Bill Text: IA HSB189 | 2017-2018 | 87th General Assembly | Introduced

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Bill Title: A bill for an act requiring the licensure of flexible credit lenders, and providing criminal and civil penalties.

Spectrum: Committee Bill

Status: (N/A - Dead) 2018-04-03 - Committee report, recommending amendment and passage. H.J. 734. [HSB189 Detail]

Download: Iowa-2017-HSB189-Introduced.html

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House Study Bill 189 - Introduced
HOUSE FILE _____
BY (PROPOSED COMMITTEE ON
WAYS AND MEANS BILL BY
CHAIRPERSON VANDER LINDEN)
A BILL FOR
An Act requiring the licensure of flexible credit lenders, and
providing criminal and civil penalties.
BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:
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Section 1. NEW SECTION . 536B.1 Title.
This chapter shall be known and may be cited as the “Iowa
Flexible Loan Act” .
Sec. 2. NEW SECTION . 536B.2 Definitions.
As used in this chapter, unless the context otherwise
requires:
1. “Annual percentage rate” means the measure of the cost
of credit, expressed as a yearly rate, that relates the amount
extended to a consumer on a flexible credit loan to the amount
and timing of payments made, as computed under the federal
Truth in Lending Act.
2. “Consumer” means an individual who obtains a flexible
credit loan.
3. “Federal Truth in Lending Act” means as defined in
section 537.1302.
4. “Finance charge” means the amount payable by a consumer
incident to or as a condition of the extension of a flexible
credit loan but excluding other fees allowed under section
536B.21.
5. “Flexible credit lender” means a person who enters
into three or more flexible credit loans in this state or
advertises, solicits, or holds itself out as offering to enter
into flexible credit loans in this state.
6. “Flexible credit loan” is a loan in which all of the
following are applicable:
a. The debt is incurred for a personal, family, or household
purpose.
b. The debt is not more than two thousand five hundred
dollars.
c. The debt is unsecured.
d. The debt is payable in substantially equal installment
payments of principal and interest for the term of the loan.
e. The debt is subject to prepayment in whole or in part at
any time without penalty.
f. The term length of the loan is for a maximum of
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twenty-four months.
7. “Licensee” means a person licensed pursuant to this
chapter.
8. “Regularly engaged in the business” means all of the
following:
a. Advertising to or making any other solicitation to a
resident of this state to offer a flexible credit loan within
this state.
b. Making three or more flexible credit loans within a
calendar year to residents of this state.
9. “Superintendent” means the superintendent of banking
within the banking division of the department of commerce.
Sec. 3. NEW SECTION . 536B.3 Exemptions.
This chapter shall not apply to any of the following:
1. A person who does business under the authority of a
law of this state, or any other state while regulated by a
state agency of that other state, or of the United States,
relating to banks, savings banks, trust companies, savings and
loan associations, profit sharing and pension trusts, credit
unions, insurance companies, or receiverships if the person
is regulated by the other law or under the jurisdiction of a
court.
2. A person who is not regularly engaged in the business of
making a flexible credit loan.
3. A person who is licensed pursuant to another law of this
state to the extent that the person’s activities are governed
by that law.
4. A consumer loan in which the rate of the finance charge,
calculated pursuant to the actuarial method, does not exceed
the rate of a finance charge permitted under chapter 535.
Sec. 4. NEW SECTION . 536B.4 License required —— application
—— fees.
1. Unless exempt under section 536B.3, a person shall not
engage in the business of making a flexible credit loan to a
resident of this state without first having obtained a license
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as a flexible credit lender from the superintendent.
2. An applicant for a license shall submit an application
in writing, under oath, and in the form as prescribed by the
superintendent. The application shall require any information
that the superintendent determines is necessary.
3. At the time of making the application, the applicant
shall pay to the superintendent an application fee of one
hundred dollars and an initial license fee of two hundred fifty
dollars.
Sec. 5. NEW SECTION . 536B.5 Grounds for denial of license.
The superintendent may deny a license for any of the
following:
1. The person is insolvent.
2. The person has failed to demonstrate the financial
responsibility, experience, character, and general fitness to
command the confidence of the community and to warrant the
belief that the business of the proposed flexible credit lender
will be operated lawfully, honestly, fairly, and efficiently,
pursuant to this chapter and any other applicable law.
