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Senate Study Bill 1064 - IntroducedA Bill ForAn Act 1relating to the licensure of flexible credit lenders,
2and making civil penalties applicable.
3BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. NEW SECTION. 536B.1 Title.
2This chapter shall be known and may be cited as the “Iowa
3Flexible Loan Act”.
4 Sec. 2. NEW SECTION. 536B.2 Definitions.
5As used in this chapter, unless the context otherwise
6requires:
71. “Annual percentage rate” means the measure of the cost
8of credit, expressed as a yearly rate, that relates the amount
9extended to a consumer on a flexible credit loan to the amount
10and timing of payments made, as computed under the federal
11Truth in Lending Act.
122. “Consumer” means an individual who obtains a flexible
13credit loan.
143. “Federal Truth in Lending Act” means as defined in
15section 537.1302.
164. “Finance charge” means the amount payable by a consumer
17incident to or as a condition of the extension of a flexible
18credit loan but excluding other fees allowed under section
19536B.19.
205. “Flexible credit lender” means a person who advertises to
21make, solicit, or hold the person out to make a flexible credit
22loan to a consumer in this state.
236. “Flexible credit loan” is a loan in which all of the
24following are applicable:
25a. The debt is incurred for a personal, family, or household
26purpose.
27b. The debt is not less than five hundred dollars and not
28more than two thousand five hundred dollars.
29c. The debt is unsecured.
30d. The debt is payable in substantially equal installment
31payments of principal and interest for the term of the loan.
32e. The debt is subject to prepayment in whole or in part at
33any time without penalty.
34f. The term length of the loan is for a minimum of six
35months and a maximum of twenty-four months.
-1- 17. “Licensee” means a person licensed pursuant to this
2chapter.
38. “Regularly engaged in the business” means any of the
4following:
5a. Advertising to or making any other solicitation to a
6resident of this state to offer a flexible credit loan within
7this state.
8b. Making three or more flexible credit loans within a
9calendar year to residents of this state.
109. “Superintendent” means the superintendent of banking
11within the banking division of the department of commerce.
12 Sec. 3. NEW SECTION. 536B.3 Exemptions.
13This chapter shall not apply to any of the following:
141. A person who does business under the authority of a
15law of this state, or any other state while regulated by a
16state agency of that other state, or of the United States,
17relating to banks, savings banks, trust companies, savings and
18loan associations, profit sharing and pension trusts, credit
19unions, insurance companies, or receiverships if the person
20is regulated by the other law or under the jurisdiction of a
21court.
222. A person who is not regularly engaged in the business of
23making a flexible credit loan.
243. A person who is licensed pursuant to another law of this
25state to the extent that the person’s activities are governed
26by that law.
274. A consumer loan to the extent provided under chapters
28533D, 535C, 536, 536A, 536C, or 537.
29 Sec. 4. NEW SECTION. 536B.4 License — application — fees.
301. Unless exempt under section 536B.3, a person shall not
31engage in the business of making a flexible credit loan to a
32resident of this state without first having obtained a license
33as a flexible credit lender from the superintendent.
342. An applicant for a license shall submit an application
35in writing, under oath, and in the form as prescribed by the
-2-1superintendent. The application shall require any information
2that the superintendent determines is necessary.
33. At the time of making the application, the applicant
4shall pay to the superintendent a fee of one hundred dollars.
5 Sec. 5. NEW SECTION. 536B.5 Grounds for denial of license.
6The superintendent may deny a license for any of the
7following:
81. The person is insolvent.
92. The person has failed to demonstrate the financial
10responsibility, experience, character, and general fitness to
11command the confidence of the community and to warrant the
12belief that the business of the proposed flexible credit lender
13will be honestly and efficiently conducted.
143. The person has failed to pay the fee required under
15section 536B.4, subsection 3.
164. The person has failed to demonstrate that the person
17maintains at least twenty-five thousand dollars in assets for
18the licensed office and each licensed branch office that is
19readily available for use in the conduct of the business.
205. The person has, either knowingly or without the exercise
21of due care to prevent a violation, violated any provision of
22this Title XIII of the Code or any rule or order adopted or made
23pursuant to this Title XIII.
24 Sec. 6. NEW SECTION. 536B.6 Issuance of license — form —
25posting.
261. The superintendent shall issue a license to an applicant
27within thirty days after receiving a complete application
28unless the superintendent finds grounds for denying the
29license.
302. A license issued under this chapter shall be valid for a
31term of one year, beginning on January 1 and ending on December
3231.
333. A license issued under this chapter shall remain in full
34force until surrendered, revoked, or suspended.
354. A license issued under this chapter shall not be
-3-1transferable or assignable.
25. A license issued under this chapter shall remain the
3property of this state. Upon the voluntary surrender of the
4license by the licensee or the revocation of the license by
5the superintendent, the licensee shall immediately deliver the
6license to the superintendent. Surrender or revocation of the
7license shall not affect any other liability of the licensee.
86. A license issued under this chapter shall be kept
9conspicuously posted at the office of the licensee and any
10licensed branch office where flexible credit loan transactions
11are conducted.
12 Sec. 7. NEW SECTION. 536B.7 License location.
131. A licensee shall designate the principal place of
14business where the licensee shall conduct flexible credit loan
15transactions pursuant to this chapter, which shall be indicated
16on the license as the licensed office location.
172. a. A licensee may obtain a branch office license from
18the superintendent for each branch office if the licensee wants
19to maintain more than one license location.
20b. A licensee may obtain a branch office license by
21submitting an application in the form as prescribed by the
22superintendent and paying a fee of two hundred fifty dollars
23for each branch office license.
24c. The superintendent shall issue a branch office
25license indicating the address of the branch office if the
26superintendent determines that the applicant is qualified for
27the license.
283. A licensee shall not conduct flexible credit loan
29transactions under any name or at any place of business other
30than the name and location indicated on the license. However,
31a licensee may do any of the following:
32a. Provide a flexible credit loan by mail or electronic
33means.
