LEGISLATIVE
SERVICES AGENCY
OFFICE OF FISCAL AND MANAGEMENT ANALYSIS
301 State House
(317)
232-9855
FISCAL IMPACT STATEMENT
LS 6920
DATE PREPARED: Dec 21, 2001
BILL
NUMBER: HB 1075
BILL AMENDED:
SUBJECT: Small short term consumer loans.
FISCAL
ANALYST: Chris Baker
PHONE NUMBER: 232-9851
FUNDS AFFECTED: X GENERAL
IMPACT:
State & Local
X DEDICATED
FEDERAL
Summary of Legislation: This bill
regulates certain small, short term loans under the Uniform Consumer
Credit
Code.
Effective Date: Upon passage.
Explanation of State Expenditures: The
Department of Financial Institutions (DFI) would have additional
administrative
expenditures for the following: additional written opinions, providing written
notification of
the standards for renewing a small loan (the bill defines a
small loan as a payday loan not less than $50 and
not greater than $401), and
printing of transcripts if the DAI sues to enjoin a payday lender. Rates for
certified
mail are as follows: $2.10 for certification and $0.34 for first class postage.
If mail weighs more
than an ounce, $0.23 is charged for each additional ounce.
Criminal Penalties for Fraud: A Class C felony is punishable by a prison term
ranging from two to eight
years depending upon mitigating and aggravating circumstances.
A Class D felony is punishable by a prison
term ranging from six months to
three years or reduction to Class A misdemeanor depending upon mitigating
and
aggravating circumstances. The average expenditure to house an adult offender
was $22,131 in FY 2000.
Individual facility expenditures ranged from $16,442
to $40,312. (This does not include the cost of new
construction.) If offenders
can be housed in existing facilities with no additional staff, the average cost
for
medical care, food, and clothing is approximately $1,825 annually or $5
daily per prisoner. The average
length of stay in DOC facilities for all Class
C felony offenders is approximately two years. The average
length of stay in
DOC facilities for all Class D felony offenders is approximately ten months.
Explanation
of State Revenues: The bill allows several civil penalties to be imposed by the
DAI for
violations as described in the bill. Depending on the circumstances
and current law, the penalties can range
from not more than $500, not more
than $1,000, to not more than $15,000. Payday lenders are considered
licensed
lenders for purpose of regulation. In FY 2001, the DAI collected $490,584 in licensed
lender fees.
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In FY 2000 $513,421 in licensed
lender fees were collected. Licensed lender fees are deposited in the
Financial
Institutions Fund.
Background: The Department reports there are currently 105
payday lenders with approximately 560
branches in operation in Indiana.
The
bill requires a person engaged in making small loans to post a bond with the DAI
of $50,000 per location
in the business of making small loans. The maximum
bond cannot exceed $500,000 per lender. Proceeds of
any bonds that are cashed
in case of a violation would be used to pay damages and penalties to a consumer
harmed
as a result of the violation. Payday lenders would be required to continue to
post the bond for a
period of five years after the lender ceased operation
in Indiana.
Criminal Penalties for Fraud: Under the bill, there are several
criminal violations for fraud involving small
loans only when a check is used
to defraud another person. Current law provides for a Class A misdemeanor,
a
Class C or D felony depending on the severity of the violation as defined in statute.
If additional court cases
occur and fines are collected, revenue to both the
Common School Fund and the state General Fund would
increase. The maximum fine
for a Class C felony and a Class D felony is $10,000. The maximum fine for
a
Class A misdemeanor is $5,000. Criminal fines are deposited in the Common School
Fund. If the case is
filed in a circuit, superior or county court, 70% of the
$120 court fee that is assessed and collected when a
guilty verdict is entered
would be deposited in the state General Fund. If the case is filed in a city or
town
court, 55% of the fee would be deposited in the state General Fund.
Fees
for Civil Actions: This bill may increase the filings of civil actions. The filing
fee for civil actions is
$100. Of this fee, 70%, or $70, is deposited in the
State General Fund if the case is filed in a trial court. If
a case is filed
in a city or town court (providing that the court has jurisdiction), the State
General Fund
receives 55% of the $100 filing fee.
