Bill Text: MS SB2571 | 2013 | Regular Session | Engrossed
Bill Title: Mississippi Consumer Alternative Installment Loan Act; create.
Spectrum: Partisan Bill (Republican 1-0)
Status: (Failed) 2013-04-03 - Died On Calendar [SB2571 Detail]
Download: Mississippi-2013-SB2571-Engrossed.html
MISSISSIPPI LEGISLATURE
2013 Regular Session
To: Business and Financial Institutions
By: Senator(s) Brown
Senate Bill 2571
(As Passed the Senate)
AN ACT TO BE KNOWN AS THE MISSISSIPPI CONSUMER ALTERNATIVE INSTALLMENT LOAN ACT; TO PROHIBIT THE ENGAGING IN THE BUSINESS OF MAKING CONSUMER INSTALLMENT LOANS OF MONEY AND CHARGING OR CONTRACTING FOR INTEREST ON THOSE LOANS WITHOUT BEING THE HOLDER OF A VALID LICENSE TO ENGAGE IN THE BUSINESS AS PROVIDED BY THIS ACT OR THE SMALL LOAN PRIVILEGE TAX LAW; TO PROVIDE THAT THE COMMISSIONER OF BANKING AND CONSUMER FINANCE SHALL ADMINISTER THIS ACT; TO PRESCRIBE THE MAXIMUM CHARGES PERMITTED FOR LOANS MADE BY LICENSEES UNDER THIS ACT AND THE METHOD OF COMPUTING THOSE CHARGES; TO PRESCRIBE THE TERMS OF LOANS MADE BY LICENSEES UNDER THIS ACT; TO PROVIDE THAT LOCAL GOVERNMENTS MAY ENACT ORDINANCES THAT ARE IN COMPLIANCE WITH, BUT NOT MORE RESTRICTIVE THAN, THE PROVISIONS OF THIS ACT; TO CREATE NEW SECTION 75-67-123, MISSISSIPPI CODE OF 1972, TO PROVIDE THAT FOR PURPOSES OF COMPLIANCE WITH MAXIMUM CHARGES PERMITTED UNDER THE SMALL LOAN REGULATORY LAW AND THE SMALL LOAN PRIVILEGE TAX LAW, ANY CHARGES, FEES OR PREMIUMS FOR CREDIT INSURANCE OR AUTO CLUB MEMBERSHIPS SHALL NOT BE INCLUDED IN THE CALCULATION OF THE FINANCE CHARGE; TO AMEND SECTION 75-17-25, MISSISSIPPI CODE OF 1972, TO CONFORM TO THE PRECEDING PROVISION; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. This act shall be known as the "Mississippi Consumer Alternative Installment Loan Act."
SECTION 2. No person, partnership, association, limited liability company or corporation shall engage in the business of making consumer installment loans of money as provided by this act and charge, contract for, or receive on any such loan interest, discount, or consideration therefor without being the holder of a valid and subsisting license under the Small Loan Privilege Tax Law (Section 75-67-201 et seq.). This act does not apply to persons engaged in the business of extending credit to borrowers primarily for business or commercial purposes. This act does not apply to any person, firm, partnership, corporation or association doing business under any of the laws of this state relating to banks, savings banks, trust companies, building and loan associations, insurance companies or credit unions. For any and each consumer installment loan that a licensee makes, it has the option to either lend money under the Small Loan Regulatory Law (Section 75-67-101 et seq.), or under this act. The provisions of this act shall be administered and enforced by the Commissioner of the Mississippi Department of Banking and Consumer Finance, or his duly authorized agents, representatives and employees.
SECTION 3. (1) For the purposes of this act, the following terms shall have the meanings as defined in this subsection:
(a) "Applicable interest," for a precomputed loan contract, means the amount of interest attributable to each monthly installment period. It is computed as if each installment period were one (1) month and any interest charged for extending the first installment period. The applicable interest for any monthly installment period is that portion of the precomputed interest that bears the same ratio to the total precomputed interest as the balances scheduled to be outstanding during that month bear to the sum of all scheduled monthly outstanding balances in the original contract.
(b) "Commissioner" means the Commissioner of the Mississippi Department of Banking and Consumer Finance.
(c) "Department" means the Mississippi Department of Banking and Consumer Finance.
(d) "Licensee" means any individual, partnership, association or corporation making loans under this act and duly licensed under the provisions of the Small Loan Privilege Tax Law (Section 75-67-201 et seq.).
