REFERENCE TITLE: consumer loan finance charges State of Arizona Senate Fifty-fifth Legislature Second Regular Session 2022 SB 1236 Introduced by Senator Livingston AN ACT amending sections 6-601, 6-602 and 6-632, arizona revised statutes; relating to consumer Lender loans. (TEXT OF BILL BEGINS ON NEXT PAGE)
REFERENCE TITLE: consumer loan finance charges
State of Arizona Senate Fifty-fifth Legislature Second Regular Session 2022
SB 1236
Introduced by Senator Livingston
REFERENCE TITLE: consumer loan finance charges
State of Arizona
Senate
Fifty-fifth Legislature
Second Regular Session
2022
SB 1236
Introduced by
Senator Livingston
AN ACT
amending sections 6-601, 6-602 and 6-632, arizona revised statutes; relating to consumer Lender loans.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona: Section 1. Section 6-601, Arizona Revised Statutes, is amended to read: START_STATUTE6-601. Definitions In this chapter, unless the context otherwise requires: 1. "Actuarial method" means the method of allocating each payment between finance charges and principal pursuant to which the payment is applied first to finance charges computed on the unpaid balance of principal for the time the balance is outstanding, and the remainder of the payment is subtracted from the unpaid principal amount. 2. "Amount financed" means the amount of credit extended to a consumer on a consumer loan determined in accordance with the truth in lending act. 3. "Annual percentage rate" means the measure of the cost of credit, expressed as a yearly rate, that relates the amount and timing of value received by the consumer to the amount and timing of payments made, determined in accordance with the truth in lending act. 4. "Consumer" means an individual who obtains a consumer lender loan for personal, family or household purposes. 5. "Consumer lender" means a person that advertises to make or procure, solicits or holds itself out to make or procure, or makes or procures consumer lender loans to consumers in this state. 6. "Consumer lender loans" means consumer loans, consumer revolving loans and home equity revolving loans. 7. "Consumer loan" means the direct closed end loan of money, whether unsecured or secured by personal or real property, in an amount of $10,000 $50,000 or less that is subject to a finance charge in which only the principal amount of the loan is considered, and not any finance charges or other fees allowed pursuant to section 6-635, for the purpose of determining whether the consumer loan is $10,000 $50,000 or less. 8. "Consumer loan rate" means the periodic rate of finance charges that applies to the outstanding principal balance of a consumer loan and that remains unpaid. Consumer loan rate does not include any prepaid finance charges pursuant to section 6-632, subsection E or any fees pursuant to section 6-635. 9. "Consumer revolving loan" means an open end revolving loan that is established pursuant to an agreement with an agreed on credit limit that does not exceed $10,000 $50,000, that the consumer may pay in full at any time but has the privilege of paying in installments and that contemplates or provides that advances may be obtained from time to time by the consumer, through checks, drafts, items, credit access devices, orders for the payment of money, evidences of debt or similar means, whether or not negotiable. 10. "Educational loan" means any loan or other aid or assistance for the purpose of furthering the education of a consumer or a relative of a consumer at an accredited or approved university, college, community college, junior college, technical, vocational or professional school, or similar institution. 11. "Finance charge" means the amount payable by a consumer incident to or as a condition of the extension of a consumer lender loan but does not include other fees allowed pursuant to section 6-635. 12. "Home equity revolving loan" means an open end revolving loan that is made pursuant to an agreement with an agreed on credit limit that is not more than $10,000 $50,000, that is secured by the consumer's principal residence and that provides that advances may be obtained from time to time by the consumer through checks, drafts, items, credit access devices, orders for the payment of money, evidences of debt or similar means, whether or not negotiable. 13. "License" means a license issued under the authority of this chapter to make consumer lender loans in accordance with this chapter. 14. "Licensee" means a person licensed pursuant to this chapter. 15. "Precomputed consumer loan" means a consumer loan that is payable in substantially equal, consecutive monthly installments that are applied to the unpaid balance of the principal and precomputed finance charges combined, subject to provisions for refund or credit in the event of prepayment and for deferral or default charges in the event of deferral or default. 