HB1780 Changes law regarding small loans.
Sponsor: Liese, Chris (85) Effective Date:00/00/0000
CoSponsor: Reynolds, David L. (77) LR Number: 4085L.09C
Last Action: COMMITTEE: BANKS AND FINANCIAL INSTITUTIONS
02/16/2000 - HCS Reported Do Pass (H)
HCS HB 1780
Next Hearing:Hearing not scheduled
Calendar:HOUSE BILLS FOR PERFECTION
Position on Calendar:020
ACTIONS HEARINGS CALENDAR
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Available Bill Summaries for HB1780 Copyright(c)
* Committee * Introduced

Available Bill Text for HB1780
* Committee * Introduced *

BILL SUMMARIES

COMMITTEE

HCS HB 1780 -- SMALL LOANS

SPONSOR:  Liese

COMMITTEE ACTION:  Voted "do pass" by the Committee on Banks and
Financial Institutions by a vote of 22 to 0.

This substitute:

(1)  Revises the definition of consumer credit loans to include
unsecured loans for personal, family, or household purposes in
amounts of $500 or more;

(2)  Allows consumer credit lenders to post a surety bond or an
irrevocable letter of credit in the amount of $100,000 with the
Director of Finance in lieu of their annual audit requirements;

(3)  Requires the Division of Finance to keep all information
regarding title lenders confidential;

(4)  Requires title loan license applications to be accompanied
by a corporate surety bond or an irrevocable letter of credit
for $20,000;

(5)  Requires all title loans, extensions, or renewals of title
loans to be in writing;

(6)  Gives title lenders, upon default by a borrower, the right
to take possession and sell the titled property after complying
with the provisions regarding defaults in Chapter 408, RSMo;

(7)  Allows interest rates on title loans to be as agreed to by
the parties and allows a fee not to exceed 5% of the principal
or $50 to be charged.  No other fees or charges of any kind may
be charged;

(8)  Requires title loan agreements to state specifically that
nonpayment of a loan may result in the loss of the borrower's
titled personal property;

(9)  Permits lenders, upon expiration or default of a title loan
agreement, to proceed against the collateral in accordance with
provisions of Chapter 400 (Uniform Commercial Code) and Chapter
408 (defaults);

(10)  Requires lenders, before taking a title loan application,
to provide potential borrowers with a notice, to be signed by
the potential borrower, stating clearly the terms of the loan;

(11)  Requires title lenders to determine the borrower's
financial ability to repay the loan;

(12)  Applies the provisions of Chapter 408 (defaults) to all
title loan transactions;

(13)  Requires lenders of unsecured loans less than $500 to
register for license with the Division of Finance, pay a $300
fee per location, and post a surety bond or irrevocable letter
of trust with the director.  These provisions do not apply to
consumer credit companies or check cashing businesses;

(14)  Requires lenders of unsecured loans less than $500 to
conspicuously post their interest rates within the premises and
to inform potential borrowers that this is a high cost way to
borrow money.  No borrower will be permitted to renew or
refinance a loan more than twice.  Lenders may not knowingly
make loans to persons who currently have 2 or more loans; and

(15)  Creates a definition of "Consumer Installment Loans" and
"Consumer Installment Lenders."  Consumer Installment Loans are
loans which are either secured or unsecured of any amount which
are payable in not less than 4 installments for a period of no
less than 120 days.  Interest rates on consumer installment
loans may be as agreed to by the parties.  Consumer installment
lenders will be regulated by the Division of Finance.

The substitute contains penalty provisions.

FISCAL NOTE:  No impact on state funds.

PROPONENTS:  Supporters say that there is a need for these types
of lenders; they are providing a service to certain consumers,
which can't be received elsewhere.  The bill addresses important
consumer protection issues, including the right to cure and
posting of rates and notices which explain in lay terms the
stipulations of the loan.  It is felt this bill can resolve many
of the problems regarding renewals and repossessions that
currently affect the industry.

