SF 274
PAG LIN

1 1 Section 1. Section 533D.1, Code 2001, is amended to read
1 2 as follows:
1 3 533D.1 TITLE AND PURPOSE.
1 4 1. This chapter shall be known and may be cited as the
1 5 "Delayed Deposit Services Licensing Loan Act".
1 6 2. The purpose of this chapter is to protect consumers who
1 7 enter into short-term loans with high rates of interest.
1 8 3. Loans made pursuant to this chapter are subject to the
1 9 Iowa consumer credit code.
1 10 4. This chapter shall be liberally construed as a consumer
1 11 protection statute in order to effectuate its purpose.
1 12 Sec. 2. Section 533D.2, Code 2001, is amended to read as
1 13 follows:
1 14 533D.2 DEFINITIONS.
1 15 For purposes of this chapter, unless the context otherwise
1 16 requires:
1 17 1. "Check" means a check, draft, share draft, or other
1 18 instrument for the payment of money.
1 19 1A. "Consumer" means any natural person who singly, or
1 20 jointly with another consumer, enters into a delayed deposit
1 21 loan.
1 22 2. "Delayed deposit services business loan" means includes
1 23 any arrangement in which a person who for a fee does either of
1 24 the following for a fee, service charge, or other
1 25 consideration:
1 26 a. Accepts a check dated subsequent to the date it was
1 27 written and agrees to hold the check for deposit until the
1 28 date written on the check.
1 29 b. Accepts a check dated on the date it was written and
1 30 holds the check for a period of time prior to deposit or
1 31 presentment pursuant to an agreement with, or any
1 32 representation made to, the maker of the check, whether
1 33 express or implied.
1 34 2A. "Delayed deposit loan business" means a person who
1 35 makes delayed deposit loans.
2 1 2B. "Facilitator" means any person who facilitates,
2 2 enables, or acts as a conduit for another person, who is or
2 3 may be exempt from licensing, who is operating a delayed
2 4 deposit loan business.
2 5 3. "Licensee" means a person licensed to operate pursuant
2 6 to this chapter, or any facilitator. Except for section
2 7 533D.3, for purposes of this chapter, a licensee includes a
2 8 supervised financial organization as defined in section
2 9 537.1301.
2 10 4. "Person" means an individual, group of individuals,
2 11 partnership, association, corporation, or any other business
2 12 unit or legal entity.
2 13 5. "Superintendent" means the superintendent of banking.
2 14 6. "Supervised financial organization" means a person as
2 15 defined in section 537.1301, subsection 42.
2 16 Sec. 3. NEW SECTION. 533D.2A APPLICABILITY -
2 17 EXEMPTIONS.
2 18 1. IN GENERAL. Except as otherwise provided in this
2 19 section, this chapter applies to any person who, for a fee,
2 20 service charge or other consideration, accepts a check dated
2 21 on the date it was written and agrees to hold it for a period
2 22 of days prior to deposit or presentment, or accepts a check
2 23 dated subsequent to the date it was written, and agrees to
2 24 hold the check for deposit until the date written on the
2 25 check.
2 26 2. FACILITATORS. This chapter applies to any facilitator.
2 27 3. SUPERVISED FINANCIAL ORGANIZATIONS. To the extent that
2 28 supervised financial organizations are subject to federal laws
2 29 that may preempt the provisions of this chapter regarding
2 30 limitations on interest rates and fees, all other provisions
2 31 of this chapter, except the requirements for licensure in
2 32 section 533D.3, apply to supervised financial organizations.
2 33 4. EMPLOYEES. Any individual who is acting solely as an
2 34 employee of a licensee need not be separately licensed.
2 35 5. EVASION OF APPLICABILITY. This chapter shall apply to
3 1 any person who seeks to evade its applicability by any device,
3 2 subterfuge, or pretense.
3 3 Sec. 4. Section 533D.3, Code 2001, is amended to read as
3 4 follows:
3 5 533D.3 LICENSE REQUIRED - APPLICATION PROCESS - DISPLAY.
3 6 1. A person shall not operate a delayed deposit services
3 7 loan business or be a facilitator in this state unless the
3 8 person is licensed by the superintendent as provided in this
3 9 chapter or unless the person is a supervised financial
3 10 organization exempt from the license requirements of this
3 11 chapter by virtue of other state or federal laws.
3 12 2. An applicant for a license shall submit an application,
3 13 under oath, to the superintendent on forms prescribed by the
3 14 superintendent. The forms shall contain such information as
3 15 the superintendent may prescribe.
3 16 3. The application required by this section shall be
3 17 submitted with both all of the following:
3 18 a. An application fee in an amount prescribed by rule
3 19 adopted by the superintendent.
3 20 b. A license fee of two hundred fifty dollars per
3 21 location.
