Iowa General Assembly Daily Bills, Amendments & Study Bills March 17, 2009



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SSB 1307

Senate Study Bill 1307

SENATE FILE

BY (PROPOSED COMMITTEE ON

WAYS AND MEANS BILL BY

CHAIRPERSON BOLKCOM)

Passed Senate, Date Passed House, Date

Vote: Ayes Nays Vote: Ayes Nays

Approved


A BILL FOR
1 An Act modifying provisions relating to the regulation of delayed

2 deposit service businesses, making penalties applicable, and

3 providing an effective date.

4 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA:

5 TLSB 2690XC 83

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Senate Study Bill 1307 continued
PAG LIN

1 1 Section 1. Section 533D.3, subsection 3, paragraph a, Code

1 2 2009, is amended to read as follows:

1 3 a. An application fee of one hundred twenty=five dollars.

1 4 Sec. 2. Section 533D.9, subsection 2, Code 2009, is

1 5 amended by adding the following new paragraph:

1 6 NEW PARAGRAPH. e. That the licensee cannot initiate debt

1 7 collection procedures, civil court proceedings, or arbitration

1 8 to collect an unpaid check unless the licensee has provided

1 9 the maker of the check the opportunity to repay the obligation

1 10 without any additional charges, other than the penalty

1 11 provided in paragraph "d" of this subsection, in biweekly

1 12 payments of not more than ten percent of the face of the check

1 13 until the debt is paid in full. Additionally, that during

1 14 this repayment period the licensee may not transfer or sell

1 15 the debt owing on the unpaid check and may not report the

1 16 account or the maker of the check to any credit reporting

1 17 agency. Further, that the maker of the check's failure to

1 18 make a biweekly payment under this paragraph shall place the

1 19 loan in default and the licensee may, after proper notice,

1 20 exercise rights against the maker under the law.

1 21 Sec. 3. Section 533D.10, subsection 1, Code 2009, is

1 22 amended to read as follows:

1 23 1. A licensee shall not do any of the following:

1 24 a. Hold from any one maker more than two checks at any one

1 25 time.

1 26 b. Hold from any one maker a check or checks in an

1 27 aggregate face amount of more than five hundred dollars at any

1 28 one time.

1 29 c. Hold or agree to hold a check for more less than

1 30 thirty=one fourteen days.

1 31 d. Require the maker to receive payment by a method which

1 32 causes the maker to pay additional or further fees and charges

1 33 to the licensee or another person.

1 34 e. Repay, refinance, or otherwise consolidate a postdated

1 35 check transaction with the proceeds of another postdated check

Senate Study Bill 1307 continued
2 1 transaction made by the same licensee. A licensee may not

2 2 enter into another transaction with the maker of a check if

2 3 the licensee presently has a transaction outstanding with the

2 4 maker or if the maker had a previous transaction with the

2 5 licensee within two days of the new transaction, unless the

2 6 licensee has provided the following notice both verbally and

2 7 in writing, and the maker has acknowledged receipt of the

2 8 notice with a signature and date:

2 9 Notice to Borrower

2 10 1. The licensee may not repay, refinance, or otherwise

2 11 consolidate a postdated check transaction with the proceeds of

2 12 another postdated check transaction made by the same licensee.

2 13 2. While a licensee may charge a penalty if a check is not



2 14 negotiable on the date agreed upon, the penalty shall not

2 15 exceed fifteen dollars. This penalty shall only be collected

2 16 by the licensee once on a check no matter how long that check

2 17 remains unpaid. This penalty is the only additional charge a


2 18 lender may charge you (the borrower) when a check is not

2 19 negotiable on the date agreed upon.

2 20 3. If your check is not negotiable on the date agreed



2 21 upon, the licensee must provide you (the borrower) the

2 22 opportunity to repay the obligation without any additional

2 23 charges, other than the penalty described above, in biweekly

2 24 payments of not more than ten percent of the face of the check

2 25 until the debt is paid in full.

2 26 By signing and dating this notice, you acknowledge the



2 27 statements above, but yet still desire to obtain another loan

2 28 with the licensee.

2 29 Borrower(s) signature: Date:

2 30 Borrower(s) signature: Date:

2 31 f. Receive any other charges or fees in addition to the

2 32 fees listed in section 533D.9, subsections 1 and 2.

2 33 g. Initiate debt collection procedures, civil court



2 34 proceedings, or civil or private arbitration proceedings to

2 35 collect an unpaid check unless the licensee has provided the

Senate Study Bill 1307 continued

3 1 maker the opportunity to repay the obligation without any

3 2 additional charges, other than the penalty provided in section

3 3 533D.9, paragraph "d", in biweekly payments of not more than

3 4 ten percent of the face of the check until the debt is paid in

3 5 full. During this repayment period the licensee may not

3 6 transfer or sell the debt owing on the unpaid check and may

3 7 not report the account or the maker of the check to any credit

3 8 reporting agency. The failure of the maker of the check to

3 9 make a biweekly payment as required shall place the loan in

3 10 default and the licensee may, after proper notice, exercise

3 11 rights against the maker under the law.

