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Regular Session, 2004
SENATE BILL NO. 285
BY SENATOR FIELDS
COMMERCIAL REGULATIONS. Creates the Louisiana Pay Day Loan Act, to regulate
"pay day loans." (2/3-CA7s2.1(A))
AN ACT 1
To enact Part XX of Chapter 2 of Code Title XII of Code Book III of Title 9 of the Louisiana 2
Revised Statutes of 1950, to be comprised of R.S. 9:3577.11 through 3577.22; to 3
provide for the Louisiana Pay Day Loan Act in order to provide for comprehensive 4
regulation of the deferred deposit loan or "pay day loan" business; to provide for civil 5
and criminal penalties; to provide for civil remedies; and to provide for related 6
matters. 7
Be it enacted by the Legislature of Louisiana: 8
Section 1. Part XX of Chapter 2 of Code Title XII of Code Book III of Title 9 of the 9
Louisiana Revised Statutes of 1950, comprised of R.S. 9:3577.11 through 3577.22, is hereby 10
enacted to read as follows: 11
PART XX. LOUISIANA PAY DAY LOAN ACT 12
Part XX is all proposed new law. 13
§3577.11. Title 14
R.S. 9:3577.11 is all proposed new law. 15
This Part shall be known as the Louisiana Pay Day Loan Act. 16
§3477.12. Legislative intent 17
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R.S. 9:3577.12 is all proposed new law. 1
The purpose of this Part is to protect vulnerable, generally low-income 2
consumers who enter into short-term, high rate loans known as pay day loans or 3
deferred deposit loans from abuses that occur in the credit marketplace when the 4
lenders making such loans are not subject to sufficient regulation. This Part shall be 5
liberally construed in order to protect consumers. 6
§3577.13. Definitions 7
R.S. 9:3577.13 is all proposed new law. 8
As used in this Part: 9
(1) "Check" shall have the definition provided for in R.S. 9:3516. 10
(2) "Consumer" shall have the definition provided for in R.S. 9:3516. 11
(3) "Commissioner" shall have the definition provided for in R.S. 9:3516. 12
(4) "Pay day loan," or "deferred deposit loan," means any loan made to a 13
consumer in which the lender accepts a check for the amount of the loan or more and 14
agrees to hold it for sixty days or less prior to the check's deposit or presentment. 15
(5) "Facilitator" means any person who facilitates or enables, or acts as a 16
conduit for a lender who makes pay day loans but who is or may be exempt from 17
licensing under this Part. 18
(6) "Licensee" means any person engaged in making pay day loans or any 19
facilitator of such loans as defined in Paragraph (5) of this Section, whether licensed 20
or unlicensed. 21
(7) "Person" shall have the definition provided for in R.S. 9:3516. 22
§3577.14. Applicability 23
R.S. 9:3577.14 is all proposed new law. 24
Beginning April 1, 2005, notwithstanding any other provision of law to the 25
contrary, this Part shall apply to any person who, for interest, fee, charge or other 26
consideration, makes pay day loans and to any facilitators of such loans. 27
§3577.15. Exemptions 28
R.S. 9:3577.15 is all proposed new law. 29
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A. Retail sellers who cash checks incidental to or independent of a sale and 1
who charge no more than two dollars per check for the service are exempt from the 2
provisions of this Part. 3
B. Banks, savings and loan associations, credit unions, or other federally 4
insured depository institutions are exempt from the provisions of this Part regarding 5
limitations on interest rates and fees to the extent provided by other state or federal 6
laws and from the requirements for licensure in R.S. 9:3577.16. All other provisions 7
of this Part shall apply to such financial institutions. 8
§3577.16. Licensing 9
R.S. 9:3577.16 is all proposed new law. 10
A. Except as otherwise provided for in R.S. 9:3577.15, beginning April 1, 11
2005, no person shall engage in or offer to engage in the business regulated by this 12
Part unless and until a license has been issued by the commissioner for each business 13
location. 14
B. No person shall conduct the business of making loans under this Part 15
within any office, suite, room, or place of business in which any other business is 16
solicited or engaged in unless authorized by the commissioner, in writing, after he 17
determines that such other business would not be contrary to the best interests of 18
consumers. 19
§3577.17. Suspension and revocation of a license; enforcement; regulations 20
R.S. 9:3577.17 is all proposed new law. 21
The commissioner of financial institutions shall have the authority to enforce 22
