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Regular Session, 2014
SENATE BILL NO. 84
BY SENATORS NEVERS, ADL EY, BROOME AND BROWN AND
REPRESENTATIVES HONORE, JAMES AND ALFRED WILLIAMS
CONSUMERS. Provides relative to consumer credit transactions. (8/1/14)
AN ACT1
To amend and reenact R.S. 9:3560(A), 3578.3, 3578.4(A), 3578.5 and 3578.6, and R.S.2
51:1406(1), and to enact R.S. 9:3537 and R.S. 9:3578.8(E), relative to consumer3
credit transactions, deferred presentment transactions and small loans; to provide4
relative to holding of checks; to provide relative to licensing; to provide relative to5
certain charges and fees; to provide certain definitions, limitations, and requirements;6
to provide for the adoption of regulations and the implementation of a database; to7
provide relative to certain prohibited acts and violations of such acts; to provide for8
certain terms, conditions, and procedures; and to provide for related matters.9
Be it enacted by the Legislature of Louisiana:10
Section 1. R.S. 9:3560(A), 3578.3, 3578.4(A), 3578.5 and 3578.6, are hereby11
amended and reenacted and R.S. 9:3537 and R.S. 9:3578.8(E) are hereby enacted to read as12
follows:13
§3537. Holding of checks14
With respect to a consumer credit transaction, an extender of credit shall15
not accept a check, as defined by R.S. 9:3516, from the issuer and agree to hold16
the check for a period of time in exchange for payment to the issuer.17 SB NO. 84
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* * *1
§3560. Licenses not required2
A. Notwithstanding R.S. 9:3557, the following persons shall be exempt from3
the consumer loan licensing requirements under this Part:4
(1)(a) A bank, savings and loan association, or similar financial institution5
organized, certified, and supervised by an agency of either the United States of6
America or the state of Louisiana pursuant to the banking, currency and related laws7
of the United States of America or the state of Louisiana.8
(b) A subsidiary of any state-chartered entity described in Subparagraph (a)9
of this Paragraph in which eighty percent or more of the ownership rests with such10
parent entity.11
(2) A trust administered by a bank or a bank trust department.12
(3) A governmental agency, instrumentality, or public entity organized by13
act of congress or the Legislature of Louisiana.14
(4) An insurance company when entering into a life insurance loan to a15
policyholder.16
(5) A qualified pension plan when entering into an extension of credit to a17
plan participant.18
(6) A bona fide pledgee of a consumer credit transaction to secure a bona19
fide loan thereon.20
(7) A seller or other creditor refinancing a retail installment transaction21
subject to the Motor Vehicle Sales Finance Act.22
(8) A creditor having no office within this state offering credit to Louisiana23
consumers through the mails and other means of interstate commerce.24
(9)(8) Unless otherwise provided by rule or regulation of the commissioner,25
persons whose lending activities pertain to federally related mortgage loans, and who26
are subject to licensing, supervision or auditing by the Federal National Mortgage27
Association, the Federal Home Loan Mortgage Corporation, the Governmental28
National Mortgage Association, the Veterans Administration, or the United States29 SB NO. 84
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Department of Housing and Urban Development. Such lenders may also make loans1
secured by a second or junior lien or mortgage on owner-occupied one-to-four family2
residential immovable property made contemporaneously with federally related3
mortgage loans or as part of a mortgage revenue bond loan program, or sold on the4
secondary market to the Federal National Mortgage Association, the Federal Home5
Loan Mortgage Corporation, or the Governmental National Mortgage Association,6
and the entity sells ten or fewer of such loans over any calendar year.7
* * *8
§3578.3. Definitions9
As used in this Chapter, the following terms have the following meanings10
ascribed to them:11
(1) "Commissioner" means the commissioner of the office of financial12
institutions.13
(2) "Deferred presentment transaction" means a transaction made pursuant14
to a written agreement whereby a licensee:15
(a) Accepts a check from the issuer dated as of the date it was written;.16
(b) Agrees to hold the check for a period of time not to exceed thirty days17
prior to negotiation or presentment; and.18
(c) Pays to the issuer of the check the amount of the check less the fee19
permitted in R.S. 9:3578.4(A). The amount paid to the issuer of the check may not20
exceed three hundred fifty dollars.21
(d) No consumer shall enter into more than ten deferred presentment22