3 22 b. c. A surety bond executed by a surety company
3 23 authorized to do business in this state in the sum of twenty-
3 24 five thousand dollars per location, which bond shall be
3 25 continuous in nature until canceled by the surety. A surety
3 26 shall provide at least thirty days' notice in writing to the
3 27 licensee and to the superintendent indicating the surety's
3 28 intent to cancel the bond and the effective date of the
3 29 cancellation. The surety bond shall be for the benefit of the
3 30 citizens of this state and shall be conditioned upon the
3 31 licensee's willingness to comply with this chapter, the
3 32 faithful performance by the licensee of the duties and
3 33 obligations pertaining to the delayed deposit services loan
3 34 business so licensed, and the prompt payment of any judgment
3 35 recovered against the licensee. The surety's liability under
4 1 this chapter is limited to the amount of the bond regardless
4 2 of the number of years the bond is in effect.
4 3 4. The superintendent shall issue a license to an
4 4 applicant if the superintendent finds all of the following:
4 5 a. The experience, character, and general fitness of the
4 6 applicant and its officers, directors, shareholders, partners,
4 7 or members are such as to warrant a finding that the applicant
4 8 will conduct the delayed deposit services loan business
4 9 honestly, fairly, and efficiently.
4 10 b. The applicant and its officers, directors,
4 11 shareholders, partners, or members have not been convicted of
4 12 a serious misdemeanor, aggravated misdemeanor, or a felony in
4 13 this state, or convicted of a crime in another jurisdiction
4 14 which that would be a serious misdemeanor, aggravated
4 15 misdemeanor, or a felony in this state.
4 16 c. The applicant is financially responsible and will
4 17 conduct the delayed deposit services loan business pursuant to
4 18 this chapter, chapter 537, and other applicable laws.
4 19 d. The applicant has unencumbered assets of at least
4 20 twenty-five thousand dollars per location available for
4 21 operating the delayed deposit services loan business.
4 22 5. The superintendent shall approve or deny an application
4 23 for a license by written order not more than ninety days after
4 24 the filing of an application. An order of the superintendent
4 25 issued pursuant to this section may be appealed pursuant to
4 26 chapter 17A.
4 27 6. A license issued pursuant to this chapter shall be
4 28 conspicuously posted at the licensee's place of business. A
4 29 license shall remain in effect until the next succeeding May
4 30 1, unless earlier suspended or revoked by the superintendent.
4 31 A license shall be renewed annually by filing with the
4 32 superintendent an application for renewal containing such
4 33 information as the superintendent may require to indicate any
4 34 material change in the information contained in the original
4 35 application or succeeding renewal applications and a renewal
5 1 fee of one two hundred fifty dollars.
5 2 Sec. 5. Section 533D.4, Code 2001, is amended to read as
5 3 follows:
5 4 533D.4 SURRENDER OF LICENSE.
5 5 1. A licensee may surrender a delayed deposit services
5 6 loan license by delivering to the superintendent written
5 7 notice that the license is surrendered.
5 8 2. The surrender does not affect the licensee's civil or
5 9 criminal liability for acts committed prior to such surrender,
5 10 or the liability of the surety on the bond, or nor does the
5 11 surrender entitle such licensee to a return of any part of the
5 12 annual license fee.
5 13 3. The superintendent may establish procedures for the
5 14 disposition of the books, accounts, and records of the
5 15 licensee and may require such action as deemed necessary for
5 16 the protection of the makers of checks which that are
5 17 outstanding at the time of surrender of the license.
5 18 Sec. 6. Section 533D.5, Code 2001, is amended to read as
5 19 follows:
5 20 533D.5 CHANGE IN CIRCUMSTANCES - NOTIFICATION OF
5 21 SUPERINTENDENT.
5 22 A licensee is to shall notify the superintendent in writing
5 23 within thirty days of the occurrence of a material development
5 24 affecting the licensee, including, but not limited to, any of
5 25 the following:
5 26 1. Filing for bankruptcy or reorganization.
5 27 2. Reorganization of the business.
5 28 3. Commencement of license revocation or any other civil
5 29 or criminal proceedings by any other state or jurisdiction.
5 30 4. The filing of a criminal indictment or complaint
5 31 against the licensee or any of the licensee's officers,
5 32 directors, shareholders, partners, members, employees, or
5 33 agents.
5 34 5. A serious misdemeanor, aggravated misdemeanor, or a
5 35 felony conviction against the licensee or any of the
6 1 licensee's officers, directors, shareholders, partners,
6 2 members, employees, or agents.
6 3 Sec. 7. Section 533D.6, Code 2001, is amended to read as
6 4 follows:
6 5 533D.6 CONTINUED OPERATION AFTER CHANGE IN OWNERSHIP -
6 6 APPROVAL OF SUPERINTENDENT REQUIRED.
6 7 1. The prior written approval of the superintendent is
6 8 required for the continued operation of a delayed deposit
6 9 services loan business whenever a change in control of a
6 10 licensee is proposed.
