House File 2485 - Introduced HOUSE FILE 2485 BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO HSB 189) A BILL FOR An Act requiring the licensure of small dollar installment loan 1 businesses, and providing criminal and civil penalties. 2 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 3 TLSB 2667HV (4) 87 gh/rn

H.F. 2485 Section 1. NEW SECTION . 536B.1 Title. 1 This chapter shall be known and may be cited as the “Iowa 2 Small Dollar Installment Loan Act” . 3 Sec. 2. NEW SECTION . 536B.2 Definitions. 4 As used in this chapter, unless the context otherwise 5 requires: 6 1. “Annual percentage rate” means the measure of the cost 7 of credit, expressed as a yearly rate, that relates the amount 8 extended to a consumer on a small dollar installment loan to 9 the amount and timing of payments made, as computed under the 10 federal Truth in Lending Act. 11 2. “Consumer” means an individual who obtains a small dollar 12 installment loan. 13 3. “Federal Truth in Lending Act” means as defined in 14 section 537.1302. 15 4. “Finance charge” means the amount payable by a consumer 16 incident to or as a condition of the extension of a small 17 dollar installment loan but excluding other fees allowed under 18 section 536B.22. 19 5. “Licensee” means a person licensed pursuant to this 20 chapter. 21 6. “Person” means the same as defined in section 533D.2. 22 7. “Regularly engaged in the business” means any of the 23 following: 24 a. Advertising to or making any other solicitation to a 25 resident of this state to offer a small dollar installment loan 26 within this state. 27 b. Making three or more small dollar installment loans 28 within a calendar year to residents of this state. 29 8. “Small dollar installment loan” is a loan in which all of 30 the following are applicable: 31 a. The debt is incurred for a personal, family, or household 32 purpose. 33 b. The debt is not less than five hundred dollars and not 34 more than one thousand dollars. 35 -1- LSB 2667HV (4) 87 gh/rn 1/ 21

H.F. 2485 c. The debt is unsecured. 1 d. The lender holds the consumer’s check or checks 2 for a specified period, or obtains the consumer’s written 3 authorization to debit the consumer’s account, other than as 4 a result of default, under an agreement, either express or 5 implied, for a specified period, before the lender does any of 6 the following: 7 (1) Offers the check or checks for deposit or presentment. 8 (2) Exercises the consumer’s written authorization to debit 9 the consumer’s account. 10 e. The debt is payable in biweekly, semimonthly, or monthly 11 payment installments, in accordance with the dates that the 12 consumer is scheduled to receive income payments. 13 f. The debt is subject to prepayment in whole or in part at 14 any time without penalty. 15 g. The term length of the loan is not less than six months 16 and not more than twelve months. 17 9. “Small dollar installment loan business” means a person 18 who advertises to make, solicit, or hold the person out to make 19 a small dollar installment loan to a consumer in this state. 20 10. “Superintendent” means the superintendent of banking 21 within the banking division of the department of commerce. 22 Sec. 3. NEW SECTION . 536B.3 Exemptions. 23 This chapter shall not apply to any of the following: 24 1. A person who does business under the authority of a 25 law of this state, or any other state while regulated by a 26 state agency of that other state, or of the United States, 27 relating to banks, savings banks, trust companies, savings and 28 loan associations, profit sharing and pension trusts, credit 29 unions, insurance companies, or receiverships if the person 30 is regulated by the other law or under the jurisdiction of a 31 court. 32 2. A person who is not regularly engaged in the business of 33 making a small dollar installment loan. 34 3. A person who is licensed pursuant to another law of this 35 -2- LSB 2667HV (4) 87 gh/rn 2/ 21

