House File 307 - Introduced
HOUSE FILE
BY VAN ENGELENHOVEN
Passed House, Date Passed Senate, Date
Vote: Ayes Nays Vote: Ayes Nays
Approved
A BILL FOR
1 An Act regulating title loans and title loan lenders, including
2 the establishment of licensing requirements, disclosure
3 requirements, title loan agreement provision requirements,
4 limitations on interest and fees charged, recordkeeping
5 requirements, and providing for fees and penalties.
6 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
7 TLSB 1763YH 81
8 kk/sh/8
PAG LIN
1 1 Section 1. NEW SECTION. 536B.1 DEFINITIONS.
1 2 As used in chapter, unless the context otherwise requires:
1 3 1. "Borrower" means a person who borrows money pursuant to
1 4 a title loan agreement.
1 5 2. "Capital" means the assets of a person less the
1 6 liabilities of that person as measured according to generally
1 7 accepted accounting principles.
1 8 3. "Certificate of title" means a certificate of title or
1 9 certificate of ownership issued by the state for personal
1 10 property.
1 11 4. "Person" means the same as defined in section 4.1.
1 12 5. "Pledged property" means personal property, ownership
1 13 of which is evidenced and delineated by a certificate of
1 14 title.
1 15 6. "Superintendent" means the superintendent of banking
1 16 within the banking division of the department of commerce.
1 17 7. "Title lender" means a person who engages in the
1 18 business of making or servicing a title loan.
1 19 8. "Title loan" means a loan of money secured by a
1 20 certificate of title to titled personal property.
1 21 9. "Title loan agreement" means a written agreement
1 22 between a borrower and a title lender for a title loan in a
1 23 form which complies with the requirements of this chapter.
1 24 10. "Title loan office" means the location in this state
1 25 at which a title lender regularly conducts business under this
1 26 chapter or any other location held out to the public as a
1 27 location at which a lender makes or services title loans.
1 28 11. "Titled personal property" means personal property,
1 29 excluding property qualified to be a personal dwelling, the
1 30 ownership of which is evidenced by a certificate of title.
1 31 Sec. 2. NEW SECTION. 536B.2 REGULATION OF TITLE LENDERS
1 32 == RULES.
1 33 1. The superintendent shall administer and regulate this
1 34 chapter.
1 35 2. An employee of the division of banking shall not have
2 1 an ownership or interest in any title loan business or receive
2 2 directly or indirectly any payment or gratuity from any such
2 3 entity.
2 4 3. The superintendent shall adopt rules necessary to
2 5 implement this chapter.
2 6 Sec. 3. NEW SECTION. 536B.3 LICENSING REQUIREMENTS ==
2 7 APPLICATION == FEE.
2 8 1. A person shall not act as a title lender without a
2 9 title loan license issued pursuant to this chapter.
2 10 2. An applicant for a title loan license shall have and
2 11 maintain capital of at least seventy=five thousand dollars at
2 12 all times.
2 13 3. The license application shall be in writing, under
2 14 oath, and in a form prescribed by the superintendent. The
2 15 application shall contain all of the following information:
2 16 a. The name of the applicant and the name and residential
2 17 address of the owners, partners, directors, trustees, and
2 18 principal officers of the applicant.
2 19 b. The date of formation of the applicant's business
2 20 entity and the address of each of the applicant's title loan
2 21 offices operated or sought to be operated in this state.
2 22 c. Any other information required by the superintendent.
2 23 4. A surety bond in the principal sum of twenty thousand
2 24 dollars per title loan office shall accompany each license
2 25 application filed with the superintendent. The bond shall be
2 26 in a form satisfactory to the superintendent and shall be
2 27 issued by a bonding company or insurance company authorized to
2 28 do business in this state. The bond shall cover the
2 29 performance of the obligations of the applicant and the
2 30 applicant's agents in connection with title loan activities.
2 31 An applicant or licensee may, in lieu of filing a bond,
2 32 provide the superintendent with an irrevocable letter of
2 33 credit in the amount of twenty thousand dollars per title loan
2 34 office, issued by any bank, trust company, savings and loan
2 35 association, or credit union operating in this state in a form
3 1 acceptable to the superintendent.