3. The person has failed to pay the fees required under
section 536B.4, subsection 3.
4. The person has failed to demonstrate that the person
maintains at least twenty-five thousand dollars in assets
readily available for use in the conduct of the business for
the licensed office and each licensed branch office or two
hundred thousand dollars for all office locations.
5. The person or, if the person is an entity, an officer,
director, shareholder, partner, or member of the entity, has
been convicted of a felony in this or any other state.
Sec. 6. NEW SECTION . 536B.6 Issuance of license —— form ——
posting.
1. The superintendent shall issue a license to an applicant
within thirty days after receiving a complete application
unless the superintendent finds grounds for denying the
license.
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2. A license issued under this chapter shall be valid for a
term of one year, beginning on January 1 and ending on December
31.
3. A license issued under this chapter shall remain in full
force until surrendered, revoked, or suspended.
4. A license issued under this chapter shall not be
transferable or assignable.
5. A license issued under this chapter shall remain the
property of this state. Upon the voluntary surrender of the
license by the licensee or the revocation of the license by
the superintendent, the licensee shall immediately deliver the
license to the superintendent. Surrender or revocation of the
license shall not affect any other liability of the licensee.
6. A license issued under this chapter shall be kept
conspicuously posted at the office of the licensee and any
licensed branch office where flexible credit loan transactions
are conducted.
Sec. 7. NEW SECTION . 536B.7 Surety bond.
1. If, at the time of an initial application or renewal of
a license, a valid bond is not on file with the department,
the applicant or licensee shall file with the superintendent
a surety bond issued by a licensed surety in an amount
satisfactory to the superintendent, provided, however, that
such amount is not less than twenty-five thousand dollars for
each office or two hundred thousand dollars for all office
locations. Such bond shall have the state of Iowa named as the
obligee in a form approved by the superintendent.
2. A bond filed pursuant to this subsection shall require
an applicant or licensee to pay any civil penalties and
examination fees. A bond shall also cover any claims for
damages brought by a consumer residing in Iowa as a result of
the licensee’s violation of this chapter. The superintendent
may also make a claim on the bond for damages brought by
a consumer residing in Iowa as a result of the licensee’s
violation of this chapter. A claim on the bond for damages
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shall not be made more than two years after the cancellation
of the bond or license.
3. A bond filed pursuant to this subsection shall be
continuous and may be canceled by the surety upon the
surety giving no less than thirty days written notice to the
superintendent. A cancellation or revocation of the bond or
withdrawal of the surety from the bond shall automatically
suspend the license issued to the licensee until a new bond
or reinstatement notice is filed and approved pursuant to
this subsection. The surety shall only be liable for damages
incurred or unpaid fees while the bond is in force.
Sec. 8. NEW SECTION . 536B.8 License location.
1. A licensee shall designate the principal place of
business where the licensee shall conduct flexible credit loan
transactions pursuant to this chapter, which shall be indicated
on the license as the licensed office location.
2. a. A licensee may obtain a branch office license from
the superintendent for each branch office if the licensee wants
to maintain more than one license location.
b. A licensee may obtain a branch office license by
submitting an application in the form as prescribed by the
superintendent and paying a fee of two hundred fifty dollars
for each branch office license.
c. The superintendent shall issue a branch office
license indicating the address of the branch office if the
superintendent determines that the applicant is qualified for
the license.
3. A licensee shall not conduct flexible credit loan
transactions under any name or at any place of business other
than the name and location indicated on the license. However,
a licensee may do any of the following:
a. Provide a flexible credit loan by mail or electronic
means.
b. Make an accommodation to a consumer at any location upon
a request by the consumer.
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c. Conduct an administrative, loan servicing, or
recordkeeping activity at any other location not open to the
public provided that the superintendent is notified in advance
of that activity.
4. A licensee may change the licensed office location or
licensed branch office location by providing the superintendent
with written notice within ten days of making the change, and
the superintendent shall amend the license accordingly.
5. a. A licensee may conduct flexible credit loan
transactions from within any licensed office location or
licensed branch office location in which any other business not
licensed pursuant to this Title XIII of the Code is solicited
or engaged in, or in conjunction with any other business not
licensed pursuant to this Title XIII.
b. If the superintendent determines that the other business
is of such a nature or is being conducted in such a manner
as to conceal an evasion or violation of this chapter or any
rules adopted pursuant to this chapter, or is otherwise being
conducted in an unlawful manner, the superintendent may order
the licensee to cease the operation of the flexible credit
lending business at the location.
