House Study Bill 189 - Introduced HOUSE FILE _____ BY (PROPOSED COMMITTEE ON WAYS AND MEANS BILL BY CHAIRPERSON VANDER LINDEN) A BILL FOR An Act requiring the licensure of flexible credit lenders, and 1 providing criminal and civil penalties. 2 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 3 TLSB 2667YC (3) 87 gh/rj

H.F. _____ Section 1. NEW SECTION . 536B.1 Title. 1 This chapter shall be known and may be cited as the “Iowa 2 Flexible 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 flexible credit loan to the amount 9 and timing of payments made, as computed under the federal 10 Truth in Lending Act. 11 2. “Consumer” means an individual who obtains a flexible 12 credit 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 flexible 17 credit loan but excluding other fees allowed under section 18 536B.21. 19 5. “Flexible credit lender” means a person who enters 20 into three or more flexible credit loans in this state or 21 advertises, solicits, or holds itself out as offering to enter 22 into flexible credit loans in this state. 23 6. “Flexible credit loan” is a loan in which all of the 24 following are applicable: 25 a. The debt is incurred for a personal, family, or household 26 purpose. 27 b. The debt is not more than two thousand five hundred 28 dollars. 29 c. The debt is unsecured. 30 d. The debt is payable in substantially equal installment 31 payments of principal and interest for the term of the loan. 32 e. The debt is subject to prepayment in whole or in part at 33 any time without penalty. 34 f. The term length of the loan is for a maximum of 35 -1- LSB 2667YC (3) 87 gh/rj 1/ 20

H.F. _____ twenty-four months. 1 7. “Licensee” means a person licensed pursuant to this 2 chapter. 3 8. “Regularly engaged in the business” means all of the 4 following: 5 a. Advertising to or making any other solicitation to a 6 resident of this state to offer a flexible credit loan within 7 this state. 8 b. Making three or more flexible credit loans within a 9 calendar year to residents of this state. 10 9. “Superintendent” means the superintendent of banking 11 within the banking division of the department of commerce. 12 Sec. 3. NEW SECTION . 536B.3 Exemptions. 13 This chapter shall not apply to any of the following: 14 1. A person who does business under the authority of a 15 law of this state, or any other state while regulated by a 16 state agency of that other state, or of the United States, 17 relating to banks, savings banks, trust companies, savings and 18 loan associations, profit sharing and pension trusts, credit 19 unions, insurance companies, or receiverships if the person 20 is regulated by the other law or under the jurisdiction of a 21 court. 22 2. A person who is not regularly engaged in the business of 23 making a flexible credit loan. 24 3. A person who is licensed pursuant to another law of this 25 state to the extent that the person’s activities are governed 26 by that law. 27 4. A consumer loan in which the rate of the finance charge, 28 calculated pursuant to the actuarial method, does not exceed 29 the rate of a finance charge permitted under chapter 535. 30 Sec. 4. NEW SECTION . 536B.4 License required —— application 31 —— fees. 32 1. Unless exempt under section 536B.3, a person shall not 33 engage in the business of making a flexible credit loan to a 34 resident of this state without first having obtained a license 35 -2- LSB 2667YC (3) 87 gh/rj 2/ 20

H.F. _____ as a flexible credit lender from the superintendent. 1 2. An applicant for a license shall submit an application 2 in writing, under oath, and in the form as prescribed by the 3 superintendent. The application shall require any information 4 that the superintendent determines is necessary. 5 3. At the time of making the application, the applicant 6 shall pay to the superintendent an application fee of one 7 hundred dollars and an initial license fee of two hundred fifty 8 dollars. 9 Sec. 5. NEW SECTION . 536B.5 Grounds for denial of license. 10 The superintendent may deny a license for any of the 11 following: 12 1. The person is insolvent. 13 2. The person has failed to demonstrate the financial 14 responsibility, experience, character, and general fitness to 15 command the confidence of the community and to warrant the 16 belief that the business of the proposed flexible credit lender 17 will be operated lawfully, honestly, fairly, and efficiently, 18 pursuant to this chapter and any other applicable law. 19 3. The person has failed to pay the fees required under 20 section 536B.4, subsection 3. 21 4. The person has failed to demonstrate that the person 22 maintains at least twenty-five thousand dollars in assets 23 readily available for use in the conduct of the business for 24 the licensed office and each licensed branch office or two 25 hundred thousand dollars for all office locations. 26 5. The person or, if the person is an entity, an officer, 27 director, shareholder, partner, or member of the entity, has 28 been convicted of a felony in this or any other state. 29 Sec. 6. NEW SECTION . 536B.6 Issuance of license —— form —— 30 posting. 31 1. The superintendent shall issue a license to an applicant 32 within thirty days after receiving a complete application 33 unless the superintendent finds grounds for denying the 34 license. 35 -3- LSB 2667YC (3) 87 gh/rj 3/ 20

