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House Study Bill 189 - IntroducedA Bill ForAn Act 1requiring the licensure of flexible credit lenders, and
2providing criminal and civil penalties.
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.21.
205. “Flexible credit lender” means a person who enters
21into three or more flexible credit loans in this state or
22advertises, solicits, or holds itself out as offering to enter
23into flexible credit loans in this state.
246. “Flexible credit loan” is a loan in which all of the
25following are applicable:
26a. The debt is incurred for a personal, family, or household
27purpose.
28b. The debt is not more than two thousand five hundred
29dollars.
30c. The debt is unsecured.
31d. The debt is payable in substantially equal installment
32payments of principal and interest for the term of the loan.
33e. The debt is subject to prepayment in whole or in part at
34any time without penalty.
35f. The term length of the loan is for a maximum of
-1-1twenty-four months.
27. “Licensee” means a person licensed pursuant to this
3chapter.
48. “Regularly engaged in the business” means all of the
5following:
6a. Advertising to or making any other solicitation to a
7resident of this state to offer a flexible credit loan within
8this state.
9b. Making three or more flexible credit loans within a
10calendar year to residents of this state.
119. “Superintendent” means the superintendent of banking
12within the banking division of the department of commerce.
13 Sec. 3. NEW SECTION. 536B.3 Exemptions.
14This chapter shall not apply to any of the following:
151. A person who does business under the authority of a
16law of this state, or any other state while regulated by a
17state agency of that other state, or of the United States,
18relating to banks, savings banks, trust companies, savings and
19loan associations, profit sharing and pension trusts, credit
20unions, insurance companies, or receiverships if the person
21is regulated by the other law or under the jurisdiction of a
22court.
232. A person who is not regularly engaged in the business of
24making a flexible credit loan.
253. A person who is licensed pursuant to another law of this
26state to the extent that the person’s activities are governed
27by that law.
284. A consumer loan in which the rate of the finance charge,
29calculated pursuant to the actuarial method, does not exceed
30the rate of a finance charge permitted under chapter 535.
31 Sec. 4. NEW SECTION. 536B.4 License required — application
32— fees.
331. Unless exempt under section 536B.3, a person shall not
34engage in the business of making a flexible credit loan to a
35resident of this state without first having obtained a license
-2-1as a flexible credit lender from the superintendent.
22. An applicant for a license shall submit an application
3in writing, under oath, and in the form as prescribed by the
4superintendent. The application shall require any information
5that the superintendent determines is necessary.
63. At the time of making the application, the applicant
7shall pay to the superintendent an application fee of one
8hundred dollars and an initial license fee of two hundred fifty
9dollars.
10 Sec. 5. NEW SECTION. 536B.5 Grounds for denial of license.
11The superintendent may deny a license for any of the
12following:
131. The person is insolvent.
142. The person has failed to demonstrate the financial
15responsibility, experience, character, and general fitness to
16command the confidence of the community and to warrant the
17belief that the business of the proposed flexible credit lender
18will be operated lawfully, honestly, fairly, and efficiently,
19pursuant to this chapter and any other applicable law.
203. The person has failed to pay the fees required under
21section 536B.4, subsection 3.
224. The person has failed to demonstrate that the person
23maintains at least twenty-five thousand dollars in assets
24readily available for use in the conduct of the business for
25the licensed office and each licensed branch office or two
26hundred thousand dollars for all office locations.
275. The person or, if the person is an entity, an officer,
28director, shareholder, partner, or member of the entity, has
29been convicted of a felony in this or any other state.
30 Sec. 6. NEW SECTION. 536B.6 Issuance of license — form —
31posting.
321. The superintendent shall issue a license to an applicant
33within thirty days after receiving a complete application
34unless the superintendent finds grounds for denying the
35license.
-3- 12. A license issued under this chapter shall be valid for a
2term of one year, beginning on January 1 and ending on December
331.
43. A license issued under this chapter shall remain in full
5force until surrendered, revoked, or suspended.
64. A license issued under this chapter shall not be
7transferable or assignable.
85. A license issued under this chapter shall remain the
9property of this state. Upon the voluntary surrender of the
10license by the licensee or the revocation of the license by
11the superintendent, the licensee shall immediately deliver the
12license to the superintendent. Surrender or revocation of the
13license shall not affect any other liability of the licensee.
146. A license issued under this chapter shall be kept
15conspicuously posted at the office of the licensee and any
16licensed branch office where flexible credit loan transactions
17are conducted.
18 Sec. 7. NEW SECTION. 536B.7 Surety bond.
191. If, at the time of an initial application or renewal of
20a license, a valid bond is not on file with the department,
21the applicant or licensee shall file with the superintendent
22a surety bond issued by a licensed surety in an amount
23satisfactory to the superintendent, provided, however, that
24such amount is not less than twenty-five thousand dollars for
25each office or two hundred thousand dollars for all office
26locations. Such bond shall have the state of Iowa named as the
27obligee in a form approved by the superintendent.
282. A bond filed pursuant to this subsection shall require
29an applicant or licensee to pay any civil penalties and
30examination fees. A bond shall also cover any claims for
31damages brought by a consumer residing in Iowa as a result of
32the licensee’s violation of this chapter. The superintendent
33may also make a claim on the bond for damages brought by
34a consumer residing in Iowa as a result of the licensee’s
35violation of this chapter. A claim on the bond for damages
-4-1shall not be made more than two years after the cancellation
2of the bond or license.
33. A bond filed pursuant to this subsection shall be
4continuous and may be canceled by the surety upon the
5surety giving no less than thirty days written notice to the
6superintendent. A cancellation or revocation of the bond or
7withdrawal of the surety from the bond shall automatically
8suspend the license issued to the licensee until a new bond
9or reinstatement notice is filed and approved pursuant to
10this subsection. The surety shall only be liable for damages
11incurred or unpaid fees while the bond is in force.
12 Sec. 8. NEW SECTION. 536B.8 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.
-5- 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 within ten days of making the change, and
8the superintendent shall amend the license 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 chapter or any
18rules adopted pursuant to this chapter, or is otherwise being
19conducted in an unlawful manner, the superintendent may order
20the licensee to cease the operation of the flexible credit
21lending business at the location.
22 Sec. 9. NEW SECTION. 536B.9 Renewal of license.
231. A license issued pursuant to this chapter shall be
24renewed annually by filing an application for renewal with the
25superintendent on or before December 1 containing information
26as required by the superintendent to indicate any material
27changes to an original application or subsequent renewal
28application and paying a renewal fee of two hundred fifty
29dollars.
302. The superintendent may assess a late fee of ten dollars
31per day for applications submitted and accepted for processing
32after December 1.
333. The license of a licensee who has not filed a renewal
34application or paid the renewal fee by December 31 shall
35expire and the licensee shall not act as a flexible credit
-6-1lender until the license is renewed or a new license is issued
2pursuant to this chapter.