Sec. 9. NEW SECTION . 536B.9 Renewal of license.
1. A license issued pursuant to this chapter shall be
renewed annually by filing an application for renewal with the
superintendent on or before December 1 containing information
as required by the superintendent to indicate any material
changes to an original application or subsequent renewal
application and paying a renewal fee of two hundred fifty
dollars.
2. The superintendent may assess a late fee of ten dollars
per day for applications submitted and accepted for processing
after December 1.
3. The license of a licensee who has not filed a renewal
application or paid the renewal fee by December 31 shall
expire and the licensee shall not act as a flexible credit
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lender until the license is renewed or a new license is issued
pursuant to this chapter.
Sec. 10. NEW SECTION . 536B.10 Disciplinary action.
1. The superintendent, after notice and hearing pursuant
to the provisions of chapter 17A, may take disciplinary action
against a licensee if the superintendent determines any of the
following:
a. The licensee has violated this chapter, a rule adopted
pursuant to this chapter, or any other state or federal law,
rule, or regulation applicable to the conduct of the business.
b. A fact or condition exists that would have warranted the
superintendent to deny the original license.
c. The licensee has failed to pay the annual license fee
or has failed to demonstrate that the licensee maintains at
least twenty-five thousand dollars in assets readily available
for use in the conduct of the business for the licensed
office location and each licensed branch office or two hundred
thousand dollars for all office locations.
d. The licensee has failed to file an annual report as
required by this chapter when the report was due or within
any extension of time provided by the superintendent for good
cause.
e. The licensee is insolvent.
f. The licensee has violated an order of the superintendent.
2. The superintendent may take one or more of the following
disciplinary actions against a licensee:
a. Revoke a license.
b. Suspend a license until further order of the
superintendent or for a specified period of time.
c. Impose a period of probation under specified conditions.
d. Impose civil penalties in an amount not to exceed five
thousand dollars for each violation.
e. Issue a citation and warning respecting licensee
behavior.
f. Order the licensee to pay restitution.
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3. The superintendent may order the emergency suspension of
a licensee’s license pursuant to section 17A.18A. A written
order containing the facts or conduct warranting the emergency
action shall be timely sent to the licensee by restricted
certified mail. Upon issuance of the emergency suspension
order, the licensee shall be notified of the right to an
evidentiary hearing. A suspension proceeding shall be promptly
scheduled if so requested by the licensee.
4. Except as provided in this section, a license shall
not be revoked or suspended except after notice and a hearing
thereon in accordance with chapter 17A.
5. The revocation, suspension, or surrender of a license
shall not impair or affect the obligation of a preexisting
lawful contract between the licensee and any person, including
a borrower.
Sec. 11. NEW SECTION . 536B.11 Cease and desist order.
1. If the superintendent believes that a person has engaged
in or is about to engage in an act or practice constituting
a violation of this chapter or any rule adopted pursuant to
this chapter or an order issued by the superintendent, the
superintendent may issue and serve a cease and desist order
on the person. Upon entry of a cease and desist order, the
superintendent shall promptly provide written notice to the
person to whom the order is directed that the order has been
entered and the reasons for entering the order.
2. a. A person to whom a cease and desist order is directed
may request a hearing in writing within fifteen business days
after the date the order was issued. Upon receipt of such
written request, the matter shall be set for a hearing within
fifteen business days of the receipt of the written request by
the superintendent, unless the person requesting the hearing
consents to a later date.
b. If a hearing is requested pursuant to this subsection
or is otherwise required by the superintendent, the
superintendent, after notice and hearing, shall issue written
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findings of fact and conclusions of law and shall affirm,
vacate, or modify the order. If a hearing is not requested
pursuant to this subsection and the superintendent has not
otherwise required a hearing, the order of the superintendent
shall be final and remain in effect until it is modified or
vacated by the superintendent.
3. The superintendent may vacate or modify an order entered
pursuant to this section if the superintendent finds that
a condition that caused its entry has changed or it would
otherwise be in the public interest to vacate or modify the
order.
