Bill Text: IA HF2485 | 2017-2018 | 87th General Assembly | Introduced
Bill Title: A bill for an act requiring the licensure of small dollar installment loan businesses, and providing criminal and civil penalties. (Formerly HSB 189.)
Sponsorship: Committee Bill
Status: (Introduced - Dead) 2018-04-09 - Introduced, placed on Ways and Means calendar. H.J. 756. [HF2485 Detail]
Download: Iowa-2017-HF2485-Introduced.html
House File 2485 - Introduced HOUSE FILE BY COMMITTEE ON WAYS AND MEANS (SUCCESSOR TO HSB 189) A BILL FOR 1 An Act requiring the licensure of small dollar installment loan 2 businesses, and providing criminal and civil penalties. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: TLSB 2667HV (4) 87 gh/rn PAG LIN 1 1 Section 1. NEW SECTION. 536B.1 Title. 1 2 This chapter shall be known and may be cited as the "Iowa 1 3 Small Dollar Installment Loan Act". 1 4 Sec. 2. NEW SECTION. 536B.2 Definitions. 1 5 As used in this chapter, unless the context otherwise 1 6 requires: 1 7 1. "Annual percentage rate" means the measure of the cost 1 8 of credit, expressed as a yearly rate, that relates the amount 1 9 extended to a consumer on a small dollar installment loan to 1 10 the amount and timing of payments made, as computed under the 1 11 federal Truth in Lending Act. 1 12 2. "Consumer" means an individual who obtains a small dollar 1 13 installment loan. 1 14 3. "Federal Truth in Lending Act" means as defined in 1 15 section 537.1302. 1 16 4. "Finance charge" means the amount payable by a consumer 1 17 incident to or as a condition of the extension of a small 1 18 dollar installment loan but excluding other fees allowed under 1 19 section 536B.22. 1 20 5. "Licensee" means a person licensed pursuant to this 1 21 chapter. 1 22 6. "Person" means the same as defined in section 533D.2. 1 23 7. "Regularly engaged in the business" means any of the 1 24 following: 1 25 a. Advertising to or making any other solicitation to a 1 26 resident of this state to offer a small dollar installment loan 1 27 within this state. 1 28 b. Making three or more small dollar installment loans 1 29 within a calendar year to residents of this state. 1 30 8. "Small dollar installment loan" is a loan in which all of 1 31 the following are applicable: 1 32 a. The debt is incurred for a personal, family, or household 1 33 purpose. 1 34 b. The debt is not less than five hundred dollars and not 1 35 more than one thousand dollars. 2 1 c. The debt is unsecured. 2 2 d. The lender holds the consumer's check or checks 2 3 for a specified period, or obtains the consumer's written 2 4 authorization to debit the consumer's account, other than as 2 5 a result of default, under an agreement, either express or 2 6 implied, for a specified period, before the lender does any of 2 7 the following: 2 8 (1) Offers the check or checks for deposit or presentment. 2 9 (2) Exercises the consumer's written authorization to debit 2 10 the consumer's account. 2 11 e. The debt is payable in biweekly, semimonthly, or monthly 2 12 payment installments, in accordance with the dates that the 2 13 consumer is scheduled to receive income payments. 2 14 f. The debt is subject to prepayment in whole or in part at 2 15 any time without penalty. 2 16 g. The term length of the loan is not less than six months 2 17 and not more than twelve months. 2 18 9. "Small dollar installment loan business" means a person 2 19 who advertises to make, solicit, or hold the person out to make 2 20 a small dollar installment loan to a consumer in this state. 2 21 10. "Superintendent" means the superintendent of banking 2 22 within the banking division of the department of commerce. 2 23 Sec. 3. NEW SECTION. 536B.3 Exemptions. 2 24 This chapter shall not apply to any of the following: 2 25 1. A person who does business under the authority of a 2 26 law of this state, or any other state while regulated by a 2 27 state agency of that other state, or of the United States, 2 28 relating to banks, savings banks, trust companies, savings and 2 29 loan associations, profit sharing and pension trusts, credit 2 30 unions, insurance companies, or receiverships if the person 2 31 is regulated by the other law or under the jurisdiction of a 2 32 court. 2 33 2. A person who is not regularly engaged in the business of 2 34 making a small dollar installment loan. 2 35 3. A person who is licensed pursuant to another law of this 3 1 state to the extent that the person's activities are governed 3 2 by that law. 3 3 4. A consumer loan to the extent provided under chapter 3 4 533D, 535C, 536, 536A, 536C, or 537. 3 5 Sec. 4. NEW SECTION. 536B.4 License required ==== application 3 6 process ==== display. 3 7 1. A person shall not operate a small dollar installment 3 8 loan business in this state unless the person is physically 3 9 located in this state and licensed by the superintendent as 3 10 provided in this chapter. 3 11 2. An applicant for a license shall submit an application to 3 12 the superintendent on forms prescribed by the superintendent. 3 13 The forms shall contain such information as the superintendent 3 14 may prescribe. 3 15 3. The application required by this section shall be 3 16 submitted with the following: 3 17 a. An application fee of one hundred dollars. 