Introduced Version






HOUSE BILL No. 1009

_____


DIGEST OF INTRODUCED BILL



Citations Affected: IC 24-4.5; IC 24-7-1-5 ; IC 28-1-29 ; IC 28-7-5 ; IC 28-8.

Synopsis: Consumer credit. Specifies that the maximum rate of interest may not be exceeded upon prepayment for the period a credit sale or loan was in effect for a simple interest transaction that includes prepaid credit service charges or finance charges. Requires a creditor to provide accurate payoff information to the debtor. Specifies that a person may not regularly engage in the business of making consumer loans unless the person is a supervised financial institution or is licensed by the department of financial institutions. Specifies that the three month window to operate without an approved license to make consumer loans applies only to lenders taking assignment of mortgages. Limits the accrual of additional pawnbroker fees. Makes certain other changes. Makes conforming amendments.

Effective: July 1, 2000.





Bodiker, Burton




    January 10, 2000, read first time and referred to Committee on Financial Institutions.







Introduced

Second Regular Session 111th General Assembly (2000)


PRINTING CODE. Amendments: Whenever an existing statute (or a section of the Indiana Constitution) is being amended, the text of the existing provision will appear in this style type, additions will appear in this style type, and deletions will appear in this style type.
Additions: Whenever a new statutory provision is being enacted (or a new constitutional provision adopted), the text of the new provision will appear in this style type. Also, the word NEW will appear in that style type in the introductory clause of each SECTION that adds a new provision to the Indiana Code or the Indiana Constitution.
Conflict reconciliation: Text in a statute in this style type or this style type reconciles conflicts between statutes enacted by the 1999 General Assembly.

HOUSE BILL No. 1009



    A BILL FOR AN ACT to amend the Indiana Code concerning trade regulations; consumer sales and credit.

Be it enacted by the General Assembly of the State of Indiana:

SOURCE: IC 24-4.5-1-102; (00)IN1009.1.1. -->     SECTION 1. IC 24-4.5-1-102 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2000]: Sec. 102. Purposes; Rules of Construction . (1) This article shall be liberally construed and applied to promote its underlying purposes and policies.
    (2) The underlying purposes and policies of this article are:
        (a) to simplify, clarify, and modernize the law governing retail installment sales, consumer credit, small loans, and usury;
        (b) to provide rate ceilings to assure an adequate supply of credit to consumers;
        (c) to further consumer understanding of the terms of credit transactions and to foster competition among suppliers of consumer credit so that consumers may obtain credit at reasonable cost;
        (d) to protect consumer buyers, lessees, and borrowers against unfair practices by some suppliers of consumer credit, having due regard for the interests of legitimate and scrupulous creditors;
        (e) to permit and encourage the development of fair and

economically sound consumer credit practices;
        (f) to conform the regulation of consumer credit transactions to the policies of the Federal Consumer Credit Protection Act; and
        (g) to make uniform the law including administrative rules among the various jurisdictions.
    (3) A reference to a requirement imposed by this article includes reference to a related rule of the department adopted pursuant to this article.
    (4) A reference to a federal law in IC 24-4.5 is a reference to the law in effect December 31, 1997. 1999.

SOURCE: IC 24-4.5-2-209; (00)IN1009.1.2. -->     SECTION 2. IC 24-4.5-2-209 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2000]: Sec. 209. Right to Prepay - (1) Subject to the provisions on rebate upon prepayment (IC  24-4.5-2-210), the buyer may prepay in full the unpaid balance of a consumer credit sale, refinancing, or consolidation at any time without penalty.
     (2) At the time of prepayment of a credit sale not subject to the provisions of rebate upon prepayment (IC 24-4.5-2-210), the total credit service charge, including the prepaid credit service charge, may not exceed the maximum charge allowed under this chapter for the period the credit sale was in effect.
    (3) The creditor shall provide an accurate payoff of the consumer credit sale to the debtor within ten (10) calendar days after the creditor receives the debtor's written request for the accurate consumer credit sale payoff amount. A creditor who fails to provide the accurate consumer credit sale payoff amount is liable for:
            (A) one hundred dollars ($100) if an accurate consumer credit sale payoff amount is not provided by the creditor within ten (10) calendar days after the creditor receives the debtor's first written request; and
            (B) the greater of:
                (i) one hundred dollars ($100); or
                (ii) the credit service charge that accrues on the sale from the date the creditor receives the first written request until the date on which the accurate consumer credit sale payoff amount is provided;