34b. Make an accommodation to a consumer at any location upon
35a request by the consumer.
-4- 1c. Conduct an administrative, loan servicing, or
2recordkeeping activity at any other location not open to the
3public provided that the superintendent is notified in advance
4of that activity.
54. A licensee may change the licensed office location or
6licensed branch office location by providing the superintendent
7with written notice, and the superintendent shall amend the
8license accordingly.
95. a. A licensee may conduct flexible credit loan
10transactions from within any licensed office location or
11licensed branch office location in which any other business not
12licensed pursuant to this Title XIII of the Code is solicited
13or engaged in, or in conjunction with any other business not
14licensed pursuant to this Title XIII.
15b. If the superintendent determines that the other business
16is of such a nature or is being conducted in such a manner
17as to conceal an evasion or violation of this Title XIII of
18the Code or any rules adopted pursuant to this Title XIII,
19or is otherwise being conducted in an unlawful manner, the
20superintendent may restrict the licensee from conducting its
21business as a flexible credit lender in conjunction with that
22other business.
23 Sec. 8. NEW SECTION. 536B.8 Renewal of license.
241. A license issued pursuant to this chapter shall be
25renewed annually. A licensee may renew a license by submitting
26an application in the form as prescribed by the superintendent
27no later than December 1 and paying a renewal fee of two
28hundred fifty dollars.
292. The superintendent may assess a late fee of ten dollars
30per day for applications submitted and accepted for processing
31after December 1.
323. The license of a licensee who has not filed a renewal
33application or paid the renewal fee by December 31 shall
34expire and the licensee shall not act as a flexible credit
35lender until the license is renewed or a new license is issued
-5-1pursuant to this chapter.
2 Sec. 9. NEW SECTION. 536B.9 Grounds for denial of license
3renewal — suspension — revocation.
41. The superintendent may deny the renewal of a license or
5suspend or revoke a license if the superintendent determines
6any of the following:
7a. The licensee is insolvent.
8b. The licensee is not a person of honesty, truthfulness,
9and good character, as determined by rule.
10c. The licensee has failed to pay the annual renewal fees.
11d. The licensee has failed to file an annual report as
12required by this chapter when the report was due or within
13any extension of time provided by the superintendent for good
14cause.
15e. The licensee has failed to demonstrate that the licensee
16maintains at least twenty-five thousand dollars in assets for
17the licensed office and each licensed branch office that is
18readily available for use in the conduct of the business.
192. The superintendent may also deny the renewal of a license
20or suspend or revoke a license if the superintendent determines
21a fact or condition exists which would have warranted the
22superintendent to refuse to originally issue the license.
23 Sec. 10. NEW SECTION. 536B.10 Records — examination by
24superintendent — fees.
251. A licensee shall keep such books, accounts, and records
26as the superintendent may require in order to determine whether
27the licensee is complying with the provisions of this chapter
28and with the rules adopted by the superintendent under this
29chapter.
302. A licensee shall preserve for at least two years after
31making the last entry on any flexible credit loan all books,
32accounts, and records pertaining to the loan. A licensee who
33uses an electronic recordkeeping system shall not be required
34to keep a written copy of the books, accounts, and records
35if the licensee is able to generate all of the information
-6-1required under this section in a timely manner for examination
2or other purposes.
33. A licensee shall make any books, accounts, and records
4kept outside of this state available to the superintendent
5within three business days upon request by the superintendent.
6The superintendent may examine such books, accounts, and
7records at the office of the licensee located outside of this
8state.
94. A licensee shall provide to the superintendent or the
10superintendent’s duly authorized representative access, during
11normal business hours, to the licensee’s offices, files, safes,
12and vaults regarding the flexible credit lending business or
13regarding the subject matter of any examination, investigation,
14or hearing regarding the licensee.
155. a. A licensee required to provide the superintendent
16with access to its records pursuant to this section shall
17pay the cost of the examination or investigation. The
18superintendent shall determine the cost of the examination or
19investigation based upon the actual cost of the operation of
20the finance bureau of the banking division of the department of
21commerce, including the proportionate share of administrative
22expenses in the operation of the banking division attributable
23to the finance bureau as determined by the superintendent,
24incurred in the discharge of duties imposed upon the
25superintendent by this chapter.
26b. Failure to pay the examination or investigation fee
27within thirty days of receipt of demand from the superintendent
28shall subject the licensee to a late fee of up to five percent
29of the amount of the examination or investigation fee for each
30day the payment is delinquent.
31 Sec. 11. NEW SECTION. 536B.11 Annual report by licensee.
321. A licensee shall annually on or before April 1 file a
33report with the superintendent giving such relevant information
34as the superintendent reasonably may require concerning
35the business and operations during the twelve-month period
-7-1ending the preceding December 31. Upon good cause shown by a
2licensee, the superintendent may extend the time for filing the
3report for a period not to exceed sixty days.
42. The annual report shall include a licensee’s average
5annual percentage rate and average loan amount during the
6twelve-month period ending the preceding December 31.
73. a. If a licensee fails to file an annual report under
8this section on or before April 1 or within any extension
9of time provided by the superintendent for good cause, the
10superintendent or any person designated by the superintendent
11may examine the books, accounts, and records of the licensee,
12prepare the annual report, and charge the licensee an
13examination fee as established by rule. The fee shall be based
14on the actual cost of the examination or investigation.
15b. If a licensee fails to file an annual report within the
16specified time and has not received an extension, the licensee
17shall be subject to a civil penalty not to exceed five dollars
18per day until the licensee has filed the annual report. The
19licensee shall pay the penalty to the superintendent within
20thirty days after the penalty is levied.
21 Sec. 12. NEW SECTION. 536B.12 Surrender of license.
22A licensee may surrender a flexible credit loan license
23by delivering to the superintendent written notice that the
24license is surrendered. The surrender does not affect the
25licensee’s civil or criminal liability for acts committed
26prior to such surrender or entitle such licensee to a return
27of any part of the annual license fee. The superintendent
28may establish procedures for the disposition of the books,
29accounts, and records of the licensee and may require such
30action as deemed necessary for the protection of consumers that
31have flexible credit loans that are outstanding at the time of
32surrender of the license.