3 18 b. A surety bond executed by a surety company authorized to 3 19 do business in this state in the sum of twenty=five thousand 3 20 dollars, which bond shall be continuous in nature until 3 21 canceled by the surety. A surety shall provide at least 3 22 thirty days' notice in writing to the licensee and to the 3 23 superintendent indicating the surety's intent to cancel the 3 24 bond and the effective date of the cancellation. The surety 3 25 bond shall be for the benefit of the citizens of this state and 3 26 shall be conditioned upon the licensee's willingness to comply 3 27 with this chapter, the faithful performance by the licensee 3 28 of the duties and obligations pertaining to the small dollar 3 29 installment loan business so licensed, and the prompt payment 3 30 of any judgment recovered against the licensee. The surety's 3 31 liability under this chapter is limited to the amount of the 3 32 bond regardless of the number of years the bond is in effect. 3 33 4. The superintendent shall issue a license to an applicant 3 34 if the superintendent finds all of the following: 3 35 a. The experience, character, and general fitness of the 4 1 applicant and its officers, directors, shareholders, partners, 4 2 or members are such as to warrant a finding that the applicant 4 3 will conduct the small dollar installment loan business 4 4 honestly, fairly, and efficiently. 4 5 b. The applicant and its officers, directors, shareholders, 4 6 partners, or members have not been convicted of a felony in 4 7 this state, or convicted of a crime in another jurisdiction 4 8 which would be a felony in this state. 4 9 c. The applicant is financially responsible and will conduct 4 10 the small dollar installment loan business pursuant to this 4 11 chapter and other applicable laws. 4 12 d. The applicant has unencumbered assets of at least 4 13 twenty=five thousand dollars available for operating the small 4 14 dollar installment loan business. 4 15 5. The superintendent shall approve or deny an application 4 16 for a license by written order not more than ninety days after 4 17 the filing of an application. An order of the superintendent 4 18 issued pursuant to this section may be appealed pursuant to 4 19 chapter 17A. 4 20 6. a. A license issued pursuant to this chapter shall 4 21 be conspicuously posted at the licensee's place of business. 4 22 A license shall remain in effect until the next succeeding 4 23 January 1, unless earlier suspended or revoked by the 4 24 superintendent. 4 25 b. A license shall be renewed annually by filing with the 4 26 superintendent on or before December 1 an application for 4 27 renewal containing such information as the superintendent may 4 28 require to indicate any material change in the information 4 29 contained in the original application or succeeding renewal 4 30 applications and a renewal fee of two hundred fifty dollars. 4 31 c. The superintendent may assess a late fee of ten dollars 4 32 per day for applications submitted and accepted for processing 4 33 after December 1. 4 34 7. The superintendent may authorize applicants and 4 35 licensees to be licensed through a nationwide licensing system 5 1 and to pay the corresponding system processing fees. The 5 2 superintendent may establish by rule or order new requirements 5 3 as necessary, including but not limited to requirements that 5 4 applicants, including officers and directors and those who have 5 5 control of the applicant, submit to fingerprinting and criminal 5 6 history checks. 5 7 8. For the purposes of this section and in order to reduce 5 8 the points of contact which the federal bureau of investigation 5 9 may be required to maintain for purposes of subsection 7, 5 10 the superintendent may use the nationwide licensing system 5 11 as a channeling agent for requesting information from and 5 12 distributing information to the United States department of 5 13 justice or other governmental agency, or to or from any other 5 14 source so directed by the superintendent. 5 15 Sec. 5. NEW SECTION. 536B.5 Surrender of license. 5 16 A licensee may surrender a small dollar installment loan 5 17 license by delivering to the superintendent written notice that 5 18 the license is surrendered. The surrender does not affect the 5 19 licensee's civil or criminal liability for acts committed prior 5 20 to such surrender, the liability of the surety on the bond, or 5 21 entitle such licensee to a return of any part of the annual 5 22 license fee. The superintendent may establish procedures for 5 23 the disposition of the books, accounts, and records of the 5 24 licensee and may require such action as deemed necessary for 5 25 the protection of the makers of checks which are outstanding at 5 26 the time of surrender of the license. 5 27 Sec. 6. NEW SECTION. 536B.6 Change in circumstances ==== 5 28 notification of superintendent. 5 29 A licensee is to notify the superintendent in writing 5 30 within thirty days of the occurrence of a material development 5 31 affecting the licensee, including but not limited to any of the 5 32 following: 5 33 1. Filing for bankruptcy or reorganization. 5 34 2. Reorganization of the business. 5 35 3. Commencement of license revocation or any other civil or 6 1 criminal proceedings by any other state or jurisdiction. 6 2 4. The filing of a criminal indictment or complaint against 6 3 the licensee or any of the licensee's officers, directors, 6 4 shareholders, partners, members, employees, or agents. 6 5 5. A felony conviction against the licensee or any of 6 6 the licensee's officers, directors, shareholders, partners, 6 7 members, employees, or agents. 6 8 Sec. 7. NEW SECTION. 536B.7 Continued operation after 6 9 change in ownership ==== approval of superintendent required. 