4. A person aggrieved by a final order of the superintendent
may seek judicial review of the order pursuant to section
17A.19.
Sec. 12. NEW SECTION . 536B.12 Records —— examination by
superintendent —— fees.
1. A licensee shall keep such books, accounts, and records
as the superintendent may require in order to determine whether
the licensee is complying with the provisions of this chapter
and with the rules adopted by the superintendent under this
chapter.
2. A licensee shall preserve for at least two years after
making the last entry on any flexible credit loan all books,
accounts, and records pertaining to the loan. A licensee who
uses an electronic recordkeeping system shall not be required
to keep a written copy of the books, accounts, and records
if the licensee is able to generate all of the information
required under this section in a timely manner for examination
or other purposes.
3. A licensee shall make any books, accounts, and records
kept outside of this state available to the superintendent
within three business days upon request by the superintendent.
The superintendent may examine such books, accounts, and
records at the office of the licensee located outside of this
state.
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4. A licensee shall provide to the superintendent or the
superintendent’s duly authorized representative access, during
normal business hours, to the licensee’s offices, files, safes,
and vaults regarding the flexible credit lending business or
regarding the subject matter of any examination, investigation,
or hearing regarding the licensee.
5. a. The superintendent shall examine the books, accounts,
and records of each licensee at least once per year and as
needed to secure information required pursuant to this chapter
and to determine if a violation of this chapter has occurred.
b. The superintendent may examine or investigate a complaint
or report concerning an alleged violation of this chapter, a
rule adopted pursuant to this chapter, or an order issued by
the superintendent.
6. a. A licensee or person subject to an examination or
investigation pursuant to subsection 5 shall pay the cost of
the examination or investigation. The superintendent may
order the cost of an examination or investigation provided
under subsection 5 to be paid by the person subject to such
examination or investigation, regardless of whether the person
is licensed under this chapter.
b. The superintendent shall determine the cost of an
examination or investigation based upon the actual cost of the
operation of the finance bureau of the banking division of
the department of commerce, including the proportionate share
of administrative expenses in the operation of the banking
division attributable to the finance bureau as determined by
the superintendent, incurred in the discharge of duties imposed
upon the superintendent by this chapter.
c. Failure to pay the cost of an examination or
investigation pursuant to this subsection within thirty days
of receipt of demand from the superintendent shall subject the
licensee or person subject to the examination or investigation
to a late fee of up to five percent of the amount of the cost
of the examination or investigation for each day the payment
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is delinquent.
Sec. 13. NEW SECTION . 536B.13 Annual report by licensee.
1. A licensee shall annually on or before April 1 file a
report with the superintendent giving such relevant information
as the superintendent reasonably may require concerning
the business and operations during the twelve-month period
ending the preceding December 31. Upon good cause shown by a
licensee, the superintendent may extend the time for filing the
report for a period not to exceed sixty days.
2. The annual report shall include a licensee’s average
annual percentage rate and average loan amount during the
twelve-month period ending the preceding December 31.
3. a. If a licensee fails to file an annual report under
this section on or before April 1 or within any extension
of time provided by the superintendent for good cause, the
superintendent or any person designated by the superintendent
may examine the books, accounts, and records of the licensee,
prepare the annual report, and charge the licensee an
examination fee as established by rule. The fee shall be based
on the actual cost of the examination or investigation.
b. If a licensee fails to file an annual report within the
specified time and has not received an extension, the licensee
shall be subject to a civil penalty not to exceed five dollars
per day until the licensee has filed the annual report. The
licensee shall pay the penalty to the superintendent within
thirty days after the penalty is levied.
Sec. 14. NEW SECTION . 536B.14 Surrender of license.
A licensee may surrender a flexible credit loan license
by delivering to the superintendent written notice that the
license is surrendered. The surrender does not affect the
licensee’s civil or criminal liability for acts committed
prior to such surrender or entitle such licensee to a return
of any part of the annual license fee. The superintendent
may establish procedures for the disposition of the books,
accounts, and records of the licensee and may require such
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action as deemed necessary for the protection of consumers that
have flexible credit loans that are outstanding at the time of
surrender of the license.
Sec. 15. NEW SECTION . 536B.15 Impairment of preexisting
loan.