(e) "Person" means a natural person, sole proprietorship, corporation, company, limited liability company, partnership, association or any other legal entity however organized.
(f) "Precomputed loan" means a loan in which the debt is expressed as the sum of the original principal amount plus interest computed actuarially in advance, assuming all payments will be made when scheduled.
(2) To compute time for precomputed loans for the calculation of interest and other purposes, a month shall be a calendar month and a day shall be considered one-thirtieth (l/30th) of a month when calculation is made for a fraction of a month. A month shall be one-twelveth (l/12th) of a year. A calendar month is that period from a given date in one (1) month to the same numbered date in the following month, and if there is no same numbered date, to the last day of the following month. When a period of time includes a month and a fraction of a month, the fraction of the month is considered to follow the whole month. In the alternative, the licensee may charge interest at the rate of one three-hundred sixty-fifth (l/365th) of the agreed annual rate for each day actually elapsed.
(3) No licensee or other person may condition an extension of credit to a consumer borrower on the consumer's repayment by preauthorized electronic fund transfers or post-dated check. Consumers may choose any method of payment offered by the licensee, including but not limited to, electronic fund transfers or debit card payments.
(4) With respect to precomputed loans:
(a) Loans shall be repayable in substantially equal and consecutive monthly installments of principal and interest combined, except that the first installment period may be longer than one (1) month by not more than fifteen (15) days, and the first installment payment amount may be larger than the remaining payments by the amount of interest charged for the extra days.
(b) Payments may be applied to the combined total of principal and precomputed interest until the loan is fully paid.
(c) When any loan contract is paid in full by cash, renewal or refinancing, or a new loan, one (1) month or more before the final installment due date, a licensee shall refund or credit the obligor the unearned interest according to the Rule of 78ths, and a month shall be earned if the prepayment occurs one (1) or more days after the payment due date. However, if the prepayment occurs before the first installment due date, the licensee shall refund or credit the obligor the unearned interest on a pro rata basis from the date of the loan to the date of prepayment. If the maturity of the loan is accelerated for any reason and judgment is entered, the licensee shall credit the borrower with the same refund as if prepayment in full had been made on the date the lawsuit is filed.
(d) If the parties agree in writing, either in the loan contract or in a later agreement, to a deferment of wholly unpaid installments, a licensee may grant a deferment and may collect a deferment charge as provided in this subsection. A deferment postpones the scheduled due date of the earliest unpaid installment and all later installments as originally scheduled, or as previously deferred, for a period equal to the deferment period. The deferment period is that period during which no installment is scheduled to be paid by reason of the deferment. The deferment charge for a one-month period may not exceed the applicable interest for the installment period immediately following the due date of the last undeferred payment. A proportionate charge may be made for deferment for periods of more or less than one (1) month. A deferment charge is earned pro rata during the deferment period and is fully earned on the last day of the deferment period. If a loan is prepaid in full during a deferment period, the licensee shall credit to the obligor a refund of the unearned deferment charge in addition to any other refund or credit made for prepayment of the loan in full.
(e) If two (2) or more installments are delinquent one (1) full month or more on any due date, and if the contract so provides, the licensee may reduce the unpaid balance by the refund credit that would be required for prepayment in full on the due date of the most recent maturing installment in default. Thereafter, and in lieu of any other default or deferment charges, the agreed rate of interest or interest at the rate of eighteen percent (18%) per annum may be charged on the unpaid balance until fully paid.
(f) Fifteen (15) days after the final installment as originally scheduled or deferred, the licensee may compute and charge interest on any balance remaining unpaid, including unpaid default or deferment charges, at a default rate of interest as agreed in the contract or at the rate of eighteen percent (18%) per annum, until fully paid.
(g) A late payment charge that complies with Section 75-17-27 shall not be considered a finance charge, if contracted for in writing.
SECTION 4. (1) With respect to a consumer loan of more than Five Hundred Dollars ($500.00) but not more than One Thousand Dollars ($1,000.00):
(a) A licensee may charge, contract for and receive a monthly installment account handling charge not to exceed Twenty Dollars ($20.00) per month.
(b) A licensee may charge a closing fee not to exceed ten percent (10%) of the amount financed. The closing fee is fully earned at the time the loan is made and shall not be subject to refund. Any closing fee shall not be part of the finance charge.