6 10 1. The prior written approval of the superintendent 6 11 is required for the continued operation of a small dollar 6 12 installment loan business whenever a change in control of a 6 13 licensee is proposed. The person requesting such approval 6 14 shall pay to the superintendent a fee of one hundred dollars. 6 15 Control in the case of a corporation means direct or indirect 6 16 ownership of, or the right to control, ten percent or more 6 17 of the voting shares of the corporation, or the ability of 6 18 a person to elect a majority of the directors or otherwise 6 19 effect a change in policy. Control in the case of any other 6 20 entity means any change in the principals of the organization, 6 21 whether active or passive. The superintendent may require 6 22 information deemed necessary to determine whether a new 6 23 application is required. Costs incurred by the superintendent 6 24 in investigating a change of control request shall be paid by 6 25 the person requesting such approval. 6 26 2. A license issued pursuant to this chapter is not 6 27 transferable or assignable. 6 28 Sec. 8. NEW SECTION. 536B.8 Principal place of business ==== 6 29 branch offices authorized. 6 30 1. Except as provided in subsection 2, a licensee may 6 31 operate a small dollar installment loan business only at an 6 32 office designated as its principal place of business in the 6 33 application. The licensee shall maintain its books, accounts, 6 34 and records at its designated principal place of business. A 6 35 licensee may change the location of its designated principal 7 1 place of business with the prior written approval of the 7 2 superintendent. The superintendent shall establish forms and 7 3 procedures for determining whether the change of location 7 4 should be approved. 7 5 2. A licensee may operate branch offices only in the same 7 6 county in which the licensee's designated principal place of 7 7 business is located. The licensee may establish a branch 7 8 office or change the location of a branch office with the prior 7 9 written approval of the superintendent. The superintendent 7 10 shall establish forms and procedures for determining whether 7 11 the location of a branch office should be approved. 7 12 3. A fee of twenty=five dollars shall be paid to the 7 13 superintendent for each request made pursuant to subsection 7 14 1 or 2 for a change of location. For each new branch office 7 15 established, a fee of two hundred fifty dollars shall be paid 7 16 to the superintendent. 7 17 Sec. 9. NEW SECTION. 536B.9 Notice of name change. 7 18 A licensee shall notify the superintendent thirty days in 7 19 advance of the effective date of a change in the name of the 7 20 licensee. With the notice of change, the licensee shall submit 7 21 a fee of twenty=five dollars per license to the superintendent. 7 22 Sec. 10. NEW SECTION. 536B.10 Other business operations 7 23 at same site ==== restrictions. 7 24 1. A licensee may operate a small dollar installment loan 7 25 business at a location where any other business is operated or 7 26 in association or conjunction with any other business with the 7 27 written approval of the superintendent and consistent with both 7 28 of the following requirements: 7 29 a. The books, accounts, and records of the small dollar 7 30 installment loan business are kept and maintained separate 7 31 and apart from the books, accounts, and records of the other 7 32 business. 7 33 b. The other business is not of a type which would tend 7 34 to enable the concealment of acts engaged in to evade the 7 35 requirements of this chapter. If the superintendent determines 8 1 upon investigation that the other business is of a type which 8 2 would conceal such acts the superintendent shall order the 8 3 licensee to cease the operation of the small dollar installment 8 4 loan business at the location. 8 5 2. The department may order the licensee to cease operations 8 6 of the business if it fails to obtain written approval of the 8 7 superintendent before operating a business in association or 8 8 conjunction with services provided under this chapter. 8 9 Sec. 11. NEW SECTION. 536B.11 Examination of records by 8 10 superintendent ==== fees. 8 11 1. The superintendent shall examine the books, accounts, 8 12 and records of each licensee at least once a year and as needed 8 13 to secure information required pursuant to this chapter and to 8 14 determine whether any violations of this chapter have occurred. 8 15 The licensee shall pay the cost of the examination. 8 16 2. The superintendent may examine or investigate complaints 8 17 or reports concerning alleged violations of this chapter or 8 18 any rule adopted or order issued by the superintendent. The 8 19 superintendent may order the actual cost of the examination or 8 20 investigation to be paid by the person who is the subject of 8 21 the examination or investigation, whether or not the alleged 8 22 violator is licensed. 8 23 3. The superintendent shall determine the cost of the 8 24 examination or investigation based upon the actual cost of the 8 25 operation of the finance bureau of the banking division of 8 26 the department of commerce, including the proportionate share 8 27 of administrative expenses in the operation of the banking 8 28 division attributable to the finance bureau as determined by 8 29 the superintendent, incurred in the discharge of duties imposed 8 30 upon the superintendent by this chapter. 