There were 78,515 civil
plenary cases filed in 2000 in courts of record statewide. Civil plenary cases
are
defined as those founded in contract, actions dealing with real and personal
property, as well as actions
seeking equitable or injunctive relief.
Explanation
of Local Expenditures: Criminal Penalties for Fraud: If more defendants are detained
in
county jails prior to their court hearings, local expenditures for jail
operations may increase. A Class A
misdemeanor is punishable by up to one year
in jail. The average daily cost to incarcerate a prisoner in a
county jail
is approximately $44.
Explanation of Local Revenues: Criminal Penalties for
Fraud: If additional court actions occur and a guilty
verdict is entered, local
governments would receive revenue from the following sources: (1) The county
general
fund would receive 27% of the $120 court fee that is assessed in a court of record.
Cities and towns
maintaining a law enforcement agency that prosecutes at least
50% of its ordinance violations in a court of
record may receive 3% of court
fees. (2) A $3 fee would be assessed and, if collected, would be deposited
into
the county law enforcement continuing education fund. (3) A $2 jury fee is assessed
and, if collected,
would be deposited into the county user fee fund to supplement
the compensation of jury members.
Class A misdemeanor: If additional court
actions occur and a guilty verdict is entered, local governments
would receive
revenue from the following sources: (1) The county general fund would receive
27% of the
$120 court fee that is assessed in a court of record. Cities and
towns maintaining a law enforcement agency
that prosecutes at least 50% of
its ordinance violations in a court of record may receive 3% of court fees. If
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3
the case is filed in a city or town court, 20%
of the court fee would be deposited in the county general fund
and 25% would
be deposited in the city or town general fund. (2) A $3 fee would be assessed
and, if
collected, would be deposited into the county law enforcement continuing
education fund. (3) A $2 jury fee
is assessed and, if collected, would be deposited
into the county user fee fund to supplement the
compensation of jury members.
Fees
for Civil Actions: If a case is filed in a trial court, the county general fund
receives 27%, or $27, of the
$100 filing fee. The 3% or $3 is deposited in
the general fund of the cities and towns maintaining a law
enforcement agency
that prosecutes at least 50% of its ordinance violations in a circuit, superior,
county, or
municipal court located in the county. If the case is filed in a
city or town court (providing the court has
jurisdiction), the county general
fund receives 20% while the city or town general fund receives 25%.
State Agencies
Affected: Department of Financial Institutions; Department of Correction.
Local
Agencies Affected: Trial courts, local law enforcement
Information Sources:
Mark Tarp, Department of Financial Institutions, (317) 232-3961; U.S. Postal
Service;
Indiana Handbook of Taxes, Revenues, and Appropriations FY 2000; 2000 Indiana
Judicial Report,
Vol. I, p.57; Office of the State Auditor Revenue Trial Balance,
June 30, 2001; Indiana Sheriffs Association;
Department of Correction.
FISCAL
IMPACT STATEMENT
LS 7081
NOTE PREPARED: Jan 3, 2004
BILL NUMBER: SB 405
BILL
AMENDED:
SUBJECT: Small Loans.
FIRST AUTHOR: Sen. Paul
BILL STATUS: As
Introduced
FIRST SPONSOR:
FUNDS AFFECTED: X
GENERAL
IMPACT: State
& Local
X
DEDICATED
FEDERAL
Summary of Legislation: The bill makes
various changes in the small loan provisions of the Uniform
Consumer Credit
Code, including: (1) increases the maximum allowable principal for a small loan
from
$400.99 to $500; (2) removes limitations on finance charges; (3) increases
delinquency charges; (4) allows
a small loan to be secured by a borrower's
authorization to debit an account instead of a borrower's check;
and (5) prohibits
a small loan if the total payable amount of the small loan exceeds 15% of the
borrower's
monthly gross income. (Current law provides that a small loan is
prohibited if it exceeds 20% of the
borrower's monthly net income.) The bill
repeals a provision that limits the circumstances under which a
small loan
may be renewed.
Effective Date: July 1, 2004.