6 11 a. Control in the case of a corporation means direct or
6 12 indirect ownership of, or the right to control, ten percent or
6 13 more of the voting shares of the corporation, or the ability
6 14 of a person to elect a majority of the directors or otherwise
6 15 effect a change in policy.
6 16 b. Control in the case of any other entity means any
6 17 change in the principals of the organization, whether active
6 18 or passive.
6 19 c. The superintendent may require information deemed
6 20 necessary to determine whether a new application is required.
6 21 Costs incurred by the superintendent in investigating a change
6 22 of control request shall be paid by the person requesting such
6 23 approval.
6 24 2. A license issued pursuant to this chapter is not
6 25 transferable or assignable.
6 26 Sec. 8. Section 533D.7, Code 2001, is amended to read as
6 27 follows:
6 28 533D.7 PRINCIPAL PLACE OF BUSINESS - BRANCH OFFICES
6 29 AUTHORIZED.
6 30 1. Except as provided in subsection 2, a licensee may
6 31 operate a delayed deposit services loan business only at an
6 32 office designated as its principal place of business in the
6 33 application.
6 34 a. The licensee shall maintain its books, accounts, and
6 35 records at its designated principal place of business.
7 1 b. A licensee may change the location of its designated
7 2 principal place of business with the prior written approval of
7 3 the superintendent. The superintendent shall establish forms
7 4 and procedures for determining whether the change of location
7 5 should be approved.
7 6 2. A licensee may operate branch offices only in the same
7 7 county in which the licensee's designated principal place of
7 8 business is located. The licensee may establish a branch
7 9 office, provided that the financial requirements of section
7 10 533D.3 are met with regard to the additional location, or
7 11 change the location of a branch office, with the prior written
7 12 approval of the superintendent. The superintendent shall
7 13 establish forms and procedures for determining whether the
7 14 location of a branch office should be approved.
7 15 3. A fee of one two hundred fifty dollars shall be paid to
7 16 the superintendent for each request made pursuant to
7 17 subsection 1 or 2.
7 18 Sec. 9. Section 533D.8, Code 2001, is amended to read as
7 19 follows:
7 20 533D.8 OTHER BUSINESS OPERATIONS AT SAME SITE -
7 21 RESTRICTIONS.
7 22 1. A licensee may operate a delayed deposit services loan
7 23 business at a location where any other business is operated or
7 24 in association or conjunction with any other business with the
7 25 written approval of the superintendent and consistent with
7 26 both of the following requirements:
7 27 a. The books, accounts, and records of the delayed deposit
7 28 services loan business are kept and maintained separate and
7 29 apart from the books, accounts, and records of the other
7 30 business.
7 31 b. The other business is not of a type which would tend to
7 32 enable the concealment of acts engaged in to evade the
7 33 requirements of this chapter. If the superintendent
7 34 determines upon investigation that the other business is of a
7 35 type which would conceal such acts the superintendent shall
8 1 order the licensee to cease the operation of the delayed
8 2 deposit services loan business at the location.
8 3 2. The department may order the licensee to cease
8 4 operations of the business if it fails to obtain written
8 5 approval of the superintendent before operating a business in
8 6 association or conjunction with services provided under this
8 7 chapter.
8 8 Sec. 10. Section 533D.9, Code 2001, is amended by striking
8 9 the section and inserting in lieu thereof the following:
8 10 533D.9 PERMITTED FEES.
8 11 A licensee shall not charge, contract for, or directly or
8 12 indirectly receive, any interest, fees, or charges, except
8 13 those specifically authorized by this section.
8 14 1. TRANSACTION FEE. A licensee shall not charge a fee in
8 15 excess of five dollars per hundred dollars of the amount
8 16 financed. However, the licensee may receive a minimum charge
8 17 of five dollars when the amount financed exceeds seventy-five
8 18 dollars, or three dollars and fifty cents when the amount
8 19 financed exceeds fifty dollars.
8 20 2. DEFAULT FEE. If the check is not negotiable on the
8 21 date agreed upon, a licensee may charge a default fee, not to
8 22 exceed fifteen dollars. Only one such fee may be collected
8 23 with respect to a check even if it has been redeposited and
8 24 returned more than once, no matter how long the check remains
8 25 unpaid. A fee charged pursuant to this subsection is a
8 26 licensee's exclusive remedy and charge for late payment or
8 27 nonpayment.
8 28 Sec. 11. NEW SECTION. 533D.9A REQUIRED DOCUMENTS AND
8 29 DISCLOSURES.
