The Florida Senate
BILL ANALYSIS AND FISCAL IMPACT STATEMENT
(This document is based on the provisions contained in the legislation as of the latest date listed below.)
Prepared By: The Professional Staff of the Committee on Banking and Insurance
BILL: CS/SB 580
INTRODUCER: Banking and Insurance Committee and Senator Gruters
SUBJECT: Consumer Finance Loans
DATE: March 29, 2023
ANALYST STAFF DIRECTOR REFERENCE ACTION
1. Knudson Knudson BI Fav/CS
2. AEG
3. FP
Please see Section IX. for Additional Information:
COMMITTEE SUBSTITUTE - Substantial Changes
I. Summary:
CS/SB 580 revises laws governing consumer finance loans, which are loans of $25,000 or less
for which a lender charges an interest rate greater than 18 percent per annum. The Florida
Consumer Finance Act (Act) in ch. 516, F.S., provides an exemption from Florida’s prohibition
against usurious contracts, under which any interest rate greater than 18 percent per annum is
prohibited.
The bill increases the maximum interest rate that may be charged to 36 percent per annum.
Current law limits consumer finance loan interest rates to no more than 30 percent per annum,
computed on the first $3,000 of the principal amount; 24 percent per annum on that part of the
principal amount exceeding $3,000 and up to $4,000; and 18 percent per annum on that part of
the principal amount exceeding $4,000 and up to $25,000.
The bill increases the number of days that a payment must be in default before a delinquency
charge may be imposed from 10 days in default to 12 days in default.
The bill revises the licensure process to allow a single licensure application for the principle
place of business and all branches. The bill defines a “branch” as any location, other than a
licensee’s principal place of business, at which a licensee operates or conducts consumer finance
loan business or controls for the purpose of conducting consumer finance loan business.
REVISED: BILL: CS/SB 580 Page 2
The bill requires consumer finance lenders, in any county designated in a Federal Emergency
Management Agency (FEMA) major disaster declaration, to suspend the following for 90 days
after the initial date of such declaration:
The application of delinquency charges for payments in default for at least 10 days;
Repossessions of collateral pledged to a consumer finance loan; and
The filing of civil actions for the collection of amounts owed under a consumer finance loan.
The bill also requires consumer finance lenders to:
Provide notice to the Office of Financial Regulation (OFR) of any assistance program offered
by the lender to borrowers impacted by a disaster subject to a FEMA major disaster
declaration.
Annually report information to the OFR detailing the loans issued by the lender during the
previous calendar year.
The effective date of the bill is July 1, 2023.
II. Present Situation:
The Office of Financial Regulation’s (OFR) Division of Consumer Finance (Division) licenses
and regulates non-depository financial service entities and individuals, and conducts
investigations of licensed entities to determine their compliance with Florida law.
1
One such
product regulated by the OFR is consumer finance loans. A consumer finance loan is a loan of
money, credit, goods, or interests valued at $25,000 or less with permitted interest rates of
between 18 and 30 percent per year.
2
This is not a traditional loan made by a bank, credit union,
or similar institution. The consumer finance lenders do not accept deposits, and earn their
revenue from the fees charged on the loans they make.
3
Licensure
Entities that engage in the business of making consumer finance loans must be licensed by the
OFR pursuant to the Florida Consumer Finance Act, ch. 516, F.S. (“the Act”). Each location of a
consumer finance lender must be separately licensed, even if the separate locations are operated
by the same business entity.
4
A consumer finance lender applicant must submit an application fee of $625 and an investigation
fee of $200 with its application for licensure.
5
Consumer finance lender licenses granted under
1
Fla. Office of Fin. Reg, Division of Consumer Finance: What We Do,
https://flofr.gov/sitePages/DivisionOfConsumerFinance.htm (last visited March 27, 2023).
2
Sections 516.01(2) and 516.031(1), F.S. See also, Fla. Office of Fin. Reg, Consumer Finance Companies,
https://flofr.gov/sitePages/ConsumerFinanceCompanies.htm (last visited March 27, 2023).
3
Naveen Reddy, What are the Primary Functions of Finance Companies? (Nov. 9, 2020),
https://smallbusiness.chron.com/primary-functions-finance-companies-40480.html (last visited March 27, 2023). Also note,
payday lenders are separately regulated pursuant to ch. 560, F.S.
4
Sections 516.01(6) and 516.05(3), F.S.
