial compliance with this
28 21 Act, including real=time reporting of outstanding payday loans
28 22 and providing data to the superintendent in an appropriate
28 23 form and with appropriate content to allow the superintendent
28 24 to adequately monitor the industry.
28 25 3. The report of the superintendent shall, if necessary,
28 26 identify and recommend specific amendments to this Act to
28 27 further protect consumers and to guarantee fair and reasonable
28 28 regulation of the payday loan industry.
28 29 EXPLANATION
28 30 This bill relates to payday lending services by providing
28 31 for the licensing and regulation of payday loan lenders in new
28 32 Code chapter 533E. The bill defines a "payday loan" as a loan
28 33 with a finance charge that exceeds a 36 percent annual
28 34 percentage rate with a term not more than 120 days and
28 35 pursuant to which the lender either accepts a personal check,
29 1 a debit authorization, or a wage assignment for repayment of
29 2 the loan. The regulation of payday loans in the bill does not
29 3 extend to banks, savings and loan associations, credit unions,
29 4 insurance companies, or similar entities licensed in this
29 5 state and primarily engaged in lending or investing funds, but
29 6 does extend to agents of such entities except with regard to
29 7 the regulation of finance charges.
29 8 The bill requires payday loan lenders to be licensed by the
29 9 superintendent of banking. The bill requires the
29 10 superintendent to restrict the issuance of licenses to only
29 11 those lenders who show financial responsibility, appoint the
29 12 superintendent as attorney in fact for the service of legal
29 13 process, and pay an annual license fee of $1,000. Lenders are
29 14 required to notify the superintendent prior to ceasing
29 15 operations, closing the business, or filing for bankruptcy.
29 16 The bill restricts the minimum term of a payday loan to no
29 17 less than 13 days. A lender shall not make a payday loan to a
29 18 consumer which would result in the consumer being indebted
29 19 with outstanding payday loans for more than 45 consecutive
29 20 days, or if the total principal amount of the loan combined
29 21 with all other outstanding payday loans of the consumer
29 22 exceeds $1,000 or 25 percent of the consumer's gross monthly
29 23 income, whichever is less. A lender shall not make a payday
29 24 loan to a consumer who already has an outstanding balance on
29 25 more than one payday loan.
29 26 The bill restricts payday loan lenders from charging more
29 27 than $15.50 per $100 loaned for any payday loan over the term
29 28 of the loan. A lender is prohibited from taking an interest
29 29 in a consumer's personal property to secure a payday loan and
29 30 may only take a wage assignment if other state requirements
29 31 are met and the assignment may be revoked by the consumer at
29 32 any time. A lender may not charge more than allowed by
29 33 existing state law for returned checks.
29 34 Prior to providing a payday loan, a lender shall check with
29 35 a consumer reporting service certified by the superintendent
30 1 for verification that the proposed payday loan is not
30 2 prohibited due to other outstanding payday loans or similar
30 3 restrictions provided under the bill. The lender shall
30 4 provide the consumer reporting service with updated
30 5 information required to be provided by the superintendent.
30 6 The bill provides requirements for a consumer reporting
30 7 service database to become certified by the superintendent,
30 8 including the submission of an application with an
30 9 investigation fee of $2,500 and a certification fee of $1,000.
30 10 A consumer reporting service is also required to submit a $1
30 11 million bond to the superintendent for certification of its
30 12 database. The proceeds of the bond may be used to satisfy
30 13 liability obligations of the consumer reporting service for
30 14 civil penalties and other liability incurred pursuant to new
30 15 Code chapter 533E. Consumer reporting services with databases
30 16 certified by the superintendent are required to maintain a
30 17 minimum of $1 million in net worth.
30 18 The bill requires certain disclosures to be made to the
30 19 consumer prior to a lender providing a payday loan regarding
30 20 the consumer's rights and responsibilities regarding the loan
30 21 and other information. A consumer shall be allowed to cancel
30 22 future payment obligations within a certain period of time and
30 23 a lender may not roll over a payday loan into another payday
30 24 loan.
30 25 The bill provides restrictions and requirements regarding
30 26 how proceeds of a loan may be issued and payments made. A
30 27 lender shall allow a consumer to enter into a repayment plan
30 28 and may not initiate a legal proceeding against a consumer to
30 29 collect on a payday loan until 28 days after default. A
30 30 lender may not garnish the wages of a consumer who is a member
30 31 of the military and may not engage in any collection activity
30 32 against a consumer who has been deployed for military combat.
30 33 The bill requires lenders to keep certain records to be
30 34 provided to the superintendent by March 1 of each year. The
30 35 superintendent may issue a civil penalty in the amount of $25
31 1 per day for each day the report is filed beyond the March 1
31 2 deadline. The superintendent shall publish a biennial report
31 3 regarding the payday lending industry. The bill places
31 4 restrictions on false, misleading, or deceptive advertising
31 5 regarding payday loans.
31 6 The bill prohibits lenders from engaging in certain
31 7 prohibited acts and from including certain provisions in
31 8 payday loan documents. A material violation of a provision of
31 9 new Code chapter 533E and commission of a prohibited act shall
31 10 be considered unfair and deceptive practices. The
31 11 superintendent may issue a cease and desist order against a
31 12 lender or other person providing payday loans without a
31 13 license. The superintendent may also issue a civil penalty in
31 14 an amount up to $10,000 and revoke or suspend the license of a
31 15 payday lender for failing to comply with any provision of new
31 16 Code chapter 533E or if any fact or condition exists which
31 17 would have resulted in the denial of a license to the lender
31 18 if the fact or condition had existed at the time of
31 19 application. An order assessing a civil penalty, or revoking
31 20 or suspending a license, is effective upon service of the
31 21 order unless the lender requests a hearing within 10 days
31 22 after service.
31 23 The bill requires payday loan lenders to post a $50,000
31 24 bond to the superintendent for each place of business where
31 25 payday loans are provided, with a total bond amount not to
31 26 exceed $500,000. The bond must remain in effect for the
31 27 duration of the license plus three years and be available for
31 28 the payment of damages and penalties to consumers and the
31 29 superintendent.
31 30 The attorney general may assist with enforcement of
31 31 violations. The superintendent may adopt reasonable rules to
31 32 enforce and administer new Code chapter 533E. All
31 33 administrative orders by the superintendent are subject to
31 34 judicial review. No waivers of any provision of new Code
31 35 chapter 533E are permitted. All fees and penalties collected
32 1 under the bill shall be deposited in the general fund of the
32 2 state. Where provisions of new Code chapter 533E conflict
32 3 with any other state financial regulation laws, new Code
32 4 chapter 533E shall prevail.
32 5 The bill repeals Code chapter 533D relating to the
32 6 licensing and regulation of delayed deposit services
32 7 businesses and makes other technical corrections. The bill
32 8 provides for certain transition provisions and requires the
32 9 superintendent to conduct a study to determine the impact and
32 10 effectiveness of the bill and to report to the general
32 11 assembly by November 1, 2009.
32 12 LSB 5022HH 81
32 13 kk:nh/gg/14