8 30 1. INFORMATION PAMPHLET PROVIDED TO ALL CONSUMERS. Before
8 31 entering into a delayed deposit loan, the licensee shall
8 32 deliver to the consumer a pamphlet prepared by the
8 33 superintendent which explains, in simple English and Spanish,
8 34 all of the consumer's rights and responsibilities in a delayed
8 35 deposit loan transaction, includes a toll-free number to the
9 1 superintendent's office to handle concerns or complaints by
9 2 consumers, and informs consumers that the superintendent's
9 3 office can provide information about whether a delayed deposit
9 4 loan businesses is licensed, whether complaints have been
9 5 filed with the superintendent, and the resolution of such
9 6 complaints.
9 7 2. LOAN DOCUMENTS. Licensees shall provide consumers with
9 8 a written agreement in clear, understandable English and the
9 9 language in which the loan was negotiated, on a form specified
9 10 or approved by the superintendent, in a form the consumer can
9 11 keep, that includes all of the following information:
9 12 a. The name, address, and telephone number of the licensee
9 13 making the delayed deposit loan, and the name and title of the
9 14 individual employee who signs the agreement on behalf of the
9 15 licensee.
9 16 b. An itemization of fees and charges to be paid by the
9 17 consumers.
9 18 c. The date on which the check will be deposited or
9 19 presented for negotiation.
9 20 d. A clear description of the consumer's payment
9 21 obligations under the transaction.
9 22 e. The default fee that the licensee will charge if the
9 23 check is not negotiable on the date agreed upon; that it may
9 24 be collected only once on a check no matter how long the check
9 25 remains unpaid; and that it is the exclusive fee and remedy
9 26 for late payment or nonpayment.
9 27 f. Disclosures required by section 537.3201 and the Truth
9 28 in Lending Act as defined in section 537.1302, irrespective of
9 29 whether the Truth in Lending Act applies to the particular
9 30 delayed deposit loan transaction.
9 31 g. Applicable notices pursuant to Iowa law, including, but
9 32 not limited to, that required by section 537.3203.
9 33 h. In a manner that is more conspicuous than the other
9 34 information provided in the loan document, and located
9 35 immediately preceding the signature of the consumer, the
10 1 following notice in at least fourteen point type: "You cannot
10 2 be prosecuted in criminal court to collect this loan."
10 3 3. POSTED NOTICE. Notices must be clearly and
10 4 conspicuously posted by all licensees in each location, in
10 5 English, and in any other language in which a significant
10 6 amount of delayed deposit loan transaction business is
10 7 conducted at that location, which informs consumers of the
10 8 following information:
10 9 a. Informs consumers that the licensee cannot use the
10 10 criminal process against a consumer to collect any delayed
10 11 deposit loan transaction check.
10 12 b. Informs the consumers of the schedule of all fees,
10 13 charges, interest, and penalties to be charged on delayed
10 14 deposit loan transactions. The schedule shall include an
10 15 example of the amounts that would be charged on a one hundred
10 16 dollar loan payable in fourteen and thirty days, and shall
10 17 provide the corresponding annual percentage rate.
10 18 Sec. 12. NEW SECTION. 533D.9B REQUIREMENTS AND TERMS.
10 19 1. Each delayed deposit loan must have a minimum term of
10 20 no less than two weeks for each fifty dollars owed on the
10 21 loan.
10 22 2. The maximum amount of a delayed deposit loan shall not
10 23 exceed five hundred dollars.
10 24 3. The minimum amount of a delayed deposit loan shall be
10 25 fifty dollars.
10 26 4. A consumer shall be permitted to make partial payments
10 27 on the loan at any time, without charge, in amounts equal to
10 28 no less than five dollar increments.
10 29 5. The check written by the consumer in a delayed deposit
10 30 loan must be made payable to the licensee.
10 31 6. Upon receipt of the check from the consumer for a
10 32 delayed deposit loan, the licensee must immediately stamp the
10 33 back of the check with an endorsement that states "This check
10 34 is being negotiated as part of a delayed deposit loan pursuant
10 35 to Iowa Code chapter 533D, and any holder of this check takes
11 1 it subject to all claims and defenses of the maker."
11 2 7. Any facilitator is subject to enforcement under
11 3 sections 533D.12 through 533D.15 and the civil remedies in
11 4 section 533D.15A if the person making the delayed deposit loan
11 5 fails to comply with the requirements of this chapter.
11 6 8. The licensee must provide the consumer, or each
11 7 consumer if there is more than one, with copies of the
11 8 documents described in section 533D.9A, subsection 2, prior to
11 9 the consummation of the loan.
11 10 9. The holder or assignee of any check written by a
11 11 consumer in connection with a delayed deposit loan takes the
11 12 instrument subject to all claims and defenses of the maker.
11 13 10. The licensee shall give to each person making a
11 14 payment, whether in whole or in part, a signed, dated receipt
11 15 showing the amount paid and the balance due on the loan.
11 16 Sec. 13. Section 533D.10, Code 2001, is amended to read as
11 17 follows:
11 18 533D.10 PROHIBITED ACTS BY LICENSEE.