3 Sec. 10. NEW SECTION. 536B.10 Disciplinary action.
41. The superintendent, after notice and hearing pursuant
5to the provisions of chapter 17A, may take disciplinary action
6against a licensee if the superintendent determines any of the
7following:
8a. The licensee has violated this chapter, a rule adopted
9pursuant to this chapter, or any other state or federal law,
10rule, or regulation applicable to the conduct of the business.
11b. A fact or condition exists that would have warranted the
12superintendent to deny the original license.
13c. The licensee has failed to pay the annual license fee
14or has failed to demonstrate that the licensee maintains at
15least twenty-five thousand dollars in assets readily available
16for use in the conduct of the business for the licensed
17office location and each licensed branch office or two hundred
18thousand dollars for all office locations.
19d. The licensee has failed to file an annual report as
20required by this chapter when the report was due or within
21any extension of time provided by the superintendent for good
22cause.
23e. The licensee is insolvent.
24f. The licensee has violated an order of the superintendent.
252. The superintendent may take one or more of the following
26disciplinary actions against a licensee:
27a. Revoke a license.
28b. Suspend a license until further order of the
29superintendent or for a specified period of time.
30c. Impose a period of probation under specified conditions.
31d. Impose civil penalties in an amount not to exceed five
32thousand dollars for each violation.
33e. Issue a citation and warning respecting licensee
34behavior.
35f. Order the licensee to pay restitution.
-7- 13. The superintendent may order the emergency suspension of
2a licensee’s license pursuant to section 17A.18A. A written
3order containing the facts or conduct warranting the emergency
4action shall be timely sent to the licensee by restricted
5certified mail. Upon issuance of the emergency suspension
6order, the licensee shall be notified of the right to an
7evidentiary hearing. A suspension proceeding shall be promptly
8scheduled if so requested by the licensee.
94. Except as provided in this section, a license shall
10not be revoked or suspended except after notice and a hearing
11thereon in accordance with chapter 17A.
125. The revocation, suspension, or surrender of a license
13shall not impair or affect the obligation of a preexisting
14lawful contract between the licensee and any person, including
15a borrower.
16 Sec. 11. NEW SECTION. 536B.11 Cease and desist order.
171. If the superintendent believes that a person has engaged
18in or is about to engage in an act or practice constituting
19a violation of this chapter or any rule adopted pursuant to
20this chapter or an order issued by the superintendent, the
21superintendent may issue and serve a cease and desist order
22on the person. Upon entry of a cease and desist order, the
23superintendent shall promptly provide written notice to the
24person to whom the order is directed that the order has been
25entered and the reasons for entering the order.
262. a. A person to whom a cease and desist order is directed
27may request a hearing in writing within fifteen business days
28after the date the order was issued. Upon receipt of such
29written request, the matter shall be set for a hearing within
30fifteen business days of the receipt of the written request by
31the superintendent, unless the person requesting the hearing
32consents to a later date.
33b. If a hearing is requested pursuant to this subsection
34or is otherwise required by the superintendent, the
35superintendent, after notice and hearing, shall issue written
-8-1findings of fact and conclusions of law and shall affirm,
2vacate, or modify the order. If a hearing is not requested
3pursuant to this subsection and the superintendent has not
4otherwise required a hearing, the order of the superintendent
5shall be final and remain in effect until it is modified or
6vacated by the superintendent.
73. The superintendent may vacate or modify an order entered
8pursuant to this section if the superintendent finds that
9a condition that caused its entry has changed or it would
10otherwise be in the public interest to vacate or modify the
11order.
124. A person aggrieved by a final order of the superintendent
13may seek judicial review of the order pursuant to section
1417A.19.
15 Sec. 12. NEW SECTION. 536B.12 Records — examination by
16superintendent — fees.
171. A licensee shall keep such books, accounts, and records
18as the superintendent may require in order to determine whether
19the licensee is complying with the provisions of this chapter
20and with the rules adopted by the superintendent under this
21chapter.
222. A licensee shall preserve for at least two years after
23making the last entry on any flexible credit loan all books,
24accounts, and records pertaining to the loan. A licensee who
25uses an electronic recordkeeping system shall not be required
26to keep a written copy of the books, accounts, and records
27if the licensee is able to generate all of the information
28required under this section in a timely manner for examination
29or other purposes.
303. A licensee shall make any books, accounts, and records
31kept outside of this state available to the superintendent
32within three business days upon request by the superintendent.
33The superintendent may examine such books, accounts, and
34records at the office of the licensee located outside of this
35state.
-9- 14. A licensee shall provide to the superintendent or the
2superintendent’s duly authorized representative access, during
3normal business hours, to the licensee’s offices, files, safes,
4and vaults regarding the flexible credit lending business or
5regarding the subject matter of any examination, investigation,
6or hearing regarding the licensee.
75. a. The superintendent shall examine the books, accounts,
8and records of each licensee at least once per year and as
9needed to secure information required pursuant to this chapter
10and to determine if a violation of this chapter has occurred.
11b. The superintendent may examine or investigate a complaint
12or report concerning an alleged violation of this chapter, a
13rule adopted pursuant to this chapter, or an order issued by
14the superintendent.
156. a. A licensee or person subject to an examination or
16investigation pursuant to subsection 5 shall pay the cost of
17the examination or investigation. The superintendent may
18order the cost of an examination or investigation provided
19under subsection 5 to be paid by the person subject to such
20examination or investigation, regardless of whether the person
21is licensed under this chapter.
22b. The superintendent shall determine the cost of an
23examination or investigation based upon the actual cost of the
24operation of the finance bureau of the banking division of
25the department of commerce, including the proportionate share
26of administrative expenses in the operation of the banking
27division attributable to the finance bureau as determined by
28the superintendent, incurred in the discharge of duties imposed
29upon the superintendent by this chapter.
30c. Failure to pay the cost of an examination or
31investigation pursuant to this subsection within thirty days
32of receipt of demand from the superintendent shall subject the
33licensee or person subject to the examination or investigation
34to a late fee of up to five percent of the amount of the cost
35of the examination or investigation for each day the payment
-10-1is delinquent.
2 Sec. 13. NEW SECTION. 536B.13 Annual report by licensee.
31. A licensee shall annually on or before April 1 file a
4report with the superintendent giving such relevant information
5as the superintendent reasonably may require concerning
6the business and operations during the twelve-month period
7ending the preceding December 31. Upon good cause shown by a
8licensee, the superintendent may extend the time for filing the
9report for a period not to exceed sixty days.
102. The annual report shall include a licensee’s average
11annual percentage rate and average loan amount during the
12twelve-month period ending the preceding December 31.
133. a. If a licensee fails to file an annual report under
14this section on or before April 1 or within any extension
15of time provided by the superintendent for good cause, the
16superintendent or any person designated by the superintendent
17may examine the books, accounts, and records of the licensee,
18prepare the annual report, and charge the licensee an
19examination fee as established by rule. The fee shall be based
20on the actual cost of the examination or investigation.
21b. If a licensee fails to file an annual report within the
22specified time and has not received an extension, the licensee
23shall be subject to a civil penalty not to exceed five dollars
24per day until the licensee has filed the annual report. The
25licensee shall pay the penalty to the superintendent within
26thirty days after the penalty is levied.