the provisions of this Part, and all of the provisions of Parts VII, VIII, and IX of 23
Chapter 2 of Title 9 of the Louisiana Revised Statutes of 1950, the Louisiana 24
Consumer Credit Law, shall be applicable to the persons licensed under this Part by 25
reference herein. Further, the commissioner may apply any other provisions of R.S. 26
9:3510, et seq., which he deems necessary and appropriate to ensure compliance with 27
this Part. 28
§3577.18. Requirements for making pay day loans 29
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R.S. 9:3577.18 is all proposed new law. 1
A. The principal amount of the pay day loan shall not be less than fifty dollars 2
nor more than three hundred dollars. 3
B.(1) A consumer shall be permitted to make partial payments on the loan of 4
no less than five dollars at any time without charge. 5
(2) After each full or partial payment made on any loan, the licensee shall 6
give to the person making such payment a signed, dated receipt showing the amount 7
paid and the balance due on the loan. 8
(3) After each partial payment, the licensee shall require a new check in an 9
amount equal to the balance due on the initial loan after the partial payment. 10
C.(1) The check written by the consumer in a pay day loan shall be made 11
payable to the licensee. 12
(2) Notwithstanding any other law to the contrary, the holder or assignee of 13
any check written by a consumer in connection with a pay day loan shall take the 14
instrument subject to all claims and defenses of the consumer. 15
D. Any facilitator, as defined in R.S. 9:3577.13(5), shall be subject to the 16
same enforcement authority and civil remedies provided for lenders in this Part, if the 17
person making the pay day loans fails to comply with the requirements of this Part. 18
§3577.19. Consumer information 19
R.S. 9:3577.19 is all proposed new law. 20
A licensee shall provide a statement in a manner which is more conspicuous 21
than the other information provided in any loan document, and is in at least fourteen 22
point bold typeface, that states: "You cannot be prosecuted in criminal court to 23
collect this pay day loan." Such notice shall be located immediately preceding the 24
signature of the consumer. 25
§3577.20. Permitted charges 26
R.S. 9:3577.20 is all proposed new law. 27
A. No licensee shall charge or receive, directly or indirectly, any interest, fees, 28
charges, or any other amount for making a pay day loan, including such loans that are 29
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delinquent, except those specifically authorized by this Section. It is the intention of 1
this Section that the licensee be strictly limited to receiving from pay day loan 2
transactions only the amounts provided for in Subsections B and C of this Section, 3
and no other, including, but not limited to, receiving any amounts as insurance in any 4
way related to pay day loan transactions. 5
B.(1) The licensee may charge interest on the amount of cash delivered to the 6
consumer in a pay day loan at a rate no greater than seventy-two percent per annum 7
as based on a three hundred sixty-five day year. 8
(2) The rate of interest charged on the outstanding balance after maturity shall 9
not be greater than the rate charged during the loan term. 10
C. If there are insufficient funds to pay a check on the date of presentment, 11
a licensee may charge a fee, not to exceed fifteen dollars. Only one such fee may be 12
collected with respect to a particular check even if it has been redeposited and 13
returned more than once. A fee charged pursuant to this Subsection shall be the 14
exclusive charge for late payment other than the interest provided for in Subsection 15
C (2) of this Section. 16
D. When a loan is repaid before its due date, unearned interest charges shall 17
be rebated to the consumer based on a method at least as favorable to the consumer 18
as the actuarial method. 19
§3577.21. Prohibited acts 20
R.S. 9:3577.21 is all proposed new law. 21
No licensee making pay day loans shall commit, or shall cause to be 22
committed, on his behalf, any of the following prohibited acts: 23
(1) Engaging in the business of pay day lending unless the commissioner has 24
first issued a valid license. 25
(2) Threatening to use or using the criminal process in this or any other state 26
to collect on the loan. 27
(3) Threatening to use or using any civil process to collect the payment of 28
pay day loans or deferred deposit loans not generally available to creditors to collect 29
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on loans in default. 1