transactions within twelve consecutive months.23
(e) A licensed lender must independently verify the total number of24
deferred presentment transactions entered into by the consumer within the25
immediately preceding twelve consecutive months. Verification must include26
examination of the licensed lender's own records, including records maintained27
at the location at which the consumer is applying for the transaction and28
records maintained at other locations within the state that are owned and29 SB NO. 84
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operated by the licensed lender, as well as utilization of the real-time access1
common database approved by the commissioner under R.S. 9:3578.8.2
(3) "Licensee" means a person licensed pursuant to this Chapter that offers3
deferred presentment transactions or small loans, or both.4
(4) "Partial payment" means a payment of fifty dollars or more on a deferred5
presentment transaction or small loan.6
(5)(4) "Prepayment" means payment in full of the deferred presentment7
transaction or small loan amount prior to the end of the term of that transaction or8
loan.9
(6)(5) "Small loan" means a consumer loan, as defined in R.S. 9:3516(14),10
of three hundred fifty dollars or less, made for a term of sixty days or less. No11
consumer shall enter into more than ten small loans within twelve consecutive12
months.13
* * *14
§3578.4. Finance charge and fees15
A.(1)(a) In conjunction with a deferred presentment transaction or small16
loan, a licensee may charge a fee not to exceed sixteen and seventy-five one17
hundredths percent of the face amount of the check issued or in the case of a small18
loan, the equivalent rate of interest, provided however that such fee or interest does19
not exceed forty-five dollars, regardless of the name or type of charge.20
(b) A licensed lender may charge to the consumer any actual common21
database cost incurred in association with R.S. 9:3578.8(E) and R.S. 9:3514(B)22
in an amount not to exceed one dollar per loan transaction. The amount of this23
charge shall be included in, and shall not be in addition to, the amount of fees24
the licensed lender is authorized to charge under Paragraph (A)(1) and25
Subsection C of this Section. 26
* * *27
§3578.5. Rebate upon prepayment28
Upon the prepayment in full of a deferred presentment transaction or small29 SB NO. 84
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loan, during the first five days of the term of such transaction or loan only, the1
licensee shall refund any and all unearned charges by a method no less favorable to2
the consumer than the actuarial method, less twenty dollars of the original fee, which3
shall be considered earned and shall not be subject to refund. Should the consumer4
make prepayment after the first five days of the term of the transaction or loan, the5
licensee shall not be required to make any refund.6
§3578.6. Prohibited acts7
A. A licensee shall not:8
(1) Except for reasonable attorney fees and costs awarded by a court, charge,9
contract for, receive, or collect a loan finance charge or credit service charge, or any10
other fee or charge other than as provided in R.S. 9:3578.4.11
(2) Sell any goods when those goods are financed with the proceeds of the12
loan or sell insurance in connection with a deferred presentment transaction or small13
loan. The sale and financing of services, including but not limited to utility payment14
services, financial or tax services, or the sale of prepaid telephone services and15
telephone-related products which are not financed with the proceeds of the loan,16
shall not be deemed a violation of this Chapter.17
(3) Refuse a partial loan payment of fifty dollars or greater.18
(4) Divide a deferred presentment transaction or small loan into multiple19
agreements for the purpose of obtaining a higher fee or charge.20
(5) Threaten any customer with prosecution or refer for prosecution any21
check accepted as payment of a deferred presentment transaction and returned by the22
lender's depository institution for reason of insufficient funds.23
(6) Structure the repayment of a loan in such a manner as to attempt to24
circumvent the provisions of this Chapter.25
(7) Renew or roll over a deferred presentment transaction or small loan.26
However, a licensee may accept a partial payment of twenty-five percent of the27
amount advanced plus fees charged and enter into a new deferred presentment28
transaction or renew the small loan for the remaining balance owed. Once a deferred29 SB NO. 84
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presentment transaction or small loan has been completed, a consumer may enter1
into a new transaction or loan with the licensee. A deferred presentment transaction2
