Bill Text: IA HF2375 | 2017-2018 | 87th General Assembly | Introduced
Bill Title: A bill for an act relating to permissible interest rates and charges for certain loans. (Formerly HSB 599.)
Spectrum: Committee Bill
Status: (Introduced - Dead) 2018-03-15 - Referred to Commerce. H.J. 594. [HF2375 Detail]
Download: Iowa-2017-HF2375-Introduced.html
House File 2375 - Introduced HOUSE FILE BY COMMITTEE ON COMMERCE (SUCCESSOR TO HSB 599) A BILL FOR 1 An Act relating to permissible interest rates and charges for 2 certain loans. 3 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: TLSB 5930HV (2) 87 gh/rn PAG LIN 1 1 Section 1. Section 536.13, subsection 7, paragraph a, Code 1 2 2018, is amended to read as follows: 1 3 a. The superintendent may establish the maximum rate of 1 4 interest or charges as permitted under this chapter for those 1 5 loans with an unpaid principal balance oftenthirty thousand 1 6 dollars or less. For those loans with an unpaid principal 1 7 balance of overtenthirty thousand dollars, the maximum rate 1 8 of interest or charges which a licensee may charge shall be 1 9 the greater of the rate permitted by chapter 535 or the rate 1 10 authorized for supervised financial organizations by chapter 1 11 537. 1 12 Sec. 2. Section 537.2401, subsection 1, Code 2018, is 1 13 amended to read as follows: 1 14 1. Except as provided with respect to a finance charge for 1 15 loans pursuant to open=end credit under section 537.2402 and 1 16 loans secured by a certificate of title of a motor vehicle 1 17 under section 537.2403, a lender may contract for and receive 1 18 a finance charge not exceeding the maximum charge permitted 1 19 by the laws of this state or of the United States for similar 1 20 lenders, and, in addition, with respect to a consumer loan, 1 21 a supervised financial organization or a mortgage lender may 1 22 contract for and receive a finance charge, calculated according 1 23 to the actuarial method, not exceeding the sum of a service 1 24 charge, collected in advance and equal to the lesser of two 1 25 percent of the amount financed or one hundred twenty dollars, 1 26 and twenty=one percent per year on the unpaid balance of the 1 27 amount financed. Except as provided in section 537.2403, this 1 28 subsection does not prohibit a lender from contracting for and 1 29 receiving a finance charge exceeding the sum of the authorized 1 30 service charge and twenty=one percent per year on the unpaid 1 31 balance of the amount financed on consumer loans if authorized 1 32 by other provisions of the law. 1 33 Sec. 3. Section 537.2403, subsection 1, Code 2018, is 1 34 amended to read as follows: 1 35 1.A lender shall not contract for or receive a finance 2 1 charge exceeding twenty=one percent per year on the unpaid 2 2 balance of the amount financed forFor a loan of money secured 2 3 by a certificate of title to a motor vehicle used for personal, 2 4 family, or household purpose except as authorized under chapter 2 5 536 or 536A, a lender shall not contract for or receive a 2 6 finance charge exceeding the sum of a service charge, collected 2 7 in advance and equal to the lesser of two percent of the amount 2 8 financed or one hundred twenty dollars, and twenty=one percent 2 9 per year on the unpaid balance of the amount financed. A 2 10 consumer who is charged a finance charge in excess of the 2 11 limitation in this section may seek any remedies available 2 12 pursuant to this chapter for an excess charge. 2 13 Sec. 4. Section 537.2501, subsection 1, Code 2018, is 2 14 amended by adding the following new paragraph: 2 15 NEW PARAGRAPH. l. For an interest=bearing consumer credit 2 16 transaction, a service charge in an amount not to exceed the 2 17 lesser of ten percent of the amount financed or thirty dollars. 