11 19 1. A licensee shall not do any of the following:
11 20 a. Hold from any one maker more than two checks one check
11 21 at any one time, or otherwise make more than one delayed
11 22 deposit loan to a consumer at a time.
11 23 b. Hold from any one maker a check or checks in an
11 24 aggregate face amount of more than five hundred dollars at any
11 25 one time.
11 26 c. Hold or agree to hold a check for more than thirty-one
11 27 days.
11 28 d. b. Require the maker to receive payment by a method
11 29 which that causes the maker to pay additional or further fees
11 30 and charges to the licensee or another person, or otherwise
11 31 charge to cash a check representing the proceeds of the
11 32 delayed deposit loan.
11 33 e. c. Repay, refinance, or otherwise consolidate a
11 34 postdated check transaction with the proceeds of another
11 35 postdated check transaction made by the same licensee. Upon
12 1 termination of a delayed deposit loan through the payment of
12 2 the consumer's check by the drawee bank, the return of a check
12 3 to a consumer who redeems it for consideration, through
12 4 expiration of maturity date, or any other method of
12 5 termination, the licensee shall not enter into another delayed
12 6 deposit loan with the same consumer for at least thirty days
12 7 thereafter; provided, that a licensee may extend the term of
12 8 the loan without charge.
12 9 f. d. Receive Contract for or receive any other charges or
12 10 fees in addition to the fees listed in section 533D.9,
12 11 subsections 1 and 2. This prohibition includes but is not
12 12 limited to any charges for insurance.
12 13 e. Engage in the business of delayed deposit lending
12 14 unless the superintendent has issued a valid license.
12 15 f. Use or threaten to use the criminal process in this or
12 16 any other state to collect on the delayed deposit loan.
12 17 g. Engage in unfair, deceptive, or fraudulent practices in
12 18 the advertising, making, or collecting of a delayed deposit
12 19 loan.
12 20 h. Use any device or agreement that would have the effect
12 21 of charging or collecting more fees than allowed by this
12 22 chapter, including but not limited to entering into a
12 23 different type of transaction with the consumer.
12 24 i. Alter any information on the check or any other loan
12 25 documents.
12 26 j. In the event of default, sue on the check. All suits
12 27 arising out of default shall be brought on the written
12 28 agreement executed by the consumer in accordance with section
12 29 533D.9A, subsection 2.
12 30 k. Accepting collateral for any delayed deposit loan; or
12 31 using or attempting to use the check provided in connection
12 32 with a delayed deposit loan as security for purposes of state
12 33 or federal law.
12 34 2. For purposes of this section, "licensee" includes a
12 35 person related to the licensee by common ownership or control,
13 1 a person in whom the licensee has any financial interest, or
13 2 any employee or agent of the licensee.
13 3 Sec. 14. Section 533D.11, Code 2001, is amended to read as
13 4 follows:
13 5 533D.11 EXAMINATION OF RECORDS BY SUPERINTENDENT.
13 6 1. The superintendent shall examine the books, accounts,
13 7 and records of each licensee annually.
13 8 2. The licensee shall pay to costs of the superintendent
13 9 incurred in an examination shall be paid by the licensee fee,
13 10 based on the actual cost of the examination plus the
13 11 proportionate share of administrative expenses in the
13 12 operation of the banking division of the department of
13 13 commerce attributable to the administration of this chapter as
13 14 determined by the superintendent.
13 15 3. The superintendent may examine or investigate
13 16 complaints or reports concerning alleged violations of this
13 17 chapter or any rule adopted or order issued by the
13 18 superintendent, or violations of chapter 537 or any rule
13 19 adopted or order issued by the administrator of the Iowa
13 20 consumer credit code. The superintendent may order the actual
13 21 cost of the examination or investigation to be paid by the
13 22 person who is the subject of the examination or investigation,
13 23 whether or not the alleged violator is licensed.
13 24 Sec. 15. Section 533D.12, subsection 1, paragraph a, Code
13 25 2001, is amended to read as follows:
13 26 a. A licensee or any of its officers, directors,
13 27 shareholders, partners, or members has violated this chapter
13 28 or any rule adopted or order issued by the superintendent, or
13 29 violated chapter 537 or any rule adopted or order issued by
13 30 the administrator of the Iowa consumer credit code.
13 31 Sec. 16. Section 533D.12, Code 2001, is amended by adding
13 32 the following new subsection:
13 33 NEW SUBSECTION. 3. The revocation, suspension, or
13 34 surrender of any license shall not relieve the licensee from
13 35 civil or criminal liability for acts committed prior to the
14 1 revocation, suspension, or surrender.
14 2 Sec. 17. Section 533D.13, Code 2001, is amended to read as
14 3 follows:
14 4 533D.13 CEASE AND DESIST ORDER - INJUNCTION.