8 31 4. Failure to pay the examination or investigation fee 8 32 within thirty days of receipt of demand from the superintendent 8 33 shall subject the licensee to a late fee of up to five percent 8 34 of the amount of the examination or investigation fee for each 8 35 day the payment is delinquent. 9 1 5. The superintendent may disclose information to 9 2 representatives of other state or federal regulatory 9 3 authorities. The superintendent may release summary complaint 9 4 information so long as the information does not specifically 9 5 identify the complainant. The superintendent may prepare 9 6 and circulate reports reflecting financial information and 9 7 examination results for all licensees on an aggregate basis, 9 8 including other information considered pertinent to the purpose 9 9 of each report for general statistical information. The 9 10 superintendent may prepare and circulate reports provided 9 11 by law. The superintendent may release the reports and 9 12 correspondence in the course of an enforcement proceeding or 9 13 a hearing held by the superintendent. The superintendent may 9 14 also provide this information to the attorney general for 9 15 purposes of enforcing this chapter or the consumer fraud Act, 9 16 section 714.16. 9 17 6. The superintendent may receive documents, materials, 9 18 or other information, including otherwise confidential and 9 19 privileged documents, materials, or other information, through 9 20 a nationwide licensing system and from other local, state, 9 21 federal, or international regulatory agencies, the conference 9 22 of state bank supervisors and its affiliates and subsidiaries, 9 23 the national association of consumer credit administrators 9 24 and its affiliates and subsidiaries, and any other regulator 9 25 association, and shall maintain as confidential and privileged 9 26 any such document, material, or other information received 9 27 with notice or the understanding that it is confidential or 9 28 privileged under the laws of the jurisdiction that is the 9 29 source of the document, material, or other information. 9 30 Sec. 12. NEW SECTION. 536B.12 Disciplinary action. 9 31 1. The superintendent may, after notice and hearing 9 32 pursuant to chapter 17A, take disciplinary action against a 9 33 licensee if the superintendent finds any of the following: 9 34 a. The licensee or any of its officers, directors, 9 35 shareholders, partners, or members has violated this chapter, 10 1 any rule adopted by the superintendent, or any other state or 10 2 federal law applicable to the conduct of its business. 10 3 b. The licensee has failed to pay a license fee required 10 4 under this chapter or to maintain in effect the bond or bonds 10 5 required under this chapter. 10 6 c. A fact or condition existing which, if it had existed 10 7 at the time of the original application for the license, would 10 8 have resulted in the denial of issuance of a license. 10 9 d. The licensee has abandoned its place of business for a 10 10 period of sixty days or more. 10 11 e. The licensee fails to pay an administrative penalty or 10 12 the cost of investigation as ordered by the superintendent. 10 13 f. The licensee has violated an order of the superintendent. 10 14 2. The superintendent may impose one or more of the 10 15 following disciplinary actions against a licensee: 10 16 a. Revoke a license. 10 17 b. Suspend a license until further order of the 10 18 superintendent or for a specified period of time. 10 19 c. Impose a period of probation under specified conditions. 10 20 d. Impose civil penalties in an amount not to exceed five 10 21 thousand dollars for each violation. 10 22 e. Issue a citation and warning respecting licensee 10 23 behavior. 10 24 f. Order the licensee to pay restitution. 10 25 3. The superintendent may order an emergency suspension 10 26 of a licensee's license pursuant to section 17A.18A. A 10 27 written order containing the facts or conduct which warrants 10 28 the emergency action shall be timely sent to the licensee by 10 29 restricted certified mail. Upon issuance of the suspension 10 30 order, the licensee must also be notified of the right to an 10 31 evidentiary hearing. A suspension proceeding shall be promptly 10 32 instituted and determined. 10 33 4. Except as provided in this section, a license shall 10 34 not be revoked or suspended except after notice and a hearing 10 35 thereon in accordance with chapter 17A. 11 1 5. A licensee may surrender a license by delivering to the 11 2 superintendent written notice of surrender, but a surrender 11 3 does not affect the licensee's civil or criminal liability for 11 4 acts committed before the surrender. 11 5 6. A revocation, suspension, or surrender of a license does 11 6 not impair or affect the obligation of a preexisting lawful 11 7 contract between the licensee and any person, including a 11 8 debtor. 11 9 Sec. 13. NEW SECTION. 536B.13 Cease and desist order ==== 11 10 injunction. 