1. The revocation, suspension, surrender, expiration, or
alteration of a license provided under this chapter shall not
impair or affect any of the following:
a. The obligation of a preexisting flexible credit loan
between a flexible credit lender and a consumer.
b. The ability or right of a flexible credit lender to
service a preexisting flexible credit loan from outside this
state.
2. If this chapter or any part of this chapter is modified,
amended, or repealed, resulting in a cancellation or alteration
of any flexible credit lender license or right of a licensee
under this chapter, that cancellation or alteration shall not
impair or affect the obligation of any preexisting contract
between a flexible credit lender and any consumer.
Sec. 16. NEW SECTION . 536B.16 Prohibited acts by licensee.
1. A licensee shall not knowingly advertise, display,
distribute, broadcast, or televise, or cause or allow to be
advertised, displayed, distributed, broadcast, or televised, in
any manner, any false, misleading, or deceptive statement or
representation with regard to the rates, terms, or conditions
of a flexible credit loan. To the extent applicable, all
advertising shall comply with the advertising requirements
specified in the federal Truth in Lending Act.
2. a. A licensee shall not provide a flexible credit loan
with an annual percentage rate greater than that provided in 10
U.S.C. §987(b), to any of the following:
(1) A member of the United States armed forces who is on
active duty under a call or order that does not specify a
period of thirty days or less.
(2) A person on active national guard duty or armed forces
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military reserve active duty.
(3) A dependent as defined in 10 U.S.C. §987(i).
b. A licensee shall not provide a flexible credit loan
to a consumer unless the consumer has signed a statement, to
be included as part of the loan, attesting to whether or not
the consumer is a military member or a dependent as defined
in 10 U.S.C. §987(i). The statement shall be in the form as
prescribed by the superintendent by rule.
c. A flexible credit loan made in violation of 10 U.S.C.
§987 is void and its terms and conditions unenforceable.
Sec. 17. NEW SECTION . 536B.17 Rules.
The superintendent may adopt rules to administer this
chapter.
Sec. 18. NEW SECTION . 536B.18 Operation of business without
license —— criminal penalty —— injunction.
A person who has engaged in the business of making a flexible
credit loan to a resident in this state without first having
obtained a license pursuant to this chapter or while such
license is suspended or revoked by the superintendent is guilty
of a serious misdemeanor. In addition to the criminal penalty
provided in this section, the superintendent may also commence
an action to enjoin the operation of a business conducted in
violation of this chapter.
Sec. 19. NEW SECTION . 536B.19 Disclosures.
1. To the extent applicable, a licensee shall comply with
the disclosure requirements as set forth in the federal Truth
in Lending Act.
2. A licensee shall conspicuously display a sign printed
in at least twelve-point bold font type at each desk in the
licensed office and licensed branch office where flexible
credit loan transactions are conducted with the following
disclosure:
Notice: Before signing any loan documents or otherwise
committing to a loan, you may take copies of those documents
away from the flexible credit lender’s place of business for
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review.
3. A licensee providing electronic flexible credit loans
shall conspicuously display the following disclosure on the
licensee’s internet site:
Notice: Before signing any loan documents or otherwise
committing to a loan, please read our terms and conditions
carefully.
4. A licensee who fails to provide disclosures as required
under this section shall be subject to a civil penalty not to
exceed three hundred dollars for each violation.
Sec. 20. NEW SECTION . 536B.20 Maximum interest rate or
finance charge.
1. A licensee may charge a rate of interest or a finance
charge on a flexible credit loan at a rate not to exceed
seventeen percent per month.
2. This section does not authorize the compounding of a
finance charge.
Sec. 21. NEW SECTION . 536B.21 Other fees and charges.
1. In addition to a rate of interest or a finance charge
authorized under section 536B.20, a licensee may collect any of
the following fees or charges:
a. A delinquency charge if an installment is not paid in
full within seven days, equal to five percent of the amount of
the installment.
b. Court costs and reasonable attorney fees if the flexible
credit loan is referred for collection to an attorney other
than an employee of the licensee.
c. A dishonored check service fee if a licensee receives
a check, draft, negotiable order of withdrawal, or similar
instrument that is not paid or is not honored by a depository
institution, equal to the actual charges assessed by the
depository institution.
2. A licensee shall not directly or indirectly charge,
contract for, or receive any other amount in connection with a
flexible credit loan except as provided in this chapter.
