Senate File 388 - Introduced SENATE FILE 388 BY COMMITTEE ON HUMAN RESOURCES (SUCCESSOR TO SF 113) A BILL FOR An Act modifying provisions relating to the regulation of 1 delayed deposit services businesses, providing penalties, 2 and including effective date provisions. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 4 TLSB 1472SV (2) 84 rn/sc

S.F. 388 Section 1. Section 533D.2, subsection 2, unnumbered 1 paragraph 1, Code 2011, is amended to read as follows: 2 “Delayed deposit services business” means a person who for a 3 fee finance charge does either of the following: 4 Sec. 2. Section 533D.2, Code 2011, is amended by adding the 5 following new subsection: 6 NEW SUBSECTION . 2A. “Finance charge” means all charges 7 payable directly or indirectly as a condition of a delayed 8 deposit service transaction, including interest, fees, service 9 charges, renewal charges, credit insurance premiums, and any 10 ancillary product sold in connection with a delayed deposit 11 service transaction. 12 Sec. 3. Section 533D.9, Code 2011, is amended to read as 13 follows: 14 533D.9 Fee Finance charge restriction —— required disclosure. 15 1. A licensee shall not charge a fee in excess of fifteen 16 dollars on the first one hundred dollars on the face amount 17 of a check or more than ten dollars on subsequent one hundred 18 dollar increments on the face amount of the check for services 19 provided by the licensee, or pro rata for any portion of one 20 hundred dollars face value apply a finance charge in excess of 21 an amount equal to thirty-six percent per annum, as computed 22 pursuant to the federal Truth in Lending Act . 23 2. A licensee shall give to the maker of the check, at the 24 time any delayed deposit service transaction is made, or if 25 there are two or more makers, to one of them, notice written in 26 clear, understandable language disclosing all of the following: 27 a. The fee finance charge to be charged imposed for the 28 transaction. 29 b. The annual percentage rate as computed pursuant to the 30 federal Truth in Lending Act. 31 c. The date on which the check will be deposited or 32 presented for negotiation. 33 d. Any penalty, not to exceed fifteen dollars, which the 34 licensee will charge if the check is not negotiable on the 35 -1- LSB 1472SV (2) 84 rn/sc 1/ 5

S.F. 388 date agreed upon. A penalty to be charged pursuant to this 1 section shall only be collected by the licensee once on a check 2 no matter how long the check remains unpaid. A penalty to be 3 charged pursuant to this section is a licensee’s exclusive 4 remedy and if a licensee charges a penalty pursuant to this 5 section no other penalties under this chapter or any other 6 provision apply. 7 3. In addition to the notice required by subsection 2 , every 8 licensee shall conspicuously display a schedule of all fees, 9 finance charges, and penalties for all services provided by 10 the licensee authorized by this section . The notice shall be 11 posted at the office and every branch office of the licensee. 12 Sec. 4. Section 533D.10, subsection 1, paragraphs d and f, 13 Code 2011, are amended to read as follows: 14 d. Require the maker to receive payment by a method which 15 causes the maker to pay additional or further fees and finance 16 charges to the licensee or another person. 17 f. Receive or apply any other finance charges or fees 18 penalties in addition to the fees those listed in section 19 533D.9 , subsections 1 and 2 . 20 Sec. 5. Section 533D.10, subsection 1, Code 2011, is amended 21 by adding the following new paragraph: 22 NEW PARAGRAPH . g. Engage in any device or subterfuge 23 intended to evade the requirements of this chapter, including 24 but not limited to assisting a maker of a check in entering 25 into a delayed deposit service transaction at a rate of 26 interest prohibited pursuant to the laws of this state, 27 entering into transactions disguised as personal property sales 28 and leaseback transactions, or disguising amounts received 29 pursuant to a transaction as cash rebates for the pretextual 30 installment sale of goods or services, or assisting a maker 31 of a check in entering into a transaction through the mail, 32 telephone, internet, or any other electronic means, regardless 33 of whether the licensee has a physical location in this state. 34 Sec. 6. Section 533D.10, Code 2011, is amended by adding the 35 -2- LSB 1472SV (2) 84 rn/sc 2/ 5

