Senate File 2276 - Introduced



                                       SENATE FILE       
                                       BY  COMMITTEE ON COMMERCE

                                       (SUCCESSOR TO SF 217)


    Passed Senate, Date               Passed House,  Date             
    Vote:  Ayes        Nays           Vote:  Ayes        Nays         
                 Approved                            

                                      A BILL FOR

  1 An Act relating to the maximum finance charge allowed for
  2    consumer loans secured by a certificate of title to a motor
  3    vehicle and making penalties applicable.
  4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
  5 TLSB 6547SV 81
  6 kk/gg/14

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                           EXPLANATION
  2 11    This bill relates to the maximum finance charge allowed for
  2 12 consumer loans secured by a certificate of title to a motor
  2 13 vehicle.  The bill prohibits a lender from contracting for or
  2 14 receiving a finance charge which exceeds 21 percent per year
  2 15 on the unpaid balance of a loan for money which is secured by
  2 16 a certificate of title to a motor vehicle.  The remedies under
  2 17 Code chapter 537 for excess charges are available to consumers
  2 18 who are charged a finance charge in excess of 21 percent per
  2 19 year for such a consumer loan.  The bill provides that an
  2 20 attempt to avoid application of the maximum finance charge on
  2 21 a loan secured by a certificate of title to a motor vehicle by
  2 22 structuring the transaction as a sale, sale and repurchase,
  2 23 sale and lease, pawn, rental purchase, or lease with the
  2 24 intent to avoid the maximum finance charge shall be considered
  2 25 a violation of the maximum finance charge and shall be
  2 26 considered a consumer fraud subject to civil penalties and
  2 27 enforcement pursuant to Code section 714.16.
  2 28    Under current law, a consumer is not obligated to pay an
  2 29 excess charge and is entitled to a refund of any excess charge
  2 30 paid.  If a consumer entitled to a refund is refused the
  2 31 refund, the consumer may recover from the creditor or other
  2 32 person liable in a civil action the excess charge and a
  2 33 penalty of not less than $100 or more than $1,000.  Under
  2 34 current law, a person who willfully and knowingly makes an
  2 35 excess charge is guilty of a serious misdemeanor.  A serious
  3  1 misdemeanor is punishable by confinement for no more than one
  3  2 year and a fine of at least $250 but not more than $1,500.
  3  3 LSB 6547SV 81
  3  4 kk:rj/gg/14