H.F. 2485 state to the extent that the person’s activities are governed 1 by that law. 2 4. A consumer loan to the extent provided under chapter 3 533D, 535C, 536, 536A, 536C, or 537. 4 Sec. 4. NEW SECTION . 536B.4 License required —— application 5 process —— display. 6 1. A person shall not operate a small dollar installment 7 loan business in this state unless the person is physically 8 located in this state and licensed by the superintendent as 9 provided in this chapter. 10 2. An applicant for a license shall submit an application to 11 the superintendent on forms prescribed by the superintendent. 12 The forms shall contain such information as the superintendent 13 may prescribe. 14 3. The application required by this section shall be 15 submitted with the following: 16 a. An application fee of one hundred dollars. 17 b. A surety bond executed by a surety company authorized to 18 do business in this state in the sum of twenty-five thousand 19 dollars, which bond shall be continuous in nature until 20 canceled by the surety. A surety shall provide at least 21 thirty days’ notice in writing to the licensee and to the 22 superintendent indicating the surety’s intent to cancel the 23 bond and the effective date of the cancellation. The surety 24 bond shall be for the benefit of the citizens of this state and 25 shall be conditioned upon the licensee’s willingness to comply 26 with this chapter, the faithful performance by the licensee 27 of the duties and obligations pertaining to the small dollar 28 installment loan business so licensed, and the prompt payment 29 of any judgment recovered against the licensee. The surety’s 30 liability under this chapter is limited to the amount of the 31 bond regardless of the number of years the bond is in effect. 32 4. The superintendent shall issue a license to an applicant 33 if the superintendent finds all of the following: 34 a. The experience, character, and general fitness of the 35 -3- LSB 2667HV (4) 87 gh/rn 3/ 21

H.F. 2485 applicant and its officers, directors, shareholders, partners, 1 or members are such as to warrant a finding that the applicant 2 will conduct the small dollar installment loan business 3 honestly, fairly, and efficiently. 4 b. The applicant and its officers, directors, shareholders, 5 partners, or members have not been convicted of a felony in 6 this state, or convicted of a crime in another jurisdiction 7 which would be a felony in this state. 8 c. The applicant is financially responsible and will conduct 9 the small dollar installment loan business pursuant to this 10 chapter and other applicable laws. 11 d. The applicant has unencumbered assets of at least 12 twenty-five thousand dollars available for operating the small 13 dollar installment loan business. 14 5. The superintendent shall approve or deny an application 15 for a license by written order not more than ninety days after 16 the filing of an application. An order of the superintendent 17 issued pursuant to this section may be appealed pursuant to 18 chapter 17A. 19 6. a. A license issued pursuant to this chapter shall 20 be conspicuously posted at the licensee’s place of business. 21 A license shall remain in effect until the next succeeding 22 January 1, unless earlier suspended or revoked by the 23 superintendent. 24 b. A license shall be renewed annually by filing with the 25 superintendent on or before December 1 an application for 26 renewal containing such information as the superintendent may 27 require to indicate any material change in the information 28 contained in the original application or succeeding renewal 29 applications and a renewal fee of two hundred fifty dollars. 30 c. The superintendent may assess a late fee of ten dollars 31 per day for applications submitted and accepted for processing 32 after December 1. 33 7. The superintendent may authorize applicants and 34 licensees to be licensed through a nationwide licensing system 35 -4- LSB 2667HV (4) 87 gh/rn 4/ 21

H.F. 2485 and to pay the corresponding system processing fees. The 1 superintendent may establish by rule or order new requirements 2 as necessary, including but not limited to requirements that 3 applicants, including officers and directors and those who have 4 control of the applicant, submit to fingerprinting and criminal 5 history checks. 6 8. For the purposes of this section and in order to reduce 7 the points of contact which the federal bureau of investigation 8 may be required to maintain for purposes of subsection 7, 9 the superintendent may use the nationwide licensing system 10 as a channeling agent for requesting information from and 11 distributing information to the United States department of 12 justice or other governmental agency, or to or from any other 13 source so directed by the superintendent. 14 Sec. 5. NEW SECTION . 536B.5 Surrender of license. 15 A licensee may surrender a small dollar installment loan 16 license by delivering to the superintendent written notice that 17 the license is surrendered. The surrender does not affect the 18 licensee’s civil or criminal liability for acts committed prior 19 to such surrender, the liability of the surety on the bond, or 20 entitle such licensee to a return of any part of the annual 21 license fee. The superintendent may establish procedures for 22 the disposition of the books, accounts, and records of the 23 licensee and may require such action as deemed necessary for 24 the protection of the makers of checks which are outstanding at 25 the time of surrender of the license. 26 Sec. 6. NEW SECTION . 536B.6 Change in circumstances —— 27 notification of superintendent. 28 A licensee is to notify the superintendent in writing 29 within thirty days of the occurrence of a material development 30 affecting the licensee, including but not limited to any of the 31 following: 32 1. Filing for bankruptcy or reorganization. 33 2. Reorganization of the business. 34 3. Commencement of license revocation or any other civil or 35 -5- LSB 2667HV (4) 87 gh/rn 5/ 21

