Bill Text: MS HB1396 | 2012 | Regular Session | Introduced
Bill Title: Consumer Installment Loan Act; create.
Spectrum: Bipartisan Bill
Status: (Failed) 2012-04-03 - Died In Committee [HB1396 Detail]
Download: Mississippi-2012-HB1396-Introduced.html
MISSISSIPPI LEGISLATURE
2012 Regular Session
To: Banking and Financial Services
By: Representatives Zuber, Flaggs
House Bill 1396
AN ACT TO BE KNOWN AS THE MISSISSIPPI CONSUMER INSTALLMENT LOAN ACT; TO PROHIBIT THE ENGAGING IN THE BUSINESS OF MAKING CONSUMER INSTALLMENT LOANS OF MONEY AND CHARGING OR CONTRACTING FOR INTEREST ON THOSE LOANS WITHOUT BEING THE HOLDER OF A VALID LICENSE TO ENGAGE IN THE BUSINESS AS PROVIDED BY THIS ACT OR THE SMALL LOAN PRIVILEGE TAX LAW; TO PROVIDE THAT THIS ACT DOES NOT SUPERSEDE CERTAIN OTHER LENDING LAWS; TO PRESCRIBE THE MAXIMUM CHARGES PERMITTED FOR LOANS MADE BY LICENSEES UNDER THIS ACT AND THE METHOD OF COMPUTING THOSE CHARGES; TO PRESCRIBE THE TERMS OF LOANS MADE BY LICENSEES UNDER THIS ACT; TO PROVIDE THAT THE COMMISSIONER OF BANKING AND CONSUMER FINANCE SHALL ADMINISTER THIS ACT; TO PROVIDE THAT LOCAL GOVERNMENTS MAY ENACT ORDINANCES THAT ARE IN COMPLIANCE WITH, BUT NOT MORE RESTRICTIVE THAN, THE PROVISIONS OF THIS ACT; TO AMEND SECTION 75-67-121, MISSISSIPPI CODE OF 1972, TO PROVIDE THAT FOR PURPOSES OF COMPLIANCE WITH MAXIMUM CHARGES PERMITTED UNDER THE SMALL LOAN REGULATORY LAW AND THE SMALL LOAN PRIVILEGE TAX LAW, ANY CHARGES, FEES OR PREMIUMS FOR CREDIT INSURANCE OR AUTO CLUB MEMBERSHIPS SHALL NOT BE INCLUDED IN THE CALCULATION OF THE FINANCE CHARGE; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. This act shall be known as the Mississippi Consumer Installment Loan Act.
SECTION 2. No person, partnership, association, limited liability company or corporation shall engage in the business of making consumer installment loans of money, and charge, contract for, or receive on any such loan interest, discount, or consideration therefor without being the holder of a valid and subsisting license to engage in the business as provided by this act or the Small Loan Privilege Tax Law, Sections 75-67-201 through 75-67-247. This act shall not supersede or prohibit lending and/or licensing under the Small Loan Regulatory Law, Sections 75-67-101 through 75-67-139; the Small Loan Privilege Tax Law, Sections 75-67-201 through 75-67-247; the Motor Vehicle Sales Finance Law, Sections 63-19-1 through 63-19-57; the Mississippi Check Cashers Act, Sections 75-67-501 through 75-67-539; the Mississippi Consumer Loan Broker Act, Sections 81-19-1 through 81-19-35; the Insurance Premium Finance Law, Sections 81-21-1 through 81-21-27; the Mississippi Pawn Shop Act, Sections 75-67-301 through 75-67-343; the Mississippi Money Transmitters act, Sections 75-15-1 through 75-15-35, and the Mississippi Title Pledge Act Sections 75-67-401 through 75-67-449. This act does not apply to persons engaged in the business of extending credit to borrowers primarily for business or commercial purposes. This act shall not apply to any person, firm, partnership, corporation or association doing business under any of the laws of this state relating to banks, savings banks, trust companies, building and loan associations, insurance companies or credit unions. This act may be used in lieu of the Small Loan Regulatory Law, Sections 75-67-101 through 75-67-139. For any and each consumer installment loan that a licensee makes, it has the option to either lend money under the Small Loan Regulatory Law, Sections 75-67-101 through 75-67-139, or under this act.
SECTION 3. (1) For the purposes of this section, the following terms shall have the meanings in this section:
(a) "Applicable interest," for a precomputed loan contract, means the amount of interest attributable to each monthly installment period. It is computed as if each installment period were one (1) month and any interest charged for extending the first installment period. The applicable interest for any monthly installment period is that portion of the precomputed interest that bears the same ratio to the total precomputed interest as the balances scheduled to be outstanding during that month bear to the sum of all scheduled monthly outstanding balances in the original contract.