3 2 5. The applicant shall include with the application a
3 3 nonrefundable application fee of one thousand dollars per
3 4 title loan office or proposed title loan office. A licensee
3 5 shall pay an annual renewal fee of one thousand dollars for
3 6 each licensed title loan office to the superintendent. All
3 7 fees collected shall be deposited in the general fund of the
3 8 state.
3 9 6. Each license shall specify the location of the title
3 10 loan office and shall be conspicuously displayed in the title
3 11 loan office. Before any title loan office may relocate, the
3 12 superintendent shall approve the relocation and mail the
3 13 licensee a new license without charge.
3 14 7. If the superintendent determines that all requirements
3 15 for licensure under this chapter have been met, the
3 16 superintendent shall issue a license for a period of not more
3 17 than two years.
3 18 8. Each license shall be uniquely numbered and shall not
3 19 be transferred or assigned. Prior to the sale of more than
3 20 fifty percent of a title lender, the proposed purchaser shall
3 21 submit an initial license application to the superintendent
3 22 and comply with all requirements of this chapter.
3 23 Sec. 4. NEW SECTION. 536B.4 DENIAL, SUSPENSION, OR
3 24 REVOCATION OF LICENSE.
3 25 1. The following acts are violations for which a license
3 26 may be denied, suspended, or revoked:
3 27 a. Failure to comply with any provision of this chapter,
3 28 any rule adopted pursuant to this chapter, any written
3 29 agreement entered into with the superintendent, or an order
3 30 issued by the superintendent.
3 31 b. Fraud, misrepresentation, deceit, or gross negligence
3 32 in any title loan transaction, regardless of reliance by or
3 33 damage to the borrower.
3 34 c. Fraudulent misrepresentation, circumvention, or
3 35 concealment of any matter required to be stated or furnished
4 1 to a borrower pursuant to this chapter, regardless of reliance
4 2 by or damage to the borrower.
4 3 d. False, deceptive, or misleading advertising by a title
4 4 lender.
4 5 e. Aiding, abetting, or conspiring by a title lender with
4 6 a person to circumvent or violate any of the requirements of
4 7 this chapter.
4 8 f. Refusal to provide information upon request of the
4 9 superintendent or refusal to permit inspection of books and
4 10 records in an investigation or examination by the
4 11 superintendent.
4 12 g. Pleading nolo contendere to or having been convicted or
4 13 found guilty, regardless of whether a judgment was deferred,
4 14 of a crime involving fraud, dishonest dealing, or any act of
4 15 moral turpitude, or acting as an ultimate equitable owner of
4 16 ten percent or more of a title lender who has pled nolo
4 17 contendere to or has been convicted or found guilty,
4 18 regardless of whether a judgment was deferred, of a crime
4 19 involving fraud, dishonest dealing, or any act of moral
4 20 turpitude.
4 21 h. Making or having made a material misstatement of fact
4 22 in an initial or renewal application for a license under this
4 23 chapter.
4 24 i. Having been the subject of any decision, finding,
4 25 injunction, suspension, prohibition, revocation, denial,
4 26 judgment, or administrative order by any court or
4 27 administrative law judge, or by any state or federal agency,
4 28 involving a violation of any federal or state law relating to
4 29 title loans or any rule or regulation adopted under such law,
4 30 or having been the subject of any injunction or adverse
4 31 administrative order by a state or federal agency regulating
4 32 banking, insurance, finance or small loan companies, real
4 33 estate, mortgage brokers, or other related or similar
4 34 industries for acts involving fraud, dishonest dealing, or any
4 35 act of moral turpitude.
5 1 j. Failing to continuously maintain the bond or letter of
5 2 credit required by section 536B.3.
5 3 k. Failing to timely pay any fee, charge, or fine imposed
5 4 or assessed pursuant to this chapter or rules adopted under
5 5 this chapter.
5 6 l. Having a license or registration, or the equivalent
5 7 thereof, to practice any profession or occupation denied,
5 8 suspended, revoked, or otherwise acted against by a licensing
5 9 authority in any jurisdiction for fraud, dishonest dealing, or
5 10 any act of moral turpitude.
5 11 m. Having demonstrated unworthiness, as defined by rule,
5 12 to transact the business of a title lender.