(4) Altering the date or any other information on a check. 2
(5) Using any device or agreement which would have the effect of charging 3
or collecting more fees, charges, or interest other than that authorized by this Part, 4
including but not limited to entering into a different type of transaction with the same 5
consumer. 6
(6) Engaging in unfair, deceptive, or fraudulent practices in the making or 7
collecting of a pay day loan. 8
(7) Charging to cash a check representing the proceeds of the pay day loan. 9
(8) Accepting payment of the pay day loan through the proceeds of another 10
pay day loan provided by the same licensee or any affiliate. 11
(9) Making or having outstanding at any time a pay day loan or loans to any 12
one consumer, which in the aggregate, exceeds three hundred dollars. 13
(10) Accepting any collateral for a pay day loan. 14
(11) Charging any interest, fees or charges other than those specifically 15
authorized by this Part, including but not limited to: 16
(a) Charges for insurance. 17
(b) Attorney fees or other collection costs. 18
(12) Threatening to take any action against a consumer that is prohibited by 19
this Part, or making any misleading or deceptive statements to a consumer regarding 20
the pay day loan or any consequences thereof. 21
(13) The making of a misrepresentation of a material fact by an applicant in 22
obtaining or attempting to obtain a license provided for in this Part. 23
(14) Including any of the following provisions in a written loan agreement or 24
otherwise making them a part of the loan transaction: 25
(a) A hold harmless clause. 26
(b) A confession of judgment clause. 27
(c) A waiver of the right to a jury trial, if applicable, in any action brought by 28
or against a consumer. 29
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(d) A mandatory arbitration clause. 1
(e) Any assignment of or order for payment of wages or other compensation 2
for services. 3
(f) A provision in which the consumer agrees not to assert any claim or 4
defense arising out of the contract. 5
(g) A waiver of any provision of the Part. 6
(15) Selling any insurance of any kind, whether or not sold in connection with 7
the making or collecting of a pay day loan. 8
(16) Violating any state law prohibiting unfair or deceptive trade practices. 9
§3577.22. Civil remedies; criminal penalties 10
R.S. 9:3577.22 is all proposed new law. 11
A. The following remedies provided herein are cumulative and shall apply to 12
licensees and unlicensed persons to whom this Part applies: 13
(1) The violation of any provision of this Part, or regulation thereunder, 14
except as the result of accidental or bona fide error of computation, renders the loan 15
void, and the person shall have no right to collect, receive or retain any interest with 16
respect to the loan. 17
(2) Any person found to have violated this Part shall be liable to the consumer 18
for actual and punitive damages, plus statutory damages of one thousand dollars for 19
each violation (to be increased by regulation promulgated by the commissioner to 20
reflect inflation occurring after April 1, 2005), plus costs and attorney fees. 21
(3) A consumer may sue for injunctive and other appropriate equitable relief 22
to stop any person from violating any provisions of this Part. 23
(4) The remedies provided in this Section are not intended to be the exclusive 24
remedies available to a consumer nor must the consumer exhaust any administrative 25
remedies provided under this Part or any other applicable law before bringing any 26
court action under this Part or any other applicable law. 27
B. Any person, including members, officers, and directors of the person, who 28
knowingly violates this Part shall be guilty of a misdemeanor and, on conviction, 29
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shall be subject to the following penalties: 1
(1) On a first offense, the violator shall be subject to a fine of five hundred 2
dollars. 3
(2) On a second offense, the violator shall be subject to a fine of three 4
thousand dollars. 5
(3) On a third offense, the violator shall be subject to a fine not exceeding six 6
thousand dollars, and shall be subject to imprisonment not to exceed six months, or 7
both. 8
Section 2.A. Except as provided for in Subsection (B) of this Section, this Act shall 9
become effective April 1, 2005. 10
B. The authority of the commissioner of financial institutions to promulgate rules and 11
regulations and to establish a procedure for licensing and to license entities in the pay day 12