(b) "Interest-bearing loan" means a loan in which the debt is expressed as a principal amount plus interest charged on actual unpaid principal balances for the time actually outstanding.
(c) "Precomputed loan" means a loan in which the debt is expressed as the sum of the original principal amount plus interest computed actuarially in advance, assuming all payments will be made when scheduled.
(2) To compute time for either interest-bearing or precomputed loans for the calculation of interest and other purposes, a month shall be a calendar month and a day shall be considered 1/30th of a month when calculation is made for a fraction of a month. A month shall be 1/12th of a year. A calendar month is that period from a given date in one (1) month to the same numbered date in the following month, and if there is no same numbered date, to the last day of the following month. When a period of time includes a month and a fraction of a month, the fraction of the month is considered to follow the whole month. In the alternative, the licensee may charge interest at the rate of 1/365th of the agreed annual rate for each day actually elapsed.
(3) No licensee or other person may condition an extension of credit to a consumer borrower on the consumer's repayment by preauthorized electronic fund transfers. Payment options, including, but not limited to, electronic fund transfers and Automatic Clearing House (ACH) transactions may be offered to consumers as a choice and the method of payment shall be chosen by the consumer.
(4) With respect to interest-bearing loans:
(a) Interest shall be computed on unpaid principal balances outstanding from time to time, for the time outstanding, until fully paid. Each payment shall be applied first to the accumulated interest and the remainder of the payment applied to the unpaid principal balance; however, if the amount of the payment is insufficient to pay the accumulated interest, the unpaid interest continues to accumulate to be paid from the proceeds of later payments and is not added to the principal balance.
(b) Interest shall not be payable in advance or compounded. However, if part or all of the consideration for a new loan contract is the unpaid principal balance of a prior loan, then the principal amount payable under the new loan contract may include any unpaid interest which has accrued. The unpaid principal balance of a precomputed loan is the balance due after refund or credit of unearned interest as provided in subsection (5)(c) of this section. The resulting loan contract shall be deemed a new and separate loan transaction for all purposes.
(c) Loans must be fully amortizing and be repayable in substantially equal and consecutive monthly installments of principal and interest.
(d) A late payment charge that complies with Section 75-17-27 shall not be considered a finance charge, if contracted for in writing.
(5) With respect to precomputed loans:
(a) Loans shall be repayable in substantially equal and consecutive monthly installments of principal and interest combined, except that the first installment period may be longer than one (1) month by not more than fifteen (15) days, and the first installment payment amount may be larger than the remaining payments by the amount of interest charged for the extra days.
(b) Payments may be applied to the combined total of principal and precomputed interest until the loan is fully paid. Payments shall be applied in the order in which they become due, except that any insurance proceeds received as a result of any claim made on any insurance which is sold by the licensee, unless sufficient to prepay the contract in full, may be applied to the unpaid installments of the total of payments in inverse order.
(c) When any loan contract is paid in full by cash, renewal or refinancing, or a new loan, one (1) month or more before the final installment due date, a licensee shall refund or credit the obligor the unearned interest according to the Rule of 78s for all fully unexpired installment periods, as originally scheduled or as deferred, which follow the date of prepayment. However, if the prepayment occurs before the first installment due date, the licensee shall refund or credit the obligor the unearned interest on a pro rata basis from the date of the loan to the date of prepayment. If the maturity of the loan is accelerated for any reason and judgment is entered, the licensee shall credit the borrower with the same refund as if prepayment in full had been made on the date the lawsuit is filed.
(d) If the parties agree in writing, either in the loan contract or in a later agreement, to a deferment of wholly unpaid installments, a licensee may grant a deferment and may collect a deferment charge as provided in this section. A deferment postpones the scheduled due date of the earliest unpaid installment and all subsequent installments as originally scheduled, or as previously deferred, for a period equal to the deferment period. The deferment period is that period during which no installment is scheduled to be paid by reason of the deferment. The deferment charge for a one-month period may not exceed the applicable interest for the installment period immediately following the due date of the last undeferred payment. A proportionate charge may be made for deferment for periods of more or less than one (1) month. A deferment charge is earned pro rata during the deferment period and is fully earned on the last day of the deferment period. If a loan is prepaid in full during a deferment period, the licensee shall credit to the obligor a refund of the unearned deferment charge in addition to any other refund or credit made for prepayment of the loan in full.
(e) If two (2) or more installments are delinquent one (1) full month or more on any due date, and if the contract so provides, the licensee may reduce the unpaid balance by the refund credit that would be required for prepayment in full on the due date of the most recent maturing installment in default. Thereafter, and in lieu of any other default or deferment charges, the agreed rate of interest or interest at the rate of eighteen percent (18%) per annum, may be charged on the unpaid balance until fully paid.