(2) With respect to a small consumer loan over One Thousand Dollars ($1,000.00):
(a) A licensee may charge the following:
(i) A licensee may contract for and charge a closing fee as follows: For loans of more than One Thousand Dollars ($1,000.00) but not more than Four Thousand Dollars ($4,000.00), four percent (4%) of the total payments due on the loan or Twenty-five Dollars ($25.00), whichever is greater. Any closing fee shall not be part of the finance charge;
(ii) A monthly installment account handling charge, not to exceed the following amounts:
Amount financed Per month charge
$1,000.01 - $1,100.00 $ 39.00
$1,100.01 - $1,200.00 $ 42.00
$1,200.01 - $1,300.00 $ 45.00
$1,300.01 - $1,400.00 $ 48.00
$1,400.01 - $1,500.00 $ 51.00
$1,500.01 - $1,600.00 $ 55.00
$1,600.01 - $1,700.00 $ 58.00
$1,700.01 - $1,800.00 $ 61.00
$1,800.01 - $1,900.00 $ 64.00
$1,900.01 - $2,000.00 $ 67.00
$2,000.01 - $2,100.00 $ 70.00
$2,100.01 - $2,200.00 $ 72.00
$2,200.01 - $2,300.00 $ 75.00
$2,300.01 - $2,400.00 $ 78.00
$2,400.01 - $2,500.00 $ 81.00
$2,500.01 - $2,600.00 $ 83.00
$2,600.01 - $2,700.00 $ 86.00
$2,700.01 - $2,800.00 $ 88.00
$2,800.01 - $2,900.00 $ 91.00
$2,900.01 - $3,000.00 $ 93.00
$3,000.01 - $3,100.00 $ 96.00
$3,100.01 - $3,200.00 $ 98.00
$3,200.01 - $3,300.00 $101.00
$3,300.01 - $3,400.00 $103.00
$3,400.01 - $3,500.00 $106.00
$3,500.01 - $3,600.00 $108.00
$3,600.01 - $3,700.00 $111.00
$3,700.01 - $3,800.00 $113.00
$3,801.01 - $3,900.00 $116.00
$3,900.01 - $4,000.00 $118.00
(b) The closing fee is fully earned at the time the loan is made and shall not be subject to refund; except that, if the loan is paid in full within the first thirty (30) days of the loan term, the first Twenty-five Dollars ($25.00) of the closing fee may be retained by the licensee and the remainder of the closing fee shall be refunded at a rate of one-thirtieth (1/30) of the remainder of the closing fee per day, beginning on the day after the date of the prepayment and ending on the thirtieth day after the loan was made.
(3) When any loan contract is paid in full by cash, renewal, or refinancing, or a new loan, the licensee shall refund any unearned interest or unearned portion of the monthly installment account handling charge, whichever is applicable. The unearned interest or unearned portion of the monthly installment account handling charge that is refunded shall be calculated based on a method that is at least as favorable to the consumer as the Rule of 78ths.
(4) The maximum closing fees shall be subject to an annual adjustment as of the first day of each year following July 1, 2013, equal to the percentage change in the Consumer Price Index compiled by the Bureau of Labor Statistics, United States Department of Labor, or, if that index is canceled or superseded, the index chosen by the Bureau of Labor Statistics as most accurately reflecting the changes in the purchasing power of the dollar for consumers, or, if no such index is chosen by the Bureau of Labor Statistics, the index chosen by the Department of Banking and Consumer Finance as most accurately reflecting the changes in the purchasing power of the dollar for consumers. The adjusted amounts shall take effect on July 1 of the year of the computations.
(5) No licensee shall use multiple notes, accounts, contracts, or agreements with the intent to obtain a higher monthly installment account handling charge than permitted by this act.
(6) A licensee may only charge the following for any loans made under this act: a monthly installment account handling charge, a closing fee, a deferment charge, a first payment extension fee, and a late charge as provided under this act. No interest, charges or other fees of any type shall be permitted.
SECTION 5. (1) A loan under this act shall be fully amortizing and be repayable in its entirety in a minimum of nine (9) substantially equal and consecutive monthly payments with a period of not less than two hundred seventy-two (272) days to maturity.
(2) Each loan agreement entered into between a licensee and a consumer borrower shall include the following language: "This business is licensed and regulated by the Department of Banking and Consumer Finance. If you have any unresolved problem with a transaction at this location, you are entitled to assistance. Please call or write: Mississippi Department of Banking and Consumer Finance, P.O. Drawer 23729, Jackson, MS 39225-3729; Phone (800) 844-2499."