33 Sec. 13. NEW SECTION. 536B.13 Impairment of preexisting
34loan.
351. The revocation, suspension, surrender, expiration, or
-8-1alteration of a license provided under this chapter shall not
2impair or affect any of the following:
3a. The obligation of a preexisting flexible credit loan
4between a flexible credit lender and a consumer.
5b. The ability or right of a flexible credit lender to
6service a preexisting flexible credit loan from outside this
7state.
82. If this chapter or any part of this chapter is modified,
9amended, or repealed, resulting in a cancellation or alteration
10of any flexible credit lender license or right of a licensee
11under this chapter, that cancellation or alteration shall not
12impair or affect the obligation of any preexisting contract
13between a flexible credit lender and any consumer.
14 Sec. 14. NEW SECTION. 536B.14 Restrictions.
151. A licensee shall not knowingly advertise, display,
16distribute, broadcast, or televise, or cause or allow to be
17advertised, displayed, distributed, broadcast, or televised, in
18any manner, any false, misleading, or deceptive statement or
19representation with regard to the rates, terms, or conditions
20of a flexible credit loan. To the extent applicable, all
21advertising shall comply with the advertising requirements
22specified in the federal Truth in Lending Act.
232. a. A licensee shall not provide a flexible credit loan
24with an annual percentage rate greater than that provided in 10
25U.S.C. §987(b), to any of the following:
26(1) A member of the United States armed forces who is on
27active duty under a call or order that does not specify a
28period of thirty days or less.
29(2) A person on active national guard duty or armed forces
30military reserve active duty.
31(3) A dependent as defined in 10 U.S.C. §987(i).
32b. A licensee shall not provide a flexible credit loan
33to a consumer unless the consumer has signed a statement, to
34be included as part of the loan, attesting to whether or not
35the consumer is a military member or a dependent as defined
-9-1in 10 U.S.C. §987(i). The statement shall be in the form as
2prescribed by the superintendent by rule.
3c. A flexible credit loan made in violation of 10 U.S.C.
4§987 is void and its terms and conditions unenforceable.
5 Sec. 15. NEW SECTION. 536B.15 Rules.
6The superintendent may adopt rules to administer this
7chapter.
8 Sec. 16. NEW SECTION. 536B.16 Noncompliance.
91. A flexible credit loan that is provided by a person who
10is required to be licensed under this chapter but who is not
11licensed is void and its terms and conditions unenforceable.
122. Except as provided in subsection 1 and section 536B.14,
13subsection 2, failure to comply with this chapter shall not
14affect the validity or enforceability of a flexible credit
15loan.
16 Sec. 17. NEW SECTION. 536B.17 Disclosures.
171. To the extent applicable, a licensee shall comply with
18the disclosure requirements as set forth in the federal Truth
19in Lending Act.
202. A licensee shall conspicuously display a sign printed
21in at least twelve-point font bold type at each desk in the
22licensed office and licensed branch office where flexible
23credit loan transactions are conducted with the following
24disclosure:
25Notice: Before signing any loan documents or otherwise
26committing to a loan, you may take copies of those documents
27away from the flexible credit lender’s place of business for
28review.
293. A licensee providing electronic flexible credit loans
30shall conspicuously display the following disclosure on the
31licensee’s internet site:
32Notice: Before signing any loan documents or otherwise
33committing to a loan, please read our terms and conditions
34carefully.
354. A licensee who fails to provide disclosures as required
-10-1under this section shall be subject to a civil penalty not to
2exceed three hundred dollars for each violation.
3 Sec. 18. NEW SECTION. 536B.18 Finance charge.
41. A licensee may charge a finance charge on a flexible
5credit loan at a rate not to exceed seventeen percent per
6month.
72. This section does not authorize the compounding of a
8finance charge.
9 Sec. 19. NEW SECTION. 536B.19 Other fees and charges.
101. In addition to a finance charge authorized under section
11536B.18, a licensee may collect any of the following fees or
12charges:
13a. A delinquency charge if an installment is not paid in
14full within seven days, equal to five percent of the amount of
15the installment.
16b. Court costs and reasonable attorney fees if the flexible
17credit loan is referred for collection to an attorney other
18than an employee of the licensee.
19c. A dishonored check service fee if a licensee receives
20a check, draft, negotiable order of withdrawal, or similar
21instrument that is not paid or is not honored by a depository
22institution, equal to the actual charges assessed by the
23depository institution.
242. A licensee shall not directly or indirectly charge,
25contract for, or receive any other amount in connection with a
26flexible credit loan except as provided in this chapter.
27EXPLANATION
28The inclusion of this explanation does not constitute agreement with
29the explanation’s substance by the members of the general assembly.
30This bill creates new Code chapter 536B to require licensure
31of persons who wish to provide flexible credit loans to
32residents of the state.
33The bill defines “flexible credit loan” to mean a loan that
34is incurred for a personal, family, or household purpose, is
35not less than $500 and not more than $2,500, is unsecured,
-11-1is payable in substantially equal installment payments of
2principal and interest for the term of the loan, is subject to
3prepayment in whole or in part at any time without penalty, and
4is for a term length of a minimum of 6 months and a maximum of
524 months.
6The bill exempts the following persons from the requirements
7of the bill: a person who does business under any law relating
8to banks, savings banks, trusts, savings and loan associations,
9profit sharing and pension trusts, credit unions, insurance
10companies, or receiverships, a person who is not regularly
11engaged in the business of making flexible credit loans, as
12defined in the bill, a person who is licensed pursuant to
13another Iowa Code chapter to the extent that the person’s
14activities are governed by that Code chapter, or a consumer
15loan provided under Code chapters 533D, 535C, 536, 536A, 536C,
16or 537.