5 13 2. If an applicant or licensee is an entity other than a
5 14 natural person, the provisions of this section apply to each
5 15 direct or ultimate equitable owner of ten percent or more of
5 16 the outstanding equity interest of such entity and to each
5 17 director, general partner, and executive officer.
5 18 3. A license may be denied, suspended, or revoked for an
5 19 act described in this section of an employee, agent, officer,
5 20 or director of the title lender if the title lender knew or
5 21 should have known about such act.
5 22 4. A license may be denied, suspended, or revoked if an
5 23 applicant or licensee is charged, in a pending enforcement
5 24 action or pending criminal prosecution, with any conduct that
5 25 would authorize denial, suspension, or revocation under this
5 26 section.
5 27 5. A title lender may have its license suspended or
5 28 revoked pursuant to this section by order of the
5 29 superintendent after a hearing is held before the
5 30 superintendent pursuant to chapter 17A on an order of the
5 31 superintendent to show cause why such order of suspension or
5 32 revocation should not be entered. The order to show cause
5 33 shall specify the grounds for suspension or revocation and
5 34 shall be served on the title lender at least ten days prior to
5 35 the hearing. A hearing is not required for denial of a
6 1 license unless requested by the applicant in writing to the
6 2 superintendent within ten days after the denial is issued.
6 3 Sec. 5. NEW SECTION. 536B.5 NOTICE TO BORROWER PRIOR TO
6 4 EXECUTION OF TITLE LOAN AGREEMENT.
6 5 1. Before executing a title loan agreement for a title
6 6 loan secured by a motor vehicle, a title lender shall provide
6 7 the borrower the following notice in at least ten point bold
6 8 type and receipt thereof shall be acknowledged by signature of
6 9 the borrower:
6 10 "(Name of Lender) NOTICE TO BORROWER
6 11 (1) Your motor vehicle title will be pledged as security
6 12 for the loan. If the loan is not repaid in full, including
6 13 all finance charges, you may lose your motor vehicle.
6 14 (2) This lender offers short=term loans.
6 15 Please read and understand the terms of the loan agreement
6 16 before signing.
6 17 I have read the above "NOTICE TO BORROWER" and I understand
6 18 that if I do not repay this loan that I may lose my motor
6 19 vehicle.
6 20 _____________ Borrower _____________ Date"
6 21 2. If a title loan is secured by titled personal property
6 22 other than a motor vehicle, the title lender shall either
6 23 provide a notice in the form provided in subsection 1 with the
6 24 proper description of the property securing the loan or use
6 25 the notice described in subsection 1, or strike the word
6 26 "motor vehicle" from where it appears, write or print in the
6 27 type of titled personal property serving as security, and have
6 28 the customer initial each place.
6 29 3. The title lender shall post in a conspicuous location
6 30 in each title loan office, in at least fourteen point bold
6 31 type, the maximum rates that such title lender charges on
6 32 title loans made by the title lender and the following
6 33 statement:
6 34 "NOTICE TO CUSTOMERS:
6 35 Borrowing from this lender places your motor vehicle at
7 1 risk. If this loan is not repaid in full, including all
7 2 finance charges, you may lose your motor vehicle. This lender
7 3 offers short=term loans. Please read and understand the terms
7 4 of the loan agreement before signing."
7 5 Sec. 6. NEW SECTION. 536B.6 TITLE LOAN AGREEMENTS ==
7 6 DISCLOSURE REQUIREMENTS.
7 7 1. A title loan, and each extension or renewal of a title
7 8 loan, shall be in writing, signed by the borrower and the
7 9 title lender, and shall provide for all of the following:
7 10 a. That the title lender agrees to make a loan to the
7 11 borrower, and the borrower agrees to give the title lender a
7 12 security interest in unencumbered titled personal property.
7 13 b. Whether the borrower consents to the title lender
7 14 keeping possession of the certificate of title to the titled
7 15 personal property.
7 16 c. That the borrower shall have the right to redeem the
7 17 certificate of title by repaying the loan in full and by
7 18 complying with the title loan agreement which may be for any
7 19 agreed period of time not less than thirty days.
7 20 d. That the title lender shall extend or renew the title
7 21 loan agreement upon the borrower's written request and the
7 22 payment by the borrower of any interest due at the time of
7 23 such extension or renewal. However, upon the third extension
7 24 or renewal of any title loan agreement, and any subsequent
7 25 extension or renewal, the borrower shall reduce the principal
7 26 of the title loan by ten percent until such loan is paid in
7 27 full.