16. "Regularly engaged in the business" means either: (a) Advertising to or any other solicitation of a resident of this state that offers a consumer loan and that occurs within this state. (b) Making three or more consumer loans within a calendar year to residents of this state. 17. "Truth in lending act" means title I of the consumer credit protection act (15 United States Code sections 1601 through 1666j), as amended, and the regulations promulgated under that act (12 Code of Federal Regulations part 226), as amended. END_STATUTE Sec. 2. Section 6-602, Arizona Revised Statutes, is amended to read: START_STATUTE6-602. Exemptions A. This chapter does not apply to: 1. A person who does business under any other law of this state, or any other state while regulated by a state agency of that other state, or of the United States, relating to banks, savings banks, trust companies, savings and loan associations, profit sharing and pension trusts, credit unions, insurance companies or receiverships if the consumer lender loan transactions are regulated by the other law or are under the jurisdiction of a court. 2. A person who is licensed as a pawnbroker pursuant to title 44, chapter 11, article 3 to the extent that the person's activities are governed by that article. 3. A person who is not regularly engaged in the business of making consumer lender loans. 4. A person who is licensed pursuant to chapter 9 of this title to the extent that the person's activities are governed by that chapter. B. The requirements of this chapter do not apply to: 1. Closed end loans of more than $10,000 $50,000. 2. Advances on open end revolving loans that are not secured by the consumer's principal residence with an agreed on credit limit of more than $10,000 $50,000, regardless of the amount of any advances on these revolving loans. 3. Advances on open end revolving loans that are secured by the consumer's principal residence with an agreed on credit limit of more than $10,000 $50,000, regardless of the amount of any advances on these revolving loans. 4. Consumer lender loans that are lawfully made to nonresidents of the state in any other state under and in accordance with a regulatory consumer lender law similar in principle to this chapter. 5. Educational loans that are either: (a) Made, insured or guaranteed pursuant to a program authorized by the United States, this state or any other state. (b) Made by a nonprofit organization that is exempt from taxation under section 501(c)(3) of the internal revenue code to students who attend postsecondary educational institutions in this state. C. A consumer loan made pursuant to a consumer lender license is not a secondary motor vehicle finance transaction as defined in section 44-281. END_STATUTE Sec. 3. Section 6-632, Arizona Revised Statutes, is amended to read: START_STATUTE6-632. Finance charges A. A licensee may contract for and receive finance charges on consumer loans that are not more than the following amounts: 1. On a consumer loan in an original principal amount of three thousand dollars $10,000 or less, a consumer loan rate of thirty-six per cent percent. 2. On a consumer loan in an original principal amount of more than three thousand dollars, either $10,000: (a) A consumer loan rate of: (i) Thirty-six per cent percent on the initial three thousand dollars $10,000 of the original principal amount. , and a consumer loan rate of (ii) Twenty-four per cent percent on that part of the principal amount greater of more than three thousand dollars $10,000 but NOT MORE than $50,000. (b) The single blended consumer loan rate that results from the total amount of finance charges that the licensee would receive through the scheduled maturity of the consumer loan at the consumer loan rates that otherwise would be applicable pursuant to subdivision (a) of this paragraph to the different portions of the unpaid principal balance, assuming that the consumer loan will be paid according to its agreed terms. B. A licensee may contract for and receive periodic finance charges on consumer revolving loans and home equity revolving loans that are not more than the following amounts: 1. On consumer revolving loans with credit limits of three thousand dollars $10,000 or less, a periodic rate corresponding to an annual percentage rate of thirty-six per cent percent on the outstanding balance each monthly billing cycle. 