Text: HSB557            Text: HSB559


House Study Bill 558

HOUSE FILE BY (PROPOSED COMMITTEE ON COMMERCE, REGULATION AND LABOR BILL BY CHAIRPERSON JENKINS) Passed House, Date Passed Senate, Date Vote: Ayes Nays Vote: Ayes Nays Approved A BILL FOR 1 An Act relating to the provision of consumer loans including 2 requiring certain disclosures for delayed deposit services and 3 title loans, providing for the licensing of credit union 4 service organizations to provide delayed deposit services, and 5 providing for interest rates by supervised financial 6 organizations when engaging in delayed deposit services. 7 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 8 TLSB 5618HC 81 9 kk/sh/8 PAG LIN 1 1 Section 1. Section 524.802, Code 2005, is amended by 1 2 adding the following new subsection: 1 3 NEW SUBSECTION. 13A. Act as a delayed deposit services 1 4 business as defined in section 533D.2. 1 5 Sec. 2. Section 533.4, Code 2005, is amended by adding the 1 6 following new subsection: 1 7 NEW SUBSECTION. 29. Act as a delayed deposit services 1 8 business as defined in section 533D.2. 1 9 Sec. 3. Section 533D.2, Code 2005, is amended by adding 1 10 the following new subsection: 1 11 NEW SUBSECTION. 1A. "Credit union service organization" 1 12 means an organization, corporation, or association whose 1 13 membership or ownership is primarily confined or restricted to 1 14 credit unions or organizations of credit unions and whose 1 15 purpose is primarily designed to provide services to credit 1 16 unions, organizations of credit unions, or credit union 1 17 members. 1 18 Sec. 4. Section 533D.2, subsection 5, Code 2005, is 1 19 amended to read as follows: 1 20 5. "Superintendent" means the any of the following: 1 21 a. The superintendent of credit unions for licensees which 1 22 are credit union service organizations. 1 23 b. The superintendent of credit unions for credit unions 1 24 acting as delayed deposit services businesses. 1 25 c. The superintendent of savings and loan associations for 1 26 savings and loan associations acting as delayed deposit 1 27 services businesses. 1 28 d. The superintendent of banking for banks and other 1 29 supervised financial institutions that are not a credit union, 1 30 credit union service organization, or savings and loan 1 31 association acting as delayed deposit services businesses. 1 32 e. The superintendent of banking for all other licensees 1 33 under this chapter. 1 34 Sec. 5. Section 533D.3, subsection 1, Code 2005, is 1 35 amended to read as follows: 2 1 1. A Except as provided in section 533D.17, a person shall 2 2 not operate a delayed deposit services business in this state 2 3 unless the person is licensed by the superintendent as 2 4 provided in this chapter. 2 5 Sec. 6. Section 533D.9, Code 2005, is amended by adding 2 6 the following new subsection: 2 7 NEW SUBSECTION. 2A. In the written notice required by 2 8 subsection 2, the licensee shall require the maker of the 2 9 check to initial by the disclosure of the fee to be charged 2 10 for the transaction and by the disclosure of the annual 2 11 percentage rate. 2 12 Sec. 7. Section 533D.16, Code 2005, is amended to read as 2 13 follows: 2 14 533D.16 APPLICABILITY. 2 15 1. This Except as provided in section 533D.17, this 2 16 chapter does not apply to a bank incorporated under the 2 17 provisions of any state or federal law, a savings and loan 2 18 association incorporated under the provisions of any state or 2 19 federal law, a credit union organized under the provisions of 2 20 any state or federal law, a corporation licensed as an 2 21 industrial loan company under chapter 536A, or an affiliate of 2 22 a bank, savings and loan association, credit union, or 2 23 industrial loan company. 2 24 2. Notwithstanding subsection 1, this chapter applies to a 2 25 credit union service organization. 2 26 Sec. 8. NEW SECTION. 533D.17 FINANCIAL ORGANIZATIONS == 2 27 RULES. 2 28 Notwithstanding section 533D.16, the superintendent shall 2 29 adopt rules to implement and make applicable the fee 2 30 restrictions, required disclosures, and prohibited acts 2 31 contained in sections 533D.9 and 533D.10 to any supervised 2 32 financial organization, as defined in section 537.1301, acting 2 33 as a delayed deposit services business in this state with 2 34 regard to transactions of delayed deposit services provided by 2 35 the supervised financial organization. 3 1 Sec. 9. Section 534.201, Code 2005, is amended by adding 3 2 the following new unnumbered paragraph: 3 3 NEW UNNUMBERED PARAGRAPH. An association may act as a 3 4 delayed deposit services business as defined in section 3 5 533D.2. 3 6 Sec. 10. Section 537.2401, subsection 1, Code 2005, is 3 7 amended to read as follows: 3 8 1. Except as provided with respect to a finance charge for 3 9 loans pursuant to open end credit under section 537.2402, a 3 10 lender may contract for and receive a finance charge not 3 11 exceeding the maximum charge permitted by the laws of this 3 12 state or of the United States for similar lenders, and, in 3 13 addition, with respect to a consumer loan, a supervised 3 14 financial organization or a mortgage lender may contract for 3 15 and receive a finance charge, calculated according to the 3 16 actuarial method, not exceeding twenty=one percent per year on 3 17 the unpaid balance of the amount financed. However, a 3 18 supervised financial organization may contract for and receive 3 19 a finance charge exceeding twenty=one percent per year on the 3 20 unpaid balance of the amount financed for transactions 3 21 conducted pursuant to delayed deposit services provided 3 22 pursuant to chapter 533D. This subsection does not prohibit a 3 23 lender from contracting for and receiving a finance charge 3 24 exceeding twenty=one percent per year on the unpaid balance of 3 25 the amount financed on consumer loans if authorized by other 3 26 provisions of the law. 3 27 Sec. 11. NEW SECTION. 