11 11 1. If the superintendent believes that any person has 11 12 engaged in or is about to engage in an act or practice 11 13 constituting a violation of this chapter or any rule adopted 11 14 or order issued by the superintendent, the superintendent may 11 15 issue and serve on the person a cease and desist order. Upon 11 16 entry of a cease and desist order the superintendent shall 11 17 promptly notify in writing all persons to whom the order is 11 18 directed that it has been entered and the reasons for the 11 19 order. Any person to whom the order is directed may request 11 20 in writing a hearing within fifteen business days after the 11 21 date of the issuance of the order. Upon receipt of the written 11 22 request, the matter shall be set for hearing within fifteen 11 23 business days of the receipt by the superintendent, unless 11 24 the person requesting the hearing consents to a later date. 11 25 If a hearing is not requested within fifteen business days 11 26 and none is ordered by the superintendent, the order of the 11 27 superintendent shall automatically become final and remain in 11 28 effect until modified or vacated by the superintendent. If 11 29 a hearing is requested or ordered, the superintendent, after 11 30 notice and hearing, shall issue written findings of fact and 11 31 conclusions of law and shall affirm, vacate, or modify the 11 32 order. 11 33 2. The superintendent may vacate or modify an order if 11 34 the superintendent finds that the conditions which caused 11 35 its entry have changed or that it is otherwise in the public 12 1 interest to do so. Any person aggrieved by a final order of the 12 2 superintendent may appeal the order as provided in chapter 17A. 12 3 3. If it appears that a person has engaged in or is engaging 12 4 in an act or practice in violation of this chapter, the 12 5 attorney general may initiate an action in the district court 12 6 to enjoin such acts or practices and to enforce compliance with 12 7 this chapter. Upon a showing of a violation of this chapter, 12 8 a permanent or temporary injunction, restraining order, or 12 9 writ of mandamus shall be granted or a receiver or conservator 12 10 may be appointed to oversee the person's assets. The attorney 12 11 general shall not be required to post a bond. 12 12 Sec. 14. NEW SECTION. 536B.14 Administrative penalty. 12 13 1. If the superintendent finds, after notice and hearing 12 14 as provided in this chapter, that a person has violated this 12 15 chapter, a rule adopted pursuant to this chapter, or an order 12 16 of the superintendent, the superintendent may order the person 12 17 to pay an administrative fine of not more than five thousand 12 18 dollars for each violation, in addition to the costs of 12 19 investigation. 12 20 2. If a person fails to pay an administrative fine and the 12 21 costs of investigation ordered pursuant to subsection 1, a 12 22 lien in the amount of the fine and costs may be imposed upon 12 23 all assets and property of the person in this state and may be 12 24 recovered in a civil action by the superintendent. Failure of 12 25 the person to pay the fine and costs constitutes a separate 12 26 violation of this chapter. 12 27 Sec. 15. NEW SECTION. 536B.15 Criminal violation ==== 12 28 operation of business without license ==== injunction. 12 29 A person required to be licensed under this chapter who 12 30 operates a small dollar installment loan business in this state 12 31 without first obtaining a license under this chapter or while 12 32 such license is suspended or revoked by the superintendent is 12 33 guilty of a serious misdemeanor. In addition to the criminal 12 34 penalty provided for in this section, the superintendent 12 35 may also commence an action to enjoin the operation of the 13 1 business. 13 2 Sec. 16. NEW SECTION. 536B.16 Impairment of preexisting 13 3 loan. 13 4 1. The revocation, suspension, surrender, expiration, or 13 5 alteration of a license provided under this chapter shall not 13 6 impair or affect any of the following: 13 7 a. The obligation of a lawful preexisting small dollar 13 8 installment loan between a small dollar installment loan 13 9 business and a consumer. 13 10 b. The ability or right of a small dollar installment loan 13 11 business to service a preexisting small dollar installment loan 13 12 from outside this state. 13 13 2. If this chapter or any part of this chapter is modified, 13 14 amended, or repealed, resulting in a cancellation or alteration 13 15 of any small dollar installment loan business license or 13 16 right of a licensee under this chapter, that cancellation or 13 17 alteration shall not impair or affect the obligation of any 13 18 preexisting contract between a small dollar installment loan 13 19 business and any consumer. 13 20 Sec. 17. NEW SECTION. 536B.17 Restrictions. 13 21 1. A licensee shall not knowingly advertise, display, 13 22 distribute, broadcast, or televise, or cause or allow to be 13 23 advertised, displayed, distributed, broadcast, or televised, in 13 24 any manner, any false, misleading, or deceptive statement or 13 25 representation with regard to the rates, terms, or conditions 13 26 of a small dollar installment loan. To the extent applicable, 13 27 all advertising shall comply with the advertising requirements 13 28 specified in the federal Truth in Lending Act. 13 29 2. a. A licensee shall not provide a small dollar 13 30 installment loan with an annual percentage rate greater than 13 31 that provided in 10 U.S.C. {987(b), to any of the following: 13 32 (1) A member of the United States armed forces who is on 13 33 active duty under a call or order that does not specify a 13 34 period of thirty days or less. 13 35 (2) A person on active national guard duty or armed forces 14 1 military reserve active duty. 14 2 (3) A dependent as defined in 10 U.S.C. {987(i). 