H.F. _____ 2. A license issued under this chapter shall be valid for a 1 term of one year, beginning on January 1 and ending on December 2 31. 3 3. A license issued under this chapter shall remain in full 4 force until surrendered, revoked, or suspended. 5 4. A license issued under this chapter shall not be 6 transferable or assignable. 7 5. A license issued under this chapter shall remain the 8 property of this state. Upon the voluntary surrender of the 9 license by the licensee or the revocation of the license by 10 the superintendent, the licensee shall immediately deliver the 11 license to the superintendent. Surrender or revocation of the 12 license shall not affect any other liability of the licensee. 13 6. A license issued under this chapter shall be kept 14 conspicuously posted at the office of the licensee and any 15 licensed branch office where flexible credit loan transactions 16 are conducted. 17 Sec. 7. NEW SECTION . 536B.7 Surety bond. 18 1. If, at the time of an initial application or renewal of 19 a license, a valid bond is not on file with the department, 20 the applicant or licensee shall file with the superintendent 21 a surety bond issued by a licensed surety in an amount 22 satisfactory to the superintendent, provided, however, that 23 such amount is not less than twenty-five thousand dollars for 24 each office or two hundred thousand dollars for all office 25 locations. Such bond shall have the state of Iowa named as the 26 obligee in a form approved by the superintendent. 27 2. A bond filed pursuant to this subsection shall require 28 an applicant or licensee to pay any civil penalties and 29 examination fees. A bond shall also cover any claims for 30 damages brought by a consumer residing in Iowa as a result of 31 the licensee’s violation of this chapter. The superintendent 32 may also make a claim on the bond for damages brought by 33 a consumer residing in Iowa as a result of the licensee’s 34 violation of this chapter. A claim on the bond for damages 35 -4- LSB 2667YC (3) 87 gh/rj 4/ 20

H.F. _____ shall not be made more than two years after the cancellation 1 of the bond or license. 2 3. A bond filed pursuant to this subsection shall be 3 continuous and may be canceled by the surety upon the 4 surety giving no less than thirty days written notice to the 5 superintendent. A cancellation or revocation of the bond or 6 withdrawal of the surety from the bond shall automatically 7 suspend the license issued to the licensee until a new bond 8 or reinstatement notice is filed and approved pursuant to 9 this subsection. The surety shall only be liable for damages 10 incurred or unpaid fees while the bond is in force. 11 Sec. 8. NEW SECTION . 536B.8 License location. 12 1. A licensee shall designate the principal place of 13 business where the licensee shall conduct flexible credit loan 14 transactions pursuant to this chapter, which shall be indicated 15 on the license as the licensed office location. 16 2. a. A licensee may obtain a branch office license from 17 the superintendent for each branch office if the licensee wants 18 to maintain more than one license location. 19 b. A licensee may obtain a branch office license by 20 submitting an application in the form as prescribed by the 21 superintendent and paying a fee of two hundred fifty dollars 22 for each branch office license. 23 c. The superintendent shall issue a branch office 24 license indicating the address of the branch office if the 25 superintendent determines that the applicant is qualified for 26 the license. 27 3. A licensee shall not conduct flexible credit loan 28 transactions under any name or at any place of business other 29 than the name and location indicated on the license. However, 30 a licensee may do any of the following: 31 a. Provide a flexible credit loan by mail or electronic 32 means. 33 b. Make an accommodation to a consumer at any location upon 34 a request by the consumer. 35 -5- LSB 2667YC (3) 87 gh/rj 5/ 20