Explanation of State Expenditures:
Summary: Under the bill, the Department of Financial Institutions
(DFI) may
require additional expenditures to oversee and react to potential fraud on the
part of payday
lenders with respect to securing a small loan through the authorization
of the debit account of a borrower.
Under current law (P.L. 38-2002), the Department
provides written notification of standards for renewing
a small loan The Department
would have to revise their notification procedures to account for debit-secured
small
loans and include the new range of what constitutes a small loan. Under the bill,
the range amount of
small loans would be revised to not less than $50 to not
more than $500. (Current law defines a small loan
as a payday loan of not less
than $50 and not greater than $401.)
Additionally, current law (IC 24-4.5-5-202(9))
allows the Department the option to act on behalf of a debtor,
in case of a
fraudulent loan secured by check. The Department may enforce the debtor's rights
against a
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2
creditor who is licensed or registered
with the Department. Under the bill, the Department would have this
option
at their disposal with respect to fraudulent loans secured with a debit account.
The
Department's current resources should be sufficient to incorporate the above changes.
Criminal
Penalties for Fraud: Under current law, penalties under IC 35-43-5 are instituted
for forgery, fraud,
and other deceptions with regard to small loans paid by
a check. The bill would add small loans that are made
under authorization to
debit a borrower's account. It is possible that widening the scope of what is
covered
under current fraud criminal penalties to include debit-secured small
loans could result in more individuals
charged with fraud.
A Class C felony
is punishable by a prison term ranging from two to eight years depending upon
mitigating
and aggravating circumstances. A Class D felony is punishable by
a prison term ranging from six months to
three years or reduction to Class
A misdemeanor depending upon mitigating and aggravating circumstances.
If offenders
can be housed in existing facilities with no additional staff, the average cost
for medical care,
food, and clothing is approximately $1,825 annually, or $5
daily, per prisoner. The average length of stay
in Department of Correction
(DOC) facilities for all Class C felony offenders is approximately two years.
The
average length of stay in DOC facilities for all Class D felony offenders is approximately
ten months.
Explanation of State Revenues: Summary: The bill would allow the
expansion of several civil penalties
currently imposed by the DFI for small
loan fraud, where the loan is secured by means of a borrower's debit
account.
Depending on the circumstances and current law, existing penalties can range from
not more than
$500, not more than $1,000, to not more than $15,000. Payday
lenders are considered licensed lenders for
purpose of regulation. In FY 2003,
the DFI collected $804,802 in licensed lender fees. In FY 2002 collections
amounted
to $475,321. Licensed lender fees are deposited in the Financial Institutions
Fund.
Criminal Penalties for Fraud: Under the bill, several criminal violations
for fraud involving small loans
would apply to debit account-secured loans
in addition to check-secured loans under current law. Penalties
include: a
Class A misdemeanor, and a Class C or D felony depending on the severity of the
violation as
defined in statute. If additional court cases occur and fines
are collected, revenue to both the Common School
Fund and the state General
Fund would increase. The maximum fine for a Class C felony and a Class D
felony
is $10,000. The maximum fine for a Class A misdemeanor is $5,000. Criminal fines
are deposited in
the Common School Fund. If the case is filed in a circuit,
superior or county court, 70% of the $120 court
fee that is assessed and collected
when a guilty verdict is entered would be deposited in the state General
Fund.
If the case is filed in a city or town court, 55% of the fee would be deposited
in the state General Fund.
Fees for Civil Actions: This bill may increase the
filings of civil actions. The filing fee for civil actions is
$100. Of this
fee, 70%, or $70, is deposited in the state General Fund if the case is filed
in a trial court. If
a case is filed in a city or town court (providing that
the court has jurisdiction), the state General Fund
receives 55% of the $100
filing fee.
Background: The Department currently reports the existence of 44
separate payday lenders with 313 Indiana
branches.
In 2002, the Department
reported 105 payday lenders in existence with approximately 560 branches in
operation
in Indiana.
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3
Explanation of Local Expenditures:
Criminal Penalties for Fraud: If more defendants are detained in
county jails
prior to their court hearings, local expenditures for jail operations may increase.
A Class A
misdemeanor is punishable by up to one year in jail. The average
daily cost to incarcerate a prisoner in a
county jail is approximately $44.
