House Study Bill 558
HOUSE FILE
BY (PROPOSED COMMITTEE ON COMMERCE,
REGULATION AND LABOR BILL BY
CHAIRPERSON JENKINS)
Passed House, Date Passed Senate, Date
Vote: Ayes Nays Vote: Ayes Nays
Approved
A BILL FOR
1 An Act relating to the provision of consumer loans including
2 requiring certain disclosures for delayed deposit services and
3 title loans, providing for the licensing of credit union
4 service organizations to provide delayed deposit services, and
5 providing for interest rates by supervised financial
6 organizations when engaging in delayed deposit services.
7 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
8 TLSB 5618HC 81
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PAG LIN
1 1 Section 1. Section 524.802, Code 2005, is amended by
1 2 adding the following new subsection:
1 3 NEW SUBSECTION. 13A. Act as a delayed deposit services
1 4 business as defined in section 533D.2.
1 5 Sec. 2. Section 533.4, Code 2005, is amended by adding the
1 6 following new subsection:
1 7 NEW SUBSECTION. 29. Act as a delayed deposit services
1 8 business as defined in section 533D.2.
1 9 Sec. 3. Section 533D.2, Code 2005, is amended by adding
1 10 the following new subsection:
1 11 NEW SUBSECTION. 1A. "Credit union service organization"
1 12 means an organization, corporation, or association whose
1 13 membership or ownership is primarily confined or restricted to
1 14 credit unions or organizations of credit unions and whose
1 15 purpose is primarily designed to provide services to credit
1 16 unions, organizations of credit unions, or credit union
1 17 members.
1 18 Sec. 4. Section 533D.2, subsection 5, Code 2005, is
1 19 amended to read as follows:
1 20 5. "Superintendent" means the any of the following:
1 21 a. The superintendent of credit unions for licensees which
1 22 are credit union service organizations.
1 23 b. The superintendent of credit unions for credit unions
1 24 acting as delayed deposit services businesses.
1 25 c. The superintendent of savings and loan associations for
1 26 savings and loan associations acting as delayed deposit
1 27 services businesses.
1 28 d. The superintendent of banking for banks and other
1 29 supervised financial institutions that are not a credit union,
1 30 credit union service organization, or savings and loan
1 31 association acting as delayed deposit services businesses.
1 32 e. The superintendent of banking for all other licensees
1 33 under this chapter.
1 34 Sec. 5. Section 533D.3, subsection 1, Code 2005, is
1 35 amended to read as follows:
2 1 1. A Except as provided in section 533D.17, a person shall
2 2 not operate a delayed deposit services business in this state
2 3 unless the person is licensed by the superintendent as
2 4 provided in this chapter.
2 5 Sec. 6. Section 533D.9, Code 2005, is amended by adding
2 6 the following new subsection:
2 7 NEW SUBSECTION. 2A. In the written notice required by
2 8 subsection 2, the licensee shall require the maker of the
2 9 check to initial by the disclosure of the fee to be charged
2 10 for the transaction and by the disclosure of the annual
2 11 percentage rate.
2 12 Sec. 7. Section 533D.16, Code 2005, is amended to read as
2 13 follows:
2 14 533D.16 APPLICABILITY.
2 15 1. This Except as provided in section 533D.17, this
2 16 chapter does not apply to a bank incorporated under the
2 17 provisions of any state or federal law, a savings and loan
2 18 association incorporated under the provisions of any state or
2 19 federal law, a credit union organized under the provisions of
2 20 any state or federal law, a corporation licensed as an
2 21 industrial loan company under chapter 536A, or an affiliate of
2 22 a bank, savings and loan association, credit union, or
2 23 industrial loan company.
2 24 2. Notwithstanding subsection 1, this chapter applies to a
2 25 credit union service organization.
2 26 Sec. 8. NEW SECTION. 533D.17 FINANCIAL ORGANIZATIONS ==
2 27 RULES.
2 28 Notwithstanding section 533D.16, the superintendent shall
2 29 adopt rules to implement and make applicable the fee
2 30 restrictions, required disclosures, and prohibited acts
2 31 contained in sections 533D.9 and 533D.10 to any supervised
2 32 financial organization, as defined in section 537.1301, acting
2 33 as a delayed deposit services business in this state with
2 34 regard to transactions of delayed deposit services provided by
2 35 the supervised financial organization.
3 1 Sec. 9. Section 534.201, Code 2005, is amended by adding
3 2 the following new unnumbered paragraph:
3 3 NEW UNNUMBERED PARAGRAPH. An association may act as a
3 4 delayed deposit services business as defined in section
3 5 533D.2.
3 6 Sec. 10. Section 537.2401, subsection 1, Code 2005, is
3 7 amended to read as follows:
3 8 1. Except as provided with respect to a finance charge for
3 9 loans pursuant to open end credit under section 537.2402, a
3 10 lender may contract for and receive a finance charge not
3 11 exceeding the maximum charge permitted by the laws of this
3 12 state or of the United States for similar lenders, and, in
3 13 addition, with respect to a consumer loan, a supervised
3 14 financial organization or a mortgage lender may contract for
3 15 and receive a finance charge, calculated according to the
3 16 actuarial method, not exceeding twenty=one percent per year on
3 17 the unpaid balance of the amount financed. However, a
3 18 supervised financial organization may contract for and receive
3 19 a finance charge exceeding twenty=one percent per year on the
3 20 unpaid balance of the amount financed for transactions
3 21 conducted pursuant to delayed deposit services provided
3 22 pursuant to chapter 533D. This subsection does not prohibit a
3 23 lender from contracting for and receiving a finance charge
3 24 exceeding twenty=one percent per year on the unpaid balance of
3 25 the amount financed on consumer loans if authorized by other
3 26 provisions of the law.