17The bill prohibits a person from engaging in the business of
18making flexible credit loans to residents in this state without
19first obtaining a license from the superintendent of the
20banking division in the department of commerce. An applicant
21for a license must submit an application in the form prescribed
22by the superintendent and pay a fee of $100.
23The bill allows the superintendent to deny a license if the
24applicant is insolvent, has failed to demonstrate the financial
25responsibility, experience, character, and general fitness
26required, as determined by rule, has failed to pay the $100
27fee, or has failed to demonstrate the availability of at least
28$25,000 in assets for the licensed office and each licensed
29branch office for use in the conduct of the business.
30The bill requires the superintendent to issue a license
31within 30 days of receiving an application unless grounds exist
32for denying it. A license is valid for one year, from January
331 to December 31, remains in full force until surrendered,
34revoked, or suspended, and is not transferable. A license
35remains the property of the state and must be immediately
-12-1returned to the superintendent if a licensee voluntarily
2surrenders it. A license must be posted conspicuously in the
3office of the licensee and any licensed branch offices.
4The bill requires a licensee to designate the principal
5place of business to be indicated on the license. A licensee
6wishing to maintain more than one place of business may
7obtain a branch office license by submitting an application
8as prescribed by the superintendent and paying a $250 fee.
9A licensee is prohibited from conducting flexible credit
10loan transactions under any name or location different than
11what is indicated on the license, provided, however, that
12a licensee may provide loans by mail or electronic means,
13make an accommodation to a consumer at any location upon
14the consumer’s request, or conduct an administrative, loan
15servicing, or recordkeeping activity at any other location if
16the superintendent is notified. A licensee can change the
17license location by giving the superintendent written notice to
18amend the license.
19The bill authorizes a licensee to conduct flexible credit
20loan transactions from any licensed office location where other
21business activities unrelated to flexible credit lending occur.
22However, the superintendent may prohibit a licensee from
23conducting business as a flexible credit lender in conjunction
24with, or at the location of, such other business if the other
25business is being conducted in an unlawful manner.
26The bill allows a licensee to obtain a renewal license by
27submitting an application as prescribed by the superintendent
28no later than December 1 and paying a $250 fee. A renewal
29application submitted after December 1 is subject to a $10 late
30fee for each day it is late. A license of a licensee who has
31not filed a renewal or paid the fee by December 31 expires.
32The bill allows the superintendent to deny a renewal license
33or suspend or revoke a license if the licensee is insolvent,
34is not a person of honesty, truthfulness, and good character,
35as determined by rule, has failed to pay the renewal fee, has
-13-1failed to file an annual report, or has failed to demonstrate
2the availability of at least $25,000 in assets for use in the
3conduct of the business for each office. The superintendent
4may deny a renewal license or suspend or revoke a license if a
5fact or condition exists to have warranted the superintendent
6to refuse to originally issue the license.
7The bill requires a licensee to keep records for the
8superintendent to determine whether the licensee is complying
9with the bill for at least two years. A licensee must make
10all records kept outside of the state available to the
11superintendent within three business days upon request. A
12licensee must provide the superintendent with access to
13the licensee’s records during normal business hours. A
14licensee subjected to an examination of its records by the
15superintendent must pay a fee determined by the actual cost of
16the examination. A licensee who fails to pay the fee within 30
17days must pay a late fee of up to 5 percent of the amount of the
18fee for each day the payment is delinquent.
19The bill requires a licensee to provide the superintendent
20with an annual report on or before April 1, which may be
21extended for no more than 60 days upon showing good cause. The
22report must include the licensee’s average annual percentage
23rate, as defined in the bill, and average loan amount during
24the 12-month period ending the preceding December 31. The
25superintendent may examine the records of a licensee who has
26failed to file an annual report, prepare the annual report, and
27charge a fee based on the cost of the examination. A licensee
28who has failed to file an annual report without an extension is
29also subject to a civil penalty not to exceed $5 for each day
30until the report is filed, which must be paid within 30 days of
31being charged.
32The bill provides that the revocation, suspension,
33surrender, cancellation, or alteration of a license will not
34impair or affect the validity of a preexisting flexible credit
35loan or the ability of a lender to service a preexisting loan
-14-1outside of this state.
2The bill restricts a licensee from advertising in any false
3or misleading manner with regards to the rates or terms of a
4flexible credit loan and requires a licensee to comply with
5the advertising requirements in the federal Truth in Lending
6Act. A licensee cannot provide a flexible credit loan to a
7military member or dependent, as defined in 10 U.S.C. §987(i),
8with an annual percentage rate greater than that provided in
910 U.S.C. §987(b). Before a licensee may provide a flexible
10credit loan, the consumer must sign a statement attesting to
11whether or not the consumer is a military member or dependent.
12A loan made in violation of 10 U.S.C. §987 is void and its terms
13and conditions unenforceable.
14The bill provides that a flexible credit loan provided
15by a person who is required to be licensed under new Code
16chapter 536B but who is not licensed is void and its terms and
17conditions unenforceable. However, any other noncompliance
18with new Code chapter 536B, except pertaining to military
19members and their dependents, will not affect the validity of
20a flexible credit loan.
21The bill requires a licensee to comply with the disclosure
22requirements in the federal Truth in Lending Act. A licensee
23must display a disclosure sign, as described in the bill, at
24each desk in the licensed office and each licensed branch
25office and on the licensee’s internet site if the licensee
26provides electronic flexible credit loans. A licensee who
27fails to do so is subject to a civil penalty not to exceed $300
28for each violation.
29The bill allows a licensee to charge a finance charge,
30as defined in the bill, on a flexible credit loan at a rate
31not to exceed 17 percent per month. However, a licensee is
32not permitted to compound a finance charge. In addition to
33this, a licensee may collect a delinquency charge, court costs
34and reasonable attorney fees, and a dishonored check service
35fee, as described in the bill. A licensee is prohibited
-15-1from collecting any other charges or fees in connection with
2conducting flexible credit loan transactions.