14 5 1. If the superintendent believes that any person has
14 6 engaged in or is about to engage in an act or practice
14 7 constituting a violation of this chapter or any rule adopted
14 8 or order issued by the superintendent, or a violation of
14 9 chapter 537 or any rule adopted or order issued by the
14 10 administrator of the Iowa consumer credit code, the
14 11 superintendent may issue and serve on the person a cease and
14 12 desist order.
14 13 2. Upon entry of a cease and desist order, the
14 14 superintendent shall promptly notify in writing all persons to
14 15 whom the order is directed that it has been entered and the
14 16 reasons for the order.
14 17 3. Any person to whom the order is directed may request in
14 18 writing a hearing within fifteen business days after the date
14 19 of the issuance of the order.
14 20 4. Upon receipt of the written request, the matter shall
14 21 be set for hearing within fifteen business days of the receipt
14 22 by the superintendent, unless the person requesting the
14 23 hearing consents to a later date. If a hearing is not
14 24 requested within fifteen business days and none is ordered by
14 25 the superintendent, the order of the superintendent shall
14 26 automatically become final and remain in effect until modified
14 27 or vacated by the superintendent. If a hearing is requested
14 28 or ordered, the superintendent, after notice and hearing,
14 29 shall issue written findings of fact and conclusions of law
14 30 and shall affirm, vacate, or modify the order.
14 31 5. The superintendent may vacate or modify an order if the
14 32 superintendent finds that the conditions which that caused its
14 33 entry have changed or that it is otherwise in the public
14 34 interest to do so. Any person aggrieved by a final order of
14 35 the superintendent may appeal the order as provided in chapter
15 1 17A.
15 2 6. If it appears that a person has engaged in or is
15 3 engaging in an act or practice in violation of this chapter or
15 4 chapter 537, the attorney general may initiate an action in
15 5 the district court to enjoin such acts or practices pursuant
15 6 to this subsection, or chapter 537, article 6, part 1, and to
15 7 enforce compliance with this chapter or chapter 537. Upon a
15 8 showing of a violation of this chapter or chapter 537, a
15 9 permanent or temporary injunction, restraining order, or writ
15 10 of mandamus shall be granted, or a receiver or conservator may
15 11 be appointed to oversee the person's assets. The attorney
15 12 general shall not be required to post a bond.
15 13 Sec. 18. Section 533D.14, subsection 1, Code 2001, is
15 14 amended to read as follows:
15 15 1. If the superintendent finds, after notice and hearing
15 16 as provided in this chapter, that a person has violated this
15 17 chapter, a rule adopted pursuant to this chapter, or an order
15 18 of the superintendent, or has violated chapter 537 or any rule
15 19 adopted or order issued by the administrator of the Iowa
15 20 consumer credit code, the superintendent may order the person
15 21 to pay an administrative fine of not more than five thousand
15 22 dollars for each violation, in addition to the costs of
15 23 investigation.
15 24 Sec. 19. Section 533D.15, Code 2001, is amended to read as
15 25 follows:
15 26 533D.15 CRIMINAL VIOLATION - OPERATION OF BUSINESS
15 27 WITHOUT LICENSE - INJUNCTION.
15 28 1. A person required to be licensed under this chapter who
15 29 operates a delayed deposit services loan business in this
15 30 state without first obtaining a license under this chapter or
15 31 while such license is suspended or revoked by the
15 32 superintendent is guilty of a serious misdemeanor.
15 33 2. In addition to the criminal penalty provided for in
15 34 this section subsection 1, the superintendent may also
15 35 commence an action to enjoin the operation of the business.
16 1 Sec. 20. NEW SECTION. 533D.15A CIVIL REMEDIES.
16 2 The remedies provided herein are cumulative and apply to
16 3 licensees, facilitators, and unlicensed persons to whom this
16 4 chapter applies and who failed to obtain a license.
16 5 1. Any violation of section 714.16, subsection 2,
16 6 paragraph "a", constitutes a violation of this chapter.
16 7 2. Any violation of this chapter constitutes a violation
16 8 of section 714.16.
16 9 3. The violation of any provision of this chapter or
16 10 related regulation, or chapter 537 or related regulation
16 11 renders the delayed deposit loan void, and the person shall
16 12 have no right to collect, receive, or retain any principal,
16 13 interest, or other charges whatsoever with respect to the
16 14 loan, except where the violation occurs as a result of
16 15 accidental or bona fide error of computation and
16 16 notwithstanding the maintenance of procedures reasonably
16 17 adopted to avoid any such error.
16 18 4. A person who violates this chapter shall be liable to
16 19 the consumer for at least the following:
16 20 a. Statutory damages of one thousand dollars for each
16 21 violation.
16 22 b. Actual, consequential, and punitive damages.
16 23 c. Costs and attorney fees.
16 24 5. A consumer may sue for injunctive and other appropriate
16 25 equitable relief.
16 26 6. The consumer may bring a class action to enforce any
16 27 provision of this chapter. This right is not waivable,
16 28 directly or indirectly.