Explanation of Local Revenues: Criminal Penalties for Fraud: If additional
court actions occur and a guilty
verdict is entered, local governments would
receive revenue from the following sources: (1) The county
general fund would
receive 27% of the $120 court fee that is assessed in a court of record. Cities
and towns
maintaining a law enforcement agency that prosecutes at least 50%
of its ordinance violations in a court of
record may receive 3% of court fees.
(2) A $3 fee would be assessed and, if collected, would be deposited
into the
county law enforcement continuing education fund. (3) A $2 jury fee is assessed
and, if collected,
would be deposited into the county user fee fund to supplement
the compensation of jury members.
Class A misdemeanor: If additional court
actions occur and a guilty verdict is entered, local governments
would receive
revenue from the following sources: (1) The county general fund would receive
27% of the
$120 court fee that is assessed in a court of record. Cities and
towns maintaining a law enforcement agency
that prosecutes at least 50% of
its ordinance violations in a court of record may receive 3% of court fees. If
the
case is filed in a city or town court, 20% of the court fee would be deposited
in the county general fund
and 25% would be deposited in the city or town general
fund. (2) A $3 fee would be assessed and, if
collected, would be deposited
into the county law enforcement continuing education fund. (3) A $2 jury fee
is
assessed and, if collected, would be deposited into the county user fee fund to
supplement the
compensation of jury members.
Fees for Civil Actions: If
a case is filed in a trial court, the county general fund receives 27%, or $27,
of the
$100 filing fee. Also, 3%, or $3, is deposited in the general fund of
the cities and towns maintaining a law
enforcement agency that prosecutes at
least 50% of its ordinance violations in a circuit, superior, county, or
municipal
court located in the county. If the case is filed in a city or town court (providing
the court has
jurisdiction), the county general fund receives 20% while the
city or town general fund receives 25%.
State Agencies Affected: Department
of Financial Institutions; Department of Correction.
Local Agencies Affected:
Trial courts, local law enforcement.
Information Sources: Department of Financial
Institutions; Indiana Handbook of Taxes, Revenues, and
Appropriations, FY 2003;
Office of the State Auditor Revenue Trial Balance, June 30, 2003.
Fiscal Analyst:
Chris Baker, 317-232-9851.
LEGISLATIVE SERVICES AGENCY
OFFICE
OF FISCAL AND MANAGEMENT ANALYSIS
200 W. Washington, Suite 301
Indianapolis,
IN 46204
(317) 233-0696
http://www.in.gov/legislative
FISCAL IMPACT STATEMENT
LS
7068
NOTE PREPARED: Apr 26, 2003
BILL NUMBER: HB 1834
BILL AMENDED: Apr
25, 2003
SUBJECT: Financial institutions.
FIRST AUTHOR: Rep. Bardon
BILL
STATUS: Enrolled
FIRST SPONSOR: Sen. Paul
FUNDS AFFECTED: X GENERAL
IMPACT:
State & Local
X DEDICATED
FEDERAL
Summary of Legislation: (CCR Amended)
The bill changes the date as of which reference is made to
Federal laws and
regulations. The bill reduces bond requirements for payday lenders. The bill defines
"month"
in the pawnbroker act to ensure consistent calculation of interest. The bill specifically
provides for
the right of credit unions to buy and sell assets. The bill provides
for the release of information to state and
Federal supervisory agencies, Federal
law enforcement agencies, and Federal prosecutorial agencies or
offices. The
bill authorizes the Department of Financial Institutions (the Department) to remove
officers,
directors, and employees of financial institutions for certain practices,
violations, and breaches. The bill
allows the Department to make certain final
orders public. The bill requires Department approval for
reductions in capital
stock, capital surplus, and preferred stock levels. The bill modifies provisions
concerning
the establishment of trust offices. The bill prohibits the unauthorized use of:
(1) the term banc
or banco; and (2) the name of an existing bank or bank holding
company or a name confusingly similar to
the name of an existing bank or bank
holding company. The bill treats savings associations and savings banks
as
though they are members of the Federal Reserve System even if they are not members.
The bill requires
approval of the Department prior to establishing a subsidiary.