27 Sec. 14. NEW SECTION. 536B.14 Surrender of license.
28A licensee may surrender a flexible credit loan license
29by delivering to the superintendent written notice that the
30license is surrendered. The surrender does not affect the
31licensee’s civil or criminal liability for acts committed
32prior to such surrender or entitle such licensee to a return
33of any part of the annual license fee. The superintendent
34may establish procedures for the disposition of the books,
35accounts, and records of the licensee and may require such
-11-1action as deemed necessary for the protection of consumers that
2have flexible credit loans that are outstanding at the time of
3surrender of the license.
4 Sec. 15. NEW SECTION. 536B.15 Impairment of preexisting
5loan.
61. The revocation, suspension, surrender, expiration, or
7alteration of a license provided under this chapter shall not
8impair or affect any of the following:
9a. The obligation of a preexisting flexible credit loan
10between a flexible credit lender and a consumer.
11b. The ability or right of a flexible credit lender to
12service a preexisting flexible credit loan from outside this
13state.
142. If this chapter or any part of this chapter is modified,
15amended, or repealed, resulting in a cancellation or alteration
16of any flexible credit lender license or right of a licensee
17under this chapter, that cancellation or alteration shall not
18impair or affect the obligation of any preexisting contract
19between a flexible credit lender and any consumer.
20 Sec. 16. NEW SECTION. 536B.16 Prohibited acts by licensee.
211. A licensee shall not knowingly advertise, display,
22distribute, broadcast, or televise, or cause or allow to be
23advertised, displayed, distributed, broadcast, or televised, in
24any manner, any false, misleading, or deceptive statement or
25representation with regard to the rates, terms, or conditions
26of a flexible credit loan. To the extent applicable, all
27advertising shall comply with the advertising requirements
28specified in the federal Truth in Lending Act.
292. a. A licensee shall not provide a flexible credit loan
30with an annual percentage rate greater than that provided in 10
31U.S.C. §987(b), to any of the following:
32(1) A member of the United States armed forces who is on
33active duty under a call or order that does not specify a
34period of thirty days or less.
35(2) A person on active national guard duty or armed forces
-12-1military reserve active duty.
2(3) A dependent as defined in 10 U.S.C. §987(i).
3b. A licensee shall not provide a flexible credit loan
4to a consumer unless the consumer has signed a statement, to
5be included as part of the loan, attesting to whether or not
6the consumer is a military member or a dependent as defined
7in 10 U.S.C. §987(i). The statement shall be in the form as
8prescribed by the superintendent by rule.
9c. A flexible credit loan made in violation of 10 U.S.C.
10§987 is void and its terms and conditions unenforceable.
11 Sec. 17. NEW SECTION. 536B.17 Rules.
12The superintendent may adopt rules to administer this
13chapter.
14 Sec. 18. NEW SECTION. 536B.18 Operation of business without
15license — criminal penalty — injunction.
16A person who has engaged in the business of making a flexible
17credit loan to a resident in this state without first having
18obtained a license pursuant to this chapter or while such
19license is suspended or revoked by the superintendent is guilty
20of a serious misdemeanor. In addition to the criminal penalty
21provided in this section, the superintendent may also commence
22an action to enjoin the operation of a business conducted in
23violation of this chapter.
24 Sec. 19. NEW SECTION. 536B.19 Disclosures.
251. To the extent applicable, a licensee shall comply with
26the disclosure requirements as set forth in the federal Truth
27in Lending Act.
282. A licensee shall conspicuously display a sign printed
29in at least twelve-point bold font type at each desk in the
30licensed office and licensed branch office where flexible
31credit loan transactions are conducted with the following
32disclosure:
33Notice: Before signing any loan documents or otherwise
34committing to a loan, you may take copies of those documents
35away from the flexible credit lender’s place of business for
-13-1review.
23. A licensee providing electronic flexible credit loans
3shall conspicuously display the following disclosure on the
4licensee’s internet site:
5Notice: Before signing any loan documents or otherwise
6committing to a loan, please read our terms and conditions
7carefully.
84. A licensee who fails to provide disclosures as required
9under this section shall be subject to a civil penalty not to
10exceed three hundred dollars for each violation.
11 Sec. 20. NEW SECTION. 536B.20 Maximum interest rate or
12finance charge.
131. A licensee may charge a rate of interest or a finance
14charge on a flexible credit loan at a rate not to exceed
15seventeen percent per month.
162. This section does not authorize the compounding of a
17finance charge.
18 Sec. 21. NEW SECTION. 536B.21 Other fees and charges.
191. In addition to a rate of interest or a finance charge
20authorized under section 536B.20, a licensee may collect any of
21the following fees or charges:
22a. A delinquency charge if an installment is not paid in
23full within seven days, equal to five percent of the amount of
24the installment.
25b. Court costs and reasonable attorney fees if the flexible
26credit loan is referred for collection to an attorney other
27than an employee of the licensee.
28c. A dishonored check service fee if a licensee receives
29a check, draft, negotiable order of withdrawal, or similar
30instrument that is not paid or is not honored by a depository
31institution, equal to the actual charges assessed by the
32depository institution.
332. A licensee shall not directly or indirectly charge,
34contract for, or receive any other amount in connection with a
35flexible credit loan except as provided in this chapter.
-14-1EXPLANATION
2The inclusion of this explanation does not constitute agreement with
3the explanation’s substance by the members of the general assembly.
4This bill creates new Code chapter 536B to require licensure
5of persons who wish to provide flexible credit loans to
6residents of the state.
7The bill defines “flexible credit loan” to mean a loan that
8is incurred for a personal, family, or household purpose, is
9not more than $2,500, is unsecured, is payable in substantially
10equal installment payments of principal and interest for the
11term of the loan, is subject to prepayment in whole or in part
12at any time without penalty, and is for a term length of a
13maximum of 24 months.
14The bill exempts the following persons from the requirements
15of the bill: a person who does business under any law relating
16to banks, savings banks, trusts, savings and loan associations,
17profit sharing and pension trusts, credit unions, insurance
18companies, or receiverships, a person who is not regularly
19engaged in the business of making flexible credit loans, as
20defined in the bill, a person who is licensed pursuant to
21another Iowa Code chapter to the extent that the person’s
22activities are governed by that Code chapter, or a consumer
23loan with a finance charge as permitted under Code chapter 535.
24The bill prohibits a person from engaging in the business
25of making flexible credit loans to a resident in this state
26without first obtaining a license from the superintendent
27of the banking division in the department of commerce. An
28applicant for a license must submit an application in the form
29prescribed by the superintendent and pay an application fee of
30$100 and an initial license fee of $250.
31The bill allows the superintendent to deny a license if
32the applicant is insolvent, has failed to demonstrate the
33financial responsibility, experience, character, and general
34fitness required, as determined by rule, has failed to pay the
35application and initial license fees, has failed to demonstrate
-15-1the availability of at least $25,000 in assets for use in
2the conduct of the business for the licensed office and each
3licensed branch office or $200,000 for all office locations, or
4if an officer, director, shareholder, partner, or member has
5been convicted of a felony, if the applicant is an entity.