loan business as provided for in this Act shall become effective upon signature by the 13
governor or, if not signed by the governor, upon expiration of the time for bills to become 14
law without signature by the governor, as provided by Article III, Section 18 of the 15
Constitution of Louisiana. If vetoed by the governor and subsequently approved by the 16
legislature, such authority provided for in this Act shall become effective on the day 17
following such approval. 18
C. Any entity which has a valid license to make small loans pursuant to the Louisiana 19
Small Loans Act may continue to lawfully operate under such license until April 1, 2005. 20
Such entity shall not operate after that time unless he complies with the provisions of this 21
Act. 22
The original instrument and the following digest, which constitutes no part
of the legislative instrument, were prepared by Jeffery T. Oglesbee.
DIGEST
Proposed law creates the Louisiana Pay Day Loan Act, to regulate "pay day loans" and
requires the law to be liberally construed in order to protect consumers.
Proposed law defines and regulates "pay day loans" as a loan made to a "consumer" in which
the lender accepts a check for the amount of the loan or more and agrees to hold it for a
period of time prior to the check's deposit or presentment. The use of the term "consumer"
means that the loan is made to a natural person for personal, family, or household purposes.
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underscored and boldfaced are additions.
Proposed law limits the principal amount of the pay day loan to not less than $50 nor more
than $300.
Proposed law prohibits charging or receiving for small loans, directly or indirectly, any
interest, fees, charges, or any other amount except interest on the amount of cash delivered
to the consumer at a rate no greater than 72 percent per annum (defined as a 365 day year).
Proposed law specifically requires lenders to accept early payments of $5.00 or more from
borrowers and to give receipts for such payments. After each partial payment, the lender shall
require a new check in an amount equal to the balance due or the initial loan after the partial
payment. In addition, requires unearned interest charges to be rebated based on a method at
least as favorable to the consumer as the actuarial method when a loan is repaid before its
due date.
Proposed law limits the rate of interest charged on the outstanding balance of a loan after
maturity to one which is not greater than the rate charged during the loan term. In addition,
authorizes an NSF fee not to exceed $15, but only one such charge with respect to a
particular check even if it has been redeposited and returned more than once. The fee is the
exclusive charge for a late payment.
Proposed law provides that "any person", including members, officers, and directors of the
"person", who knowingly violates the proposed law is guilty of a misdemeanor and is subject
to the following penalties:
(1) On a first offense, the violator shall be subject to a fine of five hundred dollars.
(2) On a second offense, the violator shall be subject to a fine of three thousand dollars.
(3) On a third offense, the violator shall be subject to a fine not exceeding six thousand
dollars, and shall be subject to imprisonment not to exceed six months, or both.
Proposed law authorizes the commissioner upon finding a violation of the proposed law or
regulations or orders after a public hearing or opportunity for such, to issue an order revoking
or suspending the right of licensees and its officers, agents, employees, or representatives to
do pay day loan business. Failure or refusal to make reports or the furnishing of false
information is also grounds for such action. A public hearing is required if an aggrieved
consumer or any member of the public file a complaint against a licensee. The complaint
process is required to be established by regulation and a list of licensees is to be made
available to the public by the commissioner.
The commissioner is specifically authorized to promulgate regulations.
Proposed law provides the following non-exclusive civil remedies to consumers which may
be brought even if the consumer has not exhausted his administrative remedies:
(1) The violation of any provision of the proposed law or regulation thereunder, except
as the result of accidental or bona fide error of computation, renders the loan void,
and the licensee has no right to collect, receive or retain any interest, with respect to
the loan.