H.F. 2485 criminal proceedings by any other state or jurisdiction. 1 4. The filing of a criminal indictment or complaint against 2 the licensee or any of the licensee’s officers, directors, 3 shareholders, partners, members, employees, or agents. 4 5. A felony conviction against the licensee or any of 5 the licensee’s officers, directors, shareholders, partners, 6 members, employees, or agents. 7 Sec. 7. NEW SECTION . 536B.7 Continued operation after 8 change in ownership —— approval of superintendent required. 9 1. The prior written approval of the superintendent 10 is required for the continued operation of a small dollar 11 installment loan business whenever a change in control of a 12 licensee is proposed. The person requesting such approval 13 shall pay to the superintendent a fee of one hundred dollars. 14 Control in the case of a corporation means direct or indirect 15 ownership of, or the right to control, ten percent or more 16 of the voting shares of the corporation, or the ability of 17 a person to elect a majority of the directors or otherwise 18 effect a change in policy. Control in the case of any other 19 entity means any change in the principals of the organization, 20 whether active or passive. The superintendent may require 21 information deemed necessary to determine whether a new 22 application is required. Costs incurred by the superintendent 23 in investigating a change of control request shall be paid by 24 the person requesting such approval. 25 2. A license issued pursuant to this chapter is not 26 transferable or assignable. 27 Sec. 8. NEW SECTION . 536B.8 Principal place of business —— 28 branch offices authorized. 29 1. Except as provided in subsection 2, a licensee may 30 operate a small dollar installment loan business only at an 31 office designated as its principal place of business in the 32 application. The licensee shall maintain its books, accounts, 33 and records at its designated principal place of business. A 34 licensee may change the location of its designated principal 35 -6- LSB 2667HV (4) 87 gh/rn 6/ 21

H.F. 2485 place of business with the prior written approval of the 1 superintendent. The superintendent shall establish forms and 2 procedures for determining whether the change of location 3 should be approved. 4 2. A licensee may operate branch offices only in the same 5 county in which the licensee’s designated principal place of 6 business is located. The licensee may establish a branch 7 office or change the location of a branch office with the prior 8 written approval of the superintendent. The superintendent 9 shall establish forms and procedures for determining whether 10 the location of a branch office should be approved. 11 3. A fee of twenty-five dollars shall be paid to the 12 superintendent for each request made pursuant to subsection 13 1 or 2 for a change of location. For each new branch office 14 established, a fee of two hundred fifty dollars shall be paid 15 to the superintendent. 16 Sec. 9. NEW SECTION . 536B.9 Notice of name change. 17 A licensee shall notify the superintendent thirty days in 18 advance of the effective date of a change in the name of the 19 licensee. With the notice of change, the licensee shall submit 20 a fee of twenty-five dollars per license to the superintendent. 21 Sec. 10. NEW SECTION . 536B.10 Other business operations 22 at same site —— restrictions. 23 1. A licensee may operate a small dollar installment loan 24 business at a location where any other business is operated or 25 in association or conjunction with any other business with the 26 written approval of the superintendent and consistent with both 27 of the following requirements: 28 a. The books, accounts, and records of the small dollar 29 installment loan business are kept and maintained separate 30 and apart from the books, accounts, and records of the other 31 business. 32 b. The other business is not of a type which would tend 33 to enable the concealment of acts engaged in to evade the 34 requirements of this chapter. If the superintendent determines 35 -7- LSB 2667HV (4) 87 gh/rn 7/ 21