6The bill requires the superintendent to issue a license
7within 30 days of receiving an application unless grounds exist
8for denying it. A license is valid for one year, from January
91 to December 31, remains in full force until surrendered,
10revoked, or suspended, and is not transferable. A license
11remains the property of the state and must be immediately
12returned to the superintendent if a licensee voluntarily
13surrenders it. A license must be posted conspicuously in the
14office of the licensee and any licensed branch offices.
15The bill requires an applicant or licensee to file a surety
16bond with the superintendent in an amount that is not less than
17$25,000 for each office or $200,000 for all office locations.
18The bond requires the applicant or licensee to pay any civil
19penalty and examination fee and shall cover any claims for
20damages brought by an Iowa consumer as a result of a violation
21of the bill. The superintendent may also make a claim on the
22bond for damages resulting from a violation of the bill. A
23claim for damages on the bond must be made within two years
24of the cancellation of the bond or license. The bond is
25continuous and may be canceled by the surety with no less than
2630 days written notice to the superintendent. A cancellation
27or revocation of the bond automatically suspends the licensee’s
28license. The surety is only liable for damages incurred or
29unpaid fees while the bond is in force.
30The bill requires a licensee to designate the principal
31place of business to be indicated on the license. A licensee
32wishing to maintain more than one place of business may
33obtain a branch office license by submitting an application
34as prescribed by the superintendent and paying a $250 fee.
35A licensee is prohibited from conducting flexible credit
-16-1loan transactions under any name or location different than
2what is indicated on the license, provided, however, that
3a licensee may provide loans by mail or electronic means,
4make an accommodation to a consumer at any location upon
5the consumer’s request, or conduct an administrative, loan
6servicing, or recordkeeping activity at any other location if
7the superintendent is notified. A licensee can change the
8license location by giving the superintendent written notice to
9amend the license within 10 days of making the change.
10The bill authorizes a licensee to conduct flexible credit
11loan transactions from any licensed office location where
12other business activities unrelated to flexible credit lending
13occur. However, the superintendent may order the licensee to
14cease the operation of the flexible credit lending business at
15the location if the other business is being conducted in an
16unlawful manner.
17The bill allows a licensee to obtain a renewal license by
18submitting an application with information required by the
19superintendent no later than December 1 and paying a $250 fee.
20A renewal application submitted after December 1 is subject to
21a $10 late fee for each day it is late. A license of a licensee
22who has not filed a renewal or paid the fee by December 31
23expires.
24The bill allows the superintendent to take disciplinary
25action after notice and hearing for any of the following
26reasons: the licensee violated the bill or any other
27applicable law; a fact or condition exists which would have
28warranted the superintendent to deny the original license;
29the licensee failed to pay fees or demonstrate availability
30of required assets; the licensee failed to file an annual
31report; the licensee is insolvent; or the licensee violated
32an order of the superintendent. The superintendent may take
33any of the following disciplinary actions against a licensee:
34revoke a license; suspend a license; impose a period of
35probation; impose civil penalties in an amount not to exceed
-17-1$5,000 for each violation; issue a citation and warning; or
2order restitution. The superintendent may order the emergency
3suspension of a licensee’s license pursuant to the procedure
4described in the bill.
5The bill allows the superintendent to issue and serve a
6cease and desist order on a person the superintendent believes
7has engaged in or is about to engage in a violation of the
8bill. Such person may request a hearing within 15 days after
9the order is issued. If a hearing is so requested, the matter
10must be set for a hearing within 15 days after receiving the
11request. The superintendent may vacate or modify an order if
12the superintendent finds changed conditions or if doing so
13would be in the public interest. A person aggrieved by such an
14order may seek judicial review pursuant to Code section 17A.19.
15The bill requires a licensee to keep records for the
16superintendent to determine whether the licensee is complying
17with the bill for at least two years. A licensee must make
18all records kept outside of the state available to the
19superintendent within three business days upon request. A
20licensee must provide the superintendent with access to
21the licensee’s records during normal business hours. The
22superintendent must examine the records of each licensee
23at least once per year and may examine or investigate any
24complaint of an alleged violation of the bill. A licensee
25subjected to an investigation or examination of its records
26by the superintendent must pay a fee determined by the actual
27cost of the investigation or examination. A licensee who fails
28to pay the fee within 30 days must pay a late fee of up to 5
29percent of the amount of the fee for each day the payment is
30delinquent.
31The bill requires a licensee to provide the superintendent
32with an annual report on or before April 1, which may be
33extended for no more than 60 days upon showing good cause. The
34report must include the licensee’s average annual percentage
35rate, as defined in the bill, and average loan amount during
-18-1the 12-month period ending the preceding December 31. The
2superintendent may examine the records of a licensee who has
3failed to file an annual report, prepare the annual report, and
4charge a fee based on the cost of the examination. A licensee
5who has failed to file an annual report without an extension is
6also subject to a civil penalty not to exceed $5 for each day
7until the report is filed, which must be paid within 30 days of
8being charged.
9The bill provides that the revocation, suspension,
10surrender, cancellation, or alteration of a license will not
11impair or affect the validity of a preexisting flexible credit
12loan or the ability of a lender to service a preexisting loan
13outside of this state.
14The bill prohibits a licensee from advertising in any false
15or misleading manner with regards to the rates or terms of a
16flexible credit loan and requires a licensee to comply with
17the advertising requirements in the federal Truth in Lending
18Act. A licensee cannot provide a flexible credit loan to a
19military member or dependent, as defined in 10 U.S.C. §987(i),
20with an annual percentage rate greater than that provided in
2110 U.S.C. §987(b). Before a licensee may provide a flexible
22credit loan, the consumer must sign a statement attesting to
23whether or not the consumer is a military member or dependent.
24A loan made in violation of 10 U.S.C. §987 is void and its terms
25and conditions unenforceable.
26The bill provides that a person who has engaged in the
27business of making a flexible credit loan to an Iowa resident
28without obtaining a license or while such license is suspended
29or revoked is guilty of a serious misdemeanor. A serious
30misdemeanor is punishable by confinement for no more than one
31year and a fine of at least $315 but not more than $1,875. In
32addition, the superintendent may commence an action to enjoin
33the operation of a business conducted in violation of the bill.
34The bill requires a licensee to comply with the disclosure
35requirements in the federal Truth in Lending Act. A licensee
-19-1must display a disclosure sign, as described in the bill, at
2each desk in the licensed office and each licensed branch
3office and on the licensee’s internet site if the licensee
4provides electronic flexible credit loans. A licensee who
5fails to do so is subject to a civil penalty not to exceed $300
6for each violation.
7The bill allows a licensee to charge a finance charge,
8as defined in the bill, on a flexible credit loan at a rate
9not to exceed 17 percent per month. However, a licensee is
10not permitted to compound a finance charge. In addition to
11this, a licensee may collect a delinquency charge, court costs
12and reasonable attorney fees, and a dishonored check service
13fee, as described in the bill. A licensee is prohibited
14from collecting any other charges or fees in connection with
15conducting flexible credit loan transactions.