7 28 e. That when the title loan is satisfied, the title lender
7 29 shall release its lien and return the certificate of title to
7 30 the borrower.
7 31 f. That if the borrower defaults, the title lender shall
7 32 be allowed to take possession of and sell the titled personal
7 33 property after compliance with chapter 554, article 9, part 6.
7 34 2. A title loan agreement shall disclose all of the
7 35 following:
8 1 a. All disclosures required by this chapter, the federal
8 2 Truth in Lending Act as defined in section 537.1302, and
8 3 chapter 537.
8 4 b. That the transaction is a loan secured by the pledge of
8 5 titled personal property and, in at least ten point bold type,
8 6 that nonpayment of the loan may result in loss of the
8 7 borrower's motor vehicle or other titled personal property.
8 8 c. The make, model, year, and identification number of the
8 9 titled personal property used as security for the title loan,
8 10 as applicable.
8 11 d. The name, business address, telephone number, and
8 12 license number of the title lender, and the name and
8 13 residential address of the borrower.
8 14 e. The amount of money advanced, designated as the "amount
8 15 financed".
8 16 f. The maturity date of the title loan agreement.
8 17 g. The total title loan interest rate to be charged and
8 18 payable on the maturity date, designated as the "finance
8 19 charge".
8 20 h. The number of payments or the period of repayment.
8 21 i. The amount financed plus the finance charge, which must
8 22 be paid to reclaim the property securing the loan on the
8 23 maturity date, designated as the "total amount of all
8 24 payments".
8 25 j. The interest rate, computed in accordance with
8 26 regulations adopted by the federal reserve board pursuant to
8 27 the federal Truth in Lending Act as defined in section
8 28 537.1302, designated as the "annual percentage rate".
8 29 k. A statement which shall be in at least ten point bold
8 30 type, separately acknowledged by the signature of the borrower
8 31 and reading as follows:
8 32 "YOU MAY CANCEL THIS LOAN WITHOUT ANY COSTS BY RETURNING
8 33 THE FULL PRINCIPAL AMOUNT TO THE LENDER BY THE CLOSE OF THE
8 34 LENDER'S NEXT FULL BUSINESS DAY."
8 35 l. The location where the titled personal property may be
9 1 delivered if the loan is not paid and the hours such location
9 2 is open for receiving such deliveries.
9 3 m. The name, address, and telephone number of the division
9 4 of banking, to which consumers may address complaints.
9 5 n. Any additional disclosures deemed necessary by the
9 6 superintendent or required by any other state or federal law.
9 7 3. The division of banking is directed to draft a sample
9 8 form for a title loan agreement to be used in title loan
9 9 transactions. Use of this form is not mandatory, but when
9 10 properly completed, the form shall satisfy the disclosure
9 11 provisions of this section.
9 12 Sec. 7. NEW SECTION. 536B.7 LIMITATIONS AND
9 13 RESTRICTIONS.
9 14 1. A title lender shall not do any of the following:
9 15 a. Execute a title loan agreement with a person under
9 16 eighteen years of age or with anyone who appears to be
9 17 intoxicated.
9 18 b. Execute a title loan agreement for an amount which
9 19 exceeds five thousand dollars.
9 20 c. Accept any waiver of any right or protection of a
9 21 borrower.
9 22 d. Fail to exercise reasonable care to protect from loss
9 23 or damage certificates of title or titled personal property in
9 24 the physical possession of the title lender.
9 25 e. Purchase titled personal property in the operation of
9 26 its business.
9 27 f. Except as provided in section 536B.8, execute a title
9 28 loan agreement which requires or permits the personal
9 29 liability of the borrower other than for titled personal
9 30 property.
9 31 g. Execute a title loan agreement that contains a
9 32 confession of judgment, a waiver of a right to jury trial, a
9 33 mandatory arbitration clause, or an assignment of payment of
9 34 wages.
9 35 h. Execute a title loan agreement unless the borrower
10 1 presents clear title at the time that the loan is made.
10 2 i. Sell or otherwise charge for any type of insurance in
10 3 connection with a title loan agreement.