(2) Any person found to have violated this Part shall be liable to the consumer for actual
and punitive damages, plus statutory damages of $1,000 dollars for each violation (to
be increased by the commissioner to reflect inflation occurring after 4/1/2005), plus
costs and attorney fees.
(3) A consumer may sue for injunctive and other appropriate equitable relief to stop any
person from violating the law.
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Proposed law requires the following when making a pay day loan:
Proposed law requires a license to provide a conspicuous statement of at least 14 point bold
typeface, that: "You cannot be prosecuted in criminal court to collect this pay day loan." shall
immediately precede the signature of the consumer.
A written loan agreement cannot include any of the following:
(1) A hold harmless clause.
(2) A confession of judgment clause.
(3) A waiver of the right to a jury trial, if applicable, in any action brought by or against
a consumer.
(4) A mandatory arbitration clause.
(5) Any assignment of or order for payment of wages or other compensation for services.
(6) A provision in which the consumer agrees not to assert any claim or defense arising
out of the contract.
(7) A waiver of any provision of the proposed law.
Proposed law specifies that the holder or assignee of the check takes the instrument subject
to all claims and defenses of the consumer.
Proposed law prohibits:
(1) Engaging in the business of pay day lending unless the commissioner has first issued
a valid license.
(2) Threatening to use or using the criminal process in this or any other state to collect
on the loan.
(3) Threatening to use or using any civil process to collect the payment of pay day loans
or deferred deposit loans not generally available to creditors to collect on loans in
default.
(4) Altering the date or any other information on a check.
(5) Using any device or agreement which would have the effect of charging or collecting
more fees, charges, or interest other than that authorized by this Part, including but
not limited to entering into a different type of transaction with the same consumer.
(6) Engaging in unfair, deceptive, or fraudulent practices in the making or collecting of
a pay day loan.
(7) Charging to cash a check representing the proceeds of the pay day loan.
(8) Accepting payment of pay day loan through the proceeds of another pay day loan
provided by the same licensee or any affiliate.
(9) Making or having outstanding at any time a pay day loan or loans to any one
consumer, which in the aggregate, exceeds three hundred dollars.
(10) Charging any amount, or using any device or agreement which would have the effect
of charging or collecting such amount, other than that authorized by the proposed
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law, including but not limited to, charging for insurance; attorneys fees or other
collection costs; and entering into a different type of transaction with the same
consumer.
(11) Accepting any collateral for a pay day loan.
(12) The misrepresentation of a material fact by an applicant in obtaining or attempting
to obtain a license.
(13) Selling any insurance of any kind.
(14) Conducting a pay day loan business within any office, suite, room, or place of
business in which any other business is solicited or engaged in unless authorized by
the commissioner, in writing, after he determines that such other business would not
be contrary to the best interests of consumers.
Proposed law specifically provides that except for financial institutions, beginning 4/1/2005,
no person can engage in or offer to engage in the pay day loan business until a license has
been issued by the commissioner for each business location. Authorizes the commission to
enforce the Act and other applicable consumer credit laws.
Proposed law exempts banks, savings and loan associations, credit unions, or other federally
insured depository institutions from the provisions regarding limitations on interest rates and
fees to the extent provided by other state or federal laws and from the requirements for
licensure. However, all other provisions apply to them. Retail sellers who cash checks
incidental to or independent of a sale and who charge no more than two dollars per check for
the service are exempt.
Proposed law requires each applicant for a license or any principal of an applicant to provide
any information that the commissioner deems necessary.
The proposed law becomes effective August 15, 2004, but under its terms applies on and
after April 1, 2005. However, the authority of the commissioner of financial institutions to
promulgate rules and regulations and to begin to issue licenses becomes effective upon
signature by the governor or lapse of time for gubernatorial action.
(Adds 9:3577.11-3577.22)