S.F. 388 following new subsection: 1 NEW SUBSECTION . 3. A delayed deposit service transaction 2 made in violation of this chapter may not be enforced against a 3 maker of a check. A delayed deposit service transaction made 4 in violation of this chapter is void, and the licensee does not 5 have the right to collect, receive, or retain any payments, 6 interest, or finance charges from the maker of the check. 7 Sec. 7. Section 533D.12, subsection 2, paragraph d, Code 8 2011, is amended by striking the paragraph. 9 Sec. 8. Section 533D.12, Code 2011, is amended by adding the 10 following new subsection: 11 NEW SUBSECTION . 7. A violation of this chapter is a 12 violation of section 714.16, subsection 2, paragraph “a” . The 13 provisions of section 714.16, including but not limited to 14 provisions relating to investigation, injunctive relief, and 15 penalties, shall apply to this chapter unless more prescriptive 16 and stringent provisions are otherwise specified in this 17 chapter. 18 Sec. 9. EFFECTIVE UPON ENACTMENT. This Act, being deemed of 19 immediate importance, takes effect upon enactment. 20 EXPLANATION 21 This bill modifies provisions relating to the regulation of 22 delayed deposit services businesses. 23 The bill deletes current provisions prohibiting delayed 24 deposit services licensees from charging a fee in excess of $15 25 on the first $100 on the face amount of a check or more than $10 26 on subsequent $100 increments on the face amount of the check 27 for services provided by the licensee. The bill substitutes a 28 provision prohibiting imposition of a finance charge in excess 29 of an amount equal to 36 percent per annum as computed pursuant 30 to the federal Truth in Lending Act. The bill defines “finance 31 charge” to mean all charges payable directly or indirectly 32 as a condition of a delayed deposit service transaction, 33 including interest, fees, service charges, renewal charges, 34 credit insurance premiums, and any ancillary product sold in 35 -3- LSB 1472SV (2) 84 rn/sc 3/ 5

S.F. 388 connection with a delayed deposit service transaction. 1 The bill provides, with respect to prohibited acts by a 2 licensee, that a licensee may not engage in any device or 3 subterfuge intended to evade the requirements of Code chapter 4 533D, including but not limited to assisting a maker of a check 5 in entering into a delayed deposit service transaction at a 6 rate of interest prohibited pursuant to Iowa law, entering into 7 transactions disguised as personal property sales and leaseback 8 transactions, or disguising amounts received pursuant to a 9 transaction as cash rebates for the pretextual installment 10 sale of goods or services, or assisting a maker of a check 11 in entering into a transaction through the mail, telephone, 12 internet, or any other electronic means, regardless of whether 13 the licensee has a physical location in this state. The 14 bill additionally provides that a delayed deposit service 15 transaction entered into which violates the Code chapter may 16 not be enforced with respect to a maker of a check, that any 17 payment made or collected in connection therewith is void, and 18 that the licensee does not have the right to collect, receive, 19 or retain any payments, interest, or finance charges. 20 Further, the bill deletes a penalty provision authorizing 21 the superintendent of banking to impose a civil penalty not to 22 exceed $5,000 per violation. The bill states that a violation 23 of the Code chapter constitutes a consumer fraud pursuant to 24 the provisions of Code section 714.16, and that the applicable 25 provisions relating to investigation, injunctive relief, 26 and penalties shall apply to Code chapter 533D unless more 27 prescriptive and stringent provisions are otherwise specified 28 in the Code chapter. The primary effect of this change is 29 to make violations subject to a civil penalty pursuant to 30 Code section 714.16, subsection 7, in an amount not to exceed 31 $40,000 per violation, and in addition a civil penalty of 32 not more than $5,000 for each day of intentional violation 33 of a temporary restraining order, preliminary injunction, or 34 permanent injunction. 35 -4- LSB 1472SV (2) 84 rn/sc 4/ 5

S.F. 388 The bill takes effect upon enactment. 1 -5- LSB 1472SV (2) 84 rn/sc 5/ 5