10 4 j. Refuse to accept partial payments toward satisfying any
10 5 obligation owed under a title loan agreement.
10 6 k. Charge any fee or penalty not specifically permitted
10 7 under this chapter.
10 8 l. Knowingly violate any provision of this chapter or any
10 9 rule adopted pursuant to this chapter.
10 10 m. Violate any provision of chapter 537 or chapter 554,
10 11 article 9, part 6.
10 12 n. Store repossessed titled personal property at a
10 13 location more than fifteen miles from the office where the
10 14 title loan agreement was executed.
10 15 o. Threaten to use or use the criminal process in this or
10 16 any state to collect on the title loan.
10 17 2. When executing or negotiating a title loan, the title
10 18 lender shall take into consideration in determining the amount
10 19 of a title loan and duration of a loan contract the financial
10 20 ability of the borrower to reasonably repay the loan in the
10 21 time and manner specified in the loan contract.
10 22 3. If a title lender enters into a transaction contrary to
10 23 this section, the loan and the security interest shall be
10 24 void.
10 25 Sec. 8. NEW SECTION. 536B.8 LIABILITY OF BORROWER.
10 26 A borrower who obtains a title loan under false pretenses
10 27 by knowingly hiding or not disclosing the existence of a valid
10 28 prior lien or security interest affecting the titled personal
10 29 property shall be personally liable to the title lender for
10 30 the full amount stated in the title loan agreement.
10 31 Sec. 9. NEW SECTION. 536B.9 INTEREST AND FEES.
10 32 1. A title lender may contract for and receive a finance
10 33 charge, calculated according to the actuarial method, not
10 34 exceeding twenty=one percent per year on the unpaid balance of
10 35 the amount financed. The title lender shall otherwise comply
11 1 with the provisions of section 537.2401 not in conflict with
11 2 the provisions of this chapter, and shall be subject to
11 3 applicable remedies and penalties provided in chapter 537,
11 4 article 5.
11 5 2. The interest rate charged in any title loan extension
11 6 or renewal agreement shall not exceed the interest rate
11 7 charged in the original title loan agreement. A title lender
11 8 may not capitalize in any title loan extension agreement any
11 9 unpaid interest due on the related title loan or any
11 10 subsequent extensions or renewals to that title loan
11 11 agreement.
11 12 Sec. 10. NEW SECTION. 536B.10 REDEMPTION == DEFAULT ==
11 13 LENDER REMEDIES.
11 14 1. A borrower shall be entitled to redeem the pledged
11 15 certificate of title and titled personal property by timely
11 16 satisfaction of the terms of the title loan agreement.
11 17 2. Upon default of a title loan agreement, the title
11 18 lender may proceed against the titled personal property upon
11 19 compliance with chapter 554, article 9, part 6. However,
11 20 prior to repossessing the titled personal property, the title
11 21 lender shall afford the borrower an opportunity to make the
11 22 titled personal property available to the title lender at a
11 23 place, date, and time reasonably convenient to the title
11 24 lender and the borrower. After the title lender takes
11 25 possession of the titled personal property, the title lender
11 26 shall immediately return without charge any personal
11 27 belongings left within the titled personal property to the
11 28 borrower.
11 29 3. Within thirty days after the sale of the titled
11 30 personal property, the borrower is entitled to receive all
11 31 proceeds from the sale of the titled personal property in
11 32 excess of the principal amount and finance charges incurred
11 33 under the title loan agreement and reasonable expenses
11 34 incurred by the title lender in taking possession of and
11 35 selling the titled personal property.
12 1 Sec. 11. NEW SECTION. 536B.11 RECORDKEEPING
12 2 REQUIREMENTS.
12 3 1. A title lender shall keep a consecutively numbered
12 4 record of each title loan agreement executed, which number
12 5 shall be placed on the corresponding title loan agreement
12 6 document. The record shall include all of the following:
12 7 a. A clear and accurate description of the titled personal
12 8 property, including its vehicle identification or serial
12 9 number, registration plate number, year, make, model, type,
12 10 and color, as applicable.
12 11 b. The date of the title loan agreement.
12 12 c. The amount of the title loan.
12 13 d. The date of maturity of the title loan.
12 14 e. The name, date of birth, social security number,
12 15 residential address, and the type of photo identification of
12 16 the borrower.
