HB 656 Amends laws relating to unsecured loans of $500 or less

Current Bill Summary

- Prepared by Senate Research -

HB 656 - This act amends the law relating to unsecured loans of $500 or less.

Costs associated with the return of checks shall not be considered a fee or charge.

Lenders are required to post the fee in terms of dollars charged per one hundred dollars loaned in the lobby of the lending office.

Currently, lenders are required to renew loans upon the borrower's request up to 6 times and the borrower shall reduce the principal by at least 5% of the original loan amount each time the loan is renewed. This act gives lenders the discretion to renew loans upon the borrower's request and restricts lenders to 3 renewals. Borrowers shall reduce the principal by at least $25 each time the loan is renewed.

Borrowers are allowed to pay the loans by entering an extended payment plan. The plans are governed by the following provisions:

• Borrowers may only enter one plan in a 12 month period with an individual lender.

• The borrower must agree to repay the amount in 4 equal installments or less over up to a 60 day term.

• There are no prepayment penalties.

• Lenders may accelerate an unpaid balance when the borrower defaults.

• Lenders shall not extend another loan to a borrower when the borrower is subject to an extended payment plan.

• Information of such plans shall be posted and available at the lending office.

• Borrowers may enter such a plan by using the same method as and signing an amendment to the original loan.

Currently, borrowers shall not be required to pay interest and fees in excess of 75% of the initial loan amount. This act reduces that amount to 60%.

The act removes a provision establishing that such loans are deemed completed and not considered a renewal when the lender presents the instrument for payment or the payee redeems the instrument by paying the full amount of the instrument to the lender.

Currently, once the borrower completes the loan, he or she may enter into a new loan with the lender. This act requires a one business day cooling off period.

The act bars licensees from threatening or instigating criminal proceedings against a borrower when checks are dishonored unless the borrower closes the account upon which the check was drawn before the date of negotiation or when the borrower stops payment on the check. Licensees shall comply with the Fair Debt Practices Act when collecting debts.

Currently, the division of finance shall report certain industry information to the general assembly every other year. This act requires a yearly report.

This act establishes a pilot program whereby the Division of Finance is charged to develop a real-time statewide compliance system for licensed payday lenders to record each payday loan transaction. The division shall deliver reports to the legislature documenting the usefulness of the system and the general compliance of licensees. The program shall be fully implemented by September 1, 2011 and sunset on August 31, 2012.

This act is similar to HB 1171 (2006), SB 975 (2006), SB 96 (2007),SB 744 (2008),HB 81 (2009), HB 150 (2009), SB 20 (2009), HB 1508 (2010), HB 2116 (2010), SB 593 (2010), SB 699 (2010), SB 811 (2010), and SB 295 (2011).


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