(f) Fifteen (15) days after the final installment as originally scheduled or deferred, the licensee, for any loan contract which has not previously been converted to an interest-bearing account, may compute and charge interest on any balance remaining unpaid, including unpaid default or deferment charges, at the agreed rate of interest or, at the rate of eighteen percent (18%) per annum, until fully paid.
(g) A late payment charge that complies with Section 75-17-27 shall not be considered a finance charge, if contracted for in writing.
SECTION 4. (1) With respect to a consumer loan of One Thousand Five Hundred Dollars ($1,500.00) or less:
(a) A licensee may charge, contract for and receive interest at an annual percentage rate of no more than ninety-nine percent (99%).
(b) A licensee may charge a closing fee not to exceed ten percent (10%) of the amount financed. The closing fee is fully earned at the time the loan is made and shall not be subject to refund.
(2) With respect to a small consumer loan over One Thousand Five Hundred Dollars ($1,500.00):
(a) A licensee may charge the following:
(i) A licensee may contract for and charge a closing fee as follows: For loans in the amount of Four Thousand Dollars ($4,000.00) or less, four percent (4%) of the total payments due on the loan or Twenty-five Dollars ($25.00), whichever is greater. Any closing fee shall not be part of the finance charge;
(ii) A monthly installment account handling charge, not to exceed the following amounts:
Amount financed Per month charge
$1,500.01 - $1,600.00 $69.00
$1,600.01 - $1,700.00 $72.00
$1,700.01 - $1,800.00 $75.00
$1,900.01 - $2,000.00 $81.00
$2,000.01 - $2,100.00 $84.00
$2,100.01 - $2,200.00 $87.00
$2,200.01 - $2,300.00 $90.00
$2,300.01 - $2,400.00 $92.00
$2,400.01 - $2,500.00 $94.00
$2,500.01 - $2,600.00 $96.00
$2,600.01 - $2,700.00 $98.00
$2,800.01 - $2,900.00 $102.00
$2,900.01 - $3,000.00 $104.00
$3,000.01 - $3,100.00 $106.00
$3,100.01 - $3,200.00 $108.00
$3,200.01 - $3,300.00 $110.00
$3,300.01 - $3,400.00 $112.00
$3,400.01 - $3,500.00 $114.00
$3,500.01 - $3,600.00 $116.00
$3,600.01 - $3,700.00 $118.00
$3,700.01 - $3,800.00 $120.00
$3,800.01 - $3,900.00 $122.00
$3,900.01 - $4,000.00 $124.00
(b) The closing fee is fully earned at the time the loan is made and shall not be subject to refund; except that, if the loan is paid in full within the first thirty (30) days of the loan term, the first Twenty-five Dollars ($25.00) of the acquisition charge may be retained by the licensee and the remainder of the acquisition charge shall be refunded at a rate of one-thirtieth (1/30) of the remainder of the acquisition charge per day, beginning on the day after the date of the prepayment and ending on the thirtieth day after the loan was made.
(3) When any loan contract is paid in full by cash, renewal, or refinancing, or a new loan, the licensee shall refund any unearned interest or unearned portion of the monthly installment account handling charge, whichever is applicable. The unearned interest or unearned portion of the monthly installment account handling charge that is refunded shall be calculated based on a method that is at least as favorable to the consumer as the Rule of 78s.
(4) The maximum closing fees shall be subject to an annual adjustment as of the first day of each year following July 1, 2012, equal to the percentage change in the Consumer Price Index compiled by the Bureau of Labor Statistics, United States Department of Labor, or, if that index is canceled or superseded, the index chosen by the Bureau of Labor Statistics as most accurately reflecting the changes in the purchasing power of the dollar for consumers, or, if no such index is chosen by the Bureau of Labor Statistics, the index chosen by the Department of Banking and Consumer Finance as most accurately reflecting the changes in the purchasing power of the dollar for consumers. The adjusted amounts shall take effect on July 1 of the year of the computations.
SECTION 5. (1) A loan under this act shall be fully amortizing and be repayable in its entirety in a minimum of six (6) substantially equal and consecutive monthly payments with a period of not less than one hundred eighty (180) days to maturity.
(2) Each loan agreement entered into between a licensee and a consumer borrower shall include a notification, in such loan agreement, of a toll-free number furnished by the Department of Banking and Consumer Finance that the consumer may contact for the purpose of receiving information from the department regarding credit or assistance with credit problems.