5
Section 516.03(1), F.S. See also, Fla. Office of Fin. Reg., Form OFR-516-01 Application for Consumer Finance Company
License, https://flofr.gov/sitePages/documents/OFR-516-01.pdf (last visited March 27, 2023). BILL: CS/SB 580 Page 3
the Act must be renewed every two years, at which time the licensee must pay a $625 biennial
license fee.
6
The Act does not apply to persons doing business under state or federal laws governing banks,
savings banks, trust companies, building and loan associations, credit unions, or industrial loan
and investment companies.
7
Permissible Interest Rates and Fees
Florida’s prohibition on usury generally prohibits
8
interest rates in excess of 18 percent per
annum simple interest on any loan, advance of money, line of credit, or forbearance.
9
Licensed
consumer finance lenders, however, may offer interest rates greater than 18 percent per annum
simple interest, up to the following limits, which are based on the amount of the loan’s
principal:
10
30 percent on the first $3,000.
24 percent on principal above $3,000 and up to $4,000.
18 percent on principal above $4,000 and up to $25,000.
The Act prohibits lenders from directly or indirectly charging borrowers additional fees as a
condition to the grant of a loan, except for the following:
11
Up to $25 for investigating the credit and character of the borrower;
A $25 annual fee on the anniversary date of each line-of-credit account;
Brokerage fees for certain loans, title insurance, and appraisals of real property offered as
security;
Intangible personal property tax on the loan note or obligation, if secured by a lien on real
property;
Documentary excise tax and lawful fees for filing, recording, or releasing an instrument
securing the loan;
The premium for any insurance in lieu of perfecting a security interest otherwise required by
the licensee in connection with the loan;
Actual and reasonable attorney fees and court costs;
Actual and commercially reasonable expenses for repossession, storing, repairing and placing
in condition for sale, and selling of any property pledged as security;
A delinquency charge for each payment in default for at least 10 days, if agreed upon in
writing before the charge is imposed, of up to $15 for payments due monthly, $7.50 for
payments due semimonthly or every 2 weeks, and $5 if three payments are due in the same
calendar month; and
A bad check charge of up to $20.
6
Sections 516.03(1) and 516.05(1) & (2), F.S.
7
Section 516.02(4), F.S.
8
Various lenders and credits licensed or chartered under the laws of the United States or specified chapters of the Florida
Statutes may charge interest at the maximum rate of interest permitted by law for similar loans or extensions of credit. See s.
687.12(1), F.S.
9
Sections 687.02 and 687.12, F.S.
10
Section 516.031(1), F.S.
11
Section 516.031(3), F.S. BILL: CS/SB 580 Page 4
A consumer finance lender may offer optional credit property, credit life, and disability
insurance at the borrower’s expense via a deduction from the principal amount of the loan.
12
Licensees under ch. 516, F.S., are expressly prohibited from charging prepayment penalties on
consumer finance loans.
13
III. Effect of Proposed Changes:
SB 580 revises laws governing consumer finance loans, which are loans of $25,000 or less for
which a lender charges an interest rate greater than 18 percent per annum. The Florida Consumer
Finance Act (Act) in ch. 516, F.S., provides an exemption from Florida’s prohibition against
usurious contracts, under which any interest rate greater than 18 percent per annum is prohibited.
The bill increases the maximum interest rate that may be charged to 36 percent per annum.
Current law limits consumer finance loan interest rates to no more than 30 percent per annum,
computed on the first $3,000 of the principal amount; 24 percent per annum on that part of the
principal amount exceeding $3,000 and up to $4,000; and 18 percent per annum on that part of
the principal amount exceeding $4,000 and up to $25,000.
The bill increases the number of days that a payment must be in default before a delinquency
charge may be imposed from 10 days in default to 12 days in default.
The bill revises the licensure process to allow a single licensure application for the principal
place of business and all branches. The bill defines a “branch” as any location, other than a
licensee’s principal place of business, at which a licensee operates or conducts consumer finance
loan business or controls for the purpose of conducting consumer finance loan business.
The bill requires consumer finance lenders, in any county designated in a Federal Emergency
Management Agency (FEMA) major disaster declaration, to suspend the following for 90 days
after the initial date of such declaration:
The application of delinquency charges for payments in default for at least 10 days;
Repossessions of collateral pledged to a consumer finance loan; and
The filing of civil actions for the collection of amounts owed under a consumer finance loan.
The bill also requires consumer finance lenders to provide notice to the OFR of any assistance
program offered by the lender to borrowers impacted by a disaster subject to a FEMA major
disaster declaration.
The bill requires consumer finance licensees to annually report aggregated and anonymized data
that does not reference any borrower’s nonpublic personal information to the OFR detailing the
loans issued by the lender during the previous calendar year. The report must include:
The number of licenses held by the licensee as of December 31.