SECTION 6. A licensee is prohibited from making a loan to a consumer borrower if the payments to be made in any month on the loan exceed twenty-two and five-tenths percent (22.5%) of the consumer's gross monthly income, as demonstrated by documentation of the income, including, but not limited to, the consumer's most recent pay stub, receipt reflecting payment of government benefits, or other official documentation. "Official documentation" includes tax returns and documentation prepared by the source of the income. Notwithstanding anything contained in this section to the contrary, a licensee may rely upon the borrower's written statement or other written information provided by the borrower in those cases where the borrower is self-employed or employed in seasonal work.
SECTION 7. A licensee is prohibited from offering any supplemental loan products under this act.
SECTION 8. Any licensee offering extensions of credit under this act shall furnish information regarding the loan account to a minimum of one (1) major credit reporting agency in compliance with the Federal Fair Credit Reporting Act (FCRA), 15 USCS Section 1681 et seq.
SECTION 9. At the time a loan is made or within twenty (20) days after a loan is made, a licensee shall not (a) accept a check and agree to hold it for a period of days before deposit or presentment, or (b) accept a check dated later than the date written.
SECTION 10. (1) The commissioner shall have the power and authority to adopt, promulgate and issue any rules and regulations, not inconsistent with law, necessary for the enforcement of this act. The commissioner may investigate any business conducted in the licensed office to determine whether any evasion or violation of this act has occurred.
(2) Licensees shall comply with, and all loans made under this act shall be in conformity with, all applicable provisions of the Small Loan Regulatory Law (Section 75-67-101 et seq.), and the Small Loan Privilege Tax Law (Section 75-67-201 et seq.), as determined by the commissioner.
(3) If any person engages in business as provided for in this act without paying the license fee as provided by the Small Loan Privilege Tax Law (Section 75-67-201 et seq.) before beginning business or before the expiration of the person's current license, as the case may be, then the person shall be liable for the full amount of the license fee plus a penalty in an amount not to exceed Twenty-five Dollars ($25.00) for each day that the person has engaged in the business without a license or after the expiration of a license.
(4) When the commissioner has reasonable cause to believe that a person is violating any provision of this act, or any regulation of the commissioner made under the authority of this act or any other applicable statute of this state, the commissioner, in addition to and without prejudice to the authority provided elsewhere in this act, may enter an order requiring the person to stop and refrain from the violation. The commissioner may sue in any court of the state having jurisdiction and venue to enjoin the person from engaging in or continuing the violation or from doing any act in furtherance of the violation. In such an action, the court may enter an order or judgment awarding a preliminary or permanent injunction.
(5) The commissioner may impose a civil penalty against any licensee adjudged by the commissioner to be in violation of the provisions of this act. The civil penalty shall not exceed Five Hundred Dollars ($500.00) per violation and shall be deposited into the Consumer Finance Fund of the department.
(6) The commissioner, or his duly authorized representative, for the purpose of discovering violations of this act and for the purpose of determining whether persons are subject to the provisions of this act, may examine persons reasonably suspected by the commissioner of conducting business that requires a license under this act, including all relevant books, records and papers employed by those persons in the transaction of their business, and may summon witnesses and examine them under oath concerning matters relating to the business of those persons, or such other matters as may be relevant to the discovery of violations of this act, including without limitation, the conduct of business without a license as required under this act.
(7) Licensees shall not conduct any other business at the licensed location other than loans made under this act, the Small Loan Regulatory Law (Section 75-67-101 et seq.) or the Small Loan Privilege Tax Law (Section 75-67-201 et seq.), except for those business activities licensees engaged in before the passage of this act.
(8) The commissioner may charge an examination fee to examine any loans made under this act in an amount not less than Three Hundred Dollars ($300.00) nor more than Six Hundred Dollars ($600.00) for each office or location within the State of Mississippi, plus any actual expenses incurred while examining the licensee's records or books that are located outside the State of Mississippi. However, in no event shall a licensee be examined more than once in a two-year period unless for cause shown based upon consumer complaint and/or other exigent reasons as determined by the commissioner.
SECTION 11. Municipalities and counties in this state may enact ordinances that are in compliance with, but not more restrictive than, the provisions of this act.