12 17 2. A title lender shall photocopy the photo identification
12 18 of the borrower or shall take an instant photograph of the
12 19 borrower, and shall attach such photocopy or photograph to the
12 20 lender's copy of the title loan agreement and all extensions
12 21 and renewals.
12 22 3. A title lender shall provide the borrower an exact copy
12 23 of the title loan agreement at the time of execution of the
12 24 agreement. The title lender shall provide each customer with
12 25 and retain a photocopy of the pledged title at the time the
12 26 agreement is signed. If a borrower's copy of the title loan
12 27 agreement is lost, destroyed, or stolen, the title lender
12 28 shall provide the borrower another exact copy of the agreement
12 29 upon receipt of a written request from the borrower at no
12 30 charge.
12 31 4. A title lender shall keep the numbered records and
12 32 copies of its title loan agreements, including a copy of the
12 33 notice required pursuant to section 536B.5, subsection 1 or 2,
12 34 for a period of no less than two years from the date of the
12 35 closing of the last transaction reflected therein. A title
13 1 lender who ceases engaging in the business of making title
13 2 loans shall keep these records for at least two years from the
13 3 date the lender ceased engaging in the business. A title
13 4 lender shall notify the superintendent to request an
13 5 examination at least ten days before ceasing business.
13 6 5. The records required by this section shall be made
13 7 available for inspection and copying by the borrower and by
13 8 any employee of the division of banking upon request during
13 9 ordinary business hours without warrant, subpoena, or court
13 10 order at no charge.
13 11 Sec. 12. NEW SECTION. 536B.12 SAFEKEEPING OF
13 12 CERTIFICATES OF TITLE == LIABILITY INSURANCE == LIABILITY OF
13 13 TITLE LENDER.
13 14 1. A title lender shall maintain a fireproof place for
13 15 pledged certificates of title and a safe place for pledged
13 16 titled personal property delivered to or repossessed by the
13 17 title lender.
13 18 2. A title lender shall maintain premises liability
13 19 insurance in an amount of not less than one million dollars
13 20 per occurrence for the benefit of customers and employees,
13 21 which insurance shall provide coverage for, among other risks,
13 22 injuries caused by the criminal acts of third parties.
13 23 3. A title lender shall not be liable for any loss or
13 24 injury occasioned or caused by the use of pledged titled
13 25 personal property unless the pledged property is actually in
13 26 the title lender's possession.
13 27 4. A title lender shall be strictly liable to the borrower
13 28 for any loss to pledged titled personal property in the title
13 29 lender's possession.
13 30 Sec. 13. NEW SECTION. 536B.13 VIOLATIONS == PENALTIES.
13 31 1. All title loan agreements entered into by a person who
13 32 acts in violation of the requirements of this chapter, and all
13 33 title pledges accepted by such person, shall be null and void.
13 34 A borrower who enters into a title loan agreement with a
13 35 person who acts in violation of the provisions of this chapter
14 1 shall not be bound by the agreement, and the title lender
14 2 shall return to the borrower the titled personal property
14 3 pledged or the fair market value of the titled property, and
14 4 all principal, interest, fees, and other charges paid by the
14 5 borrower. The borrower may commence a civil action to enforce
14 6 this subsection in which the borrower is entitled to
14 7 reasonable attorney fees, costs, and interest.
14 8 2. a. The attorney general may initiate an action against
14 9 any person who acts as a title lender without a title loan
14 10 license for civil and criminal penalties as provided in this
14 11 section.
14 12 b. The attorney general may commence an action to impose a
14 13 civil penalty for title lending without a title loan license
14 14 in an amount not less than one thousand dollars and not more
14 15 than five thousand dollars for each day that a person acts in
14 16 violation of the licensing requirement. The action shall be
14 17 commenced in the district court for any county in which the
14 18 person executed any title loan agreement or any county in
14 19 which any of the pledged titled personal property is normally
14 20 kept. Civil penalties collected shall be deposited in the
14 21 general fund of the state.
14 22 c. A first offense violation of the licensing requirement
14 23 of this chapter is a simple misdemeanor. A second or
14 24 subsequent offense is an aggravated misdemeanor. For purposes
14 25 of jurisdiction and venue, the crime of unlawful title lending
14 26 shall be deemed to have occurred in both the county in which
14 27 an unlawful title loan agreement was executed and the county
14 28 in which the pledged property is normally kept.