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EXPLANATION
The inclusion of this explanation does not constitute agreement with
the explanation’s substance by the members of the general assembly.
This bill creates new Code chapter 536B to require licensure
of persons who wish to provide flexible credit loans to
residents of the state.
The bill defines “flexible credit loan” to mean a loan that
is incurred for a personal, family, or household purpose, is
not more than $2,500, is unsecured, is payable in substantially
equal installment payments of principal and interest for the
term of the loan, is subject to prepayment in whole or in part
at any time without penalty, and is for a term length of a
maximum of 24 months.
The bill exempts the following persons from the requirements
of the bill: a person who does business under any law relating
to banks, savings banks, trusts, savings and loan associations,
profit sharing and pension trusts, credit unions, insurance
companies, or receiverships, a person who is not regularly
engaged in the business of making flexible credit loans, as
defined in the bill, a person who is licensed pursuant to
another Iowa Code chapter to the extent that the person’s
activities are governed by that Code chapter, or a consumer
loan with a finance charge as permitted under Code chapter 535.
The bill prohibits a person from engaging in the business
of making flexible credit loans to a resident in this state
without first obtaining a license from the superintendent
of the banking division in the department of commerce. An
applicant for a license must submit an application in the form
prescribed by the superintendent and pay an application fee of
$100 and an initial license fee of $250.
The bill allows the superintendent to deny a license if
the applicant is insolvent, has failed to demonstrate the
financial responsibility, experience, character, and general
fitness required, as determined by rule, has failed to pay the
application and initial license fees, has failed to demonstrate
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the availability of at least $25,000 in assets for use in
the conduct of the business for the licensed office and each
licensed branch office or $200,000 for all office locations, or
if an officer, director, shareholder, partner, or member has
been convicted of a felony, if the applicant is an entity.
The bill requires the superintendent to issue a license
within 30 days of receiving an application unless grounds exist
for denying it. A license is valid for one year, from January
1 to December 31, remains in full force until surrendered,
revoked, or suspended, and is not transferable. A license
remains the property of the state and must be immediately
returned to the superintendent if a licensee voluntarily
surrenders it. A license must be posted conspicuously in the
office of the licensee and any licensed branch offices.
The bill requires an applicant or licensee to file a surety
bond with the superintendent in an amount that is not less than
$25,000 for each office or $200,000 for all office locations.
The bond requires the applicant or licensee to pay any civil
penalty and examination fee and shall cover any claims for
damages brought by an Iowa consumer as a result of a violation
of the bill. The superintendent may also make a claim on the
bond for damages resulting from a violation of the bill. A
claim for damages on the bond must be made within two years
of the cancellation of the bond or license. The bond is
continuous and may be canceled by the surety with no less than
30 days written notice to the superintendent. A cancellation
or revocation of the bond automatically suspends the licensee’s
license. The surety is only liable for damages incurred or
unpaid fees while the bond is in force.
The bill requires a licensee to designate the principal
place of business to be indicated on the license. A licensee
wishing to maintain more than one place of business may
obtain a branch office license by submitting an application
as prescribed by the superintendent and paying a $250 fee.
A licensee is prohibited from conducting flexible credit
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loan transactions under any name or location different than
what is indicated on the license, provided, however, that
a licensee may provide loans by mail or electronic means,
make an accommodation to a consumer at any location upon
the consumer’s request, or conduct an administrative, loan
servicing, or recordkeeping activity at any other location if
the superintendent is notified. A licensee can change the
license location by giving the superintendent written notice to
amend the license within 10 days of making the change.
The bill authorizes a licensee to conduct flexible credit
loan transactions from any licensed office location where
other business activities unrelated to flexible credit lending
occur. However, the superintendent may order the licensee to
cease the operation of the flexible credit lending business at
the location if the other business is being conducted in an
unlawful manner.
The bill allows a licensee to obtain a renewal license by
submitting an application with information required by the
superintendent no later than December 1 and paying a $250 fee.
A renewal application submitted after December 1 is subject to
a $10 late fee for each day it is late. A license of a licensee
who has not filed a renewal or paid the fee by December 31
expires.
