Senate File 409 - Introduced SENATE FILE BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO SSB 1312) Passed Senate, Date Passed House, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act relating to financial transactions including the sale of 2 specific items used in livestock and plant production, 3 providing for an exemption and refund of sales and use taxes, 4 providing for a maximum finance charge on consumer loans 5 secured by a certificate of title to a motor vehicle, making 6 penalties applicable, and including an effective and 7 retroactive applicability date provision. 8 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 9 TLSB 3621SV 81 10 mg/cf/24 PAG LIN 1 1 Section 1. Section 423.3, subsection 11, unnumbered 1 2 paragraph 1, Code 2005, is amended to read as follows: 1 3 The sales price exclusive of services of farm machinery and 1 4 equipment, including auxiliary attachments which improve the 1 5 performance, safety, operation, or efficiency of the machinery 1 6 and equipment, and including auger systems, curtains and 1 7 curtain systems, drip systems, fan and fan systems, shutters, 1 8 inlets and shutter or inlet systems, and refrigerators, and 1 9 replacement parts, if all of the following conditions are met: 1 10 Sec. 2. Section 537.2401, subsection 1, Code 2005, is 1 11 amended to read as follows: 1 12 1. Except as provided with respect to a finance charge for 1 13 loans pursuant to open end credit under section 537.2402 and 1 14 loans secured by a certificate of title of a motor vehicle 1 15 under section 537.2403, a lender may contract for and receive 1 16 a finance charge not exceeding the maximum charge permitted by 1 17 the laws of this state or of the United States for similar 1 18 lenders, and, in addition, with respect to a consumer loan, a 1 19 supervised financial organization or a mortgage lender may 1 20 contract for and receive a finance charge, calculated 1 21 according to the actuarial method, not exceeding twenty=one 1 22 percent per year on the unpaid balance of the amount financed. 1 23ThisExcept as provided in section 537.2403, this subsection 1 24 does not prohibit a lender from contracting for and receiving 1 25 a finance charge exceeding twenty=one percent per year on the 1 26 unpaid balance of the amount financed on consumer loans if 1 27 authorized by other provisions of the law. 1 28 Sec. 3. Section 537.2402, subsection 1, Code 2005, is 1 29 amended to read as follows: 1 30 1. If authorized to make supervised loans, a creditor may 1 31 contract for and receive a finance charge without limitation 1 32 as to amount or rate with respect to a loan pursuant to open= 1 33 end credit as permitted in this section except as provided in 1 34 section 537.2403. 1 35 Sec. 4. NEW SECTION. 537.2403 FINANCE CHARGE FOR 2 1 CONSUMER LOANS SECURED BY A MOTOR VEHICLE. 2 2 1. A lender shall not contract for or receive a finance 2 3 charge exceeding twenty=one percent per year on the unpaid 2 4 balance of the amount financed for a loan of money secured by 2 5 a certificate of title to a motor vehicle used for personal, 2 6 family, or household purpose except as authorized under 2 7 chapter 536 or 536A. A consumer who is charged a finance 2 8 charge in excess of the limitation in this section may seek 2 9 any remedies available pursuant to this chapter for an excess 2 10 charge. 2 11 2. It shall be a violation of this section and an unlawful 2 12 practice under section 714.16 to attempt to avoid application 2 13 of this section by structuring a loan of money secured by 2 14 certificate of title to a motor vehicle as a sale, sale and 2 15 repurchase, sale and lease, pawn, rental purchase, lease, or 2 16 other type of transaction with the intent to avoid application 2 17 of this section or any other applicable provision of this 2 18 chapter. 2 19 Sec. 5. REFUNDS. Refunds of taxes, interest, or penalties 2 20 which arise from claims resulting from the amendment of 2 21 section 423.3, subsection 11, in this Act, for the exemption 2 22 of sales of auger systems, curtains and curtain systems, drip 2 23 systems, fan and fan systems, shutters, inlets and shutter or 2 24 inlet systems, and refrigerators occurring between January 1, 2 25 1992, and the effective date of this Act, shall be limited to 2 26 twenty=five thousand dollars in the aggregate and shall not be 2 27 allowed unless refund claims are filed prior to October 1, 2 28 2005, notwithstanding any other provision of law. If the 2 29 amount of claims totals more than twenty=five thousand dollars 2 30 in the aggregate, the department of revenue shall prorate the 2 31 twenty=five thousand dollars among all claimants in relation 2 32 to the amounts of the claimants' valid claims. Claimants 2 33 shall not be entitled to interest on any refunds. 2 34 Sec. 6. EFFECTIVE DATE AND RETROACTIVE APPLICABILITY 2 35 PROVISION. This Act, being deemed of immediate importance, 3 1 takes effect upon enactment and applies retroactively to 3 2 January 1, 1992. 3 3 EXPLANATION 3 4 This bill relates to financial transactions involving 3 5 certain equipment and motor vehicle sales and loan 3 6 transactions. 3 7 The bill adds to the exemption from the sales and use taxes 3 8 of the sales of farm machinery and equipment to include auger 3 9 systems, curtains and curtain systems, drip systems, fans and 3 10 fan systems, shutters, inlets and shutter or inlet systems, 3 11 and refrigerators. The exemption of these additional items is 3 12 retroactive to sales occurring on or after January 1, 1992. 3 13 Because of the retroactivity, a provision for refund of taxes, 3 14 interest, and penalties is included in the bill. However, the 3 15 claims for refunds are limited to $25,000 in the aggregate, 3 16 and claims must be filed by October 1, 2005. 3 17 The bill relates to the maximum finance charge allowed for 3 18 consumer loans secured by a certificate of title to a motor 3 19 vehicle. The bill prohibits a lender from contracting for or 3 20 receiving a finance charge which exceeds 21 percent per year 3 21 on the unpaid balance of a loan for money which is secured by 3 22 a certificate of title to a motor vehicle. The remedies under 3 23 Code chapter 537 for excess charges are available to consumers 3 24 who are charged a finance charge in excess of 21 percent per 3 25 year for such a consumer loan. The bill provides that an 3 26 attempt to avoid application of the maximum finance charge on 3 27 a loan secured by a certificate of title to a motor vehicle by 3 28 structuring the transaction as a sale, sale and repurchase, 3 29 sale and lease, pawn, rental purchase, or lease with the 3 30 intent to avoid the maximum finance charge shall be considered 3 31 a violation of the maximum finance charge and shall be 3 32 considered a consumer fraud subject to civil penalties and 3 33 enforcement pursuant to Code section 714.16. 3 34 Under current law, a consumer is not obligated to pay an 3 35 excess charge and is entitled to a refund of any excess charge 4 1 paid. If a consumer entitled to a refund is refused the 4 2 refund, the consumer may recover from the creditor or other 4 3 person liable in a civil action the excess charge and a 4 4 penalty of not less than $100 or more than $1,000. Under 4 5 current law, a person who willfully and knowingly makes an 4 6 excess charge is guilty of a serious misdemeanor. A serious 4 7 misdemeanor is punishable by confinement for no more than one 4 8 year and a fine of at least $250 but not more than $1,500. 4 9 The bill takes effect upon enactment and applies 4 10 retroactively to January 1, 1992. 4 11 LSB 3621SV 81 4 12 mg:rj/cf/24