             if an accurate consumer credit sale payoff amount is not provided by the creditor within ten (10) calendar days after the creditor receives the debtor's second written request, and the creditor failed to comply with clause (A).
SOURCE: IC 24-4.5-3-209; (00)IN1009.1.3. -->     SECTION 3. IC 24-4.5-3-209 IS AMENDED TO READ AS

FOLLOWS [EFFECTIVE JULY 1, 2000]: Sec. 209. Right to Prepay - (1) Subject to the provisions on rebate upon prepayment (IC 24-4.5-3-210), the debtor may prepay in full the unpaid balance of a consumer loan, refinancing, or consolidation at any time without penalty. With respect to a consumer loan that is primarily secured by an interest in land, a lender may contract for a penalty for prepayment of the loan in full, not to exceed two percent (2%) of the net unpaid balance after deducting all refunds and rebates as of the date of the prepayment. However, the penalty may not be imposed:
        (1) (a) if the loan is refinanced or consolidated with the same creditor;
        (2) (b) for prepayment by proceeds of any insurance or acceleration after default; or
        (3) (c) after three (3) years from the contract date.
     (2) At the time of prepayment of a consumer loan not subject to the provisions of rebate upon prepayment (IC 24-4.5-3-210), the total finance charge, including the prepaid finance charge, may not exceed the maximum charge allowed under this chapter for the period the loan was in effect.
     (3) The creditor shall provide an accurate payoff of the consumer loan to the debtor within ten (10) calendar days after the creditor receives the debtor's written request for the accurate consumer loan payoff amount. A creditor who fails to provide the accurate consumer loan payoff amount is liable for:
            (A) one hundred dollars ($100) if an accurate consumer loan payoff amount is not provided by the creditor within ten (10) calendar days after the creditor receives the debtor's first written request; and
            (B) the greater of:
                (i) one hundred dollars ($100); or
                (ii) the loan finance charge that accrues on the loan from the date the creditor receives the first written request until the date on which the accurate consumer loan payoff amount is provided;

             if an accurate consumer loan payoff amount is not provided by the creditor within ten (10) calendar days after the creditor receives the debtor's second written request, and the creditor failed to comply with clause (A).

SOURCE: IC 24-4.5-3-502; (00)IN1009.1.4. -->     SECTION 4. IC 24-4.5-3-502 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2000]: Sec. 502. Authority to Make Consumer Loans - Unless a person is a supervised financial organization or has first obtained a license from the department, the

person shall not regularly engage in this state in the business of:
        (1) (a) making consumer loans; or
        (2) (b) taking assignments of and undertaking direct collection of payments from or enforcement of rights against debtors arising from consumer loans. but the person
However, an assignee
may collect and enforce for three (3) months without a license if the person assignee promptly applies for a license and the person's assignee's application has not been denied.