The bill allows the superintendent to take disciplinary
action after notice and hearing for any of the following
reasons: the licensee violated the bill or any other
applicable law; a fact or condition exists which would have
warranted the superintendent to deny the original license;
the licensee failed to pay fees or demonstrate availability
of required assets; the licensee failed to file an annual
report; the licensee is insolvent; or the licensee violated
an order of the superintendent. The superintendent may take
any of the following disciplinary actions against a licensee:
revoke a license; suspend a license; impose a period of
probation; impose civil penalties in an amount not to exceed
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$5,000 for each violation; issue a citation and warning; or
order restitution. The superintendent may order the emergency
suspension of a licensee’s license pursuant to the procedure
described in the bill.
The bill allows the superintendent to issue and serve a
cease and desist order on a person the superintendent believes
has engaged in or is about to engage in a violation of the
bill. Such person may request a hearing within 15 days after
the order is issued. If a hearing is so requested, the matter
must be set for a hearing within 15 days after receiving the
request. The superintendent may vacate or modify an order if
the superintendent finds changed conditions or if doing so
would be in the public interest. A person aggrieved by such an
order may seek judicial review pursuant to Code section 17A.19.
The bill requires a licensee to keep records for the
superintendent to determine whether the licensee is complying
with the bill for at least two years. A licensee must make
all records kept outside of the state available to the
superintendent within three business days upon request. A
licensee must provide the superintendent with access to
the licensee’s records during normal business hours. The
superintendent must examine the records of each licensee
at least once per year and may examine or investigate any
complaint of an alleged violation of the bill. A licensee
subjected to an investigation or examination of its records
by the superintendent must pay a fee determined by the actual
cost of the investigation or examination. A licensee who fails
to pay the fee within 30 days must pay a late fee of up to 5
percent of the amount of the fee for each day the payment is
delinquent.
The bill requires a licensee to provide the superintendent
with an annual report on or before April 1, which may be
extended for no more than 60 days upon showing good cause. The
report must include the licensee’s average annual percentage
rate, as defined in the bill, and average loan amount during
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the 12-month period ending the preceding December 31. The
superintendent may examine the records of a licensee who has
failed to file an annual report, prepare the annual report, and
charge a fee based on the cost of the examination. A licensee
who has failed to file an annual report without an extension is
also subject to a civil penalty not to exceed $5 for each day
until the report is filed, which must be paid within 30 days of
being charged.
The bill provides that the revocation, suspension,
surrender, cancellation, or alteration of a license will not
impair or affect the validity of a preexisting flexible credit
loan or the ability of a lender to service a preexisting loan
outside of this state.
The bill prohibits a licensee from advertising in any false
or misleading manner with regards to the rates or terms of a
flexible credit loan and requires a licensee to comply with
the advertising requirements in the federal Truth in Lending
Act. A licensee cannot provide a flexible credit loan to a
military member or dependent, as defined in 10 U.S.C. §987(i),
with an annual percentage rate greater than that provided in
10 U.S.C. §987(b). Before a licensee may provide a flexible
credit loan, the consumer must sign a statement attesting to
whether or not the consumer is a military member or dependent.
A loan made in violation of 10 U.S.C. §987 is void and its terms
and conditions unenforceable.
The bill provides that a person who has engaged in the
business of making a flexible credit loan to an Iowa resident
without obtaining a license or while such license is suspended
or revoked is guilty of a serious misdemeanor. A serious
misdemeanor is punishable by confinement for no more than one
year and a fine of at least $315 but not more than $1,875. In
addition, the superintendent may commence an action to enjoin
the operation of a business conducted in violation of the bill.
The bill requires a licensee to comply with the disclosure
requirements in the federal Truth in Lending Act. A licensee
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must display a disclosure sign, as described in the bill, at
each desk in the licensed office and each licensed branch
office and on the licensee’s internet site if the licensee
provides electronic flexible credit loans. A licensee who
fails to do so is subject to a civil penalty not to exceed $300
for each violation.
The bill allows a licensee to charge a finance charge,
as defined in the bill, on a flexible credit loan at a rate
not to exceed 17 percent per month. However, a licensee is
not permitted to compound a finance charge. In addition to
this, a licensee may collect a delinquency charge, court costs
and reasonable attorney fees, and a dishonored check service
fee, as described in the bill. A licensee is prohibited
from collecting any other charges or fees in connection with
conducting flexible credit loan transactions.
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