H.F. _____ c. Conduct an administrative, loan servicing, or 1 recordkeeping activity at any other location not open to the 2 public provided that the superintendent is notified in advance 3 of that activity. 4 4. A licensee may change the licensed office location or 5 licensed branch office location by providing the superintendent 6 with written notice within ten days of making the change, and 7 the superintendent shall amend the license accordingly. 8 5. a. A licensee may conduct flexible credit loan 9 transactions from within any licensed office location or 10 licensed branch office location in which any other business not 11 licensed pursuant to this Title XIII of the Code is solicited 12 or engaged in, or in conjunction with any other business not 13 licensed pursuant to this Title XIII. 14 b. If the superintendent determines that the other business 15 is of such a nature or is being conducted in such a manner 16 as to conceal an evasion or violation of this chapter or any 17 rules adopted pursuant to this chapter, or is otherwise being 18 conducted in an unlawful manner, the superintendent may order 19 the licensee to cease the operation of the flexible credit 20 lending business at the location. 21 Sec. 9. NEW SECTION . 536B.9 Renewal of license. 22 1. A license issued pursuant to this chapter shall be 23 renewed annually by filing an application for renewal with the 24 superintendent on or before December 1 containing information 25 as required by the superintendent to indicate any material 26 changes to an original application or subsequent renewal 27 application and paying a renewal fee of two hundred fifty 28 dollars. 29 2. The superintendent may assess a late fee of ten dollars 30 per day for applications submitted and accepted for processing 31 after December 1. 32 3. The license of a licensee who has not filed a renewal 33 application or paid the renewal fee by December 31 shall 34 expire and the licensee shall not act as a flexible credit 35 -6- LSB 2667YC (3) 87 gh/rj 6/ 20

H.F. _____ lender until the license is renewed or a new license is issued 1 pursuant to this chapter. 2 Sec. 10. NEW SECTION . 536B.10 Disciplinary action. 3 1. The superintendent, after notice and hearing pursuant 4 to the provisions of chapter 17A, may take disciplinary action 5 against a licensee if the superintendent determines any of the 6 following: 7 a. The licensee has violated this chapter, a rule adopted 8 pursuant to this chapter, or any other state or federal law, 9 rule, or regulation applicable to the conduct of the business. 10 b. A fact or condition exists that would have warranted the 11 superintendent to deny the original license. 12 c. The licensee has failed to pay the annual license fee 13 or has failed to demonstrate that the licensee maintains at 14 least twenty-five thousand dollars in assets readily available 15 for use in the conduct of the business for the licensed 16 office location and each licensed branch office or two hundred 17 thousand dollars for all office locations. 18 d. The licensee has failed to file an annual report as 19 required by this chapter when the report was due or within 20 any extension of time provided by the superintendent for good 21 cause. 22 e. The licensee is insolvent. 23 f. The licensee has violated an order of the superintendent. 24 2. The superintendent may take one or more of the following 25 disciplinary actions against a licensee: 26 a. Revoke a license. 27 b. Suspend a license until further order of the 28 superintendent or for a specified period of time. 29 c. Impose a period of probation under specified conditions. 30 d. Impose civil penalties in an amount not to exceed five 31 thousand dollars for each violation. 32 e. Issue a citation and warning respecting licensee 33 behavior. 34 f. Order the licensee to pay restitution. 35 -7- LSB 2667YC (3) 87 gh/rj 7/ 20