-20-gh/rj
2providing criminal and civil penalties.
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.21.
205. “Flexible credit lender” means a person who enters
21into three or more flexible credit loans in this state or
22advertises, solicits, or holds itself out as offering to enter
23into flexible credit loans in this state.
246. “Flexible credit loan” is a loan in which all of the
25following are applicable:
26a. The debt is incurred for a personal, family, or household
27purpose.
28b. The debt is not more than two thousand five hundred
29dollars.
30c. The debt is unsecured.
31d. The debt is payable in substantially equal installment
32payments of principal and interest for the term of the loan.
33e. The debt is subject to prepayment in whole or in part at
34any time without penalty.
35f. The term length of the loan is for a maximum of
-1-1twenty-four months.
27. “Licensee” means a person licensed pursuant to this
3chapter.
48. “Regularly engaged in the business” means all of the
5following:
6a. Advertising to or making any other solicitation to a
7resident of this state to offer a flexible credit loan within
8this state.
9b. Making three or more flexible credit loans within a
10calendar year to residents of this state.
119. “Superintendent” means the superintendent of banking
12within the banking division of the department of commerce.
13 Sec. 3. NEW SECTION. 536B.3 Exemptions.
14This chapter shall not apply to any of the following:
151. A person who does business under the authority of a
16law of this state, or any other state while regulated by a
17state agency of that other state, or of the United States,
18relating to banks, savings banks, trust companies, savings and
19loan associations, profit sharing and pension trusts, credit
20unions, insurance companies, or receiverships if the person
21is regulated by the other law or under the jurisdiction of a
22court.
232. A person who is not regularly engaged in the business of
24making a flexible credit loan.
253. A person who is licensed pursuant to another law of this
26state to the extent that the person’s activities are governed
27by that law.
284. A consumer loan in which the rate of the finance charge,
29calculated pursuant to the actuarial method, does not exceed
30the rate of a finance charge permitted under chapter 535.
31 Sec. 4. NEW SECTION. 536B.4 License required — application
32— fees.
331. Unless exempt under section 536B.3, a person shall not
34engage in the business of making a flexible credit loan to a
35resident of this state without first having obtained a license
-2-1as a flexible credit lender from the superintendent.
22. An applicant for a license shall submit an application
3in writing, under oath, and in the form as prescribed by the
4superintendent. The application shall require any information
5that the superintendent determines is necessary.
63. At the time of making the application, the applicant
7shall pay to the superintendent an application fee of one
8hundred dollars and an initial license fee of two hundred fifty
9dollars.
10 Sec. 5. NEW SECTION. 536B.5 Grounds for denial of license.
11The superintendent may deny a license for any of the
12following:
131. The person is insolvent.
142. The person has failed to demonstrate the financial
15responsibility, experience, character, and general fitness to
16command the confidence of the community and to warrant the
17belief that the business of the proposed flexible credit lender
18will be operated lawfully, honestly, fairly, and efficiently,
19pursuant to this chapter and any other applicable law.
203. The person has failed to pay the fees required under
21section 536B.4, subsection 3.
224. The person has failed to demonstrate that the person
23maintains at least twenty-five thousand dollars in assets
24readily available for use in the conduct of the business for
25the licensed office and each licensed branch office or two
26hundred thousand dollars for all office locations.
275. The person or, if the person is an entity, an officer,
28director, shareholder, partner, or member of the entity, has
29been convicted of a felony in this or any other state.
30 Sec. 6. NEW SECTION. 536B.6 Issuance of license — form —
31posting.
321. The superintendent shall issue a license to an applicant
33within thirty days after receiving a complete application
34unless the superintendent finds grounds for denying the
35license.
-3- 12. A license issued under this chapter shall be valid for a
2term of one year, beginning on January 1 and ending on December
331.
43. A license issued under this chapter shall remain in full
5force until surrendered, revoked, or suspended.
64. A license issued under this chapter shall not be
7transferable or assignable.
85. A license issued under this chapter shall remain the
9property of this state. Upon the voluntary surrender of the
10license by the licensee or the revocation of the license by
11the superintendent, the licensee shall immediately deliver the
12license to the superintendent. Surrender or revocation of the
13license shall not affect any other liability of the licensee.
146. A license issued under this chapter shall be kept
15conspicuously posted at the office of the licensee and any
16licensed branch office where flexible credit loan transactions
17are conducted.
18 Sec. 7. NEW SECTION. 536B.7 Surety bond.
191. If, at the time of an initial application or renewal of
20a license, a valid bond is not on file with the department,
21the applicant or licensee shall file with the superintendent
22a surety bond issued by a licensed surety in an amount
23satisfactory to the superintendent, provided, however, that
24such amount is not less than twenty-five thousand dollars for
25each office or two hundred thousand dollars for all office
26locations. Such bond shall have the state of Iowa named as the
27obligee in a form approved by the superintendent.
282. A bond filed pursuant to this subsection shall require
29an applicant or licensee to pay any civil penalties and
30examination fees. A bond shall also cover any claims for
31damages brought by a consumer residing in Iowa as a result of
32the licensee’s violation of this chapter. The superintendent
33may also make a claim on the bond for damages brought by
34a consumer residing in Iowa as a result of the licensee’s
35violation of this chapter. A claim on the bond for damages
-4-1shall not be made more than two years after the cancellation
2of the bond or license.
33. A bond filed pursuant to this subsection shall be
4continuous and may be canceled by the surety upon the
5surety giving no less than thirty days written notice to the
6superintendent. A cancellation or revocation of the bond or
7withdrawal of the surety from the bond shall automatically
8suspend the license issued to the licensee until a new bond
9or reinstatement notice is filed and approved pursuant to
10this subsection. The surety shall only be liable for damages
11incurred or unpaid fees while the bond is in force.
12 Sec. 8. NEW SECTION. 536B.8 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.
-5- 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 within ten days of making the change, and
8the superintendent shall amend the license 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 chapter or any
18rules adopted pursuant to this chapter, or is otherwise being
19conducted in an unlawful manner, the superintendent may order
20the licensee to cease the operation of the flexible credit
21lending business at the location.
22 Sec. 9. NEW SECTION. 536B.9 Renewal of license.
231. A license issued pursuant to this chapter shall be
24renewed annually by filing an application for renewal with the
25superintendent on or before December 1 containing information
26as required by the superintendent to indicate any material
27changes to an original application or subsequent renewal
28application and paying a renewal fee of two hundred fifty
29dollars.
302. The superintendent may assess a late fee of ten dollars
31per day for applications submitted and accepted for processing
32after December 1.
333. The license of a licensee who has not filed a renewal
34application or paid the renewal fee by December 31 shall
35expire and the licensee shall not act as a flexible credit
-6-1lender until the license is renewed or a new license is issued
2pursuant to this chapter.
3 Sec. 10. NEW SECTION. 536B.10 Disciplinary action.
41. The superintendent, after notice and hearing pursuant
5to the provisions of chapter 17A, may take disciplinary action
6against a licensee if the superintendent determines any of the
7following:
8a. The licensee has violated this chapter, a rule adopted
9pursuant to this chapter, or any other state or federal law,
10rule, or regulation applicable to the conduct of the business.