SOURCE: IC 24-4.5-3-503; (00)IN1009.1.5. -->     SECTION 5. IC 24-4.5-3-503 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2000]: Sec. 503. License to Make Consumer Loans . (1) The department shall receive and act on all applications for licenses to make consumer loans. Applications must be as prescribed by the director of the department of financial institutions.
    (2) A license shall not be issued unless the department finds that the financial responsibility, character, and fitness of the applicant and of the members of the applicant (if the applicant is a co-partnership or an association) and of the officers and directors of the applicant (if the applicant is a corporation) are such as to warrant belief that the business will be operated honestly and fairly within the purposes of this article. The director is entitled to request evidence of compliance with this section at the time of application or after a license is issued. The evidence requested includes, but is not limited to, an official report of criminal activity of the applicant from the state law enforcement agency of the state in which the applicant resides.
    (3) Upon written request, the applicant is entitled to a hearing on the question of the qualifications of the applicant for a license as provided in IC 4-21.5.
    (4) The applicant shall pay the following fees at the time designated by the department:
        (a) An initial license fee as established by the department under IC 28-11-3-5.
        (b) An initial investigation fee as established by the department under IC 28-11-3-5.
        (c) An annual renewal fee as established by the department under IC 28-11-3-5.
        (d) A fee as established by the department under IC 28-11-3-5 may be charged for each day the annual renewal fee is delinquent.
    (5) The applicant may deduct the fees required under subsection 4(a) through 4(c) from the filing fees paid under IC 24-4.5-6-203.
     (6) A loan license issued under this section is not assignable or transferable.
SOURCE: IC 24-4.5-5-204; (00)IN1009.1.6. -->     SECTION 6. IC 24-4.5-5-204 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2000]: Sec. 204. Debtor's Right to Rescind Certain Transactions . (1) A violation by a creditor of Section 125 of the Federal Consumer Credit Protection Act (IC 24-4.5-1-302) concerning the debtor's right to rescind a transaction that is a consumer credit sale or a consumer loan constitutes a violation of IC 24-4.5. A creditor may not accrue interest during the period when a consumer loan may be rescinded under Section 125 of the Federal Consumer Protection Act (15 U.S.C. 1635).
     (2) A creditor must make available for disbursement the proceeds of a transaction subject to subsection (1) on the first business day after the expiration of the rescission period under subsection (1).
SOURCE: IC 24-7-1-5; (00)IN1009.1.7. -->     SECTION 7. IC 24-7-1-5 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2000]: Sec. 5. This article does not apply to Rental purchase agreements under this article involving motor vehicles (as defined in IC 9-13-2-105 (a)) are prohibited.
SOURCE: IC 28-1-29-3; (00)IN1009.1.8. -->     SECTION 8. IC 28-1-29-3 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2000]: Sec. 3. (a) No person shall operate a budget service company in the state of Indiana without having obtained a license from the department. The director is entitled to request evidence of compliance with this section at the time of application or after a license is issued. The evidence requested includes, but is not limited to, an official report of criminal activity of the applicant from the state law enforcement agency of the state in which the applicant resides. The fee for a license or renewal shall be fixed by the department under IC 28-11-3-5 and shall be nonrefundable. A licensee failing to renew annually shall be required to pay a fee fixed by the department under IC 28-11-3-5 for a new application.
    (b) If a person knowingly acts as a budget service company in violation of this chapter, any agreement the person has made under this chapter is void and the debtor under the agreement is not obligated to pay any fees. If the debtor has paid any amounts to the person, the debtor, or the department on behalf of the debtor, may recover the payment from the person that violated this section.
     (c) A license issued under this section is not assignable or transferable.
SOURCE: IC 28-1-29-8; (00)IN1009.1.9. -->     SECTION 9. IC 28-1-29-8 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2000]: Sec. 8. A licensee:
        (1) Shall deliver to every contract debtor, at the time the contract is made, a copy of the contract, showing:
             (A) the date executed;
             (B) the maximum rate of charge the licensee will impose;
            (C) the
initial set up fee;
             (D) the cancellation fee; and
             (E) the total fee to be assessed by the licensee, including the initial set up fee but excluding the cancellation fee;
             (F) the amount of debts claimed by the contract debtor to be due his the contract debtor's creditors; and
             (G) the total debt to be repaid under the contract;
        and shall immediately notify all creditors of the licensee's and contract debtor's relationship. The contract shall specify the schedule of payments from the contract debtor under the debt program and the total amount to be paid under the payment schedule.
        (2) May take no fee unless a debt program, or finance program, or both agreed upon by the licensee and the contract debtor has been arranged. All creditors must be notified of the contract debtor's and licensee's relationship. Acceptance of a program payment constitutes agreement by the creditor.
        (3) Shall give to the contract debtor a dated receipt for each payment, at the time of the payment, unless the payment is made by check, money order, or direct deposit.
        (4) Shall, upon cancellation by the contract debtor of the contract, notify immediately in writing all creditors of the contract debtor.
        (5) Shall maintain in his the licensee's business such books, accounts, and records as will enable the department or the state's attorney general to determine whether such license is complying with this chapter. Such books, accounts, and records shall be preserved for at least three (3) years after making the final entry of any contract recorded therein.
        (6) May not, except as provided in subdivision (7), receive a fee from the contract debtor for services in excess of fifteen percent (15%) of the amount the debtor agrees to pay through the licensee, divided into equal monthly payments over the term of the contract. The total monthly amount of fees paid by the contract debtor to the licensee plus the fair share fees paid by the contract debtor's creditors to the licensee shall not exceed twenty percent (20%) of the monthly amount the debtor agrees to pay through the licensee. The accrual method of accounting shall apply to the creditor's fair share fees received by the licensee. The program fee may be charged for any one (1) month or part of a month. As a portion of the total fees and charges stated in the