2. On consumer revolving loans with credit limits of more than three thousand dollars $10,000 and home equity revolving loans, either: (a) A periodic rate corresponding to an annual percentage rate of: (i) Thirty-six per cent percent on that portion of the outstanding balance each monthly billing cycle that is not more than three thousand dollars and a periodic rate corresponding to an annual percentage rate of $10,000. (ii) Twenty-four per cent percent on that portion of the outstanding balance each monthly billing cycle that is more than three thousand dollars $10,000 but NOT MORE than $50,000. (b) A periodic rate corresponding to the single blended annual percentage rate that would result in a periodic finance charge during a monthly billing cycle that is not more than the finance charges that result from the application of the multiple periodic rates authorized by subdivision (a) of this paragraph. C. A licensee may charge a fixed or variable rate of periodic finance charges on a consumer revolving loan or a home equity revolving loan, as provided by the agreement that establishes the consumer revolving loan or home equity revolving loan. The licensee shall not base a variable rate of periodic finance charges on an index that is under the control of the licensee. Unless the consumer can readily verify the index on which an adjustment in the rate of periodic finance charges is based, the licensee shall provide conspicuous notice of the rate adjustment at least one monthly billing cycle before the effective date of the rate adjustment. The licensee may include a rate adjustment notice on or with a periodic statement to the consumer. The corresponding annual percentage rate of periodic finance charges may not increase or decrease more than three percentage points in any period of twelve consecutive months, and the corresponding annual percentage rate of periodic finance charges may not increase or decrease more than seven percentage points above or below the initial annual percentage rate of periodic finance charges at the time the consumer revolving loan or home equity revolving loan is established. D. Except as permitted allowed by subsection E of this section, prepaid finance charges commonly referred to as points are prohibited. E. In addition to the finance charges authorized in subsections A, B and C of this section, a licensee may contract for and receive, and collect finance charges on, nonrefundable prepaid finance charges or fees commonly referred to as points in an amount of not more than: 1. Four per cent percent of the original principal amount of a consumer loan of at least five thousand dollars $5,000 secured by the consumer's principal residence. 2. Four per cent percent of the agreed on credit limit of a home equity revolving loan. F. If a consumer loan, consumer revolving loan or home equity revolving loan is in existence before the effective date of this amendment to this section July 24, 2014 and is modified or restructured after the effective date of this amendment to this section July 24, 2014 and the total new cash advances do not exceed one hundred dollars $100, a licensee may not contract for and receive periodic finance charges at an annual percentage rate that is higher than the annual percentage rate that existed before the effective date of this amendment to this section July 24, 2014. END_STATUTE
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 6-601, Arizona Revised Statutes, is amended to read:
START_STATUTE6-601. Definitions
In this chapter, unless the context otherwise requires:
1. "Actuarial method" means the method of allocating each payment between finance charges and principal pursuant to which the payment is applied first to finance charges computed on the unpaid balance of principal for the time the balance is outstanding, and the remainder of the payment is subtracted from the unpaid principal amount.
2. "Amount financed" means the amount of credit extended to a consumer on a consumer loan determined in accordance with the truth in lending act.
3. "Annual percentage rate" means the measure of the cost of credit, expressed as a yearly rate, that relates the amount and timing of value received by the consumer to the amount and timing of payments made, determined in accordance with the truth in lending act.
4. "Consumer" means an individual who obtains a consumer lender loan for personal, family or household purposes.
5. "Consumer lender" means a person that advertises to make or procure, solicits or holds itself out to make or procure, or makes or procures consumer lender loans to consumers in this state.
6. "Consumer lender loans" means consumer loans, consumer revolving loans and home equity revolving loans.
7. "Consumer loan" means the direct closed end loan of money, whether unsecured or secured by personal or real property, in an amount of $10,000 $50,000 or less that is subject to a finance charge in which only the principal amount of the loan is considered, and not any finance charges or other fees allowed pursuant to section 6-635, for the purpose of determining whether the consumer loan is $10,000 $50,000 or less.
8. "Consumer loan rate" means the periodic rate of finance charges that applies to the outstanding principal balance of a consumer loan and that remains unpaid. Consumer loan rate does not include any prepaid finance charges pursuant to section 6-632, subsection E or any fees pursuant to section 6-635.