3 12 Sec. 4. Section 533D.10, subsection 1, Code 2009, is

3 13 amended by adding the following new paragraph:

3 14 NEW PARAGRAPH. h. Enter into a delayed deposit service

3 15 transaction which will cause the maker of the check, when all

3 16 other delayed deposit service transactions entered into with

3 17 any licensee involving the maker of the check are accounted

3 18 for, and when the term of the transaction is aggregated with

3 19 the other transactions, to be indebted for a period exceeding

3 20 ninety days during the preceding twelve=month period. For

3 21 purposes of this paragraph, if the maker of the check has

3 22 entered into more than one delayed deposit service transaction

3 23 with the same or another licensee, and the periods during

3 24 which the transactions are outstanding overlap, each day of

3 25 each respective transaction shall be counted in satisfying the

3 26 ninety=day restriction. For purposes of this paragraph, if a

3 27 maker of a check is making biweekly payments during a

3 28 repayment period as provided in section 533D.9, subsection 2,

3 29 paragraph "e", the repayment period shall not be counted in

3 30 satisfying the ninety=day restriction.

3 31 Sec. 5. NEW SECTION. 533D.10A ELECTRONIC DATABASE.

3 32 1. Each licensee shall, by October 1, 2009, subscribe to,

3 33 report to, and utilize an electronic database tracking

3 34 service, to be developed or selected pursuant to rules adopted

3 35 by the banking division of the department of commerce, that
Senate Study Bill 1307 continued
4 1 permits the licensee to determine whether a maker of a check

4 2 has an outstanding unpaid check or debit authorization that

4 3 is, or reasonably appears to be, connected to a delayed

4 4 deposit service transaction. Each licensee shall require a

4 5 maker of a check to sign a written declaration confirming

4 6 that, pursuant to section 533D.10, subsection 1, paragraph

4 7 "h", the maker of the check is eligible to enter into a

4 8 delayed deposit service transaction.

4 9 2. a. Records of a licensee and the electronic database

4 10 tracking service shall be subject to review and examination by

4 11 the division to determine whether the licensee is in

4 12 compliance with this section and other applicable provisions

4 13 of this chapter.

4 14 b. Information, records, and documents obtained in the

4 15 performance of the review and examination, including the

4 16 amount of any outstanding unpaid check or debit authorization

4 17 and the identity of the maker of the check, are confidential

4 18 and shall not be disclosed by the division and are not subject

4 19 to subpoena. Such information, records, and documents do not

4 20 constitute a public record under chapter 22. The

4 21 superintendent may disclose such information to

4 22 representatives of other state or federal regulatory

4 23 authorities and may release summary complaint information so

4 24 long as the information does not specifically identify the

4 25 complainant. The superintendent may also provide this

4 26 information to the attorney general for purposes of enforcing

4 27 this chapter.

4 28 Sec. 6. EFFECTIVE DATE. The section of this Act enacting

4 29 section 533D.10, subsection 1, paragraph "h", takes effect

4 30 October 1, 2009.

4 31 EXPLANATION

4 32 This bill relates to specified aspects of the regulation of

4 33 delayed deposit service businesses.

4 34 The bill increases the amount which is required to be

4 35 submitted by a person applying to operate a delayed deposit
Senate Study Bill 1307 continued
5 1 service business from $100 to $125.

5 2 The bill provides that a licensee must disclose to the

5 3 maker of a check that the licensee cannot initiate debt

5 4 collection procedures, civil court proceedings, or arbitration

5 5 to collect an unpaid check unless the licensee has provided

5 6 the maker of a check the opportunity to repay the obligation

5 7 without any charges, other than the current $15 penalty, in

5 8 biweekly payments of not more than 10 percent of the face of

5 9 the check until the debt is paid in full. The bill adds that

5 10 during this repayment period the licensee cannot sell or

5 11 transfer the debt owing on the unpaid check or report the

5 12 account or the maker of the check to a credit reporting

5 13 agency. If the maker of the check fails to honor the

5 14 repayment obligation, the bill provides that the loan shall be

5 15 placed in default. The bill makes the failure to conform with

5 16 these provisions a prohibited act on the part of the licensee,

5 17 which could subject the licensee to disciplinary action as

5 18 specified in Code section 533D.12.

5 19 Additionally, the bill changes a current provision that

5 20 prohibits a licensee from holding or agreeing to hold a check

5 21 for more than 31 days to a modified provision that the

5 22 licensee cannot hold or agree to hold a check for less than 14

5 23 days. The bill also prohibits a licensee from entering into

5 24 another transaction with the maker of a check who already has

5 25 a transaction outstanding with the licensee or from entering

5 26 into a new transaction within two days of the conclusion of

5 27 the previous transaction, unless the maker acknowledges in

5 28 writing specified restrictions relating to successive

5 29 transactions, applicable penalties, and the opportunity to

5 30 repay the obligation in installments in the event the check is

5 31 not negotiable.

5 32 The bill also prohibits a licensee from entering into a

5 33 transaction that results in the maker of the check being

5 34 indebted to the licensee, or when aggregated with other

5 35 delayed deposit service business licensees, for longer than a

Senate Study Bill 1307 continued
6 1 90=day period during the preceding 12 months. This section of

6 2 the bill takes effect October 1, 2009.

6 3 The bill requires a licensee, by October 1, 2009, to

6 4 subscribe to, report to, and utilize an electronic database

6 5 tracking service developed or selected by the banking division

6 6 of the department of commerce to monitor the number of

6 7 transactions entered into by a maker of a check for purposes

6 8 of complying with this provision. The bill states that

6 9 licensee records and the database shall be subject to review

6 10 and examination by the division, and provides that

6 11 information, records, and documents obtained by the division

6 12 in the performance of such a review or examination shall be

6 13 considered confidential.

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