-16-gh/sc
2and making civil penalties applicable.
3BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
1 Section 1. NEW SECTION. 536B.1 Title.
2This chapter shall be known and may be cited as the “Iowa
3Flexible Loan Act”.
4 Sec. 2. NEW SECTION. 536B.2 Definitions.
5As used in this chapter, unless the context otherwise
6requires:
71. “Annual percentage rate” means the measure of the cost
8of credit, expressed as a yearly rate, that relates the amount
9extended to a consumer on a flexible credit loan to the amount
10and timing of payments made, as computed under the federal
11Truth in Lending Act.
122. “Consumer” means an individual who obtains a flexible
13credit loan.
143. “Federal Truth in Lending Act” means as defined in
15section 537.1302.
164. “Finance charge” means the amount payable by a consumer
17incident to or as a condition of the extension of a flexible
18credit loan but excluding other fees allowed under section
19536B.19.
205. “Flexible credit lender” means a person who advertises to
21make, solicit, or hold the person out to make a flexible credit
22loan to a consumer in this state.
236. “Flexible credit loan” is a loan in which all of the
24following are applicable:
25a. The debt is incurred for a personal, family, or household
26purpose.
27b. The debt is not less than five hundred dollars and not
28more than two thousand five hundred dollars.
29c. The debt is unsecured.
30d. The debt is payable in substantially equal installment
31payments of principal and interest for the term of the loan.
32e. The debt is subject to prepayment in whole or in part at
33any time without penalty.
34f. The term length of the loan is for a minimum of six
35months and a maximum of twenty-four months.
-1- 17. “Licensee” means a person licensed pursuant to this
2chapter.
38. “Regularly engaged in the business” means any of the
4following:
5a. Advertising to or making any other solicitation to a
6resident of this state to offer a flexible credit loan within
7this state.
8b. Making three or more flexible credit loans within a
9calendar year to residents of this state.
109. “Superintendent” means the superintendent of banking
11within the banking division of the department of commerce.
12 Sec. 3. NEW SECTION. 536B.3 Exemptions.
13This chapter shall not apply to any of the following:
141. A person who does business under the authority of a
15law of this state, or any other state while regulated by a
16state agency of that other state, or of the United States,
17relating to banks, savings banks, trust companies, savings and
18loan associations, profit sharing and pension trusts, credit
19unions, insurance companies, or receiverships if the person
20is regulated by the other law or under the jurisdiction of a
21court.
222. A person who is not regularly engaged in the business of
23making a flexible credit loan.
243. A person who is licensed pursuant to another law of this
25state to the extent that the person’s activities are governed
26by that law.
274. A consumer loan to the extent provided under chapters
28533D, 535C, 536, 536A, 536C, or 537.
29 Sec. 4. NEW SECTION. 536B.4 License — application — fees.
301. Unless exempt under section 536B.3, a person shall not
31engage in the business of making a flexible credit loan to a
32resident of this state without first having obtained a license
33as a flexible credit lender from the superintendent.
342. An applicant for a license shall submit an application
35in writing, under oath, and in the form as prescribed by the
-2-1superintendent. The application shall require any information
2that the superintendent determines is necessary.
33. At the time of making the application, the applicant
4shall pay to the superintendent a fee of one hundred dollars.
5 Sec. 5. NEW SECTION. 536B.5 Grounds for denial of license.
6The superintendent may deny a license for any of the
7following:
81. The person is insolvent.
92. The person has failed to demonstrate the financial
10responsibility, experience, character, and general fitness to
11command the confidence of the community and to warrant the
12belief that the business of the proposed flexible credit lender
13will be honestly and efficiently conducted.
143. The person has failed to pay the fee required under
15section 536B.4, subsection 3.
164. The person has failed to demonstrate that the person
17maintains at least twenty-five thousand dollars in assets for
18the licensed office and each licensed branch office that is
19readily available for use in the conduct of the business.
205. The person has, either knowingly or without the exercise
21of due care to prevent a violation, violated any provision of
22this Title XIII of the Code or any rule or order adopted or made
23pursuant to this Title XIII.
24 Sec. 6. NEW SECTION. 536B.6 Issuance of license — form —
25posting.
261. The superintendent shall issue a license to an applicant
27within thirty days after receiving a complete application
28unless the superintendent finds grounds for denying the
29license.
302. A license issued under this chapter shall be valid for a
31term of one year, beginning on January 1 and ending on December
3231.
333. A license issued under this chapter shall remain in full
34force until surrendered, revoked, or suspended.
354. A license issued under this chapter shall not be
-3-1transferable or assignable.
25. A license issued under this chapter shall remain the
3property of this state. Upon the voluntary surrender of the
4license by the licensee or the revocation of the license by
5the superintendent, the licensee shall immediately deliver the
6license to the superintendent. Surrender or revocation of the
7license shall not affect any other liability of the licensee.
86. A license issued under this chapter shall be kept
9conspicuously posted at the office of the licensee and any
10licensed branch office where flexible credit loan transactions
11are conducted.
12 Sec. 7. NEW SECTION. 536B.7 License location.
131. A licensee shall designate the principal place of
14business where the licensee shall conduct flexible credit loan
15transactions pursuant to this chapter, which shall be indicated
16on the license as the licensed office location.
172. a. A licensee may obtain a branch office license from
18the superintendent for each branch office if the licensee wants
19to maintain more than one license location.
20b. A licensee may obtain a branch office license by
21submitting an application in the form as prescribed by the
22superintendent and paying a fee of two hundred fifty dollars
23for each branch office license.
24c. The superintendent shall issue a branch office
25license indicating the address of the branch office if the
26superintendent determines that the applicant is qualified for
27the license.
283. A licensee shall not conduct flexible credit loan
29transactions under any name or at any place of business other
30than the name and location indicated on the license. However,
31a licensee may do any of the following:
32a. Provide a flexible credit loan by mail or electronic
33means.