H.F. 2485 upon investigation that the other business is of a type which 1 would conceal such acts the superintendent shall order the 2 licensee to cease the operation of the small dollar installment 3 loan business at the location. 4 2. The department may order the licensee to cease operations 5 of the business if it fails to obtain written approval of the 6 superintendent before operating a business in association or 7 conjunction with services provided under this chapter. 8 Sec. 11. NEW SECTION . 536B.11 Examination of records by 9 superintendent —— fees. 10 1. The superintendent shall examine the books, accounts, 11 and records of each licensee at least once a year and as needed 12 to secure information required pursuant to this chapter and to 13 determine whether any violations of this chapter have occurred. 14 The licensee shall pay the cost of the examination. 15 2. The superintendent may examine or investigate complaints 16 or reports concerning alleged violations of this chapter or 17 any rule adopted or order issued by the superintendent. The 18 superintendent may order the actual cost of the examination or 19 investigation to be paid by the person who is the subject of 20 the examination or investigation, whether or not the alleged 21 violator is licensed. 22 3. The superintendent shall determine the cost of the 23 examination or investigation based upon the actual cost of the 24 operation of the finance bureau of the banking division of 25 the department of commerce, including the proportionate share 26 of administrative expenses in the operation of the banking 27 division attributable to the finance bureau as determined by 28 the superintendent, incurred in the discharge of duties imposed 29 upon the superintendent by this chapter. 30 4. Failure to pay the examination or investigation fee 31 within thirty days of receipt of demand from the superintendent 32 shall subject the licensee to a late fee of up to five percent 33 of the amount of the examination or investigation fee for each 34 day the payment is delinquent. 35 -8- LSB 2667HV (4) 87 gh/rn 8/ 21

H.F. 2485 5. The superintendent may disclose information to 1 representatives of other state or federal regulatory 2 authorities. The superintendent may release summary complaint 3 information so long as the information does not specifically 4 identify the complainant. The superintendent may prepare 5 and circulate reports reflecting financial information and 6 examination results for all licensees on an aggregate basis, 7 including other information considered pertinent to the purpose 8 of each report for general statistical information. The 9 superintendent may prepare and circulate reports provided 10 by law. The superintendent may release the reports and 11 correspondence in the course of an enforcement proceeding or 12 a hearing held by the superintendent. The superintendent may 13 also provide this information to the attorney general for 14 purposes of enforcing this chapter or the consumer fraud Act, 15 section 714.16. 16 6. The superintendent may receive documents, materials, 17 or other information, including otherwise confidential and 18 privileged documents, materials, or other information, through 19 a nationwide licensing system and from other local, state, 20 federal, or international regulatory agencies, the conference 21 of state bank supervisors and its affiliates and subsidiaries, 22 the national association of consumer credit administrators 23 and its affiliates and subsidiaries, and any other regulator 24 association, and shall maintain as confidential and privileged 25 any such document, material, or other information received 26 with notice or the understanding that it is confidential or 27 privileged under the laws of the jurisdiction that is the 28 source of the document, material, or other information. 29 Sec. 12. NEW SECTION . 536B.12 Disciplinary action. 30 1. The superintendent may, after notice and hearing 31 pursuant to chapter 17A, take disciplinary action against a 32 licensee if the superintendent finds any of the following: 33 a. The licensee or any of its officers, directors, 34 shareholders, partners, or members has violated this chapter, 35 -9- LSB 2667HV (4) 87 gh/rn 9/ 21

H.F. 2485 any rule adopted by the superintendent, or any other state or 1 federal law applicable to the conduct of its business. 2 b. The licensee has failed to pay a license fee required 3 under this chapter or to maintain in effect the bond or bonds 4 required under this chapter. 5 c. A fact or condition existing which, if it had existed 6 at the time of the original application for the license, would 7 have resulted in the denial of issuance of a license. 8 d. The licensee has abandoned its place of business for a 9 period of sixty days or more. 10 e. The licensee fails to pay an administrative penalty or 11 the cost of investigation as ordered by the superintendent. 12 f. The licensee has violated an order of the superintendent. 13 2. The superintendent may impose one or more of the 14 following disciplinary actions against a licensee: 15 a. Revoke a license. 16 b. Suspend a license until further order of the 17 superintendent or for a specified period of time. 18 c. Impose a period of probation under specified conditions. 19 d. Impose civil penalties in an amount not to exceed five 20 thousand dollars for each violation. 21 e. Issue a citation and warning respecting licensee 22 behavior. 23 f. Order the licensee to pay restitution. 24 3. The superintendent may order an emergency suspension 25 of a licensee’s license pursuant to section 17A.18A. A 26 written order containing the facts or conduct which warrants 27 the emergency action shall be timely sent to the licensee by 28 restricted certified mail. Upon issuance of the suspension 29 order, the licensee must also be notified of the right to an 30 evidentiary hearing. A suspension proceeding shall be promptly 31 instituted and determined. 32 4. Except as provided in this section, a license shall 33 not be revoked or suspended except after notice and a hearing 34 thereon in accordance with chapter 17A. 35 -10- LSB 2667HV (4) 87 gh/rn 10/ 21

