Bill Text: HI HB2609 | 2018 | Regular Session | Introduced
Bill Title: Relating To Short-term Loans.
Spectrum: Partisan Bill (Democrat 16-0)
Status: (Introduced - Dead) 2018-02-06 - The committee(s) on IAC recommend(s) that the measure be deferred. [HB2609 Detail]
Download: Hawaii-2018-HB2609-Introduced.html
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HOUSE OF REPRESENTATIVES |
H.B. NO. |
2609 |
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TWENTY-NINTH LEGISLATURE, 2018 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
relating to short-term loans.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The legislature finds that:
(1) Credit and liquidity are essential to modern consumers;
(2) Consumers with lower credit scores or no credit files have great difficulty in obtaining affordable credit;
(3) Current credit options for this market segment are expensive, can lead to cycles of debt, are only minimally supervised by the State, and have the potential for significant abuse; and
(4) There is a need for alternative forms of credit that are both affordable to borrowers yet adequately compensate lenders for the enhanced risk of default in the repayment of these loans.
The purpose of this Act is to authorize short-term loans that are affordable for borrowers with limited access to credit but provide a sufficient yield for lenders to compensate for the risks associated with making credit available to this currently underserved portion of the credit spectrum.
SECTION 2. The Hawaii Revised Statutes is amended by adding a new chapter to be appropriately designated and to read as follows:
"Chapter
SHORT-TERM LOANS
§ -1 Definitions. As used in this chapter, unless the context otherwise requires:
"Commissioner" means the commissioner of
financial institutions.
"Division" means the division of financial institutions within the department of commerce and consumer affairs.
"Precomputed loan" means a loan in which the debt is a sum comprising the principal amount and the amount of fees and interest computed in advance on the assumption that all scheduled payments will be made when due.
"Short-term
lender" means a lender that makes a short-term loan.
"Short-term
loan" means a loan made pursuant to and in compliance with this chapter.
§ -2 Short-term loans. (a) A short-term lender may engage in the business of making short-term loans provided
that each short-term loan meets all of the requirements of this chapter.
(b) The
principal amount of the short-term loan shall not exceed two
thousand dollars.
(c) The minimum duration of the short-term loan
is the number of months equal to the sum of the originally contracted loan
amount and all applicable charges divided by the total monthly payment. The maximum duration of the short-term loan
shall not exceed thirty months.
(d) The total monthly payment on the short-term loan shall not exceed an amount
that is eight per cent of the borrower's verified gross monthly income.
(e) Before making a short-term loan to a borrower,
a short-term lender shall make a reasonable attempt to verify the borrower's
income for purposes of subsection (d).
At a minimum, the short-term lender shall obtain from the borrower one
or more recent pay stubs or other written evidence of recurring income, such as
a bank statement. The written evidence
shall include at least one document that, when presented to the short-term
lender, is dated not earlier than forty-five days prior to the initiation of
the short-term loan transaction.
(f) The short-term
loan shall be made pursuant to a written loan contract that sets forth
the terms and conditions of the short-term loan. A copy of the loan contract shall be provided
to the borrower. The loan contract shall
disclose in a clear and concise manner all of the following:
(1) The total amount of fees and charges the borrower will be required to pay in connection with the short-term loan pursuant to the loan contract;
(2) The total amount of each payment, when each payment is due, and the total number of payments that the borrower will be required to make under the loan contract;
(3) A statement, printed in boldface type of the minimum size of ten points, as follows: "WARNING: The cost of this loan is higher than the average cost charged by financial institutions on substantially similar loans.";
(4) A statement, printed in a minimum font size of ten points, which informs the borrower that complaints regarding the short-term loan or lender may be submitted to the commissioner and includes the correct telephone number and mailing address for the commissioner;
(5) A statement, printed in a minimum font size of ten points, as follows: "You have the right to rescind or cancel this loan if you do so by five p.m. of the business day immediately following the day you receive this contract.";
(6) A statement, printed in a minimum font size of ten points, as follows: "Electronic payment is optional. You have the right to revoke or remove your authorization for electronic payment at any time."; and
(7) Any disclosures required under the federal Truth in Lending Act (15 U.S.C. 1601, et seq.).
(g) The short-term
loan shall be a precomputed loan and shall be payable in substantially
equal installments of principal, fees, and interest combined.
(h) The short-term
loan may be rescinded or canceled on or before five p.m. of the business
day immediately following the day of the short-term loan transaction; provided
that, at the time of the rescission, all funds received by the borrower are
returned to the short-term lender at the location of the original transaction
in United States currency. In the event
the original transaction was not transacted in person, then any attempted rescission
shall be not be valid unless the borrower returns the funds either:
(1) By automated clearing house (ACH) transaction from an insured depository institution if ACH time-stamped on or before the date and time of expiration of the rescission period; or
(2) By United States mail if postmarked on or before the date and time of expiration of the rescission period.
(i) A short-term lender may charge, collect, and
receive only the following fees and charges in connection with a
short-term loan:
(1) Interest at a rate not exceeding thirty-six per cent; provided that the monthly maintenance fee described in subsection (i)(2) shall not be included in the calculation of interest;
(2) A monthly maintenance fee that does not exceed the lesser of six dollars per each one hundred dollars of the originally contracted loan amount, or thirty dollars, provided that the fee is not added to the loan balance on which interest is charged; provided, further, that a short-term lender shall not charge, collect, or receive a monthly maintenance fee if the borrower is a person on active duty in the armed forces of the United States or a dependent of that person;
(3) One check collection charge per loan not exceeding an amount equal to twenty-five dollars per calendar year plus any amount passed on from a financial institutions for each check, negotiable order of withdrawal, share draft, or other negotiable instrument returned or dishonored for any reason, provided that the terms and conditions upon which check collection charges will be charged to the borrower are set forth in the written loan contract described in subsection (f); and
(4) Damages, costs, and disbursements to which the short-term lender may become entitled to by law in connection with any civil action to collect a loan after default, provided that the total amount of damages and costs shall not exceed the originally contracted loan amount.