H.F. _____ 3. The superintendent may order the emergency suspension of 1 a licensee’s license pursuant to section 17A.18A. A written 2 order containing the facts or conduct warranting the emergency 3 action shall be timely sent to the licensee by restricted 4 certified mail. Upon issuance of the emergency suspension 5 order, the licensee shall be notified of the right to an 6 evidentiary hearing. A suspension proceeding shall be promptly 7 scheduled if so requested by the licensee. 8 4. Except as provided in this section, a license shall 9 not be revoked or suspended except after notice and a hearing 10 thereon in accordance with chapter 17A. 11 5. The revocation, suspension, or surrender of a license 12 shall not impair or affect the obligation of a preexisting 13 lawful contract between the licensee and any person, including 14 a borrower. 15 Sec. 11. NEW SECTION . 536B.11 Cease and desist order. 16 1. If the superintendent believes that a person has engaged 17 in or is about to engage in an act or practice constituting 18 a violation of this chapter or any rule adopted pursuant to 19 this chapter or an order issued by the superintendent, the 20 superintendent may issue and serve a cease and desist order 21 on the person. Upon entry of a cease and desist order, the 22 superintendent shall promptly provide written notice to the 23 person to whom the order is directed that the order has been 24 entered and the reasons for entering the order. 25 2. a. A person to whom a cease and desist order is directed 26 may request a hearing in writing within fifteen business days 27 after the date the order was issued. Upon receipt of such 28 written request, the matter shall be set for a hearing within 29 fifteen business days of the receipt of the written request by 30 the superintendent, unless the person requesting the hearing 31 consents to a later date. 32 b. If a hearing is requested pursuant to this subsection 33 or is otherwise required by the superintendent, the 34 superintendent, after notice and hearing, shall issue written 35 -8- LSB 2667YC (3) 87 gh/rj 8/ 20

H.F. _____ findings of fact and conclusions of law and shall affirm, 1 vacate, or modify the order. If a hearing is not requested 2 pursuant to this subsection and the superintendent has not 3 otherwise required a hearing, the order of the superintendent 4 shall be final and remain in effect until it is modified or 5 vacated by the superintendent. 6 3. The superintendent may vacate or modify an order entered 7 pursuant to this section if the superintendent finds that 8 a condition that caused its entry has changed or it would 9 otherwise be in the public interest to vacate or modify the 10 order. 11 4. A person aggrieved by a final order of the superintendent 12 may seek judicial review of the order pursuant to section 13 17A.19. 14 Sec. 12. NEW SECTION . 536B.12 Records —— examination by 15 superintendent —— fees. 16 1. A licensee shall keep such books, accounts, and records 17 as the superintendent may require in order to determine whether 18 the licensee is complying with the provisions of this chapter 19 and with the rules adopted by the superintendent under this 20 chapter. 21 2. A licensee shall preserve for at least two years after 22 making the last entry on any flexible credit loan all books, 23 accounts, and records pertaining to the loan. A licensee who 24 uses an electronic recordkeeping system shall not be required 25 to keep a written copy of the books, accounts, and records 26 if the licensee is able to generate all of the information 27 required under this section in a timely manner for examination 28 or other purposes. 29 3. A licensee shall make any books, accounts, and records 30 kept outside of this state available to the superintendent 31 within three business days upon request by the superintendent. 32 The superintendent may examine such books, accounts, and 33 records at the office of the licensee located outside of this 34 state. 35 -9- LSB 2667YC (3) 87 gh/rj 9/ 20

H.F. _____ 4. A licensee shall provide to the superintendent or the 1 superintendent’s duly authorized representative access, during 2 normal business hours, to the licensee’s offices, files, safes, 3 and vaults regarding the flexible credit lending business or 4 regarding the subject matter of any examination, investigation, 5 or hearing regarding the licensee. 6 5. a. The superintendent shall examine the books, accounts, 7 and records of each licensee at least once per year and as 8 needed to secure information required pursuant to this chapter 9 and to determine if a violation of this chapter has occurred. 10 b. The superintendent may examine or investigate a complaint 11 or report concerning an alleged violation of this chapter, a 12 rule adopted pursuant to this chapter, or an order issued by 13 the superintendent. 14 6. a. A licensee or person subject to an examination or 15 investigation pursuant to subsection 5 shall pay the cost of 16 the examination or investigation. The superintendent may 17 order the cost of an examination or investigation provided 18 under subsection 5 to be paid by the person subject to such 19 examination or investigation, regardless of whether the person 20 is licensed under this chapter. 21 b. The superintendent shall determine the cost of an 22 examination or investigation based upon the actual cost of the 23 operation of the finance bureau of the banking division of 24 the department of commerce, including the proportionate share 25 of administrative expenses in the operation of the banking 26 division attributable to the finance bureau as determined by 27 the superintendent, incurred in the discharge of duties imposed 28 upon the superintendent by this chapter. 29 c. Failure to pay the cost of an examination or 30 investigation pursuant to this subsection within thirty days 31 of receipt of demand from the superintendent shall subject the 32 licensee or person subject to the examination or investigation 33 to a late fee of up to five percent of the amount of the cost 34 of the examination or investigation for each day the payment 35 -10- LSB 2667YC (3) 87 gh/rj 10/ 20