11b. A fact or condition exists that would have warranted the
12superintendent to deny the original license.
13c. The licensee has failed to pay the annual license fee
14or has failed to demonstrate that the licensee maintains at
15least twenty-five thousand dollars in assets readily available
16for use in the conduct of the business for the licensed
17office location and each licensed branch office or two hundred
18thousand dollars for all office locations.
19d. The licensee has failed to file an annual report as
20required by this chapter when the report was due or within
21any extension of time provided by the superintendent for good
22cause.
23e. The licensee is insolvent.
24f. The licensee has violated an order of the superintendent.
252. The superintendent may take one or more of the following
26disciplinary actions against a licensee:
27a. Revoke a license.
28b. Suspend a license until further order of the
29superintendent or for a specified period of time.
30c. Impose a period of probation under specified conditions.
31d. Impose civil penalties in an amount not to exceed five
32thousand dollars for each violation.
33e. Issue a citation and warning respecting licensee
34behavior.
35f. Order the licensee to pay restitution.
-7- 13. The superintendent may order the emergency suspension of
2a licensee’s license pursuant to section 17A.18A. A written
3order containing the facts or conduct warranting the emergency
4action shall be timely sent to the licensee by restricted
5certified mail. Upon issuance of the emergency suspension
6order, the licensee shall be notified of the right to an
7evidentiary hearing. A suspension proceeding shall be promptly
8scheduled if so requested by the licensee.
94. Except as provided in this section, a license shall
10not be revoked or suspended except after notice and a hearing
11thereon in accordance with chapter 17A.
125. The revocation, suspension, or surrender of a license
13shall not impair or affect the obligation of a preexisting
14lawful contract between the licensee and any person, including
15a borrower.
16 Sec. 11. NEW SECTION. 536B.11 Cease and desist order.
171. If the superintendent believes that a person has engaged
18in or is about to engage in an act or practice constituting
19a violation of this chapter or any rule adopted pursuant to
20this chapter or an order issued by the superintendent, the
21superintendent may issue and serve a cease and desist order
22on the person. Upon entry of a cease and desist order, the
23superintendent shall promptly provide written notice to the
24person to whom the order is directed that the order has been
25entered and the reasons for entering the order.
262. a. A person to whom a cease and desist order is directed
27may request a hearing in writing within fifteen business days
28after the date the order was issued. Upon receipt of such
29written request, the matter shall be set for a hearing within
30fifteen business days of the receipt of the written request by
31the superintendent, unless the person requesting the hearing
32consents to a later date.
33b. If a hearing is requested pursuant to this subsection
34or is otherwise required by the superintendent, the
35superintendent, after notice and hearing, shall issue written
-8-1findings of fact and conclusions of law and shall affirm,
2vacate, or modify the order. If a hearing is not requested
3pursuant to this subsection and the superintendent has not
4otherwise required a hearing, the order of the superintendent
5shall be final and remain in effect until it is modified or
6vacated by the superintendent.
73. The superintendent may vacate or modify an order entered
8pursuant to this section if the superintendent finds that
9a condition that caused its entry has changed or it would
10otherwise be in the public interest to vacate or modify the
11order.
124. A person aggrieved by a final order of the superintendent
13may seek judicial review of the order pursuant to section
1417A.19.
15 Sec. 12. NEW SECTION. 536B.12 Records — examination by
16superintendent — fees.
171. A licensee shall keep such books, accounts, and records
18as the superintendent may require in order to determine whether
19the licensee is complying with the provisions of this chapter
20and with the rules adopted by the superintendent under this
21chapter.
222. A licensee shall preserve for at least two years after
23making the last entry on any flexible credit loan all books,
24accounts, and records pertaining to the loan. A licensee who
25uses an electronic recordkeeping system shall not be required
26to keep a written copy of the books, accounts, and records
27if the licensee is able to generate all of the information
28required under this section in a timely manner for examination
29or other purposes.
303. A licensee shall make any books, accounts, and records
31kept outside of this state available to the superintendent
32within three business days upon request by the superintendent.
33The superintendent may examine such books, accounts, and
34records at the office of the licensee located outside of this
35state.
-9- 14. A licensee shall provide to the superintendent or the
2superintendent’s duly authorized representative access, during
3normal business hours, to the licensee’s offices, files, safes,
4and vaults regarding the flexible credit lending business or
5regarding the subject matter of any examination, investigation,
6or hearing regarding the licensee.
75. a. The superintendent shall examine the books, accounts,
8and records of each licensee at least once per year and as
9needed to secure information required pursuant to this chapter
10and to determine if a violation of this chapter has occurred.
11b. The superintendent may examine or investigate a complaint
12or report concerning an alleged violation of this chapter, a
13rule adopted pursuant to this chapter, or an order issued by
14the superintendent.
156. a. A licensee or person subject to an examination or
16investigation pursuant to subsection 5 shall pay the cost of
17the examination or investigation. The superintendent may
18order the cost of an examination or investigation provided
19under subsection 5 to be paid by the person subject to such
20examination or investigation, regardless of whether the person
21is licensed under this chapter.
22b. The superintendent shall determine the cost of an
23examination or investigation based upon the actual cost of the
24operation of the finance bureau of the banking division of
25the department of commerce, including the proportionate share
26of administrative expenses in the operation of the banking
27division attributable to the finance bureau as determined by
28the superintendent, incurred in the discharge of duties imposed
29upon the superintendent by this chapter.
30c. Failure to pay the cost of an examination or
31investigation pursuant to this subsection within thirty days
32of receipt of demand from the superintendent shall subject the
33licensee or person subject to the examination or investigation
34to a late fee of up to five percent of the amount of the cost
35of the examination or investigation for each day the payment
-10-1is delinquent.
2 Sec. 13. NEW SECTION. 536B.13 Annual report by licensee.
31. A licensee shall annually on or before April 1 file a
4report with the superintendent giving such relevant information
5as the superintendent reasonably may require concerning
6the business and operations during the twelve-month period
7ending the preceding December 31. Upon good cause shown by a
8licensee, the superintendent may extend the time for filing the
9report for a period not to exceed sixty days.
102. The annual report shall include a licensee’s average
11annual percentage rate and average loan amount during the
12twelve-month period ending the preceding December 31.
133. a. If a licensee fails to file an annual report under
14this section on or before April 1 or within any extension
15of time provided by the superintendent for good cause, the
16superintendent or any person designated by the superintendent
17may examine the books, accounts, and records of the licensee,
18prepare the annual report, and charge the licensee an
19examination fee as established by rule. The fee shall be based
20on the actual cost of the examination or investigation.
21b. If a licensee fails to file an annual report within the
22specified time and has not received an extension, the licensee
23shall be subject to a civil penalty not to exceed five dollars
24per day until the licensee has filed the annual report. The
25licensee shall pay the penalty to the superintendent within
26thirty days after the penalty is levied.