contract, the licensee may require the debtor to pay a maximum initial payment of fifty dollars ($50). The initial payment must be deducted from the total contract fees and charges to determine the monthly amortizable amount for subsequent fees. Unless approved by the department, the licensee may not retain in the debtor's trust account, for charges, an amount more than one (1) month's fee plus the close-out fee. Any fee charged by the licensee to the debtor under this section for services rendered by the licensee, other than the amount pursuant to subdivision (7), is not considered a debt owed by the debtor to the licensee.
        (7) Upon cancellation by a contract debtor or termination of payments by a contract debtor, may not withhold for his the licensee's own benefit, in addition to the amounts specified in subdivision (6), more than one hundred dollars ($100), which may be accrued as a close-out fee. The licensee may not charge the contract debtor more than one (1) set up fee, or cancellation fee, or both unless the contract debtor leaves the services of the licensee for more than six (6) months.
        (8) May not accept an account unless a thorough, written budget analysis of the debtor indicates that the debtor can reasonably meet the payments required in the budget analysis.
        (9) May not enter into a contract with a contract debtor for a period longer than twenty-four (24) months.

SOURCE: IC 28-7-5-4; (00)IN1009.1.10. -->     SECTION 10. IC 28-7-5-4 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2000]: Sec. 4. Application for a pawnbroker's license shall be submitted on a form prescribed by the department and must include all information required by the department. The director is entitled to request evidence of compliance with this section at the time of application or after a license is issued. The evidence requested includes, but is not limited to, an official report of criminal activity of the applicant from the state law enforcement agency of the state in which the applicant resides.
SOURCE: IC 28-7-5-28.5; (00)IN1009.1.11. -->     SECTION 11. IC 28-7-5-28.5 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2000]: Sec. 28.5. In addition to the loan finance charge authorized by section 28 of this chapter, a pawnbroker may charge, contract for, and receive a fee not to exceed one-fifth (1/5) of the principal amount of the loan per month or any fractional part of a month for servicing the pledge that may include investigating the title, storing, providing security, appraisal, handling, making daily reports to local law enforcement officers, and for other expenses and costs associated with servicing the pledge. The fee for

each month after the second month of the loan transaction is limited to one-thirtieth (1/30) of the monthly fee for each day the loan is outstanding. Such a charge when made and collected is not interest and is not a rate under IC 35-45-7-1.

SOURCE: IC 28-8-4-20; (00)IN1009.1.12. -->     SECTION 12. IC 28-8-4-20 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2000]: Sec. 20. A person may not engage in the business of money transmission without a license required by this chapter. Application for a license shall be submitted on a form prescribed by the department and must include all information required by the department. The director is entitled to request evidence of compliance with this section at the time of application or after a license is issued. The evidence requested includes, but is not limited to, an official report of criminal activity of the applicant from the state law enforcement agency of the state in which the applicant resides.
SOURCE: IC 28-8-5-12; (00)IN1009.1.13. -->     SECTION 13. IC 28-8-5-12 IS AMENDED TO READ AS FOLLOWS [EFFECTIVE JULY 1, 2000]: Sec. 12. (a) The department shall determine the financial responsibility, business experience, character, and general fitness of the applicant before issuing the license.
    (b) The department may refuse to issue a license if an applicant who is an individual has been convicted of a felony.
    (c) The director of the department may request evidence of compliance with this section by the licensee at the time of application or after a license is issued. The evidence requested includes, but is not limited to, an official report of criminal activity of the applicant from the state law enforcement agency of the state in which the applicant resides.