H.F. _____ is delinquent. 1 Sec. 13. NEW SECTION . 536B.13 Annual report by licensee. 2 1. A licensee shall annually on or before April 1 file a 3 report with the superintendent giving such relevant information 4 as the superintendent reasonably may require concerning 5 the business and operations during the twelve-month period 6 ending the preceding December 31. Upon good cause shown by a 7 licensee, the superintendent may extend the time for filing the 8 report for a period not to exceed sixty days. 9 2. The annual report shall include a licensee’s average 10 annual percentage rate and average loan amount during the 11 twelve-month period ending the preceding December 31. 12 3. a. If a licensee fails to file an annual report under 13 this section on or before April 1 or within any extension 14 of time provided by the superintendent for good cause, the 15 superintendent or any person designated by the superintendent 16 may examine the books, accounts, and records of the licensee, 17 prepare the annual report, and charge the licensee an 18 examination fee as established by rule. The fee shall be based 19 on the actual cost of the examination or investigation. 20 b. If a licensee fails to file an annual report within the 21 specified time and has not received an extension, the licensee 22 shall be subject to a civil penalty not to exceed five dollars 23 per day until the licensee has filed the annual report. The 24 licensee shall pay the penalty to the superintendent within 25 thirty days after the penalty is levied. 26 Sec. 14. NEW SECTION . 536B.14 Surrender of license. 27 A licensee may surrender a flexible credit loan license 28 by delivering to the superintendent written notice that the 29 license is surrendered. The surrender does not affect the 30 licensee’s civil or criminal liability for acts committed 31 prior to such surrender or entitle such licensee to a return 32 of any part of the annual license fee. The superintendent 33 may establish procedures for the disposition of the books, 34 accounts, and records of the licensee and may require such 35 -11- LSB 2667YC (3) 87 gh/rj 11/ 20

H.F. _____ action as deemed necessary for the protection of consumers that 1 have flexible credit loans that are outstanding at the time of 2 surrender of the license. 3 Sec. 15. NEW SECTION . 536B.15 Impairment of preexisting 4 loan. 5 1. The revocation, suspension, surrender, expiration, or 6 alteration of a license provided under this chapter shall not 7 impair or affect any of the following: 8 a. The obligation of a preexisting flexible credit loan 9 between a flexible credit lender and a consumer. 10 b. The ability or right of a flexible credit lender to 11 service a preexisting flexible credit loan from outside this 12 state. 13 2. If this chapter or any part of this chapter is modified, 14 amended, or repealed, resulting in a cancellation or alteration 15 of any flexible credit lender license or right of a licensee 16 under this chapter, that cancellation or alteration shall not 17 impair or affect the obligation of any preexisting contract 18 between a flexible credit lender and any consumer. 19 Sec. 16. NEW SECTION . 536B.16 Prohibited acts by licensee. 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 flexible credit loan. To the extent applicable, all 26 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 flexible credit loan 29 with an annual percentage rate greater than that provided in 10 30 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 -12- LSB 2667YC (3) 87 gh/rj 12/ 20