27 Sec. 14. NEW SECTION. 536B.14 Surrender of license.
28A licensee may surrender a flexible credit loan license
29by delivering to the superintendent written notice that the
30license is surrendered. The surrender does not affect the
31licensee’s civil or criminal liability for acts committed
32prior to such surrender or entitle such licensee to a return
33of any part of the annual license fee. The superintendent
34may establish procedures for the disposition of the books,
35accounts, and records of the licensee and may require such
-11-1action as deemed necessary for the protection of consumers that
2have flexible credit loans that are outstanding at the time of
3surrender of the license.
4 Sec. 15. NEW SECTION. 536B.15 Impairment of preexisting
5loan.
61. The revocation, suspension, surrender, expiration, or
7alteration of a license provided under this chapter shall not
8impair or affect any of the following:
9a. The obligation of a preexisting flexible credit loan
10between a flexible credit lender and a consumer.
11b. The ability or right of a flexible credit lender to
12service a preexisting flexible credit loan from outside this
13state.
142. If this chapter or any part of this chapter is modified,
15amended, or repealed, resulting in a cancellation or alteration
16of any flexible credit lender license or right of a licensee
17under this chapter, that cancellation or alteration shall not
18impair or affect the obligation of any preexisting contract
19between a flexible credit lender and any consumer.
20 Sec. 16. NEW SECTION. 536B.16 Prohibited acts by licensee.
211. A licensee shall not knowingly advertise, display,
22distribute, broadcast, or televise, or cause or allow to be
23advertised, displayed, distributed, broadcast, or televised, in
24any manner, any false, misleading, or deceptive statement or
25representation with regard to the rates, terms, or conditions
26of a flexible credit loan. To the extent applicable, all
27advertising shall comply with the advertising requirements
28specified in the federal Truth in Lending Act.
292. a. A licensee shall not provide a flexible credit loan
30with an annual percentage rate greater than that provided in 10
31U.S.C. §987(b), to any of the following:
32(1) A member of the United States armed forces who is on
33active duty under a call or order that does not specify a
34period of thirty days or less.
35(2) A person on active national guard duty or armed forces
-12-1military reserve active duty.
2(3) A dependent as defined in 10 U.S.C. §987(i).
3b. A licensee shall not provide a flexible credit loan
4to a consumer unless the consumer has signed a statement, to
5be included as part of the loan, attesting to whether or not
6the consumer is a military member or a dependent as defined
7in 10 U.S.C. §987(i). The statement shall be in the form as
8prescribed by the superintendent by rule.
9c. A flexible credit loan made in violation of 10 U.S.C.
10§987 is void and its terms and conditions unenforceable.
11 Sec. 17. NEW SECTION. 536B.17 Rules.
12The superintendent may adopt rules to administer this
13chapter.
14 Sec. 18. NEW SECTION. 536B.18 Operation of business without
15license — criminal penalty — injunction.
16A person who has engaged in the business of making a flexible
17credit loan to a resident in this state without first having
18obtained a license pursuant to this chapter or while such
19license is suspended or revoked by the superintendent is guilty
20of a serious misdemeanor. In addition to the criminal penalty
21provided in this section, the superintendent may also commence
22an action to enjoin the operation of a business conducted in
23violation of this chapter.
24 Sec. 19. NEW SECTION. 536B.19 Disclosures.
251. To the extent applicable, a licensee shall comply with
26the disclosure requirements as set forth in the federal Truth
27in Lending Act.
282. A licensee shall conspicuously display a sign printed
29in at least twelve-point bold font type at each desk in the
30licensed office and licensed branch office where flexible
31credit loan transactions are conducted with the following
32disclosure:
33Notice: Before signing any loan documents or otherwise
34committing to a loan, you may take copies of those documents
35away from the flexible credit lender’s place of business for
-13-1review.
23. A licensee providing electronic flexible credit loans
3shall conspicuously display the following disclosure on the
4licensee’s internet site:
5Notice: Before signing any loan documents or otherwise
6committing to a loan, please read our terms and conditions
7carefully.
84. A licensee who fails to provide disclosures as required
9under this section shall be subject to a civil penalty not to
10exceed three hundred dollars for each violation.
11 Sec. 20. NEW SECTION. 536B.20 Maximum interest rate or
12finance charge.
131. A licensee may charge a rate of interest or a finance
14charge on a flexible credit loan at a rate not to exceed
15seventeen percent per month.
162. This section does not authorize the compounding of a
17finance charge.
18 Sec. 21. NEW SECTION. 536B.21 Other fees and charges.
191. In addition to a rate of interest or a finance charge
20authorized under section 536B.20, a licensee may collect any of
21the following fees or charges:
22a. A delinquency charge if an installment is not paid in
23full within seven days, equal to five percent of the amount of
24the installment.
25b. Court costs and reasonable attorney fees if the flexible
26credit loan is referred for collection to an attorney other
27than an employee of the licensee.
28c. A dishonored check service fee if a licensee receives
29a check, draft, negotiable order of withdrawal, or similar
30instrument that is not paid or is not honored by a depository
31institution, equal to the actual charges assessed by the
32depository institution.
332. A licensee shall not directly or indirectly charge,
34contract for, or receive any other amount in connection with a
35flexible credit loan except as provided in this chapter.
-14-1EXPLANATION
2The inclusion of this explanation does not constitute agreement with
3the explanation’s substance by the members of the general assembly.
4This bill creates new Code chapter 536B to require licensure
5of persons who wish to provide flexible credit loans to
6residents of the state.
7The bill defines “flexible credit loan” to mean a loan that
8is incurred for a personal, family, or household purpose, is
9not more than $2,500, is unsecured, is payable in substantially
10equal installment payments of principal and interest for the
11term of the loan, is subject to prepayment in whole or in part
12at any time without penalty, and is for a term length of a
13maximum of 24 months.
14The bill exempts the following persons from the requirements
15of the bill: a person who does business under any law relating
16to banks, savings banks, trusts, savings and loan associations,
17profit sharing and pension trusts, credit unions, insurance
18companies, or receiverships, a person who is not regularly
19engaged in the business of making flexible credit loans, as
20defined in the bill, a person who is licensed pursuant to
21another Iowa Code chapter to the extent that the person’s
22activities are governed by that Code chapter, or a consumer
23loan with a finance charge as permitted under Code chapter 535.
24The bill prohibits a person from engaging in the business
25of making flexible credit loans to a resident in this state
26without first obtaining a license from the superintendent
27of the banking division in the department of commerce. An
28applicant for a license must submit an application in the form
29prescribed by the superintendent and pay an application fee of
30$100 and an initial license fee of $250.
31The bill allows the superintendent to deny a license if
32the applicant is insolvent, has failed to demonstrate the
33financial responsibility, experience, character, and general
34fitness required, as determined by rule, has failed to pay the
35application and initial license fees, has failed to demonstrate
-15-1the availability of at least $25,000 in assets for use in
2the conduct of the business for the licensed office and each
3licensed branch office or $200,000 for all office locations, or
4if an officer, director, shareholder, partner, or member has
5been convicted of a felony, if the applicant is an entity.