14 3 b. A licensee shall not provide a small dollar installment 14 4 loan to a consumer unless the consumer has signed a statement, 14 5 to be included as part of the loan, attesting to whether or not 14 6 the consumer is a military member or a dependent as defined 14 7 in 10 U.S.C. {987(i). The statement shall be in the form as 14 8 prescribed by the superintendent by rule. 14 9 c. An unsecured consumer loan made in violation of 10 U.S.C. 14 10 {987 is void and its terms and conditions unenforceable. 14 11 Sec. 18. NEW SECTION. 536B.18 Rules. 14 12 The superintendent may adopt rules to administer this 14 13 chapter. 14 14 Sec. 19. NEW SECTION. 536B.19 Noncompliance. 14 15 1. A small dollar installment loan that is provided by 14 16 a person who is required to be licensed under this chapter 14 17 but who is not licensed is void and its terms and conditions 14 18 unenforceable. 14 19 2. Except as provided in subsection 1 and section 536B.17, 14 20 subsection 2, failure to comply with this chapter shall 14 21 not affect the validity or enforceability of a small dollar 14 22 installment loan. 14 23 Sec. 20. NEW SECTION. 536B.20 Disclosures. 14 24 1. To the extent applicable, a licensee shall comply with 14 25 the disclosure requirements as set forth in the federal Truth 14 26 in Lending Act. 14 27 2. A licensee shall conspicuously display a sign printed 14 28 in at least twelve=point bold font type at each desk in the 14 29 licensed office and licensed branch office where small dollar 14 30 installment loan transactions are conducted with the following 14 31 disclosure: 14 32 Notice: Before signing any loan documents or otherwise 14 33 committing to a loan, you may take copies of those documents 14 34 away from the small dollar installment loan business's place 14 35 of business for review. 15 1 3. A licensee providing electronic small dollar installment 15 2 loans shall conspicuously display the following disclosure on 15 3 the licensee's internet site: 15 4 Notice: Before signing any loan documents or otherwise 15 5 committing to a loan, please read our terms and conditions 15 6 carefully. 15 7 4. A licensee who fails to provide disclosures as required 15 8 under this section shall be subject to a civil penalty not to 15 9 exceed three hundred dollars for each violation. 15 10 Sec. 21. NEW SECTION. 536B.21 Finance charge. 15 11 1. A licensee may charge a finance charge on a small dollar 15 12 installment loan at a rate not to exceed twenty percent of the 15 13 first five hundred dollars loaned, plus seven and one=half 15 14 percent of any amount in excess of five hundred dollars loaned. 15 15 The finance charge shall be deemed fully earned as of the date 15 16 of the small dollar installment loan transaction and shall not 15 17 be refundable or prorated in the event of prepayment. 15 18 2. This section does not authorize the compounding of a 15 19 finance charge. 15 20 Sec. 22. NEW SECTION. 536B.22 Other fees and charges. 15 21 1. In addition to a finance charge authorized under section 15 22 536B.21, a licensee may collect any of the following fees or 15 23 charges: 15 24 a. A monthly maintenance fee on each small dollar 15 25 installment loan at a rate not to exceed eleven dollars and 15 26 twenty=five cents per one hundred dollars loaned. Such fee 15 27 shall be refundable to the consumer on a pro rata basis upon 15 28 prepayment in full prior to the maturity date of the loan. 15 29 b. A delinquency charge if an installment is not paid in 15 30 full within seven days, equal to five percent of the amount of 15 31 the installment. 15 32 c. Court costs and reasonable attorney fees if the small 15 33 dollar installment loan is referred for collection to an 15 34 attorney other than an employee of the licensee. 15 35 d. A dishonored check service fee if a licensee receives 16 1 a check, draft, negotiable order of withdrawal, or similar 16 2 instrument that is not paid or is not honored by a depository 16 3 institution, equal to the actual charges assessed by the 16 4 depository institution. 16 5 2. A licensee shall not directly or indirectly charge, 16 6 contract for, or receive any other amount in connection with 16 7 a small dollar installment loan except as provided in this 16 8 chapter. 16 9 EXPLANATION 16 10 The inclusion of this explanation does not constitute agreement with 16 11 the explanation's substance by the members of the general assembly. 16 12 This bill creates new Code chapter 536B to require licensure 16 13 of persons who wish to provide small dollar installment loans 16 14 to residents of the state. 16 15 The bill defines "small dollar installment loan" to mean 16 16 a loan that is incurred for a personal, family, or household 16 17 purpose, is not less than $500 and not more than $1,000, is 16 18 unsecured, is held for a specified period, is payable in 16 19 biweekly, semimonthly, or monthly payment installments, is 16 20 subject to prepayment in whole or in part at any time without 16 21 penalty, and is for a term length of a minimum of six months and 16 22 a maximum of 12 months. 