H.F. _____ 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 flexible credit loan 3 to a consumer unless the consumer has signed a statement, to 4 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. A flexible credit loan made in violation of 10 U.S.C. 9 §987 is void and its terms and conditions unenforceable. 10 Sec. 17. NEW SECTION . 536B.17 Rules. 11 The superintendent may adopt rules to administer this 12 chapter. 13 Sec. 18. NEW SECTION . 536B.18 Operation of business without 14 license —— criminal penalty —— injunction. 15 A person who has engaged in the business of making a flexible 16 credit loan to a resident in this state without first having 17 obtained a license pursuant to this chapter or while such 18 license is suspended or revoked by the superintendent is guilty 19 of a serious misdemeanor. In addition to the criminal penalty 20 provided in this section, the superintendent may also commence 21 an action to enjoin the operation of a business conducted in 22 violation of this chapter. 23 Sec. 19. NEW SECTION . 536B.19 Disclosures. 24 1. To the extent applicable, a licensee shall comply with 25 the disclosure requirements as set forth in the federal Truth 26 in Lending Act. 27 2. A licensee shall conspicuously display a sign printed 28 in at least twelve-point bold font type at each desk in the 29 licensed office and licensed branch office where flexible 30 credit loan transactions are conducted with the following 31 disclosure: 32 Notice: Before signing any loan documents or otherwise 33 committing to a loan, you may take copies of those documents 34 away from the flexible credit lender’s place of business for 35 -13- LSB 2667YC (3) 87 gh/rj 13/ 20

H.F. _____ review. 1 3. A licensee providing electronic flexible credit loans 2 shall conspicuously display the following disclosure on the 3 licensee’s internet site: 4 Notice: Before signing any loan documents or otherwise 5 committing to a loan, please read our terms and conditions 6 carefully. 7 4. A licensee who fails to provide disclosures as required 8 under this section shall be subject to a civil penalty not to 9 exceed three hundred dollars for each violation. 10 Sec. 20. NEW SECTION . 536B.20 Maximum interest rate or 11 finance charge. 12 1. A licensee may charge a rate of interest or a finance 13 charge on a flexible credit loan at a rate not to exceed 14 seventeen percent per month. 15 2. This section does not authorize the compounding of a 16 finance charge. 17 Sec. 21. NEW SECTION . 536B.21 Other fees and charges. 18 1. In addition to a rate of interest or a finance charge 19 authorized under section 536B.20, a licensee may collect any of 20 the following fees or charges: 21 a. A delinquency charge if an installment is not paid in 22 full within seven days, equal to five percent of the amount of 23 the installment. 24 b. Court costs and reasonable attorney fees if the flexible 25 credit loan is referred for collection to an attorney other 26 than an employee of the licensee. 27 c. A dishonored check service fee if a licensee receives 28 a check, draft, negotiable order of withdrawal, or similar 29 instrument that is not paid or is not honored by a depository 30 institution, equal to the actual charges assessed by the 31 depository institution. 32 2. A licensee shall not directly or indirectly charge, 33 contract for, or receive any other amount in connection with a 34 flexible credit loan except as provided in this chapter. 35 -14- LSB 2667YC (3) 87 gh/rj 14/ 20

H.F. _____ EXPLANATION 1 The inclusion of this explanation does not constitute agreement with 2 the explanation’s substance by the members of the general assembly. 3 This bill creates new Code chapter 536B to require licensure 4 of persons who wish to provide flexible credit loans to 5 residents of the state. 6 The bill defines “flexible credit loan” to mean a loan that 7 is incurred for a personal, family, or household purpose, is 8 not more than $2,500, is unsecured, is payable in substantially 9 equal installment payments of principal and interest for the 10 term of the loan, is subject to prepayment in whole or in part 11 at any time without penalty, and is for a term length of a 12 maximum of 24 months. 13 The bill exempts the following persons from the requirements 14 of the bill: a person who does business under any law relating 15 to banks, savings banks, trusts, savings and loan associations, 16 profit sharing and pension trusts, credit unions, insurance 17 companies, or receiverships, a person who is not regularly 18 engaged in the business of making flexible credit loans, as 19 defined in the bill, a person who is licensed pursuant to 20 another Iowa Code chapter to the extent that the person’s 21 activities are governed by that Code chapter, or a consumer 22 loan with a finance charge as permitted under Code chapter 535. 23 The bill prohibits a person from engaging in the business 24 of making flexible credit loans to a resident in this state 25 without first obtaining a license from the superintendent 26 of the banking division in the department of commerce. An 27 applicant for a license must submit an application in the form 28 prescribed by the superintendent and pay an application fee of 29 $100 and an initial license fee of $250. 30 The bill allows the superintendent to deny a license if 31 the applicant is insolvent, has failed to demonstrate the 32 financial responsibility, experience, character, and general 33 fitness required, as determined by rule, has failed to pay the 34 application and initial license fees, has failed to demonstrate 35 -15- LSB 2667YC (3) 87 gh/rj 15/ 20