H.F. 2485 5. A licensee may surrender a license by delivering to the 1 superintendent written notice of surrender, but a surrender 2 does not affect the licensee’s civil or criminal liability for 3 acts committed before the surrender. 4 6. A revocation, suspension, or surrender of a license does 5 not impair or affect the obligation of a preexisting lawful 6 contract between the licensee and any person, including a 7 debtor. 8 Sec. 13. NEW SECTION . 536B.13 Cease and desist order —— 9 injunction. 10 1. If the superintendent believes that any person has 11 engaged in or is about to engage in an act or practice 12 constituting a violation of this chapter or any rule adopted 13 or order issued by the superintendent, the superintendent may 14 issue and serve on the person a cease and desist order. Upon 15 entry of a cease and desist order the superintendent shall 16 promptly notify in writing all persons to whom the order is 17 directed that it has been entered and the reasons for the 18 order. Any person to whom the order is directed may request 19 in writing a hearing within fifteen business days after the 20 date of the issuance of the order. Upon receipt of the written 21 request, the matter shall be set for hearing within fifteen 22 business days of the receipt by the superintendent, unless 23 the person requesting the hearing consents to a later date. 24 If a hearing is not requested within fifteen business days 25 and none is ordered by the superintendent, the order of the 26 superintendent shall automatically become final and remain in 27 effect until modified or vacated by the superintendent. If 28 a hearing is requested or ordered, the superintendent, after 29 notice and hearing, shall issue written findings of fact and 30 conclusions of law and shall affirm, vacate, or modify the 31 order. 32 2. The superintendent may vacate or modify an order if 33 the superintendent finds that the conditions which caused 34 its entry have changed or that it is otherwise in the public 35 -11- LSB 2667HV (4) 87 gh/rn 11/ 21

H.F. 2485 interest to do so. Any person aggrieved by a final order of the 1 superintendent may appeal the order as provided in chapter 17A. 2 3. If it appears that a person has engaged in or is engaging 3 in an act or practice in violation of this chapter, the 4 attorney general may initiate an action in the district court 5 to enjoin such acts or practices and to enforce compliance with 6 this chapter. Upon a showing of a violation of this chapter, 7 a permanent or temporary injunction, restraining order, or 8 writ of mandamus shall be granted or a receiver or conservator 9 may be appointed to oversee the person’s assets. The attorney 10 general shall not be required to post a bond. 11 Sec. 14. NEW SECTION . 536B.14 Administrative penalty. 12 1. If the superintendent finds, after notice and hearing 13 as provided in this chapter, that a person has violated this 14 chapter, a rule adopted pursuant to this chapter, or an order 15 of the superintendent, the superintendent may order the person 16 to pay an administrative fine of not more than five thousand 17 dollars for each violation, in addition to the costs of 18 investigation. 19 2. If a person fails to pay an administrative fine and the 20 costs of investigation ordered pursuant to subsection 1, a 21 lien in the amount of the fine and costs may be imposed upon 22 all assets and property of the person in this state and may be 23 recovered in a civil action by the superintendent. Failure of 24 the person to pay the fine and costs constitutes a separate 25 violation of this chapter. 26 Sec. 15. NEW SECTION . 536B.15 Criminal violation —— 27 operation of business without license —— injunction. 28 A person required to be licensed under this chapter who 29 operates a small dollar installment loan business in this state 30 without first obtaining a license under this chapter or while 31 such license is suspended or revoked by the superintendent is 32 guilty of a serious misdemeanor. In addition to the criminal 33 penalty provided for in this section, the superintendent 34 may also commence an action to enjoin the operation of the 35 -12- LSB 2667HV (4) 87 gh/rn 12/ 21