16 23 The bill exempts the following persons from the requirements 16 24 of the bill: a person who does business under any law relating 16 25 to banks, savings banks, trusts, savings and loan associations, 16 26 profit sharing and pension trusts, credit unions, insurance 16 27 companies, or receiverships, a person who is not regularly 16 28 engaged in the business of making small dollar installment 16 29 loans, as defined in the bill, a person who is licensed 16 30 pursuant to another Iowa Code chapter to the extent that 16 31 the person's activities are governed by that Code chapter, 16 32 or a consumer loan with a finance charge as permitted under 16 33 specified law. 16 34 The bill prohibits a person from operating a small dollar 16 35 installment loan business in the state unless the person is 17 1 physically located in the state and is licensed pursuant to 17 2 the bill. The bill requires an application for a license 17 3 to include an application fee of $100 and a surety bond, as 17 4 described in the bill. The superintendent of banking shall 17 5 issue a license pursuant to the bill if the superintendent 17 6 finds all of the following: the experience, character, and 17 7 general fitness of the applicant is such as to warrant a 17 8 finding that the applicant will conduct the small dollar 17 9 installment loan business honestly, fairly, and efficiently; 17 10 the applicant has not been convicted of a felony; the 17 11 applicant is financially responsible; and the applicant has 17 12 unencumbered assets of at least $25,000 available for operating 17 13 the business. The superintendent shall approve or deny an 17 14 application for a license by written order within 90 days of 17 15 filing. 17 16 The bill requires a license issued pursuant to the bill to be 17 17 conspicuously posted at the licensee's place of business. A 17 18 license is valid until the next succeeding January 1, unless 17 19 earlier suspended or revoked. The bill provides that a license 17 20 shall be renewed annually by filing a renewal application with 17 21 the superintendent on or before December 1. The superintendent 17 22 may assess a late fee of $10 per day for a late renewal 17 23 application. The bill allows the superintendent to license 17 24 applicants through a nationwide licensing system and to use 17 25 such system as a channeling agent with the federal government. 17 26 The bill provides that a licensee may surrender a license by 17 27 delivering written notice to the superintendent. The surrender 17 28 shall not affect the licensee's criminal or civil liability 17 29 for acts committed prior to the surrender, the liability of 17 30 the surety bond, or payment of the annual license fee. The 17 31 superintendent may establish procedures for the disposition of 17 32 the surrendered licensee's books, accounts, and records and may 17 33 require any action necessary for the protection of outstanding 17 34 makers of checks. 17 35 The bill requires a licensee to notify the superintendent 18 1 in writing within 30 days upon any of the following: filing 18 2 for bankruptcy or reorganization; reorganization of the 18 3 business; commencement of license revocation or any other civil 18 4 or criminal proceedings by any other state or jurisdiction; 18 5 the filing of a criminal indictment or complaint against the 18 6 licensee or any other specified persons; or a felony conviction 18 7 against the licensee or any other specified persons. 18 8 The bill requires prior written approval of the 18 9 superintendent for the continued operation of a small dollar 18 10 installment loan business whenever a change in control 18 11 of a licensee is proposed, as described in the bill. The 18 12 person requesting such approval shall pay a $100 fee to 18 13 the superintendent, as well as any costs incurred by the 18 14 superintendent in investigating a change in control request. 18 15 A license issued pursuant to the bill is not transferable or 18 16 assignable. 18 17 The bill provides that a licensee may operate a small dollar 18 18 installment loan business only at its designated principal 18 19 place of business, where the licensee shall maintain its books, 18 20 accounts, and records. A licensee may change the location of 18 21 its principal place of business with the prior written approval 18 22 of the superintendent. A licensee may establish branch offices 18 23 in the same county in which the principal place of business is 18 24 located, with the prior written approval of the superintendent. 18 25 A licensee shall notify the superintendent 30 days in advance 18 26 of a change in the name of the licensee. A licensee shall 18 27 pay a $25 fee to the superintendent for a request to change 18 28 the location of a principal place of business, to establish a 18 29 branch office, or to provide notice of a name change. 18 30 The bill permits a licensee to operate a small dollar 18 31 installment loan business at a location where any other 18 32 business is operated with the written approval of the 18 33 superintendent, so long as the licensee's books, accounts, and 18 34 records are kept separate and apart from the other business, 18 35 and the other business is not of a type which would tend 19 1 to enable the concealment of acts engaged in to evade the 19 2 requirements of the bill. 19 3 The bill requires the superintendent to examine the books, 19 4 accounts, and records of each licensee at least once a year 19 5 and as needed to secure information required by the bill and 19 6 to determine whether any violations of the bill have occurred. 19 7 The licensee shall pay the cost of the examination. The 19 8 superintendent may also examine or investigate complaints or 19 9 reports concerning alleged violations of the bill, and may 19 10 order the actual cost of the examination or investigation as 19 11 specified in the bill be paid by the person subject to such 19 12 examination or investigation. Failure to pay the examination 19 13 or investigation fee within 30 days of receipt of demand shall 19 14 subject the licensee to a late fee of up to 5 percent of the 19 15 amount of the fee for each day the payment is delinquent. 