House File 501 - Introduced
HOUSE FILE
BY SHOULTZ
Passed House, Date Passed Senate, Date
Vote: Ayes Nays Vote: Ayes Nays
Approved
A BILL FOR
1 An Act prohibiting payday lending and providing for penalties.
2 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
3 TLSB 1900HH 81
4 kk/gg/14
PAG LIN
1 1 Section 1. Section 524.211, subsection 2 and 4, Code 2005,
1 2 are amended to read as follows:
1 3 2. The superintendent, general counsel, examiners, and
1 4 other employees assigned to the finance bureau of the banking
1 5 division are prohibited from obtaining a loan of money or
1 6 property from a person or entity licensed pursuant to chapter
1 7 533A, 533D, 536, or 536A, or a person or entity affiliated
1 8 with such licensee.
1 9 4. Examiners and other employees assigned to the bank
1 10 bureau of the banking division who have credit relations with
1 11 a person or entity licensed pursuant to chapter 533A, 533D,
1 12 536, or 536A, or with a person or entity affiliated with such
1 13 licensee, are prohibited from participating in decisions,
1 14 oversight, and official review of matters concerning the
1 15 regulation of the licensee.
1 16 Sec. 2. Section 533C.103, subsection 11, Code 2005, is
1 17 amended by striking the subsection.
1 18 Sec. 3. NEW SECTION. 536B.1 TITLE.
1 19 This chapter shall be known and may be cited as the "Payday
1 20 Lending Prohibition Act".
1 21 Sec. 4. NEW SECTION. 536B.2 FINDINGS AND PURPOSE.
1 22 1. The general assembly finds all of the following:
1 23 a. Payday lenders typically charge effective interest
1 24 rates of over four hundred percent per year.
1 25 b. Payday lenders typically make most of their profits by
1 26 allowing borrowers to become caught in a cycle of revolving
1 27 debt.
1 28 c. Some payday lenders have created schemes to disguise
1 29 payday loan transactions or cause payday loan transactions to
1 30 appear to be made by a financial institution chartered in
1 31 another state.
1 32 d. The problem of predatory payday lending has increased
1 33 rapidly over the last several years.
1 34 2. The purpose of this chapter is to protect consumers
1 35 from predatory terms and tactics employed in the lending and
2 1 collection of payday loans.
2 2 Sec. 5. NEW SECTION. 536B.3 DEFINITIONS.
2 3 For purposes of this chapter, unless the context otherwise
2 4 requires:
2 5 1. "Check" means a check, draft, share draft, or other
2 6 instrument for the payment of money.
2 7 2. "Payday lending services" means the performance of
2 8 either of the following services for a fee:
2 9 a. Acceptance of a check dated subsequent to the date it
2 10 was written.
2 11 b. Acceptance of a check dated on the date it was written
2 12 and holding the check for a period of time prior to deposit or
2 13 presentment pursuant to an agreement with, or any
2 14 representation made to, the maker of the check, whether
2 15 express or implied.
2 16 3. "Person" means the same as defined in section 4.1.
2 17 4. "Superintendent" means the superintendent of banking.
2 18 Sec. 6. NEW SECTION. 536B.4 PAYDAY LENDING PROHIBITION.
2 19 It is unlawful for a person to engage in a business that
2 20 consists in whole or in part of making, offering, arranging,
2 21 or acting as an agent in, the provision of payday lending
2 22 services. This prohibition shall not apply to persons who do
2 23 not hold themselves out to the public as being in the business
2 24 of making loans or providing payday lending services.
2 25 Sec. 7. NEW SECTION. 536B.5 ENFORCEMENT.
2 26 The superintendent, with the assistance of the attorney
2 27 general, shall enforce the provisions of this chapter.
2 28 Sec. 8. NEW SECTION. 536B.6 VIOLATIONS == PENALTIES.
2 29 1. A person who violates any provision of this chapter or
2 30 the rules adopted pursuant to this chapter is guilty of a
2 31 serious misdemeanor. Each payday lending service transaction
2 32 shall be deemed a separate violation under this chapter. A
2 33 person who commits a second or subsequent violation of this
2 34 chapter is guilty of a class "D" felony.
