HCS/SS/SB 694 - This act modifies the law relating to payday loans. Under current law, payday lenders are required to pay an annual licensing fee of $300 per location. This act increases that amount to $500 per location.
Costs associated with the return of checks shall be considered collection expenses which, under current law, are not considered a fee or charge.
The act requires payday lenders to conspicuously post the fee in terms of dollars charged per $100 loaned.
Current law limits the number of renewals to 6 and requires a 5% reduction of the original principal amount beginning with the first renewal. The act repeals these provisions and bars renewals and extensions.
Borrowers may pay outstanding loans by means of an extended payment plan (EPP) with the following conditions:
• Borrowers may not be eligible to enter into more than 1 such plan in a 12 month period with an individual lender.
• Borrowers shall agree in a signed written agreement to repay the amount in 4 equal installments or less over an aggregate term of 60 days or less if the borrower receives bi-monthly paychecks or an aggregate term of 120 days or less if the borrower receives monthly paychecks. Interest shall not accrue during the term of the EPP.
• There shall be no prepayment penalties. However, the lender shall have the right of acceleration upon failure to pay.
• Another loan may not be extended to the borrower by the lender until the EPP is paid in full.
• The lender shall post a notice stating that the borrower may enter into such an agreement and that the lender maintains literature at the counter describing the terms and conditions of the plans.
• The borrower shall enter into the agreement on the day before the due date of the loan by signing an amendment to the original agreement reflecting the new payment schedule.
No additional interest or fees may be charged if borrowers fail to make full payment upon the expiration of the original loan or the EPP.
The act requires lenders who offer payday loans through the internet to be licensed as all other lenders unless otherwise preempted by federal law.
Lenders are required to inform consumers of the intended use of payday loans through their marketing materials.
Current law limits the total amount of accumulated interest and fees to 75% of the initial loan amount of the life of the loan. This act reduces that amount to 35%.
With the exception of instances when a borrower closes an account or stops payment on a check, lenders are barred from threatening criminal proceedings against a borrower if a check given as security for a loan is dishonored. Those who knowingly do so are liable for 3 times the amount of the dishonored check.
Lenders are required to comply with the Fair Debt Collection Practices Act regarding harassment or abuse, false or misleading misrepresentations and unfair collections practices.
Under current law, the Division of Finance is required to report certain information relating to the payday loan industry to the General Assembly every other year. This act requires an annual reporting.
CHRIS HOGERTY