House Study Bill 154 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON JUDICIARY BILL BY CHAIRPERSON BALTIMORE) A BILL FOR An Act specifying notice of right to cure provisions applicable 1 to a closed credit card account. 2 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 3 TLSB 2186YC (1) 85 rn/sc

H.F. _____ Section 1. Section 537.5110, subsection 2, paragraph a, 1 Code 2013, is amended to read as follows: 2 a. A creditor who believes in good faith that a consumer is 3 in default may give the consumer written notice of the alleged 4 default, and, if the consumer has a right to cure the default, 5 shall give the consumer the notice of right to cure provided 6 in section 537.5111 before commencing any legal action in any 7 court on an obligation of the consumer and before repossessing 8 collateral. If the obligation is a credit card account that 9 has been closed, in lieu of giving the notice of right to cure 10 provided in section 537.5111, the creditor shall give the 11 notice of right to cure provided in section 537.5112 before 12 commencing any legal action in any court on the obligation of 13 the consumer. However, this subsection and subsection 4 do 14 not require a creditor to give notice of right to cure prior 15 to the filing of a petition by a creditor seeking to enforce 16 the consumer’s obligation in which attachment under chapter 639 17 is sought upon any of the grounds specified in section 639.3, 18 subsections 3 to 12 . 19 Sec. 2. Section 537.5110, subsection 4, paragraph c, Code 20 2013, is amended to read as follows: 21 c. Until the expiration of the minimum applicable period 22 after the notice is given, the consumer may cure the default by 23 tendering either the amount of all unpaid installments due at 24 the time of the tender, without acceleration, plus any unpaid 25 delinquency or deferral charges, or the amount stated in the 26 notice of right to cure, whichever is less, or by tendering any 27 performance necessary to cure any default other than nonpayment 28 of amounts due, which is described in the notice of right to 29 cure. The Unless the obligation in default is a credit card 30 account that has been closed, the act of curing a default 31 restores to the consumer the consumer’s rights under the 32 agreement as though no default had occurred, except as provided 33 in subsection 3 . 34 Sec. 3. NEW SECTION . 537.5112 Notice of right to cure —— 35 -1- LSB 2186YC (1) 85 rn/sc 1/ 4

H.F. _____ closed credit card accounts. 1 1. The notice of right to cure an obligation in default 2 on a closed credit card account shall be in writing and 3 shall conspicuously state the name, address, and telephone 4 number of the creditor to which payment is to be made, a 5 brief identification of the credit transaction and of the 6 consumer’s right to cure the default, a statement of the nature 7 of the right to cure the default, a statement of the nature 8 of the alleged default, a statement of the total payment, 9 including an itemization of any delinquency or deferral 10 charges imposed after the credit card account was closed, 11 any legally authorized collection costs or attorney fees, or 12 other performance necessary to cure the alleged default, and 13 the exact date by which the amount must be paid or performance 14 tendered. 15 2. A notice in substantially the following form complies 16 with this section: 17 .................... 18 (name, address, and telephone number of creditor) 19 .................... 20 (account number, if any) 21 .................... 22 (brief identification of credit transaction) 23 You are now in default on this credit transaction. You have a 24 right to correct this default until ... (date). Your default 25 consists of 26 .................... 27 (describe default alleged) 28 Correction of the default: Before ..., (date) 29 .................... 30 (describe the acts necessary for cure) 31 If you do not correct your default by the date stated 32 above, we may exercise rights against you under the law. 33 If we arrange for installment payments with you to satisfy 34 this debt and you default on one or more of the installment 35 -2- LSB 2186YC (1) 85 rn/sc 2/ 4

H.F. _____ payments within the next year, we may exercise our rights 1 without sending you another notice like this one. If you have 2 questions, write or telephone promptly. 3 ................ 4 (the creditor) 5 3. A creditor gives notice to the consumer under this part 6 when the creditor delivers the notice to the consumer or mails 7 the notice to the consumer at the consumer’s residence as 8 defined in section 537.1201, subsection 4. 9 Sec. 4. Section 537.5201, subsection 1, paragraph a, 10 subparagraph (26), Code 2013, is amended to read as follows: 11 (26) Failure to provide a proper notice of cure or right to 12 cure under sections 537.5110 , and 537.5111 , or 537.5112 . 13 EXPLANATION 14 This bill specifies notice of right to cure provisions 15 applicable to a credit card account that has been closed. 16 The bill provides notice of right to cure provisions 17 contained in new Code section 537.5112 that will apply to 18 closed credit card accounts, which are similar to general 19 notice of right to cure provisions contained in Code section 20 537.5111 requiring a creditor to provide specified information 21 to a consumer in a specified format in connection with a credit 22 transaction in default. 23 The new Code section differs from the general provisions 24 in requiring the notice to include an itemization of any 25 attorney fees applicable to the defaulted account, and by 26 providing a statement that if the creditor arranges for 27 installment payments with the consumer to satisfy the debt 28 and the consumer defaults on one or more of the installment 29 payments within the next year, the creditor may exercise their 30 rights without sending the consumer another notice of right to 31 cure. Additionally, the notice states that if the consumer has 32 questions, the consumer should write or telephone the creditor 33 promptly. 34 The bill makes conforming changes reflecting the distinction 35 -3- LSB 2186YC (1) 85 rn/sc 3/ 4

H.F. _____ between a credit transaction on an open account and a closed 1 credit card account. 2 -4- LSB 2186YC (1) 85 rn/sc 4/ 4