The number of loan originations by the licensee under all licenses.
12
Section 516.35(2), F.S.
13
Section 516.031(6), F.S. BILL: CS/SB 580 Page 5
The total dollar amount of loans and the number of loans outstanding by the licensee as of
December 31.
The total number of loans in which the licensee holds a security interest in collateral as of
December 31.
The total number of unsecured loans as of December 31.
The total number of loans, separated by principal amount, in the following ranges as of
December 31:
o Up to and including $5,000.
o $5,001 to $10,000.
o $10,001 to $15,000.
o $15,001 to $20,000.
o $20,001 to $25,000.
The total number and amount of loans charged off as of December 31.
The total dollar amount of loans and the number of loans with delinquency status listed as:
o Current or less than 30 days past due.
o From 30 to 589 days past due.
o From 60 to 89 days past due.
o At least 90 days past due.
Licensees claiming any information submitted in the report is a trade secret must submit to the
OFR an affidavit and designated the information claimed to be a trade secret in accordance with
s. 655.0591, F.S. The OFR may publish a report using the annual report data, provided that all
data published in the report is anonymized and aggregated from all licensees.
The effective date of the bill is July 1, 2023.
IV. Constitutional Issues:
A. Municipality/County Mandates Restrictions:
None.
B. Public Records/Open Meetings Issues:
The bill allows the OFR to publish a report of information submitted by consumer
finance lenders detailing their lending activities during the prior calendar year, “provided
that all data published in the report is anonymized and aggregated from all licensees.”
However, the lack of a public records exemption related to the reports submitted by
insurers may result in the OFR having to provide the reports of individual lenders to a
person making such a public records request. The report in each consumer finance
lender’s report to the OFR could receive trade secret protection to the extent the lender,
pursuant to s. 655.0591, F.S., claims a trade secret and is successful in obtaining a
declaratory judgment from a circuit court that the documents in question constitute
protected trade secrets. BILL: CS/SB 580 Page 6
C. Trust Funds Restrictions:
None.
D. State Tax or Fee Increases:
None.
E. Other Constitutional Issues:
None.
V. Fiscal Impact Statement:
A. Tax/Fee Issues:
None.
B. Private Sector Impact:
The bill may result in more consumer finance loans being issued by Florida-licensed
consumer finance lenders to borrowers who cannot currently qualify for loans given the
current interest rate limits. However, such borrowers will be subject to greater interest
payments than are allowed under current law.
C. Government Sector Impact:
The OFR estimated “its revenues may decrease by as much as $5,000 per fiscal year if it
no longer receives the background investigation fee of $200 required for each additional
location” once the current licensure process is “replaced by a branch office license
requirement.” The OFR stated that the reduction, “would not impact the OFR’s
operation” and that “the reduction in staff time no longer needed to review a full license
application for each additional location when replaced with a branch office license would
likely offset any loss in revenues.”
14
The OFR also noted that the bill “would require the OFR to make technology changes to
its internal licensing system to create a branch office license and annual reporting
functionality” but believe that “the cost of these changes would be negligible and can be
covered within the OFR’s existing budget.”
15
VI. Technical Deficiencies:
None.
14
Office of Financial Regulation, 2023 Agency Legislative Bill Analysis of SB 580, pg. 5, February 2023 (on file with the
Senate Banking and Insurance Committee).
15
See id at pg. 6. BILL: CS/SB 580 Page 7
VII. Related Issues:
None.
VIII. Statutes Affected:
This bill substantially amends the following sections of the Florida Statutes: 516.01, 516.02,
516.03, 516.031, and 516.15.
This bill creates the following sections of the Florida Statutes: 516.38 and 516.39.
This bill reenacts the following sections of the Florida Statutes: 516.19.
IX. Additional Information:
A. Committee Substitute – Statement of Substantial Changes:
(Summarizing differences between the Committee Substitute and the prior version of the bill.)
CS by Banking and Insurance on March 29 2023:
The committee substitute clarifies what constitutes an assistance program offered by a
consumer finance lender in response to a disaster subject to a FEMA major disaster
declaration, requires additional reporting regarding the length of loan delinquencies, and
clarifies the application of the bill’s requirement that consumer finance lenders suspend
for 90 days after a FEMA major disaster declaration the application of delinquency
charges, collateral repossessions, and civil actions for collections.
B. Amendments:
None.
This Senate Bill Analysis does not reflect the intent or official position of the bill’s introducer or the Florida Senate.