2 18 Sec. 5. Section 537.2510, subsection 3, paragraph a, Code 2 19 2018, is amended to read as follows: 2 20 a. If the prepayment is in full, the creditor may collect 2 21 or retain a minimum charge not exceeding five dollars in a 2 22 transaction which had an amount financed of seventy=five 2 23 dollars or less, or not exceeding seven dollars and fifty cents 2 24 in a transaction which had an amount financed of more than 2 25 seventy=five dollars, if the minimum charge was contracted 2 26 for, and the finance charge earned at the time of prepayment 2 27 is less than the minimum charge contracted for. If, however, 2 28 a creditor has collected a service charge in association with 2 29 an interest=bearing consumer credit transaction pursuant to 2 30 section 537.2501, subsection 1, paragraph "l", the creditor 2 31 shall not collect or retain a minimum charge upon prepayment 2 32 pursuant to this subsection. 2 33 Sec. 6. Section 537.2510, Code 2018, is amended by adding 2 34 the following new subsection: 2 35 NEW SUBSECTION. 9. This section does not apply to a service 3 1 charge collected pursuant to section 537.2501, subsection 1, 3 2 paragraph "l". 3 3 EXPLANATION 3 4 The inclusion of this explanation does not constitute agreement with 3 5 the explanation's substance by the members of the general assembly. 3 6 This bill relates to permissible interest rates and charges 3 7 for certain loans. 3 8 Current law allows the superintendent of banking to 3 9 establish the maximum rate of interest or charges for regulated 3 10 loans subject to Code chapter 536 with unpaid principal 3 11 balances of $10,000 or less. The bill increases this amount to 3 12 $30,000. For loans with unpaid principal balances in excess 3 13 of $30,000 (formerly $10,000), the maximum interest rate or 3 14 charges a lender may charge remains the greater of the rate 3 15 permitted in Code chapter 535 or the rate authorized for 3 16 supervised financial organizations in Code chapter 537. 3 17 Current law allows a supervised financial organization or 3 18 mortgage lender to contract for and receive a finance charge 3 19 not exceeding 21 percent per year on the unpaid balance of the 3 20 amount financed for a consumer loan subject to Code chapter 537 3 21 that is not pursuant to open=end credit. The bill provides 3 22 that such finance charge may also include a service charge, 3 23 collected in advance and equal to the lesser of 2 percent of 3 24 the amount financed or $120, in addition to 21 percent per 3 25 year on the unpaid balance of the consumer loan. A lender may 3 26 contract for and receive a finance charge in excess of this 3 27 amount if authorized by other provisions of the law. Under 3 28 current law, the maximum finance charge amount for a consumer 3 29 loan as provided in the bill also serves as the maximum amount 3 30 for interest rates on certain consumer loans made by state 3 31 credit unions (Code section 533.316), the maximum finance 3 32 charge amount applicable to certain supervised loans (Code 3 33 section 537.2308), and the maximum finance charge applicable 3 34 to certain consumer credit transactions on refinancing (Code 3 35 section 537.2504) and consolidation (Code section 537.2505). 4 1 Additionally, current law allows a lender to contract for 4 2 and receive a finance charge not exceeding 21 percent per 4 3 year on the unpaid balance of the amount financed for a loan 4 4 secured by a certificate of title to certain motor vehicles. 4 5 The bill provides that such finance charge may also include a 4 6 service charge, collected in advance and equal to the lesser 4 7 of 2 percent of the amount financed or $120, in addition to 21 4 8 percent per year on the unpaid balance of the consumer loan. 4 9 The bill authorizes a creditor to contract for and receive, 4 10 for an interest=bearing consumer credit transaction, a service 4 11 charge in an amount not to exceed the lesser of 10 percent 4 12 of the amount financed or $30. The bill provides that if a 4 13 creditor has received such a service charge, the creditor 4 14 shall not collect or retain a minimum charge upon prepayment 4 15 as authorized under Code section 537.2510. The bill specifies 4 16 that Code section 537.2510, relating to rebate upon prepayment, 4 17 does not apply to service charges collected pursuant to the 4 18 bill. LSB 5930HV (2) 87 gh/rn