19 16 The superintendent may disclose information to other state 19 17 or federal regulatory authorities and may receive documents, 19 18 materials, or other information through a nationwide licensing 19 19 system and from other regulatory agencies, as provided in the 19 20 bill. 19 21 The bill permits the superintendent to take disciplinary 19 22 action against a licensee, after notice and hearing, if the 19 23 superintendent finds any of the following: the licensee or any 19 24 other specified person has violated any provision of the bill, 19 25 any rule adopted by the superintendent, or any other applicable 19 26 state or federal law; the licensee has failed to pay a license 19 27 fee or to maintain in effect the required surety bond; a fact 19 28 or condition existing which would have resulted in the initial 19 29 denial of issuance of a license; the licensee has abandoned its 19 30 place of business for 60 days or more; or the licensee fails 19 31 to pay an administrative penalty or the cost of investigation 19 32 as ordered. The superintendent may impose one or more of the 19 33 following disciplinary actions against a licensee: revoke a 19 34 license; suspend a license; impose a period of probation under 19 35 specified conditions; impose civil or administrative penalties 20 1 in an amount not to exceed $5,000 per violation; issue a 20 2 citation and warning; or order the licensee to pay restitution. 20 3 The superintendent may also order an emergency suspension of 20 4 a license as provided in the bill. The bill provides that a 20 5 license shall not be revoked or suspended except after notice 20 6 and a hearing. 20 7 The bill permits the superintendent to issue a cease and 20 8 desist order on any person the superintendent believes is 20 9 engaged in or is about to engage in a violation of the bill 20 10 or any rule or order issued by the superintendent. The 20 11 bill provides procedures for notice and hearing for the 20 12 issuance of a cease and desist order, as provided in the bill. 20 13 After notice and hearing, if so requested or ordered, the 20 14 superintendent shall affirm, vacate, or modify the order. The 20 15 superintendent may vacate or modify an order if conditions 20 16 which caused its entry have changed or if it is otherwise 20 17 in the public interest to do so. The bill also permits the 20 18 attorney general to initiate action in district court if it 20 19 appears a person has engaged in or will engage in a violation 20 20 of the bill, as provided in the bill. 20 21 The bill provides that a person who operates a small dollar 20 22 installment loan business in the state without first obtaining 20 23 a license or while such license is suspended or revoked is 20 24 guilty of a serious misdemeanor. A serious misdemeanor is 20 25 punishable by confinement for no more than one year and a fine 20 26 of at least $315 but not more than $1,875. In addition, the 20 27 superintendent may commence an action to enjoin the operation 20 28 of the business. 20 29 The bill provides that the revocation, suspension, 20 30 surrender, cancellation, or alteration of a license will not 20 31 impair or affect the validity of a preexisting small dollar 20 32 installment loan or the ability of a lender to service a 20 33 preexisting loan outside of this state. 20 34 The bill prohibits a licensee from advertising in any false 20 35 or misleading manner with regards to the rates or terms of 21 1 a small dollar installment loan and requires a licensee to 21 2 comply with the advertising requirements in the federal Truth 21 3 in Lending Act. A licensee cannot provide a small dollar 21 4 installment loan to a military member or dependent, as defined 21 5 in 10 U.S.C. {987(i), with an annual percentage rate greater 21 6 than that provided in 10 U.S.C. {987(b). Before a licensee 21 7 may provide a small dollar installment loan, the consumer must 21 8 sign a statement attesting to whether or not the consumer is a 21 9 military member or dependent. A loan made in violation of 10 21 10 U.S.C. {987 is void and its terms and conditions unenforceable. 21 11 The bill requires a licensee to comply with the disclosure 21 12 requirements in the federal Truth in Lending Act. A licensee 21 13 must display a disclosure sign, as described in the bill, at 21 14 each desk in the licensed office and each licensed branch 21 15 office and on the licensee's internet site if the licensee 21 16 provides electronic small dollar installment loans. A licensee 21 17 who fails to do so is subject to a civil penalty not to exceed 21 18 $300 for each violation. 21 19 The bill allows a licensee to charge a finance charge, as 21 20 defined in the bill, on a small dollar installment loan at 21 21 a rate not to exceed 20 percent of the first $500 loaned, 21 22 plus 7.5 percent of any amount in excess of $500 loaned. The 21 23 finance charge shall be deemed fully earned as of the date of 21 24 the loan transaction and shall not be refundable or prorated 21 25 in the event of prepayment. A licensee is not permitted to 21 26 compound a finance charge. In addition to a finance charge, a 21 27 licensee may collect a monthly maintenance fee, a delinquency 21 28 charge, court costs and reasonable attorney fees, and a 21 29 dishonored check service fee, as described in the bill. A 21 30 licensee is prohibited from collecting any other charges or 21 31 fees in connection with conducting small dollar installment 21 32 loan transactions. LSB 2667HV (4) 87 gh/rn