9. "Consumer revolving loan" means an open end revolving loan that is established pursuant to an agreement with an agreed on credit limit that does not exceed $10,000 $50,000, that the consumer may pay in full at any time but has the privilege of paying in installments and that contemplates or provides that advances may be obtained from time to time by the consumer, through checks, drafts, items, credit access devices, orders for the payment of money, evidences of debt or similar means, whether or not negotiable.
10. "Educational loan" means any loan or other aid or assistance for the purpose of furthering the education of a consumer or a relative of a consumer at an accredited or approved university, college, community college, junior college, technical, vocational or professional school, or similar institution.
11. "Finance charge" means the amount payable by a consumer incident to or as a condition of the extension of a consumer lender loan but does not include other fees allowed pursuant to section 6-635.
12. "Home equity revolving loan" means an open end revolving loan that is made pursuant to an agreement with an agreed on credit limit that is not more than $10,000 $50,000, that is secured by the consumer's principal residence and that provides that advances may be obtained from time to time by the consumer through checks, drafts, items, credit access devices, orders for the payment of money, evidences of debt or similar means, whether or not negotiable.
13. "License" means a license issued under the authority of this chapter to make consumer lender loans in accordance with this chapter.
14. "Licensee" means a person licensed pursuant to this chapter.
15. "Precomputed consumer loan" means a consumer loan that is payable in substantially equal, consecutive monthly installments that are applied to the unpaid balance of the principal and precomputed finance charges combined, subject to provisions for refund or credit in the event of prepayment and for deferral or default charges in the event of deferral or default.
16. "Regularly engaged in the business" means either:
(a) Advertising to or any other solicitation of a resident of this state that offers a consumer loan and that occurs within this state.
(b) Making three or more consumer loans within a calendar year to residents of this state.
17. "Truth in lending act" means title I of the consumer credit protection act (15 United States Code sections 1601 through 1666j), as amended, and the regulations promulgated under that act (12 Code of Federal Regulations part 226), as amended. END_STATUTE
Sec. 2. Section 6-602, Arizona Revised Statutes, is amended to read:
START_STATUTE6-602. Exemptions
A. This chapter does not apply to:
1. A person who does business under any other law of this state, or any other state while regulated by a state agency of that other state, or of the United States, relating to banks, savings banks, trust companies, savings and loan associations, profit sharing and pension trusts, credit unions, insurance companies or receiverships if the consumer lender loan transactions are regulated by the other law or are under the jurisdiction of a court.
2. A person who is licensed as a pawnbroker pursuant to title 44, chapter 11, article 3 to the extent that the person's activities are governed by that article.
3. A person who is not regularly engaged in the business of making consumer lender loans.
4. A person who is licensed pursuant to chapter 9 of this title to the extent that the person's activities are governed by that chapter.
B. The requirements of this chapter do not apply to:
1. Closed end loans of more than $10,000 $50,000.
2. Advances on open end revolving loans that are not secured by the consumer's principal residence with an agreed on credit limit of more than $10,000 $50,000, regardless of the amount of any advances on these revolving loans.
3. Advances on open end revolving loans that are secured by the consumer's principal residence with an agreed on credit limit of more than $10,000 $50,000, regardless of the amount of any advances on these revolving loans.
4. Consumer lender loans that are lawfully made to nonresidents of the state in any other state under and in accordance with a regulatory consumer lender law similar in principle to this chapter.
5. Educational loans that are either:
(a) Made, insured or guaranteed pursuant to a program authorized by the United States, this state or any other state.
(b) Made by a nonprofit organization that is exempt from taxation under section 501(c)(3) of the internal revenue code to students who attend postsecondary educational institutions in this state.