34b. Make an accommodation to a consumer at any location upon
35a request by the consumer.
-4- 1c. Conduct an administrative, loan servicing, or
2recordkeeping activity at any other location not open to the
3public provided that the superintendent is notified in advance
4of that activity.
54. A licensee may change the licensed office location or
6licensed branch office location by providing the superintendent
7with written notice, and the superintendent shall amend the
8license accordingly.
95. a. A licensee may conduct flexible credit loan
10transactions from within any licensed office location or
11licensed branch office location in which any other business not
12licensed pursuant to this Title XIII of the Code is solicited
13or engaged in, or in conjunction with any other business not
14licensed pursuant to this Title XIII.
15b. If the superintendent determines that the other business
16is of such a nature or is being conducted in such a manner
17as to conceal an evasion or violation of this Title XIII of
18the Code or any rules adopted pursuant to this Title XIII,
19or is otherwise being conducted in an unlawful manner, the
20superintendent may restrict the licensee from conducting its
21business as a flexible credit lender in conjunction with that
22other business.
23 Sec. 8. NEW SECTION. 536B.8 Renewal of license.
241. A license issued pursuant to this chapter shall be
25renewed annually. A licensee may renew a license by submitting
26an application in the form as prescribed by the superintendent
27no later than December 1 and paying a renewal fee of two
28hundred fifty dollars.
292. The superintendent may assess a late fee of ten dollars
30per day for applications submitted and accepted for processing
31after December 1.
323. The license of a licensee who has not filed a renewal
33application or paid the renewal fee by December 31 shall
34expire and the licensee shall not act as a flexible credit
35lender until the license is renewed or a new license is issued
-5-1pursuant to this chapter.
2 Sec. 9. NEW SECTION. 536B.9 Grounds for denial of license
3renewal — suspension — revocation.
41. The superintendent may deny the renewal of a license or
5suspend or revoke a license if the superintendent determines
6any of the following:
7a. The licensee is insolvent.
8b. The licensee is not a person of honesty, truthfulness,
9and good character, as determined by rule.
10c. The licensee has failed to pay the annual renewal fees.
11d. The licensee has failed to file an annual report as
12required by this chapter when the report was due or within
13any extension of time provided by the superintendent for good
14cause.
15e. The licensee has failed to demonstrate that the licensee
16maintains at least twenty-five thousand dollars in assets for
17the licensed office and each licensed branch office that is
18readily available for use in the conduct of the business.
192. The superintendent may also deny the renewal of a license
20or suspend or revoke a license if the superintendent determines
21a fact or condition exists which would have warranted the
22superintendent to refuse to originally issue the license.
23 Sec. 10. NEW SECTION. 536B.10 Records — examination by
24superintendent — fees.
251. A licensee shall keep such books, accounts, and records
26as the superintendent may require in order to determine whether
27the licensee is complying with the provisions of this chapter
28and with the rules adopted by the superintendent under this
29chapter.
302. A licensee shall preserve for at least two years after
31making the last entry on any flexible credit loan all books,
32accounts, and records pertaining to the loan. A licensee who
33uses an electronic recordkeeping system shall not be required
34to keep a written copy of the books, accounts, and records
35if the licensee is able to generate all of the information
-6-1required under this section in a timely manner for examination
2or other purposes.
33. A licensee shall make any books, accounts, and records
4kept outside of this state available to the superintendent
5within three business days upon request by the superintendent.
6The superintendent may examine such books, accounts, and
7records at the office of the licensee located outside of this
8state.
94. A licensee shall provide to the superintendent or the
10superintendent’s duly authorized representative access, during
11normal business hours, to the licensee’s offices, files, safes,
12and vaults regarding the flexible credit lending business or
13regarding the subject matter of any examination, investigation,
14or hearing regarding the licensee.
155. a. A licensee required to provide the superintendent
16with access to its records pursuant to this section shall
17pay the cost of the examination or investigation. The
18superintendent shall determine the cost of the examination or
19investigation based upon the actual cost of the operation of
20the finance bureau of the banking division of the department of
21commerce, including the proportionate share of administrative
22expenses in the operation of the banking division attributable
23to the finance bureau as determined by the superintendent,
24incurred in the discharge of duties imposed upon the
25superintendent by this chapter.
26b. Failure to pay the examination or investigation fee
27within thirty days of receipt of demand from the superintendent
28shall subject the licensee to a late fee of up to five percent
29of the amount of the examination or investigation fee for each
30day the payment is delinquent.
31 Sec. 11. NEW SECTION. 536B.11 Annual report by licensee.
321. A licensee shall annually on or before April 1 file a
33report with the superintendent giving such relevant information
34as the superintendent reasonably may require concerning
35the business and operations during the twelve-month period
-7-1ending the preceding December 31. Upon good cause shown by a
2licensee, the superintendent may extend the time for filing the
3report for a period not to exceed sixty days.
42. The annual report shall include a licensee’s average
5annual percentage rate and average loan amount during the
6twelve-month period ending the preceding December 31.
73. a. If a licensee fails to file an annual report under
8this section on or before April 1 or within any extension
9of time provided by the superintendent for good cause, the
10superintendent or any person designated by the superintendent
11may examine the books, accounts, and records of the licensee,
12prepare the annual report, and charge the licensee an
13examination fee as established by rule. The fee shall be based
14on the actual cost of the examination or investigation.
15b. If a licensee fails to file an annual report within the
16specified time and has not received an extension, the licensee
17shall be subject to a civil penalty not to exceed five dollars
18per day until the licensee has filed the annual report. The
19licensee shall pay the penalty to the superintendent within
20thirty days after the penalty is levied.
21 Sec. 12. NEW SECTION. 536B.12 Surrender of license.
22A licensee may surrender a flexible credit loan license
23by delivering to the superintendent written notice that the
24license is surrendered. The surrender does not affect the
25licensee’s civil or criminal liability for acts committed
26prior to such surrender or entitle such licensee to a return
27of any part of the annual license fee. The superintendent
28may establish procedures for the disposition of the books,
29accounts, and records of the licensee and may require such
30action as deemed necessary for the protection of consumers that
31have flexible credit loans that are outstanding at the time of
32surrender of the license.
