House File 5HOUSE FILE BY HEDDENS, BAILEY, GAYMAN, WENTHE, KUHN, FREVERT, D. OLSON, REICHERT, JOCHUM, WHITAKER, LYKAM, BUKTA, DAVITT, MURPHY, ABDUL=SAMAD, and STAED Passed House, Date Passed Senate, 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 1538HH 82 6 rn/gg/14 PAG LIN 1 1 Section 1. Section 537.2401, subsection 1, Code 2007, 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 ThisExcept 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 2007, 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 1 24 open=end credit as permitted in this section except as 1 25 provided in 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 a 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 $315 but not more than $1,875. 3 3 LSB 1538HH 82 3 4 rn:rj/gg/14