6The bill requires the superintendent to issue a license
7within 30 days of receiving an application unless grounds exist
8for denying it. A license is valid for one year, from January
91 to December 31, remains in full force until surrendered,
10revoked, or suspended, and is not transferable. A license
11remains the property of the state and must be immediately
12returned to the superintendent if a licensee voluntarily
13surrenders it. A license must be posted conspicuously in the
14office of the licensee and any licensed branch offices.
15The bill requires an applicant or licensee to file a surety
16bond with the superintendent in an amount that is not less than
17$25,000 for each office or $200,000 for all office locations.
18The bond requires the applicant or licensee to pay any civil
19penalty and examination fee and shall cover any claims for
20damages brought by an Iowa consumer as a result of a violation
21of the bill. The superintendent may also make a claim on the
22bond for damages resulting from a violation of the bill. A
23claim for damages on the bond must be made within two years
24of the cancellation of the bond or license. The bond is
25continuous and may be canceled by the surety with no less than
2630 days written notice to the superintendent. A cancellation
27or revocation of the bond automatically suspends the licensee’s
28license. The surety is only liable for damages incurred or
29unpaid fees while the bond is in force.
30The bill requires a licensee to designate the principal
31place of business to be indicated on the license. A licensee
32wishing to maintain more than one place of business may
33obtain a branch office license by submitting an application
34as prescribed by the superintendent and paying a $250 fee.
35A licensee is prohibited from conducting flexible credit
-16-1loan transactions under any name or location different than
2what is indicated on the license, provided, however, that
3a licensee may provide loans by mail or electronic means,
4make an accommodation to a consumer at any location upon
5the consumer’s request, or conduct an administrative, loan
6servicing, or recordkeeping activity at any other location if
7the superintendent is notified. A licensee can change the
8license location by giving the superintendent written notice to
9amend the license within 10 days of making the change.
10The bill authorizes a licensee to conduct flexible credit
11loan transactions from any licensed office location where
12other business activities unrelated to flexible credit lending
13occur. However, the superintendent may order the licensee to
14cease the operation of the flexible credit lending business at
15the location if the other business is being conducted in an
16unlawful manner.
17The bill allows a licensee to obtain a renewal license by
18submitting an application with information required by the
19superintendent no later than December 1 and paying a $250 fee.
20A renewal application submitted after December 1 is subject to
21a $10 late fee for each day it is late. A license of a licensee
22who has not filed a renewal or paid the fee by December 31
23expires.
24The bill allows the superintendent to take disciplinary
25action after notice and hearing for any of the following
26reasons: the licensee violated the bill or any other
27applicable law; a fact or condition exists which would have
28warranted the superintendent to deny the original license;
29the licensee failed to pay fees or demonstrate availability
30of required assets; the licensee failed to file an annual
31report; the licensee is insolvent; or the licensee violated
32an order of the superintendent. The superintendent may take
33any of the following disciplinary actions against a licensee:
34revoke a license; suspend a license; impose a period of
35probation; impose civil penalties in an amount not to exceed
-17-1$5,000 for each violation; issue a citation and warning; or
2order restitution. The superintendent may order the emergency
3suspension of a licensee’s license pursuant to the procedure
4described in the bill.
5The bill allows the superintendent to issue and serve a
6cease and desist order on a person the superintendent believes
7has engaged in or is about to engage in a violation of the
8bill. Such person may request a hearing within 15 days after
9the order is issued. If a hearing is so requested, the matter
10must be set for a hearing within 15 days after receiving the
11request. The superintendent may vacate or modify an order if
12the superintendent finds changed conditions or if doing so
13would be in the public interest. A person aggrieved by such an
14order may seek judicial review pursuant to Code section 17A.19.
15The bill requires a licensee to keep records for the
16superintendent to determine whether the licensee is complying
17with the bill for at least two years. A licensee must make
18all records kept outside of the state available to the
19superintendent within three business days upon request. A
20licensee must provide the superintendent with access to
21the licensee’s records during normal business hours. The
22superintendent must examine the records of each licensee
23at least once per year and may examine or investigate any
24complaint of an alleged violation of the bill. A licensee
25subjected to an investigation or examination of its records
26by the superintendent must pay a fee determined by the actual
27cost of the investigation or examination. A licensee who fails
28to pay the fee within 30 days must pay a late fee of up to 5
29percent of the amount of the fee for each day the payment is
30delinquent.
31The bill requires a licensee to provide the superintendent
32with an annual report on or before April 1, which may be
33extended for no more than 60 days upon showing good cause. The
34report must include the licensee’s average annual percentage
35rate, as defined in the bill, and average loan amount during
-18-1the 12-month period ending the preceding December 31. The
2superintendent may examine the records of a licensee who has
3failed to file an annual report, prepare the annual report, and
4charge a fee based on the cost of the examination. A licensee
5who has failed to file an annual report without an extension is
6also subject to a civil penalty not to exceed $5 for each day
7until the report is filed, which must be paid within 30 days of
8being charged.
9The bill provides that the revocation, suspension,
10surrender, cancellation, or alteration of a license will not
11impair or affect the validity of a preexisting flexible credit
12loan or the ability of a lender to service a preexisting loan
13outside of this state.
14The bill prohibits a licensee from advertising in any false
15or misleading manner with regards to the rates or terms of a
16flexible credit loan and requires a licensee to comply with
17the advertising requirements in the federal Truth in Lending
18Act. A licensee cannot provide a flexible credit loan to a
19military member or dependent, as defined in 10 U.S.C. §987(i),
20with an annual percentage rate greater than that provided in
2110 U.S.C. §987(b). Before a licensee may provide a flexible
22credit loan, the consumer must sign a statement attesting to
23whether or not the consumer is a military member or dependent.
24A loan made in violation of 10 U.S.C. §987 is void and its terms
25and conditions unenforceable.
26The bill provides that a person who has engaged in the
27business of making a flexible credit loan to an Iowa resident
28without obtaining a license or while such license is suspended
29or revoked is guilty of a serious misdemeanor. A serious
30misdemeanor is punishable by confinement for no more than one
31year and a fine of at least $315 but not more than $1,875. In
32addition, the superintendent may commence an action to enjoin
33the operation of a business conducted in violation of the bill.
34The bill requires a licensee to comply with the disclosure
35requirements in the federal Truth in Lending Act. A licensee
-19-1must display a disclosure sign, as described in the bill, at
2each desk in the licensed office and each licensed branch
3office and on the licensee’s internet site if the licensee
4provides electronic flexible credit loans. A licensee who
5fails to do so is subject to a civil penalty not to exceed $300
6for each violation.
7The bill allows a licensee to charge a finance charge,
8as defined in the bill, on a flexible credit loan at a rate
9not to exceed 17 percent per month. However, a licensee is
10not permitted to compound a finance charge. In addition to
11this, a licensee may collect a delinquency charge, court costs
12and reasonable attorney fees, and a dishonored check service
13fee, as described in the bill. A licensee is prohibited
14from collecting any other charges or fees in connection with
15conducting flexible credit loan transactions.
-20-gh/rj