SECTION 12. (1) A licensee under this act shall have no liability for any act or practice done or omitted in conformity with (a) any rule or regulation of the commissioner, or (b) any rule, regulation, interpretation or approval of any other state or federal agency or any opinion of the Attorney General, notwithstanding that after that act or omission has occurred the rule, regulation, interpretation, approval or opinion is amended, rescinded, or determined by judicial or other authority to be invalid for any reason.
(2) A licensee under this act, acting in conformity with a written interpretation or approval by an official or employee of any state or federal agency or department, shall be presumed to have acted in accordance with applicable law, notwithstanding that after that act has occurred, the interpretation or approval is amended, rescinded, or determined by judicial or other authority to be incorrect or invalid for any reason.
SECTION 13. The following shall be codified as Section 75-67-123, Mississippi Code of 1972:
75-67-123. Notwithstanding any other law to the contrary, for purposes of compliance with maximum charges permitted under the Small Loan Regulatory Law (Section 75-67-101 et seq.) and the Small Loan Privilege Tax Law (Section 75-67-201 et seq.), any charges, fees or premiums for voluntarily purchased credit insurance or auto club memberships shall not be included in the calculation of the finance charge.
SECTION 14. Section 75-17-25, Mississippi Code of 1972, is amended as follows:
75-17-25. The term
"finance charge" as used in this section, Sections 75-17-1, 75-17-11,
75-17-13, 75-17-15, 75-17-17, 75-17-19, 75-17-21, 75-17-23, 75-17-27, 75-17-29,
75-17-33, 63-19-43, 75-67-127 and 75-67-217 means the amount or rate paid or
payable, directly or indirectly, by a debtor for receiving a loan or incident
to or as a condition of the extension of credit, including, but not limited to,
interest, brokerage fees, finance charges, loan fees, discount, points, service
charges, transaction charges, activity charges, carrying charges, time price
differential, finder's fees or any other cost or expense to the debtor for
services rendered or to be rendered to the debtor in making, arranging or
negotiating a loan of money or an extension of credit and for the accounting,
guaranteeing, endorsing, collecting and other actual services rendered by the
lender; * * *
however, * * *
recording fees, motor vehicle title fees, attorney's fees, insurance premiums, fees
or charges permitted to be charged under the provisions of Section 75-67-121,
fees permitted to be charged under the provisions of Section 79-7-7, service
charges as provided in Section 81-19-31, and with respect to a debt secured by
an interest in land, bona fide closing costs and appraisal fees incidental to
the transaction shall not be included in the finance charge. The term
"finance charge," as used in this section and the sections enumerated
above, shall not include any fees for the set up, establishment, processing or
maintenance of a loan to a plan participant from a retirement plan intending to
be tax-qualified (within the meaning of 26 USCS Section 401 et seq.) that are
paid or payable directly or indirectly by the plan participant to the plan
record keeper or third party administrator.
Subject to the other provisions of this section, Sections 75-17-1, 75-17-13, 75-17-15, 75-17-17, 75-17-19, 75-17-21, 75-17-23, 75-17-27, 75-17-29, 75-17-33, 63-19-43, 75-67-127 and 75-67-217, the finance charge may be calculated on the assumption that the indebtedness will be discharged as it becomes due, and prepayment penalties and statutory default charges shall not be included in the finance charge. Nothing in Section 75-17-1 or Section 75-17-19, 75-17-21, 75-17-23, 75-17-27, 75-17-29 or 75-17-33 shall limit or restrict the manner of contracting for such finance charge, whether by way of add-on, discount or otherwise, so long as the annual percentage rate does not exceed that permitted by law. If a greater finance charge than that authorized by applicable law shall be stipulated for or received in any case, all interest and finance charges shall be forfeited, and may be recovered back, whether the contract be executed or executory. If a finance charge be contracted for or received that exceeds the maximum authorized by law by more than one hundred percent (100%), the principal and all finance charges shall be forfeited and any amount paid may be recovered by suit. The provisions of this section, Section 75-17-1 and Sections 75-17-19, 75-17-21, 75-17-23, 75-17-27, 75-17-29 and 75-17-33 shall not restrict the extension of credit pursuant to any other applicable law. A licensee under the Small Loan Regulatory Law (Section 75-67-101 et seq.), and the Small Loan Privilege Tax Law (Section 75-67-201 et seq.), may contract for and receive finance charges as authorized by Section 75-17-21, and the late payment charge as authorized by Section 75-17-27, regardless of the purpose for which the loan or other extension of credit is made.
SECTION 15. This act shall take effect and be in force from and after July 1, 2013.