H.F. 2485 business. 1 Sec. 16. NEW SECTION . 536B.16 Impairment of preexisting 2 loan. 3 1. The revocation, suspension, surrender, expiration, or 4 alteration of a license provided under this chapter shall not 5 impair or affect any of the following: 6 a. The obligation of a lawful preexisting small dollar 7 installment loan between a small dollar installment loan 8 business and a consumer. 9 b. The ability or right of a small dollar installment loan 10 business to service a preexisting small dollar installment loan 11 from outside this state. 12 2. If this chapter or any part of this chapter is modified, 13 amended, or repealed, resulting in a cancellation or alteration 14 of any small dollar installment loan business license or 15 right of a licensee under this chapter, that cancellation or 16 alteration shall not impair or affect the obligation of any 17 preexisting contract between a small dollar installment loan 18 business and any consumer. 19 Sec. 17. NEW SECTION . 536B.17 Restrictions. 20 1. A licensee shall not knowingly advertise, display, 21 distribute, broadcast, or televise, or cause or allow to be 22 advertised, displayed, distributed, broadcast, or televised, in 23 any manner, any false, misleading, or deceptive statement or 24 representation with regard to the rates, terms, or conditions 25 of a small dollar installment loan. To the extent applicable, 26 all advertising shall comply with the advertising requirements 27 specified in the federal Truth in Lending Act. 28 2. a. A licensee shall not provide a small dollar 29 installment loan with an annual percentage rate greater than 30 that provided in 10 U.S.C. §987(b), to any of the following: 31 (1) A member of the United States armed forces who is on 32 active duty under a call or order that does not specify a 33 period of thirty days or less. 34 (2) A person on active national guard duty or armed forces 35 -13- LSB 2667HV (4) 87 gh/rn 13/ 21

H.F. 2485 military reserve active duty. 1 (3) A dependent as defined in 10 U.S.C. §987(i). 2 b. A licensee shall not provide a small dollar installment 3 loan to a consumer unless the consumer has signed a statement, 4 to be included as part of the loan, attesting to whether or not 5 the consumer is a military member or a dependent as defined 6 in 10 U.S.C. §987(i). The statement shall be in the form as 7 prescribed by the superintendent by rule. 8 c. An unsecured consumer loan made in violation of 10 U.S.C. 9 §987 is void and its terms and conditions unenforceable. 10 Sec. 18. NEW SECTION . 536B.18 Rules. 11 The superintendent may adopt rules to administer this 12 chapter. 13 Sec. 19. NEW SECTION . 536B.19 Noncompliance. 14 1. A small dollar installment loan that is provided by 15 a person who is required to be licensed under this chapter 16 but who is not licensed is void and its terms and conditions 17 unenforceable. 18 2. Except as provided in subsection 1 and section 536B.17, 19 subsection 2, failure to comply with this chapter shall 20 not affect the validity or enforceability of a small dollar 21 installment loan. 22 Sec. 20. NEW SECTION . 536B.20 Disclosures. 23 1. To the extent applicable, a licensee shall comply with 24 the disclosure requirements as set forth in the federal Truth 25 in Lending Act. 26 2. A licensee shall conspicuously display a sign printed 27 in at least twelve-point bold font type at each desk in the 28 licensed office and licensed branch office where small dollar 29 installment loan transactions are conducted with the following 30 disclosure: 31 Notice: Before signing any loan documents or otherwise 32 committing to a loan, you may take copies of those documents 33 away from the small dollar installment loan business’s place 34 of business for review. 35 -14- LSB 2667HV (4) 87 gh/rn 14/ 21