3 27 Sec. 11. NEW SECTION. 537.3213 TITLE LOAN DISCLOSURES.
3 28 1. A person who provides a loan of money secured by a
3 29 certificate of title to a motor vehicle shall, prior to making
3 30 the loan, provide to the borrower a notice written in clear,
3 31 understandable language disclosing all of the following:
3 32 a. The fee to be charged for the transaction.
3 33 b. The annual percentage rate on the first hundred dollars
3 34 on the face amount of the loan which the fee represents, and
3 35 the annual percentage rate on subsequent one hundred dollar
4 1 increments which the fee represents, if different.
4 2 c. Any penalty which the lender will charge if the
4 3 borrower makes a payment with a check that is not negotiable
4 4 on the date agreed upon. A penalty to be charged pursuant to
4 5 this paragraph shall only be collected by the lender once on a
4 6 check no matter how long the check remains unpaid. A penalty
4 7 to be charged pursuant to this subsection is a lender's
4 8 exclusive remedy and if a lender charges a penalty pursuant to
4 9 this subsection, no other penalties under this chapter or any
4 10 other provision shall apply.
4 11 2. In addition to the notice required by subsection 1, a
4 12 person who provides a loan of money secured by a certificate
4 13 of title to a motor vehicle shall conspicuously display a
4 14 schedule of all fees, charges, and penalties for all services
4 15 provided by the person as the lender. The notice shall be
4 16 posted at the principal place of business and every branch
4 17 office of the lender.
4 18 3. A loan of money secured by a certificate of title to a
4 19 motor vehicle provided in violation of any provision of this
4 20 section is null and void. A borrower who enters into a loan
4 21 with a person who acts in violation of this section shall not
4 22 be bound by the loan agreement, and the lender shall return to
4 23 the borrower the titled personal property pledged or the fair
4 24 market value of the titled property and all principal,
4 25 interest, fees, and other charges paid by the borrower. The
4 26 borrower may commence a civil action to enforce this
4 27 subsection in which the borrower is entitled to reasonable
4 28 attorney fees, costs, and interest.
4 29 4. This section shall not apply to a supervised financial
4 30 organization.
4 31 EXPLANATION
4 32 This bill relates to the provision of delayed deposit
4 33 services and vehicle title loans. The bill requires credit
4 34 union service organizations as defined by the bill to be
4 35 licensed and generally subject to the requirements of Code
5 1 chapter 533D when engaging in the delayed deposit services
5 2 business, commonly known as "payday loans".
5 3 The bill requires licensed delayed deposit services
5 4 providers to require customers to initial next to the required
5 5 disclosures relating to fees to be charged and the annual
5 6 percentage rate.
5 7 The bill allows supervised financial organizations, as
5 8 defined by Code section 537.1301, to charge interest rates
5 9 above 21 percent for delayed deposit services transactions.
5 10 The bill amends the definition of "superintendent" in Code
5 11 chapter 533D so that "superintendent" may mean the
5 12 superintendent of banking, the superintendent of credit
5 13 unions, or the superintendent of savings and loan
5 14 associations, depending on the entity that is engaging in the
5 15 delayed deposit services business. Generally, the
5 16 superintendent of banking will continue to license all delayed
5 17 deposit services providers who are not credit unions, credit
5 18 union services organizations, or savings and loan
5 19 associations.
5 20 The bill requires the superintendent of banking, the
5 21 superintendent of credit unions, and the superintendent of
5 22 savings and loan associations to adopt rules to make
5 23 applicable the requirements relating to fee restrictions,
5 24 disclosures, and prohibited acts of Code sections 533D.9 and
5 25 533D.10 to supervised financial organizations, as applicable.
5 26 The bill clarifies that state banks, credit unions, and
5 27 savings and loan associations may engage in the delayed
5 28 deposit services business.
5 29 The bill requires persons who provide loans secured by a
5 30 certificate of title to a motor vehicle, except for supervised
5 31 financial organizations, to make certain written disclosures
5 32 prior to providing the loan. The lender must disclose the fee
5 33 being charged for the loan transaction and give the annual
5 34 percentage rate for each $100 increment of the loan if the
5 35 rate is different for additional $100 increments. The lender
6 1 must also disclose what penalty the lender will charge for a
6 2 returned check, which may only be collected one time
6 3 regardless of how long the check remains unpaid. The lender
6 4 must also display a schedule of all fees, charges, and
6 5 penalties for all services provided at each office of the
6 6 lender. A loan provided without the required disclosures is
6 7 null and void and the borrower is not obligated to pay the
6 8 loan. A lender who provides a loan secured by a certificate
6 9 of title to a motor vehicle without the required disclosures
6 10 shall return the certificate of title pledged and all loan
6 11 payments, interest, and other fees and charges paid by the
6 12 borrower or the borrower may file a civil action for such
6 13 items plus attorney fees, costs, and interest.
6 14 LSB 5618HC 81
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