(j) A short-term lender may refinance a short-term loan provided that all
of the following apply to the refinanced loan:
(1) The loan is a short-term loan;
(2) Interest on the loan does not exceed a rate of thirty-six per cent; and
(3) The short-term lender does not charge, collect, or receive the monthly maintenance fee described in subsection (i)(2).
(k) For purposes of
this section, the monthly maintenance fee is considered to be fully earned at
the beginning of each calendar month.
(l) No short-term lender shall
make a short-term loan to a borrower that includes a demand feature that
permits the short-term lender, in the event the borrower fails to meet the
repayment terms for any outstanding balance, to terminate the short-term loan
in advance of the original maturity date and to demand repayment of the entire
outstanding balance, unless both of the following requirements are met:
(1) Not earlier than ten days after the borrower's payment was due, the short-term lender provides written notice to the borrower of the termination of the short-term loan; and
(2) In addition to the outstanding balance, the short-term lender collects only prorated interest and the fees earned up to the termination of the short-term loan. For purposes of this subsection, the outstanding balance and prorated interest and fees shall be calculated as if the borrower had voluntarily prepaid the short-term loan in full on the date of termination.
(m) A
short-term lender shall not charge, collect, or receive in connection with a
short-term loan a total amount of fees and charges that exceeds fifty per cent
of the originally contracted loan amount.
For purposes of this section, all charges made in connection with the
short-term loan shall be included when calculating the total loan charges except
for both of the following:
(1) The check collection charge authorized under subsection (i)(3); and
(2) The interest charges on a loan that is refinanced in accordance with subsection (j).
(n) Any interest, fees, and charges charged for a
short-term loan in compliance with this section shall be exempt from chapter
478.
§ -3
Prohibition on multiple loans. Except as otherwise provided in section
-2(j), no short-term lender shall make a short-term loan to a
borrower if there exists an outstanding loan between the borrower and any of
the following:
(1) A short-term lender;
(2) A person related to a short-term lender by common ownership or control;
(3) A
person in whom a short-term lender has any financial interest of ten per cent
or more; or
(4) Any employee or agent of a short-term lender.
§ -4 Limitation
on collection attempts. A
short-term lender shall not attempt to collect from a borrower's account after
two consecutive attempts have failed, unless the short-term lender obtains new
written authorization from the borrower to electronically transfer or withdraw
funds from the borrower's account.
§ -5
Registration. (a) A short-term lender
shall register with the commissioner prior to engaging in the business of
making short-term loans.
(b) Each short-term lender agency shall renew its registration on or before
December 31 of each odd-numbered year.
(c) In addition to any
other action authorized by law, the commissioner may
revoke, suspend, or refuse to renew the registration of any short-term lender
that violates this chapter.
§ -6 Maintenance of books and records. (a)
Every short-term lender shall keep and
use in the short-term lender's business such books, accounts, records, and loan
documents as will enable the commissioner to determine whether the short-term
lender is complying with the requirements of this chapter relating to
short-term loans.
(b) Every
short-term lender shall preserve the
books, accounts, records, and loan documents pertaining to short-term loans
made under this chapter for at least
one year after making the final entry on, or final revision of any loan
document relative to, any short-term loan recorded therein.
(c) Accounting
systems maintained in whole or in part by mechanical or electronic data
processing methods that provide information equivalent to that otherwise
required are acceptable for this purpose.
§ -7 Civil penalties. The commissioner
may assess a fine against a person who violates this chapter or a rule adopted
under this chapter in an amount not to exceed $
per day for each day the violation is outstanding, plus the State's costs and
expenses for the investigation and prosecution of the matter, including
reasonable attorneys' fees.
§ -8 Administrative
procedures. All administrative proceedings under this chapter shall be
conducted in accordance with chapter 91.
§ -9 Hearings. The
commissioner may not assess a civil penalty without notice and an opportunity
to be heard.
§ -10 Division functions. (a) The division shall exercise all
administrative functions of the State in relation to the regulation of
short-term loans pursuant to this chapter.
(b) The division shall interpret and carry out the provisions of this chapter.
§ -11 Rules. The commissioner may adopt rules pursuant to chapter 91 to implement this chapter."
SECTION 3. The commissioner of financial institutions shall review short-term loans made pursuant to this Act for a period of two years following the effective date of this Act, and shall submit a report of its findings and recommendations, including any proposed legislation, to the legislature no later than twenty days prior to the convening of the regular session of 2021 on the availability and affordability of short-term loans, and on whether the existing authorization for payday loans in section 480F-4, Hawaii Revised Statutes, should be repealed.
SECTION 4. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.
SECTION 5. This Act shall take effect on July 1, 2018; provided that section 2 of this Act shall be repealed on June
30, 2020. The repeal of section 2 of this Act shall not affect the validity of any short-term loan made prior to June 30, 2020.
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INTRODUCED BY: |
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Report Title:
Short-Term Loans; Division of Financial Institutions; PayDay Lending
Description:
Authorizes and regulates short-term lending in the State such that short-term loans shall not exceed a term of thirty months, require payments not to exceed eight per cent of the borrower's gross monthly income, and other conditions.
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.