537.3213 TITLE LOAN DISCLOSURES. 3 28 1. A person who provides a loan of money secured by a 3 29 certificate of title to a motor vehicle shall, prior to making 3 30 the loan, provide to the borrower a notice written in clear, 3 31 understandable language disclosing all of the following: 3 32 a. The fee to be charged for the transaction. 3 33 b. The annual percentage rate on the first hundred dollars 3 34 on the face amount of the loan which the fee represents, and 3 35 the annual percentage rate on subsequent one hundred dollar 4 1 increments which the fee represents, if different. 4 2 c. Any penalty which the lender will charge if the 4 3 borrower makes a payment with a check that is not negotiable 4 4 on the date agreed upon. A penalty to be charged pursuant to 4 5 this paragraph shall only be collected by the lender once on a 4 6 check no matter how long the check remains unpaid. A penalty 4 7 to be charged pursuant to this subsection is a lender's 4 8 exclusive remedy and if a lender charges a penalty pursuant to 4 9 this subsection, no other penalties under this chapter or any 4 10 other provision shall apply. 4 11 2. In addition to the notice required by subsection 1, a 4 12 person who provides a loan of money secured by a certificate 4 13 of title to a motor vehicle shall conspicuously display a 4 14 schedule of all fees, charges, and penalties for all services 4 15 provided by the person as the lender. The notice shall be 4 16 posted at the principal place of business and every branch 4 17 office of the lender. 4 18 3. A loan of money secured by a certificate of title to a 4 19 motor vehicle provided in violation of any provision of this 4 20 section is null and void. A borrower who enters into a loan 4 21 with a person who acts in violation of this section shall not 4 22 be bound by the loan agreement, and the lender shall return to 4 23 the borrower the titled personal property pledged or the fair 4 24 market value of the titled property and all principal, 4 25 interest, fees, and other charges paid by the borrower. The 4 26 borrower may commence a civil action to enforce this 4 27 subsection in which the borrower is entitled to reasonable 4 28 attorney fees, costs, and interest. 4 29 4. This section shall not apply to a supervised financial 4 30 organization. 4 31 EXPLANATION 4 32 This bill relates to the provision of delayed deposit 4 33 services and vehicle title loans. The bill requires credit 4 34 union service organizations as defined by the bill to be 4 35 licensed and generally subject to the requirements of Code 5 1 chapter 533D when engaging in the delayed deposit services 5 2 business, commonly known as "payday loans". 5 3 The bill requires licensed delayed deposit services 5 4 providers to require customers to initial next to the required 5 5 disclosures relating to fees to be charged and the annual 5 6 percentage rate. 5 7 The bill allows supervised financial organizations, as 5 8 defined by Code section 537.1301, to charge interest rates 5 9 above 21 percent for delayed deposit services transactions. 5 10 The bill amends the definition of "superintendent" in Code 5 11 chapter 533D so that "superintendent" may mean the 5 12 superintendent of banking, the superintendent of credit 5 13 unions, or the superintendent of savings and loan 5 14 associations, depending on the entity that is engaging in the 5 15 delayed deposit services business. Generally, the 5 16 superintendent of banking will continue to license all delayed 5 17 deposit services providers who are not credit unions, credit 5 18 union services organizations, or savings and loan 5 19 associations. 5 20 The bill requires the superintendent of banking, the 5 21 superintendent of credit unions, and the superintendent of 5 22 savings and loan associations to adopt rules to make 5 23 applicable the requirements relating to fee restrictions, 5 24 disclosures, and prohibited acts of Code sections 533D.9 and 5 25 533D.10 to supervised financial organizations, as applicable. 5 26 The bill clarifies that state banks, credit unions, and 5 27 savings and loan associations may engage in the delayed 5 28 deposit services business. 5 29 The bill requires persons who provide loans secured by a 5 30 certificate of title to a motor vehicle, except for supervised 5 31 financial organizations, to make certain written disclosures 5 32 prior to providing the loan. The lender must disclose the fee 5 33 being charged for the loan transaction and give the annual 5 34 percentage rate for each $100 increment of the loan if the 5 35 rate is different for additional $100 increments. The lender 6 1 must also disclose what penalty the lender will charge for a 6 2 returned check, which may only be collected one time 6 3 regardless of how long the check remains unpaid. The lender 6 4 must also display a schedule of all fees, charges, and 6 5 penalties for all services provided at each office of the 6 6 lender. A loan provided without the required disclosures is 6 7 null and void and the borrower is not obligated to pay the 6 8 loan. A lender who provides a loan secured by a certificate 6 9 of title to a motor vehicle without the required disclosures 6 10 shall return the certificate of title pledged and all loan 6 11 payments, interest, and other fees and charges paid by the 6 12 borrower or the borrower may file a civil action for such 6 13 items plus attorney fees, costs, and interest. 6 14 LSB 5618HC 81 6 15 kk:nh/sh/8
Text: HSB557            Text: HSB559