H.F. _____ the availability of at least $25,000 in assets for use in 1 the conduct of the business for the licensed office and each 2 licensed branch office or $200,000 for all office locations, or 3 if an officer, director, shareholder, partner, or member has 4 been convicted of a felony, if the applicant is an entity. 5 The bill requires the superintendent to issue a license 6 within 30 days of receiving an application unless grounds exist 7 for denying it. A license is valid for one year, from January 8 1 to December 31, remains in full force until surrendered, 9 revoked, or suspended, and is not transferable. A license 10 remains the property of the state and must be immediately 11 returned to the superintendent if a licensee voluntarily 12 surrenders it. A license must be posted conspicuously in the 13 office of the licensee and any licensed branch offices. 14 The bill requires an applicant or licensee to file a surety 15 bond with the superintendent in an amount that is not less than 16 $25,000 for each office or $200,000 for all office locations. 17 The bond requires the applicant or licensee to pay any civil 18 penalty and examination fee and shall cover any claims for 19 damages brought by an Iowa consumer as a result of a violation 20 of the bill. The superintendent may also make a claim on the 21 bond for damages resulting from a violation of the bill. A 22 claim for damages on the bond must be made within two years 23 of the cancellation of the bond or license. The bond is 24 continuous and may be canceled by the surety with no less than 25 30 days written notice to the superintendent. A cancellation 26 or revocation of the bond automatically suspends the licensee’s 27 license. The surety is only liable for damages incurred or 28 unpaid fees while the bond is in force. 29 The bill requires a licensee to designate the principal 30 place of business to be indicated on the license. A licensee 31 wishing to maintain more than one place of business may 32 obtain a branch office license by submitting an application 33 as prescribed by the superintendent and paying a $250 fee. 34 A licensee is prohibited from conducting flexible credit 35 -16- LSB 2667YC (3) 87 gh/rj 16/ 20

H.F. _____ loan transactions under any name or location different than 1 what is indicated on the license, provided, however, that 2 a licensee may provide loans by mail or electronic means, 3 make an accommodation to a consumer at any location upon 4 the consumer’s request, or conduct an administrative, loan 5 servicing, or recordkeeping activity at any other location if 6 the superintendent is notified. A licensee can change the 7 license location by giving the superintendent written notice to 8 amend the license within 10 days of making the change. 9 The bill authorizes a licensee to conduct flexible credit 10 loan transactions from any licensed office location where 11 other business activities unrelated to flexible credit lending 12 occur. However, the superintendent may order the licensee to 13 cease the operation of the flexible credit lending business at 14 the location if the other business is being conducted in an 15 unlawful manner. 16 The bill allows a licensee to obtain a renewal license by 17 submitting an application with information required by the 18 superintendent no later than December 1 and paying a $250 fee. 19 A renewal application submitted after December 1 is subject to 20 a $10 late fee for each day it is late. A license of a licensee 21 who has not filed a renewal or paid the fee by December 31 22 expires. 23 The bill allows the superintendent to take disciplinary 24 action after notice and hearing for any of the following 25 reasons: the licensee violated the bill or any other 26 applicable law; a fact or condition exists which would have 27 warranted the superintendent to deny the original license; 28 the licensee failed to pay fees or demonstrate availability 29 of required assets; the licensee failed to file an annual 30 report; the licensee is insolvent; or the licensee violated 31 an order of the superintendent. The superintendent may take 32 any of the following disciplinary actions against a licensee: 33 revoke a license; suspend a license; impose a period of 34 probation; impose civil penalties in an amount not to exceed 35 -17- LSB 2667YC (3) 87 gh/rj 17/ 20