The bill modifies the change of control statute.
The bill broadens the ability
of banks to invest in Federal Home Loan Bank stock while maintaining a ceiling
on
such investments. The bill makes technical corrections.
Effective Date: Upon
passage; July 1, 2003.
Explanation of State Expenditures: Removal of Bank Employees
by the Department: The Department
would have the authorization to remove certain
employees of financial institutions as listed above for
violations under the
bill. Given the Department already holds hearings for financial institution employees
that
violate current law under IC 28-11, the Department's resources should be adequate
to implement this
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2
provision.
Department
Approval: The bill requires Department approval for reductions in capital stock,
capital surplus,
and preferred stock levels; and for a financial institution
to establish a subsidiary. The Department's
resources should be adequate to
implement this provision.
Explanation of State Revenues: Criminal Penalties:
Under the bill, the inclusion of savings banks and
associations as Federal
Reserve System members places them under the penalty provisions of current
members
of the Federal Reserve System. Reckless violation of this provision would constitute
a Class B
misdemeanor.
If additional court cases occur and fines are collected,
revenue to both the Common School Fund and the
state General Fund would increase.
The maximum fine for a Class B misdemeanor is $1,000. Criminal fines
are deposited
in the Common School Fund. If the case is filed in a circuit, superior or county
court, 70% of
the $120 court fee that is assessed and collected when a guilty
verdict is entered would be deposited in the
state General Fund. If the case
is filed in a city or town court, 55% of the fee would be deposited in the state
General
Fund.
Civil Penalties: Removal of Bank Employees by the Department- Under the
bill, if a financial institution
willfully permits a person to serve in a financial
institution that has had an employee of the institution
removed by the Department
would be required to pay a civil penalty of $500 per day that the violation
continues.
Civil penalties paid as a result of this provision would be deposited into the
Financial Institutions
Fund.
Small Loan Bonds: Under current law, persons
engaged in making small loans are required to post a bond
with the Department.
If a lender ceases operation in Indiana, the lender must maintain the bond for
additional
five years with the Department. The bill reduces from five to two
years the amount of time a bond must be
filed with the Department after cessation
of lending activities in Indiana.
Illegal Use of Existing Bank Name- Under
the bill, the Department may order a bank to cease and desist
the false use
of an existing bank name or a confusingly similar bank name. If the bank persists
in using the
name, the Department may impose a civil penalty of up to $15,000
per each violation of the cease and desist
order. The Department may adopt
rules to implement this provision.
Under current law, it is illegal to use
in a business title or advertise the word bank as a part of the name or
title
by a person, firm, limited liability company, or corporation (not a bank or trust
company). The bill
includes bank holding companies that are exempt from this
provision. Additionally, the bill makes it illegal
for the above listed entities
to use in a business title or advertise with the words "banc" or "banco."
The bill
raises the penalty on entities in violation of this provision from
$200 to $500 per each day the violation
continues. Penalties from this provision
are deposited in the Financial Institutions Fund.
Explanation of Local Expenditures:
Criminal Penalties: A Class B misdemeanor is punishable by up to
180 days in
jail. The average daily cost to incarcerate a prisoner in a county jail is approximately
$44.
Explanation of Local Revenues: Criminal Penalties: If additional court
actions occur and a guilty verdict
is entered, local governments would receive
revenue from the following sources: (1) The county general fund
would receive
27% of the $120 court fee that is assessed in a court of record. Cities and towns
maintaining
a law enforcement agency that prosecutes at least 50% of its ordinance
violations in a court of record may
receive 3% of court fees. If the case is
filed in a city or town court, 20% of the court fee would be deposited
Page
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HB 1834+
3
in the county general fund and 25% would be deposited in
the city or town general fund. (2) A $3 fee would
be assessed and, if collected,
would be deposited into the county law enforcement continuing education fund.
(3)
A $2 jury fee is assessed and, if collected, would be deposited into the county
user fee fund to supplement
the compensation of jury members.
State Agencies
Affected: Department of Financial Institutions.
Local Agencies Affected: Trial
courts, local law enforcement agencies.
Information Sources:
Fiscal Analyst:
Chris Baker, 317-232-9851