33 Sec. 13. NEW SECTION. 536B.13 Impairment of preexisting
34loan.
351. The revocation, suspension, surrender, expiration, or
-8-1alteration of a license provided under this chapter shall not
2impair or affect any of the following:
3a. The obligation of a preexisting flexible credit loan
4between a flexible credit lender and a consumer.
5b. The ability or right of a flexible credit lender to
6service a preexisting flexible credit loan from outside this
7state.
82. If this chapter or any part of this chapter is modified,
9amended, or repealed, resulting in a cancellation or alteration
10of any flexible credit lender license or right of a licensee
11under this chapter, that cancellation or alteration shall not
12impair or affect the obligation of any preexisting contract
13between a flexible credit lender and any consumer.
14 Sec. 14. NEW SECTION. 536B.14 Restrictions.
151. A licensee shall not knowingly advertise, display,
16distribute, broadcast, or televise, or cause or allow to be
17advertised, displayed, distributed, broadcast, or televised, in
18any manner, any false, misleading, or deceptive statement or
19representation with regard to the rates, terms, or conditions
20of a flexible credit loan. To the extent applicable, all
21advertising shall comply with the advertising requirements
22specified in the federal Truth in Lending Act.
232. a. A licensee shall not provide a flexible credit loan
24with an annual percentage rate greater than that provided in 10
25U.S.C. §987(b), to any of the following:
26(1) A member of the United States armed forces who is on
27active duty under a call or order that does not specify a
28period of thirty days or less.
29(2) A person on active national guard duty or armed forces
30military reserve active duty.
31(3) A dependent as defined in 10 U.S.C. §987(i).
32b. A licensee shall not provide a flexible credit loan
33to a consumer unless the consumer has signed a statement, to
34be included as part of the loan, attesting to whether or not
35the consumer is a military member or a dependent as defined
-9-1in 10 U.S.C. §987(i). The statement shall be in the form as
2prescribed by the superintendent by rule.
3c. A flexible credit loan made in violation of 10 U.S.C.
4§987 is void and its terms and conditions unenforceable.
5 Sec. 15. NEW SECTION. 536B.15 Rules.
6The superintendent may adopt rules to administer this
7chapter.
8 Sec. 16. NEW SECTION. 536B.16 Noncompliance.
91. A flexible credit loan that is provided by a person who
10is required to be licensed under this chapter but who is not
11licensed is void and its terms and conditions unenforceable.
122. Except as provided in subsection 1 and section 536B.14,
13subsection 2, failure to comply with this chapter shall not
14affect the validity or enforceability of a flexible credit
15loan.
16 Sec. 17. NEW SECTION. 536B.17 Disclosures.
171. To the extent applicable, a licensee shall comply with
18the disclosure requirements as set forth in the federal Truth
19in Lending Act.
202. A licensee shall conspicuously display a sign printed
21in at least twelve-point font bold type at each desk in the
22licensed office and licensed branch office where flexible
23credit loan transactions are conducted with the following
24disclosure:
25Notice: Before signing any loan documents or otherwise
26committing to a loan, you may take copies of those documents
27away from the flexible credit lender’s place of business for
28review.
293. A licensee providing electronic flexible credit loans
30shall conspicuously display the following disclosure on the
31licensee’s internet site:
32Notice: Before signing any loan documents or otherwise
33committing to a loan, please read our terms and conditions
34carefully.
354. A licensee who fails to provide disclosures as required
-10-1under this section shall be subject to a civil penalty not to
2exceed three hundred dollars for each violation.
3 Sec. 18. NEW SECTION. 536B.18 Finance charge.
41. A licensee may charge a finance charge on a flexible
5credit loan at a rate not to exceed seventeen percent per
6month.
72. This section does not authorize the compounding of a
8finance charge.
9 Sec. 19. NEW SECTION. 536B.19 Other fees and charges.
101. In addition to a finance charge authorized under section
11536B.18, a licensee may collect any of the following fees or
12charges:
13a. A delinquency charge if an installment is not paid in
14full within seven days, equal to five percent of the amount of
15the installment.
16b. Court costs and reasonable attorney fees if the flexible
17credit loan is referred for collection to an attorney other
18than an employee of the licensee.
19c. A dishonored check service fee if a licensee receives
20a check, draft, negotiable order of withdrawal, or similar
21instrument that is not paid or is not honored by a depository
22institution, equal to the actual charges assessed by the
23depository institution.
242. A licensee shall not directly or indirectly charge,
25contract for, or receive any other amount in connection with a
26flexible credit loan except as provided in this chapter.
27EXPLANATION
28The inclusion of this explanation does not constitute agreement with
29the explanation’s substance by the members of the general assembly.
30This bill creates new Code chapter 536B to require licensure
31of persons who wish to provide flexible credit loans to
32residents of the state.
33The bill defines “flexible credit loan” to mean a loan that
34is incurred for a personal, family, or household purpose, is
35not less than $500 and not more than $2,500, is unsecured,
-11-1is payable in substantially equal installment payments of
2principal and interest for the term of the loan, is subject to
3prepayment in whole or in part at any time without penalty, and
4is for a term length of a minimum of 6 months and a maximum of
524 months.
6The bill exempts the following persons from the requirements
7of the bill: a person who does business under any law relating
8to banks, savings banks, trusts, savings and loan associations,
9profit sharing and pension trusts, credit unions, insurance
10companies, or receiverships, a person who is not regularly
11engaged in the business of making flexible credit loans, as
12defined in the bill, a person who is licensed pursuant to
13another Iowa Code chapter to the extent that the person’s
14activities are governed by that Code chapter, or a consumer
15loan provided under Code chapters 533D, 535C, 536, 536A, 536C,
16or 537.
