House File 2221 - Introduced
HOUSE FILE
BY McCARTHY
Passed House, Date Passed Senate, Date
Vote: Ayes Nays Vote: Ayes Nays
Approved
A BILL FOR
1 An Act relating to consumer loans secured by a certificate of
2 title to a motor vehicle by creating the crime of
3 loansharking, providing for a maximum finance charge,
4 providing for criminal penalties, making penalties applicable,
5 and providing an effective date.
6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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PAG LIN
1 1 Section 1. Section 537.2401, subsection 1, Code 2005, is
1 2 amended to read as follows:
1 3 1. Except as provided with respect to a finance charge for
1 4 loans pursuant to open end credit under section 537.2402 and
1 5 loans secured by a certificate of title of a motor vehicle
1 6 under section 537.2403, a lender may contract for and receive
1 7 a finance charge not exceeding the maximum charge permitted by
1 8 the laws of this state or of the United States for similar
1 9 lenders, and, in addition, with respect to a consumer loan, a
1 10 supervised financial organization or a mortgage lender may
1 11 contract for and receive a finance charge, calculated
1 12 according to the actuarial method, not exceeding twenty=one
1 13 percent per year on the unpaid balance of the amount financed.
1 14 This Except as provided in section 537.2403, this subsection
1 15 does not prohibit a lender from contracting for and receiving
1 16 a finance charge exceeding twenty=one percent per year on the
1 17 unpaid balance of the amount financed on consumer loans if
1 18 authorized by other provisions of the law.
1 19 Sec. 2. Section 537.2402, subsection 1, Code 2005, is
1 20 amended to read as follows:
1 21 1. If authorized to make supervised loans, a creditor may
1 22 contract for and receive a finance charge without limitation
1 23 as to amount or rate with respect to a loan pursuant to open=
1 24 end credit as permitted in this section except as provided in
1 25 section 537.2403.
1 26 Sec. 3. NEW SECTION. 537.2403 FINANCE CHARGE FOR
1 27 CONSUMER LOANS SECURED BY A MOTOR VEHICLE.
1 28 1. A lender shall not contract for or receive a finance
1 29 charge exceeding twenty=one percent per year on the unpaid
1 30 balance of the amount financed for a loan of money secured by
1 31 a certificate of title to a motor vehicle used for personal,
1 32 family, or household purpose except as authorized under
1 33 chapter 536 or 536A. A consumer who is charged a finance
1 34 charge in excess of the limitation in this section may seek
1 35 any remedies available pursuant to this chapter for an excess
2 1 charge.
2 2 2. It shall be a violation of this section and an unlawful
2 3 practice under section 714.16 to attempt to avoid application
2 4 of this section by structuring a loan of money secured by
2 5 certificate of title to a motor vehicle as a sale, sale and
2 6 repurchase, sale and lease, pawn, rental purchase, lease, or
2 7 other type of transaction with the intent to avoid application
2 8 of this section or any other applicable provision of this
2 9 chapter.
2 10 Sec. 4. NEW SECTION. 714.27 LOANSHARKING INVOLVING A
2 11 MOTOR VEHICLE AS SECURITY.
2 12 A person commits the crime of loansharking by contracting
2 13 for and receiving a finance charge in violation of section
2 14 537.2403. Loansharking is a serious misdemeanor.
2 15 Sec. 5. EFFECTIVE DATE. This Act, being deemed of
2 16 immediate importance, takes effect upon enactment.
2 17 EXPLANATION
2 18 This bill relates to consumer loans secured by a
2 19 certificate of title to a motor vehicle. The bill prohibits a
2 20 lender from contracting for or receiving a finance charge
2 21 which exceeds 21 percent per year on the unpaid balance of a
2 22 loan for money which is secured by a certificate of title to a
2 23 motor vehicle. The remedies under Code chapter 537 for excess
2 24 charges are available to consumers who are charged a finance
2 25 charge in excess of 21 percent per year for such a consumer
2 26 loan. The bill provides that an attempt to avoid application
2 27 of the maximum finance charge on a loan secured by a
2 28 certificate of title to a motor vehicle by structuring the
2 29 transaction as a sale, sale and repurchase, sale and lease,
2 30 pawn, rental purchase, or lease with the intent to avoid the
2 31 maximum finance charge shall be considered a violation of the
2 32 maximum finance charge and shall be considered a consumer
2 33 fraud subject to civil penalties and enforcement pursuant to
2 34 Code section 714.16.
2 35 Under current law, a consumer is not obligated to pay an
3 1 excess charge and is entitled to a refund of any excess charge
3 2 paid. If a consumer entitled to a refund is refused the
3 3 refund, the consumer may recover from the creditor or other
3 4 person liable in a civil action the excess charge and a
3 5 penalty of not less than $100 or more than $1,000. Under
3 6 current law, a person who willfully and knowingly makes an
3 7 excess charge is guilty of a serious misdemeanor. A serious
3 8 misdemeanor is punishable by confinement for no more than one
3 9 year and a fine of at least $250 but not more than $1,500.
3 10 The bill creates the crime of loansharking. Loansharking
3 11 is committed by a person who contracts for and receives a
3 12 finance charge in violation of new Code section 537.2403
3 13 relating to consumer loans secured by a certificate of title.
3 14 A person who commits the crime of loansharking is guilty of a
3 15 serious misdemeanor. A serious misdemeanor is punishable by
3 16 confinement for no more than one year and a fine of at least
3 17 $250 but not more than $1,500.
3 18 The bill takes effect upon enactment.
3 19 LSB 6078YH 81
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