Proponents also feel it is necessary to expand the regulatory
authority of the Division of Finance for more comprehensive
oversight of the industry.

Others testifying for the bill would like for title and payday
lenders to acquire licenses and operate under the laws
established for other types of loans.

Testifying for the bill were Representative Liese; Division of
Finance; AARP; Missouri Financial Services Association;
Association of Small Loan Companies; and Missouri Finance
Institute.

OPPONENTS:  Those who oppose the bill say that they have a
problem with limiting the number of loan renewals at 2.  It is
felt that in many instances the lenders will not get their money
back.  It is necessary to develop a formula to ensure the
borrowers pay down these loans.  They also feel there is a need
to address bad checks; currently, payday lenders have no
recourse on bad checks.  They know of no instances where
prosecutors have taken action on bad checks written to payday
lenders.  Opponents also feel that the state should not give
municipalities the authority to regulate what businesses operate
within their boundaries.

Testifying against the bill were Missouri Association of
Financial Services; Mitch Mayberry; and Consumer Lending
Alliance.

Bob Dominique, Legislative Analyst


INTRODUCED

HB 1780 -- Small Loans

Co-Sponsors:  Liese, Gaw, Kreider, McBride, Franklin, Auer,
Parker, Troupe, Riley, Reynolds

Relating to small loans, this bill:

(1)  Revises the definition of consumer credit loans to include
unsecured loans for personal, family, or household purposes in
amounts of $500 or more;

(2)  Allows consumer credit lenders to post a surety bond or an
irrevocable letter of credit in the amount of $100,000 with the
Director of Finance in lieu of their annual audit requirements;

(3)  Allows cities, towns, and villages to prohibit title
lending within their boundaries;

(4)  Requires the Division of Finance to keep all information
regarding title lenders confidential;

(5)  Requires title loans license applications to be accompanied
by a corporate surety bond or an irrevocable letter of credit
for $20,000;

(6)  Requires all title loans, extensions, or renewals of title
loans to be in writing;

(7)  Gives title lenders, upon default by a borrower, the right
to take possession and sell the titled property after complying
with the provisions regarding defaults in Chapter 408;

(8)  Authorizes the Director of Finance to set interest rates on
title loans.  Rates will be determined by considering the rates
lawfully charged for similar loans in states bordering
Missouri.  Interest will accrue on a daily basis and no other
fees or charges will be permitted, except a nonrefundable fee
used for lien perfection.  After December 31, 2000, the rates
will be declared by the director no later than the fifteenth of
November for use in the following year;

(9)  Requires title loan agreements to state specifically that
nonpayment of a loan may result in the loss of the borrower's
titled personal property;

(10)  Permits lenders, upon expiration or default of a title
loan agreement, to proceed against the collateral in accordance
with provisions of Chapter 400 (Uniform Commercial Code) and
Chapter 408 (defaults);

(11)  Requires lenders, before taking a title loan application,
to provide potential borrowers with a notice, to be signed by
the potential borrower, stating clearly the terms of the loan;

(12)  Requires title lenders to determine the borrower's
financial ability to repay the loan;

(13)  Applies the provisions of Chapter 408 (defaults) to all
title loan transactions;

(14)  Requires lenders of unsecured loans under $500 to register
for license with the Division of Finance, pay a $300 fee per
location, and post a surety bond or irrevocable letter of trust
with the director.  These provisions do not apply to consumer
credit companies or check cashing businesses;

(15)  Requires lenders of unsecured loans under $500 to
conspicuously post their interest rates within the premises and
to inform potential borrowers that this is a high cost way to
borrow money.  No borrower will be permitted to renew or
refinance a loan more than twice.  Lenders may not knowingly
make loans to persons who currently have 2 or more loans; and

(16)  Allows cities, towns, and villages to prohibit payday
lending within their boundaries.

The bill contains penalty provisions.


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