17The bill prohibits a person from engaging in the business of
18making flexible credit loans to residents in this state without
19first obtaining a license from the superintendent of the
20banking division in the department of commerce. An applicant
21for a license must submit an application in the form prescribed
22by the superintendent and pay a fee of $100.
23The bill allows the superintendent to deny a license if the
24applicant is insolvent, has failed to demonstrate the financial
25responsibility, experience, character, and general fitness
26required, as determined by rule, has failed to pay the $100
27fee, or has failed to demonstrate the availability of at least
28$25,000 in assets for the licensed office and each licensed
29branch office for use in the conduct of the business.
30The bill requires the superintendent to issue a license
31within 30 days of receiving an application unless grounds exist
32for denying it. A license is valid for one year, from January
331 to December 31, remains in full force until surrendered,
34revoked, or suspended, and is not transferable. A license
35remains the property of the state and must be immediately
-12-1returned to the superintendent if a licensee voluntarily
2surrenders it. A license must be posted conspicuously in the
3office of the licensee and any licensed branch offices.
4The bill requires a licensee to designate the principal
5place of business to be indicated on the license. A licensee
6wishing to maintain more than one place of business may
7obtain a branch office license by submitting an application
8as prescribed by the superintendent and paying a $250 fee.
9A licensee is prohibited from conducting flexible credit
10loan transactions under any name or location different than
11what is indicated on the license, provided, however, that
12a licensee may provide loans by mail or electronic means,
13make an accommodation to a consumer at any location upon
14the consumer’s request, or conduct an administrative, loan
15servicing, or recordkeeping activity at any other location if
16the superintendent is notified. A licensee can change the
17license location by giving the superintendent written notice to
18amend the license.
19The bill authorizes a licensee to conduct flexible credit
20loan transactions from any licensed office location where other
21business activities unrelated to flexible credit lending occur.
22However, the superintendent may prohibit a licensee from
23conducting business as a flexible credit lender in conjunction
24with, or at the location of, such other business if the other
25business is being conducted in an unlawful manner.
26The bill allows a licensee to obtain a renewal license by
27submitting an application as prescribed by the superintendent
28no later than December 1 and paying a $250 fee. A renewal
29application submitted after December 1 is subject to a $10 late
30fee for each day it is late. A license of a licensee who has
31not filed a renewal or paid the fee by December 31 expires.
32The bill allows the superintendent to deny a renewal license
33or suspend or revoke a license if the licensee is insolvent,
34is not a person of honesty, truthfulness, and good character,
35as determined by rule, has failed to pay the renewal fee, has
-13-1failed to file an annual report, or has failed to demonstrate
2the availability of at least $25,000 in assets for use in the
3conduct of the business for each office. The superintendent
4may deny a renewal license or suspend or revoke a license if a
5fact or condition exists to have warranted the superintendent
6to refuse to originally issue the license.
7The bill requires a licensee to keep records for the
8superintendent to determine whether the licensee is complying
9with the bill for at least two years. A licensee must make
10all records kept outside of the state available to the
11superintendent within three business days upon request. A
12licensee must provide the superintendent with access to
13the licensee’s records during normal business hours. A
14licensee subjected to an examination of its records by the
15superintendent must pay a fee determined by the actual cost of
16the examination. A licensee who fails to pay the fee within 30
17days must pay a late fee of up to 5 percent of the amount of the
18fee for each day the payment is delinquent.
19The bill requires a licensee to provide the superintendent
20with an annual report on or before April 1, which may be
21extended for no more than 60 days upon showing good cause. The
22report must include the licensee’s average annual percentage
23rate, as defined in the bill, and average loan amount during
24the 12-month period ending the preceding December 31. The
25superintendent may examine the records of a licensee who has
26failed to file an annual report, prepare the annual report, and
27charge a fee based on the cost of the examination. A licensee
28who has failed to file an annual report without an extension is
29also subject to a civil penalty not to exceed $5 for each day
30until the report is filed, which must be paid within 30 days of
31being charged.
32The bill provides that the revocation, suspension,
33surrender, cancellation, or alteration of a license will not
34impair or affect the validity of a preexisting flexible credit
35loan or the ability of a lender to service a preexisting loan
-14-1outside of this state.
2The bill restricts a licensee from advertising in any false
3or misleading manner with regards to the rates or terms of a
4flexible credit loan and requires a licensee to comply with
5the advertising requirements in the federal Truth in Lending
6Act. A licensee cannot provide a flexible credit loan to a
7military member or dependent, as defined in 10 U.S.C. §987(i),
8with an annual percentage rate greater than that provided in
910 U.S.C. §987(b). Before a licensee may provide a flexible
10credit loan, the consumer must sign a statement attesting to
11whether or not the consumer is a military member or dependent.
12A loan made in violation of 10 U.S.C. §987 is void and its terms
13and conditions unenforceable.
14The bill provides that a flexible credit loan provided
15by a person who is required to be licensed under new Code
16chapter 536B but who is not licensed is void and its terms and
17conditions unenforceable. However, any other noncompliance
18with new Code chapter 536B, except pertaining to military
19members and their dependents, will not affect the validity of
20a flexible credit loan.
21The bill requires a licensee to comply with the disclosure
22requirements in the federal Truth in Lending Act. A licensee
23must display a disclosure sign, as described in the bill, at
24each desk in the licensed office and each licensed branch
25office and on the licensee’s internet site if the licensee
26provides electronic flexible credit loans. A licensee who
27fails to do so is subject to a civil penalty not to exceed $300
28for each violation.
29The bill allows a licensee to charge a finance charge,
30as defined in the bill, on a flexible credit loan at a rate
31not to exceed 17 percent per month. However, a licensee is
32not permitted to compound a finance charge. In addition to
33this, a licensee may collect a delinquency charge, court costs
34and reasonable attorney fees, and a dishonored check service
35fee, as described in the bill. A licensee is prohibited
-15-1from collecting any other charges or fees in connection with
2conducting flexible credit loan transactions.
-16-gh/sc