2 35 2. A person who receives payday lending services which
3 1 were performed in violation of this chapter may seek any
3 2 damages suffered as a result of the violation including
3 3 attorney fees and court costs.
3 4 Sec. 9. NEW SECTION. 536B.7 RULES.
3 5 The superintendent shall adopt rules necessary to implement
3 6 and enforce this chapter.
3 7 Sec. 10. Section 537.7102, subsection 3, Code 2005, is
3 8 amended to read as follows:
3 9 3. "Debt" means an actual or alleged obligation arising
3 10 out of a consumer credit transaction, consumer rental purchase
3 11 agreement, or a transaction which would have been a consumer
3 12 credit transaction either if a finance charge was made, if the
3 13 obligation was not payable in installments, if a lease was for
3 14 a term of four months or less, or if a lease was of an
3 15 interest in land. A debt includes a check as defined in
3 16 section 554.3104 given in a transaction in connection with a
3 17 consumer rental purchase agreement, in a transaction which was
3 18 a consumer credit sale, or in a transaction which would have
3 19 been a consumer credit sale if credit was granted and if a
3 20 finance charge was made, or in a transaction regulated under
3 21 chapter 533D.
3 22 Sec. 11. Chapter 533D, Code 2005, is repealed.
3 23 Sec. 12. TRANSITION PROVISIONS. A person licensed
3 24 pursuant to chapter 533D, Code 2005, shall not initiate or
3 25 renew a transaction for delayed deposit services on or after
3 26 July 1, 2005. Loans outstanding on or after July 1, 2005,
3 27 shall be enforceable upon the agreed terms of the loan.
3 28 Licensees shall surrender licenses issued pursuant to chapter
3 29 533D to the superintendent by August 1, 2005. The
3 30 superintendent shall provide written notification of the
3 31 requirements of this section to all persons licensed under
3 32 chapter 533D within thirty days after enactment of this Act.
3 33 EXPLANATION
3 34 This bill relates to payday lending services which are also
3 35 referred to as delayed deposit services. The bill, in new
4 1 Code chapter 536B, provides a list of findings by the general
4 2 assembly related to the effects of payday loans on consumers
4 3 in this state and provides a purpose of protecting consumers
4 4 from predatory terms and tactics used in the lending and
4 5 collection of payday loans.
4 6 The bill prohibits a person from engaging in a business
4 7 that makes, offers, or arranges, or acts as an agent in, the
4 8 provision of payday lending services. The bill defines
4 9 "payday lending services" as the acceptance of a check dated
4 10 subsequent to the date the check was written or acceptance of
4 11 a check dated on the date the check was written but holding
4 12 the check for a period of time prior to deposit pursuant to an
4 13 agreement. Persons who do not hold themselves out as being in
4 14 the business of making loans are not subject to new Code
4 15 chapter 536B.
4 16 The bill provides for the enforcement of new Code chapter
4 17 536B by the superintendent of banking with assistance from the
4 18 attorney general. A person who violates any provision of Code
4 19 chapter 536B is guilty of a serious misdemeanor. A serious
4 20 misdemeanor is punishable by confinement for no more than one
4 21 year and a fine of at least $250 but not more than $1,500. A
4 22 person who commits a second or subsequent violation is guilty
4 23 of a class "D" felony. A class "D" felony is punishable by
4 24 confinement for no more than five years and a fine of at least
4 25 $750 but not more than $7,500. The superintendent of banking
4 26 shall adopt rules as necessary.
4 27 The bill repeals Code chapter 533D relating to the
4 28 licensing and regulation of delayed deposit services
4 29 businesses. Persons licensed under current law to provide
4 30 delayed deposit services may not initiate or renew a loan
4 31 transaction on or after July 1, 2005, and must surrender
4 32 licenses issued under Code chapter 533D by August 1, 2005.
4 33 However, loan transactions initiated prior to July 1, 2005,
4 34 are enforceable under the terms of the loan. The
4 35 superintendent is required to provide written notification of
5 1 the transition provisions to all persons licensed under Code
5 2 chapter 533D within 30 days after enactment.
5 3 LSB 1900HH 81
5 4 kk:nh/gg/14