16 29 7. The remedies provided in this section are not intended
16 30 to be the exclusive remedies available to the consumer.
16 31 Sec. 21. Section 533D.16, Code 2001, is repealed.
16 32 EXPLANATION
16 33 This bill amends Code chapter 533D, regarding delayed
16 34 deposit loans, more commonly known as "payday loans".
16 35 The bill changes the title of the chapter in Code section
17 1 533D.1 to the "Delayed Deposit Loan Act", instead of the
17 2 "Delayed Deposit Services Licensing Act", to indicate clearly
17 3 that the financial transactions covered by Code chapter 533D
17 4 are loans. The bill also adds that the chapter's purpose is
17 5 to protect consumers who enter into short-term loans with high
17 6 rates of interest, and that the loans regulated under Code
17 7 chapter 533D are also subject to Code chapter 537, the Iowa
17 8 consumer credit code, except as specifically displaced by
17 9 provisions of the delayed deposit loan Act. References to
17 10 Code chapter 537 are added at numerous places in the chapter.
17 11 The bill adds several definitions to Code section 533D.2,
17 12 including "consumer", "delayed deposit loan business",
17 13 "facilitator", and "supervised financial organization". The
17 14 bill changes the existing definition for "licensee". The bill
17 15 changes the definition for the previously defined term of
17 16 "delayed deposit services business", and applies it to
17 17 "delayed deposit loan".
17 18 The bill adds new Code section 533D.2A, which addresses the
17 19 applicability of the chapter and specific exemptions. New
17 20 Code section 533D.2A states that Code chapter 533D applies to
17 21 any person who, for a fee or other consideration, accepts a
17 22 check dated on the date it was written and agrees to hold it
17 23 for a period of days prior to deposit or presentment, or
17 24 accepts a check dated subsequent to the date it was written
17 25 and agrees to hold the check for deposit until the date
17 26 written on the check. Code section 533D.2A states that the
17 27 chapter applies to any person who seeks to evade its
17 28 applicability by any device, subterfuge, or pretense.
17 29 Individual employees of a licensee acting solely as employees
17 30 do not need to be separately licensed under the chapter.
17 31 Facilitators are expressly within the applicability of the
17 32 chapter. "Facilitators" is defined in Code section 533D.2,
17 33 subsection 2B, as any person who facilitates, enables, or acts
17 34 as a conduit for another person who is or may be exempt from
17 35 licensing, who is operating a delayed deposit loan business.
18 1 To the extent that supervised financial organizations are
18 2 subject to federal law that may preempt the provisions of the
18 3 delayed deposit loan Act regarding limitations on interest
18 4 rates and fees, all other provisions of Code chapter 533D,
18 5 except the licensure requirements in Code section 533D.3,
18 6 apply to supervised financial organizations. "Supervised
18 7 financial organizations" is defined in Code section 533D.2,
18 8 subsection 2A, by reference to Code section 537.1301,
18 9 subsection 42, as any person, other than an insurance company
18 10 or other organization primarily engaged in an insurance
18 11 business, which is organized, chartered, or holding an
18 12 authorization certificate pursuant to Code chapter 524, 533,
18 13 or 534, or pursuant to the laws of any other state or of the
18 14 United States which authorizes the person to make loans and to
18 15 receive deposits, including a savings, share, certificate, or
18 16 deposit account, and which is subject to supervision by an
18 17 official or agency of this state, such other state, or of the
18 18 United States. In conjunction, current Code section 533D.16,
18 19 which provides that Code chapter 533D is not applicable to
18 20 state and federal banks, savings and loan associations, credit
18 21 unions, or industrial loan companies, is repealed.
18 22 The bill amends Code section 533D.3 regarding the license
18 23 application process. The bill adds a license fee of $250 per
18 24 location, separate from the application fee. The bill
18 25 requires that the license applicant, officers, directors,
18 26 shareholders, partners, or members have not been convicted of
18 27 a serious misdemeanor, aggravated misdemeanor, or a felony,
18 28 rather than the previous requirement of no prior felonies.
18 29 The bill requires the applicant to have unencumbered assets of
18 30 at least $25,000 per location available for operating the
18 31 business, not $25,000 total. The bill changes the renewal fee
18 32 to $250, from $100. Changes in terminology, including the
18 33 added concepts of facilitators and supervised financial
18 34 organizations, are also made in the Code section.
18 35 The bill changes Code section 533D.5 to require the
19 1 licensee to notify the superintendent in writing within 30
19 2 days when a serious misdemeanor, aggravated misdemeanor, or a
19 3 felony conviction is entered against the licensee, or any
19 4 officer, director, shareholder, partner, member, employee, or
19 5 agent, rather than the previous requirement of notification of
19 6 only a felony conviction.