14 29 d. If a violation of the licensing requirement is
14 30 intentional or knowing, the person shall be barred from
14 31 applying for a title loan license for a period of five years
14 32 from the date of the last violation.
14 33 3. Whenever it appears to the superintendent that any
14 34 title lender is failing, refusing, or neglecting to make a
14 35 good faith effort to comply with the provisions of this
15 1 chapter, the superintendent may issue an order to cease and
15 2 desist and may assess and collect a civil penalty of not more
15 3 than one thousand dollars per day for each day that the
15 4 neglect, failure, or refusal occurs or continues. In
15 5 determining the amount of the penalty, the superintendent
15 6 shall take into account the appropriateness of the penalty
15 7 with respect to the gravity of the violation, the history of
15 8 previous violations, and such other matters as justice may
15 9 require. Civil penalties collected shall be deposited in the
15 10 general fund of the state.
15 11 Sec. 14. NEW SECTION. 536B.14 PAWN OR PAWNBROKER TITLE
15 12 PROHIBITED.
15 13 A business licensed pursuant to this chapter shall not use
15 14 the terms "pawn" or "pawnbroker" in the lender's title,
15 15 business name, or advertising.
15 16 EXPLANATION
15 17 This bill provides for the licensing and regulation of
15 18 persons who engage in the business of making a loan of money
15 19 secured by a certificate of title to personal property such as
15 20 a motor vehicle.
15 21 The bill requires all persons making title loans to be
15 22 licensed by the superintendent of banking of the division of
15 23 banking of the department of commerce pursuant to the
15 24 provisions of new Code chapter 536B. The bill restricts
15 25 employees of the division of banking from owning or receiving
15 26 payment from a title lender. To be licensed as a title
15 27 lender, an application must be filed with the superintendent
15 28 which contains certain information and includes a $20,000
15 29 surety bond or an irrevocable $20,000 letter of credit to
15 30 cover potential liabilities of the title lender. All
15 31 application and renewal fees shall be deposited in the general
15 32 fund of the state. The bill requires all issued licenses to
15 33 be conspicuously displayed in each title loan office.
15 34 Licenses are valid for no more than two years and are not
15 35 transferable or assignable.
16 1 The superintendent may deny, suspend, or revoke a license
16 2 for any violation of new Code chapter 536B, for certain acts
16 3 of fraud or misrepresentation, certain criminal acts, failing
16 4 to provide information to the superintendent, failing to
16 5 maintain a bond or letter of credit, and failing to pay a fee
16 6 or fine. The superintendent shall hold a hearing regarding a
16 7 denial, suspension, or revocation of a title loan license
16 8 after ten days' notice to the licensee or upon the request of
16 9 an applicant.
16 10 The bill requires title lenders to provide certain notices
16 11 and disclosures to borrowers regarding the consequences of not
16 12 paying the loan in full. Title loan agreements are required
16 13 to contain certain provisions regarding the transfer of
16 14 possession of the certificate of title, the borrower's right
16 15 of redemption, renewal of the agreement, and consequences of
16 16 default. The title loan agreement must contain all required
16 17 disclosures required under federal law and Code chapter 537,
16 18 and language that default may result in the loss of the
16 19 borrower's titled personal property pledged under the
16 20 agreement. The agreement must provide a description of the
16 21 titled personal property pledged, information regarding the
16 22 title lender, the amount of money financed under the
16 23 agreement, the maturity date, the total finance charge, the
16 24 number of payments, the total amount of all payments, the
16 25 annual percentage rate, a right of cancellation within one
16 26 business day by the borrower, where the titled personal
16 27 property may be delivered if default occurs, and contact
16 28 information for the division of banking for complaints. The
16 29 division of banking shall make available a sample title loan
16 30 agreement.