SECTION 6. A licensee is prohibited from making a loan to a consumer borrower if the total of all payments to be made in any month on the loan exceeds twenty-two and five-tenths percent (22.5%) of the consumer's gross monthly income, as demonstrated by documentation of the income, including, but not limited to, the consumer's most recent pay stub, receipt reflecting payment of government benefits, or other official documentation. "Official documentation" includes tax returns and documentation prepared by the source of the income. Notwithstanding anything contained in this section to the contrary, a licensee may rely upon the borrower's written statement or other written information provided by the borrower in those cases where the borrower is self-employed or employed in seasonal work.
SECTION 7. At the time a loan is made or within twenty (20) days after a loan is made, a licensee shall not (a) accept a check and agree to hold it for a period of days before deposit or presentment, or (b) accept a check dated later than the date written.
SECTION 8. (1) Upon application by the licensee, and approval by the Commissioner of the Department of Banking and Consumer Finance ("the commissioner"), the commissioner may approve the conduct of other businesses not specifically permitted by this act in the licensee's place of business, unless the commissioner finds that such conduct will conceal or facilitate evasion or violation of this act. That approval shall be in writing and shall describe the other businesses that may be conducted in the licensed office.
(2) A licensee may, without notice to and approval of the commissioner, in addition to the business permitted by this act, conduct any other business that is licensed under state law and regulated by the commissioner.
(3) The commissioner shall make and enforce any reasonable rules and regulations for the conduct of business under this act in the same office with other businesses as may be necessary to prevent evasions or violations of this act. The commissioner may investigate any business conducted in the licensed office to determine whether any evasion or violation of this act has occurred.
SECTION 9. Municipalities and counties in this state may enact ordinances that are in compliance with, but not more restrictive than, the provisions of this act.
SECTION 10. (1) A licensee under this act shall have no liability for any act or practice done or omitted in conformity with (a) any rule or regulation of the commissioner, or (b) any rule, regulation, interpretation or approval of any other state or federal agency or any opinion of the Attorney General, notwithstanding that after that act or omission has occurred the rule, regulation, interpretation, approval or opinion is amended, rescinded, or determined by judicial or other authority to be invalid for any reason.
(2) A licensee under this act, acting in conformity with a written interpretation or approval by an official or employee of any state or federal agency or department, shall be presumed to have acted in accordance with applicable law, notwithstanding that after that act has occurred, the interpretation or approval is amended, rescinded, or determined by judicial or other authority to be incorrect or invalid for any reason.
SECTION 11. Section 75-67-121, Mississippi Code of 1972, is amended as follows:
75-67-121. Any licensee under this article may charge any borrower on loans of One Hundred Dollars ($100.00) or more the actual cost of recording any instrument executed as security for a loan; any reasonable fee paid to an attorney for investigating the title to any property given as security for a loan; the actual cost of any premium paid for insurance upon any property given as security for a loan, such insurance to be placed with an insurance company agent of the borrower's selection so long as it is licensed to do business in the State of Mississippi; the actual cost of any premium paid for life, health and/or accident insurance on any borrower where the amount of insurance required is not in excess of the amount of the loan; and the premium for the insurance is in keeping with that usually and customarily paid for like insurance.
In addition, after the licensee has fully approved the loan to the borrower, the licensee may offer the borrower the opportunity to purchase an auto club membership. The licensee shall inform the borrower in writing that the purchase of an auto club membership is optional and is not required as a condition of receiving the loan, and that failure to purchase an auto club membership will not affect the licensee's approval of the loan or the receipt of the loan by the borrower. The notification shall be initialed by the borrower. If the borrower chooses to purchase an auto club membership, the licensee shall allow the borrower to pay the cost of the auto club membership using funds other than the proceeds of a loan or have the cost deducted from the proceeds of any loan obtained from the licensee. The borrower shall be allowed to cancel the auto club membership for a full refund of the purchase price at any time within thirty (30) days after the date of purchase from the licensee if the borrower has not used any of the services provided through the auto club membership. The commissioner shall monitor the number of loans made by licensees with which the borrower chooses to purchase an auto club membership, and shall report that information to the Chairmen of the House Banking and Financial Services Committee and the Senate Business and Financial Institutions Committee by January 1, 2009. This paragraph shall stand repealed on July 1, 2015.
Notwithstanding any other law to the contrary, for purposes of compliance with maximum charges permitted under the Small Loan Regulatory Law and the Small Loan Privilege Tax Law, any charges, fees or premiums for credit insurance or auto club memberships shall not be included in the calculation of the finance charge.
Whenever he finds it necessary, the Commissioner of Banking and Consumer Finance shall have the power to adopt and enforce reasonable rules and regulations to prevent the abuse of this section and the making of excessive charges under this section.
SECTION 12. This act shall take effect and be in force from and after July 1, 2012.