H.F. 2485 3. A licensee providing electronic small dollar installment 1 loans shall conspicuously display the following disclosure on 2 the licensee’s internet site: 3 Notice: Before signing any loan documents or otherwise 4 committing to a loan, please read our terms and conditions 5 carefully. 6 4. A licensee who fails to provide disclosures as required 7 under this section shall be subject to a civil penalty not to 8 exceed three hundred dollars for each violation. 9 Sec. 21. NEW SECTION . 536B.21 Finance charge. 10 1. A licensee may charge a finance charge on a small dollar 11 installment loan at a rate not to exceed twenty percent of the 12 first five hundred dollars loaned, plus seven and one-half 13 percent of any amount in excess of five hundred dollars loaned. 14 The finance charge shall be deemed fully earned as of the date 15 of the small dollar installment loan transaction and shall not 16 be refundable or prorated in the event of prepayment. 17 2. This section does not authorize the compounding of a 18 finance charge. 19 Sec. 22. NEW SECTION . 536B.22 Other fees and charges. 20 1. In addition to a finance charge authorized under section 21 536B.21, a licensee may collect any of the following fees or 22 charges: 23 a. A monthly maintenance fee on each small dollar 24 installment loan at a rate not to exceed eleven dollars and 25 twenty-five cents per one hundred dollars loaned. Such fee 26 shall be refundable to the consumer on a pro rata basis upon 27 prepayment in full prior to the maturity date of the loan. 28 b. A delinquency charge if an installment is not paid in 29 full within seven days, equal to five percent of the amount of 30 the installment. 31 c. Court costs and reasonable attorney fees if the small 32 dollar installment loan is referred for collection to an 33 attorney other than an employee of the licensee. 34 d. A dishonored check service fee if a licensee receives 35 -15- LSB 2667HV (4) 87 gh/rn 15/ 21

H.F. 2485 a check, draft, negotiable order of withdrawal, or similar 1 instrument that is not paid or is not honored by a depository 2 institution, equal to the actual charges assessed by the 3 depository institution. 4 2. A licensee shall not directly or indirectly charge, 5 contract for, or receive any other amount in connection with 6 a small dollar installment loan except as provided in this 7 chapter. 8 EXPLANATION 9 The inclusion of this explanation does not constitute agreement with 10 the explanation’s substance by the members of the general assembly. 11 This bill creates new Code chapter 536B to require licensure 12 of persons who wish to provide small dollar installment loans 13 to residents of the state. 14 The bill defines “small dollar installment loan” to mean 15 a loan that is incurred for a personal, family, or household 16 purpose, is not less than $500 and not more than $1,000, is 17 unsecured, is held for a specified period, is payable in 18 biweekly, semimonthly, or monthly payment installments, is 19 subject to prepayment in whole or in part at any time without 20 penalty, and is for a term length of a minimum of six months and 21 a maximum of 12 months. 22 The bill exempts the following persons from the requirements 23 of the bill: a person who does business under any law relating 24 to banks, savings banks, trusts, savings and loan associations, 25 profit sharing and pension trusts, credit unions, insurance 26 companies, or receiverships, a person who is not regularly 27 engaged in the business of making small dollar installment 28 loans, as defined in the bill, a person who is licensed 29 pursuant to another Iowa Code chapter to the extent that 30 the person’s activities are governed by that Code chapter, 31 or a consumer loan with a finance charge as permitted under 32 specified law. 33 The bill prohibits a person from operating a small dollar 34 installment loan business in the state unless the person is 35 -16- LSB 2667HV (4) 87 gh/rn 16/ 21

H.F. 2485 physically located in the state and is licensed pursuant to 1 the bill. The bill requires an application for a license 2 to include an application fee of $100 and a surety bond, as 3 described in the bill. The superintendent of banking shall 4 issue a license pursuant to the bill if the superintendent 5 finds all of the following: the experience, character, and 6 general fitness of the applicant is such as to warrant a 7 finding that the applicant will conduct the small dollar 8 installment loan business honestly, fairly, and efficiently; 9 the applicant has not been convicted of a felony; the 10 applicant is financially responsible; and the applicant has 11 unencumbered assets of at least $25,000 available for operating 12 the business. The superintendent shall approve or deny an 13 application for a license by written order within 90 days of 14 filing. 15 The bill requires a license issued pursuant to the bill to be 16 conspicuously posted at the licensee’s place of business. A 17 license is valid until the next succeeding January 1, unless 18 earlier suspended or revoked. The bill provides that a license 19 shall be renewed annually by filing a renewal application with 20 the superintendent on or before December 1. The superintendent 21 may assess a late fee of $10 per day for a late renewal 22 application. The bill allows the superintendent to license 23 applicants through a nationwide licensing system and to use 24 such system as a channeling agent with the federal government. 25 The bill provides that a licensee may surrender a license by 26 delivering written notice to the superintendent. The surrender 27 shall not affect the licensee’s criminal or civil liability 28 for acts committed prior to the surrender, the liability of 29 the surety bond, or payment of the annual license fee. The 30 superintendent may establish procedures for the disposition of 31 the surrendered licensee’s books, accounts, and records and may 32 require any action necessary for the protection of outstanding 33 makers of checks. 34 The bill requires a licensee to notify the superintendent 35 -17- LSB 2667HV (4) 87 gh/rn 17/ 21