16 31 The bill prohibits title lenders from certain actions
16 32 including executing a title loan agreement with an underage or
16 33 intoxicated person, for an amount greater than $5,000,
16 34 requiring a borrower to accept personal liability, or
16 35 containing a confession of judgment, a waiver of a right to
17 1 jury trial, mandatory arbitration clause, assignment of
17 2 payment of wages, or any other waiver of a right or protection
17 3 of a borrower. The bill prohibits title lenders from failing
17 4 to protect certificates of title or titled personal property
17 5 in the lender's possession, purchasing titled personal
17 6 property, selling insurance, refusing to accept partial
17 7 payments, charging additional fees or penalties, storing
17 8 titled personal property more than 15 miles from the title
17 9 loan office, threatening or using the criminal process to
17 10 collect on a title loan, or failing to ensure the borrower had
17 11 clear title at the time of execution of the title loan. The
17 12 bill provides that a borrower may be personally liable for a
17 13 title loan agreement if the borrower fails to disclose a prior
17 14 valid lien on the titled personal property pledged for the
17 15 title loan.
17 16 The bill restricts the amount of interest a title lender
17 17 may charge to 21 percent per year. The title lender must
17 18 comply with the provisions of Code section 537.2401 regarding
17 19 finance charges on consumer loans or be subject to remedies
17 20 and penalties of Code chapter 537, article 5. A renewal of
17 21 the title loan agreement shall not exceed the amount of
17 22 interest charged in the original agreement and a lender may
17 23 not capitalize unpaid interest in a renewal of the agreement.
17 24 The bill provides that the borrower shall redeem the
17 25 pledged certificate of title upon satisfaction of the loan.
17 26 The bill provides that upon default of the agreement, the
17 27 title lender may proceed to repossess the titled personal
17 28 property pursuant to the provisions related to repossession in
17 29 Code chapter 554, article 9, part 6. Prior to repossession,
17 30 the title lender must permit the borrower to voluntarily
17 31 provide the titled personal property to the lender. After
17 32 repossession, the title lender must return all personal
17 33 property left within the titled personal property repossessed.
17 34 The title lender must give all proceeds in excess of the
17 35 amount owed under the agreement to the borrower within 30 days
18 1 after sale of the titled personal property.
18 2 The bill requires title lenders to keep certain records
18 3 regarding executed title loan agreements including a
18 4 description of the titled personal property, the date and
18 5 amount of the title loan, the date of maturity, and
18 6 information regarding the borrower. The title lender must
18 7 maintain a photocopy of the photo identification of the
18 8 borrower and provide the borrower an exact copy of the
18 9 agreement and a copy of the pledged title. The title lender
18 10 shall keep copies of title loan agreements for at least two
18 11 years. The records required to be kept must be made available
18 12 to the borrower and the superintendent.
18 13 The title lender is required to keep pledged certificates
18 14 of title safe and must maintain at least $1,000,000 in general
18 15 liability insurance. A title lender is not liable for damage
18 16 to pledged property not in the lender's possession but is
18 17 strictly liable for losses of property in the lender's
18 18 possession.
18 19 The bill provides that all title loan agreements executed
18 20 in violation of any provision of Code chapter 536B are void
18 21 and the borrower is entitled to the return of the titled
18 22 personal property pledged, and all principal, interest, and
18 23 fees paid by the borrower. The borrower may file a civil
18 24 action to enforce return of the property and payments made.
18 25 The attorney general may file an action for civil and criminal
18 26 penalties against a person who acts as a title lender without
18 27 a license. Civil penalties shall be no less than $1,000 but
18 28 not more than $5,000 per day the person acts without a
18 29 license. A first criminal offense is punishable as a simple
18 30 misdemeanor. A simple misdemeanor is punishable by
18 31 confinement for no more than 30 days or a fine of at least $50
18 32 but not more than $500 or by both. A second or subsequent
18 33 offense is punishable as an aggravated misdemeanor. An
18 34 aggravated misdemeanor is punishable by confinement for no
18 35 more than two years and a fine of at least $500 but not more
19 1 than $5,000. Persons intentionally acting as a title lender
19 2 without a license are also barred from obtaining a license for
19 3 five years. The superintendent may impose civil penalties
19 4 between $1,000 and $5,000 for noncompliance with any provision
19 5 of Code chapter 536B for each day of noncompliance. Civil
19 6 penalties collected shall be deposited in the general fund.
19 7 The bill prohibits title lenders from using the term "pawn"
19 8 or "pawnbroker" in the lender's business name or advertising.
19 9 LSB 1763YH 81
19 10 kk:nh/sh/8