H.F. _____ $5,000 for each violation; issue a citation and warning; or 1 order restitution. The superintendent may order the emergency 2 suspension of a licensee’s license pursuant to the procedure 3 described in the bill. 4 The bill allows the superintendent to issue and serve a 5 cease and desist order on a person the superintendent believes 6 has engaged in or is about to engage in a violation of the 7 bill. Such person may request a hearing within 15 days after 8 the order is issued. If a hearing is so requested, the matter 9 must be set for a hearing within 15 days after receiving the 10 request. The superintendent may vacate or modify an order if 11 the superintendent finds changed conditions or if doing so 12 would be in the public interest. A person aggrieved by such an 13 order may seek judicial review pursuant to Code section 17A.19. 14 The bill requires a licensee to keep records for the 15 superintendent to determine whether the licensee is complying 16 with the bill for at least two years. A licensee must make 17 all records kept outside of the state available to the 18 superintendent within three business days upon request. A 19 licensee must provide the superintendent with access to 20 the licensee’s records during normal business hours. The 21 superintendent must examine the records of each licensee 22 at least once per year and may examine or investigate any 23 complaint of an alleged violation of the bill. A licensee 24 subjected to an investigation or examination of its records 25 by the superintendent must pay a fee determined by the actual 26 cost of the investigation or examination. A licensee who fails 27 to pay the fee within 30 days must pay a late fee of up to 5 28 percent of the amount of the fee for each day the payment is 29 delinquent. 30 The bill requires a licensee to provide the superintendent 31 with an annual report on or before April 1, which may be 32 extended for no more than 60 days upon showing good cause. The 33 report must include the licensee’s average annual percentage 34 rate, as defined in the bill, and average loan amount during 35 -18- LSB 2667YC (3) 87 gh/rj 18/ 20

H.F. _____ the 12-month period ending the preceding December 31. The 1 superintendent may examine the records of a licensee who has 2 failed to file an annual report, prepare the annual report, and 3 charge a fee based on the cost of the examination. A licensee 4 who has failed to file an annual report without an extension is 5 also subject to a civil penalty not to exceed $5 for each day 6 until the report is filed, which must be paid within 30 days of 7 being charged. 8 The bill provides that the revocation, suspension, 9 surrender, cancellation, or alteration of a license will not 10 impair or affect the validity of a preexisting flexible credit 11 loan or the ability of a lender to service a preexisting loan 12 outside of this state. 13 The bill prohibits a licensee from advertising in any false 14 or misleading manner with regards to the rates or terms of a 15 flexible credit loan and requires a licensee to comply with 16 the advertising requirements in the federal Truth in Lending 17 Act. A licensee cannot provide a flexible credit loan to a 18 military member or dependent, as defined in 10 U.S.C. §987(i), 19 with an annual percentage rate greater than that provided in 20 10 U.S.C. §987(b). Before a licensee may provide a flexible 21 credit loan, the consumer must sign a statement attesting to 22 whether or not the consumer is a military member or dependent. 23 A loan made in violation of 10 U.S.C. §987 is void and its terms 24 and conditions unenforceable. 25 The bill provides that a person who has engaged in the 26 business of making a flexible credit loan to an Iowa resident 27 without obtaining a license or while such license is suspended 28 or revoked is guilty of a serious misdemeanor. A serious 29 misdemeanor is punishable by confinement for no more than one 30 year and a fine of at least $315 but not more than $1,875. In 31 addition, the superintendent may commence an action to enjoin 32 the operation of a business conducted in violation of the bill. 33 The bill requires a licensee to comply with the disclosure 34 requirements in the federal Truth in Lending Act. A licensee 35 -19- LSB 2667YC (3) 87 gh/rj 19/ 20