19 7 The bill changes the fee in Code section 533D.7 to $250, an
19 8 increase from $150, for a change in the designated principal
19 9 place of business, or establishment or change of location of a
19 10 branch office.
19 11 The bill inserts new language regarding fees in Code
19 12 section 533D.9. A licensee may only charge the fees allowed
19 13 in that Code section. The allowable transaction fee is $5 per
19 14 $100 of the amount financed, or a minimum charge of $5 when
19 15 the amount financed exceeds $75, or $3.50 when the amount
19 16 financed exceeds $50. The previous fee allowed was $15 on the
19 17 first $100 financed, and $10 for subsequent $100 increments.
19 18 The default fee that may be charged if the check is not
19 19 negotiable on the date agreed upon is no more than $15. It
19 20 may be charged once, no matter how many times the check is
19 21 redeposited and returned. This fee is the licensee's
19 22 exclusive remedy for late payment and nonpayment. This fee
19 23 and language are similar to that in the current Code.
19 24 Provisions regarding disclosure of terms in current Code
19 25 section 533D.9 are deleted, and addressed separately in new
19 26 Code section 533D.9A.
19 27 New Code section 533D.9A sets forth the disclosure
19 28 requirements for delayed deposit loan transactions, including:
19 29 (1) an information pamphlet must be furnished to all consumers
19 30 before entering into a loan, that conveys, in English and
19 31 Spanish, all of the consumer's rights and responsibilities,
19 32 including a toll-free telephone number to the banking division
19 33 for questions, concerns, or complaints; (2) loan documents
19 34 written in simple English that include an itemization of fees
19 35 and charges, the date the check will be deposited or
20 1 presented, a clear description of the payment obligations, the
20 2 default fee, and the limitations upon the licensee in charging
20 3 it, disclosures required under the Iowa consumer credit code
20 4 and the federal Truth in Lending Act, and a notice in at least
20 5 14 point type that states: "You cannot be prosecuted in
20 6 criminal court to collect this loan."; (3) posted notices that
20 7 inform consumers of the schedule of all fees, charges,
20 8 interest, and penalties, and that the criminal process cannot
20 9 be used to collect any deferred deposit transaction checks.
20 10 The bill adds new Code section 533D.9B regarding the
20 11 requirements and terms of the delayed deposit loans. The
20 12 maximum amount of a delayed deposit loan is $500, the minimum
20 13 is $50. Each delayed deposit loan must have a minimum term of
20 14 no less than two weeks for each $50 owed. The consumer may
20 15 make partial payments on the loan at any time, in at least $5
20 16 increments. The check received by the licensee must
20 17 immediately be stamped with an endorsement that states the
20 18 check is being negotiated pursuant to Code chapter 533D, and
20 19 any holder of the check takes it subject to all claims and
20 20 defenses of the maker, and Code section 533D.9B states that
20 21 any holder or assignee takes the instrument subject to all
20 22 claims and defenses of the maker. The licensee must give the
20 23 consumer copies of all documents required by Code section
20 24 533D.9A, and a signed, dated receipt each time a payment is
20 25 made, showing the amount paid and the balance due on the loan.
20 26 The bill amends Code section 533D.10, regarding prohibited
20 27 acts by licensees, which for purposes of this section includes
20 28 any person related to the licensee by common ownership or
20 29 control, a person in whom the licensee has any financial
20 30 interest, or any employee or agent of the licensee. The bill
20 31 prohibits a licensee from the following: (1) holding more
20 32 than one check from any one maker at any time, or otherwise
20 33 making more than one loan to a consumer at a time, rather than
20 34 the current Code language that allows a licensee to hold no
20 35 more than two checks at one time from a single maker; (2)
21 1 requiring a maker to receive payment by a method that causes
21 2 the maker to pay additional fees and charges to the licensee
21 3 or another person; (3) repaying, refinancing, or otherwise
21 4 consolidating a postdated check transaction with the proceeds
21 5 of another postdated check transaction made by the licensee,
21 6 including the addition in the bill of a 30-day prohibition on
21 7 the licensee entering into another transaction with the same
21 8 consumer upon repayment of the loan; (4) contracting for or
21 9 receiving any charges or fees other than the transaction fee
21 10 and default fee permitted under Code section 533.9; (5)
21 11 engaging in the business of delayed deposit lending without a
21 12 license; (6) using or threatening to use the criminal process
21 13 to collect on a delayed deposit loan; (7) engaging in unfair,
21 14 deceptive, or fraudulent practices in advertising, making or
21 15 collecting a loan; (8) using any device or agreement that
21 16 would have the effect of charging or collecting more fees than
21 17 allowed by Code chapter 533D; (9) altering any information on
21 18 the check or loan documents; (10) suing on the check in the
21 19 event of default; and (11) accepting collateral for any
21 20 delayed deposit loan, or using or attempting to use the check
21 21 given for the delayed deposit transaction as security for
21 22 purposes of state or federal law.