H.F. 2485 in writing within 30 days upon any of the following: filing 1 for bankruptcy or reorganization; reorganization of the 2 business; commencement of license revocation or any other civil 3 or criminal proceedings by any other state or jurisdiction; 4 the filing of a criminal indictment or complaint against the 5 licensee or any other specified persons; or a felony conviction 6 against the licensee or any other specified persons. 7 The bill requires prior written approval of the 8 superintendent for the continued operation of a small dollar 9 installment loan business whenever a change in control 10 of a licensee is proposed, as described in the bill. The 11 person requesting such approval shall pay a $100 fee to 12 the superintendent, as well as any costs incurred by the 13 superintendent in investigating a change in control request. 14 A license issued pursuant to the bill is not transferable or 15 assignable. 16 The bill provides that a licensee may operate a small dollar 17 installment loan business only at its designated principal 18 place of business, where the licensee shall maintain its books, 19 accounts, and records. A licensee may change the location of 20 its principal place of business with the prior written approval 21 of the superintendent. A licensee may establish branch offices 22 in the same county in which the principal place of business is 23 located, with the prior written approval of the superintendent. 24 A licensee shall notify the superintendent 30 days in advance 25 of a change in the name of the licensee. A licensee shall 26 pay a $25 fee to the superintendent for a request to change 27 the location of a principal place of business, to establish a 28 branch office, or to provide notice of a name change. 29 The bill permits a licensee to operate a small dollar 30 installment loan business at a location where any other 31 business is operated with the written approval of the 32 superintendent, so long as the licensee’s books, accounts, and 33 records are kept separate and apart from the other business, 34 and the other business is not of a type which would tend 35 -18- LSB 2667HV (4) 87 gh/rn 18/ 21

H.F. 2485 to enable the concealment of acts engaged in to evade the 1 requirements of the bill. 2 The bill requires the superintendent to examine the books, 3 accounts, and records of each licensee at least once a year 4 and as needed to secure information required by the bill and 5 to determine whether any violations of the bill have occurred. 6 The licensee shall pay the cost of the examination. The 7 superintendent may also examine or investigate complaints or 8 reports concerning alleged violations of the bill, and may 9 order the actual cost of the examination or investigation as 10 specified in the bill be paid by the person subject to such 11 examination or investigation. Failure to pay the examination 12 or investigation fee within 30 days of receipt of demand shall 13 subject the licensee to a late fee of up to 5 percent of the 14 amount of the fee for each day the payment is delinquent. 15 The superintendent may disclose information to other state 16 or federal regulatory authorities and may receive documents, 17 materials, or other information through a nationwide licensing 18 system and from other regulatory agencies, as provided in the 19 bill. 20 The bill permits the superintendent to take disciplinary 21 action against a licensee, after notice and hearing, if the 22 superintendent finds any of the following: the licensee or any 23 other specified person has violated any provision of the bill, 24 any rule adopted by the superintendent, or any other applicable 25 state or federal law; the licensee has failed to pay a license 26 fee or to maintain in effect the required surety bond; a fact 27 or condition existing which would have resulted in the initial 28 denial of issuance of a license; the licensee has abandoned its 29 place of business for 60 days or more; or the licensee fails 30 to pay an administrative penalty or the cost of investigation 31 as ordered. The superintendent may impose one or more of the 32 following disciplinary actions against a licensee: revoke a 33 license; suspend a license; impose a period of probation under 34 specified conditions; impose civil or administrative penalties 35 -19- LSB 2667HV (4) 87 gh/rn 19/ 21