C. A consumer loan made pursuant to a consumer lender license is not a secondary motor vehicle finance transaction as defined in section 44-281. END_STATUTE
Sec. 3. Section 6-632, Arizona Revised Statutes, is amended to read:
START_STATUTE6-632. Finance charges
A. A licensee may contract for and receive finance charges on consumer loans that are not more than the following amounts:
1. On a consumer loan in an original principal amount of three thousand dollars $10,000 or less, a consumer loan rate of thirty-six per cent percent.
2. On a consumer loan in an original principal amount of more than three thousand dollars, either $10,000:
(a) A consumer loan rate of:
(i) Thirty-six per cent percent on the initial three thousand dollars $10,000 of the original principal amount. , and a consumer loan rate of
(ii) Twenty-four per cent percent on that part of the principal amount greater of more than three thousand dollars $10,000 but NOT MORE than $50,000.
(b) The single blended consumer loan rate that results from the total amount of finance charges that the licensee would receive through the scheduled maturity of the consumer loan at the consumer loan rates that otherwise would be applicable pursuant to subdivision (a) of this paragraph to the different portions of the unpaid principal balance, assuming that the consumer loan will be paid according to its agreed terms.
B. A licensee may contract for and receive periodic finance charges on consumer revolving loans and home equity revolving loans that are not more than the following amounts:
1. On consumer revolving loans with credit limits of three thousand dollars $10,000 or less, a periodic rate corresponding to an annual percentage rate of thirty-six per cent percent on the outstanding balance each monthly billing cycle.
2. On consumer revolving loans with credit limits of more than three thousand dollars $10,000 and home equity revolving loans, either:
(a) A periodic rate corresponding to an annual percentage rate of:
(i) Thirty-six per cent percent on that portion of the outstanding balance each monthly billing cycle that is not more than three thousand dollars and a periodic rate corresponding to an annual percentage rate of $10,000.
(ii) Twenty-four per cent percent on that portion of the outstanding balance each monthly billing cycle that is more than three thousand dollars $10,000 but NOT MORE than $50,000.
(b) A periodic rate corresponding to the single blended annual percentage rate that would result in a periodic finance charge during a monthly billing cycle that is not more than the finance charges that result from the application of the multiple periodic rates authorized by subdivision (a) of this paragraph.
C. A licensee may charge a fixed or variable rate of periodic finance charges on a consumer revolving loan or a home equity revolving loan, as provided by the agreement that establishes the consumer revolving loan or home equity revolving loan. The licensee shall not base a variable rate of periodic finance charges on an index that is under the control of the licensee. Unless the consumer can readily verify the index on which an adjustment in the rate of periodic finance charges is based, the licensee shall provide conspicuous notice of the rate adjustment at least one monthly billing cycle before the effective date of the rate adjustment. The licensee may include a rate adjustment notice on or with a periodic statement to the consumer. The corresponding annual percentage rate of periodic finance charges may not increase or decrease more than three percentage points in any period of twelve consecutive months, and the corresponding annual percentage rate of periodic finance charges may not increase or decrease more than seven percentage points above or below the initial annual percentage rate of periodic finance charges at the time the consumer revolving loan or home equity revolving loan is established.
D. Except as permitted allowed by subsection E of this section, prepaid finance charges commonly referred to as points are prohibited.
E. In addition to the finance charges authorized in subsections A, B and C of this section, a licensee may contract for and receive, and collect finance charges on, nonrefundable prepaid finance charges or fees commonly referred to as points in an amount of not more than:
1. Four per cent percent of the original principal amount of a consumer loan of at least five thousand dollars $5,000 secured by the consumer's principal residence.
2. Four per cent percent of the agreed on credit limit of a home equity revolving loan.
F. If a consumer loan, consumer revolving loan or home equity revolving loan is in existence before the effective date of this amendment to this section July 24, 2014 and is modified or restructured after the effective date of this amendment to this section July 24, 2014 and the total new cash advances do not exceed one hundred dollars $100, a licensee may not contract for and receive periodic finance charges at an annual percentage rate that is higher than the annual percentage rate that existed before the effective date of this amendment to this section July 24, 2014. END_STATUTE