or small loan shall be considered completed when the amount advanced has been3
paid in full by the consumer.4
(8) Take any direct or indirect interest, possessory or otherwise, whether5
perfected or unperfected, in any property in connection with a small loan, or a6
deferred presentment transaction.7
(9) Through the use of mail, telephone, Internet, electronic or any other8
means, engage in any device or subterfuge intended to evade the requirements9
of this Chapter, including but not limited to:10
(a) Offering, making, assisting a borrower to obtain, or brokering a11
deferred presentment transaction or small loan at a rate of interest prohibited12
by Louisiana law, or acting as an agent for a third party in such a transaction.13
(b) Making deferred presentment transactions or small loans disguised14
as personal property sales, consumer credit sales, and leaseback transactions.15
(c) Disguising deferred presentment transactions or small loan proceeds16
as cash rebates for the pretextual installment sale of goods or services.17
(d) Disguising a deferred presentment transaction or small loan as a18
revolving line of credit, or making or assisting a borrower to obtain a revolving19
line of credit for the purpose of avoiding the requirements of Subsection(A)(1)20
of this Section.21
B. It shall be unlawful for any small loan lender, for any reason and by any22
means, including but not limited to direct deposit and personal tender, to accept as23
payment, offer to accept as payment, or require for use as security any check issued24
pursuant to the federal Social Security Act. In addition, it shall be unlawful for any25
lender making small loans to act as a depository institution for the acceptance of any26
check issued pursuant to the federal Social Security Act, unless such lender is a27
federally insured financial institution.28
C. A violation of this Section shall constitute a violation of Chapter 1329 SB NO. 84
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of Title 51 of the Louisiana Revised Statutes of 1950.1
* * *2
§3578.8. Powers of the commissioner; adoption of rules and regulation3
* * *4
E.(1) The commissioner shall approve as provided in this Section the use5
of a single common database with real-time access through an Internet6
connection for licensed lenders who make deferred presentment transactions7
and small loans pursuant to this Chapter, hereinafter referred to in this8
Subsection as "licensees". The database shall be accessible to the commissioner9
and to the licensees so that the commissioner shall be able to verify the number10
and nature of transactions that are outstanding for a particular consumer. The11
commissioner is hereby authorized to allow a charge to be designated by the12
outside contractor or third party service not to exceed one dollar per13
transaction. The licensee may charge this amount to the consumer, provided14
that the amount of this charge shall be included in, and shall not be in addition15
to, the amount of fees the licensee is authorized to charge under R.S. 9:3578.4.16
The licensee shall remit the transaction charge amount directly to the outside17
contractor or third party service approved by the commissioner to utilize and18
maintain the common database system.19
(2) No licensee shall engage in lending activity with a consumer who has20
taken out more than ten loans under this Chapter in the previous twelve21
consecutive months.22
(3) Licensees shall submit such loan transaction data before entering23
into each transaction in such format as required by the commissioner, including24
but not limited to the borrower's name, social security number or employment25
authorization alien number, address, driver's license number, amount of26
transaction, date of transaction, the date the transaction is closed, and such27
additional information as required by the commissioner.28
(4) Each database provider shall indemnify and hold harmless the29 SB NO. 84
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licensees for any breach of confidentiality due to the provider's data security.1
Additionally, each database provider shall post a five million dollar bond to2
secure any possible liabilities as a result of any breach of security, should same3
arise.4
(5) Each database provider shall protect the identity of all borrowers by5
using a numerical identification system in lieu of a social security number.6
* * *7
Section 2. R.S. 51:1406(1) is hereby amended and reenacted to read as follows:8
§1406. Exemptions 9
The provisions of this Chapter shall not apply to: 10
(1) Any federally insured financial institution, its subsidiaries, and affiliates11
or any licensee of the Office of Financial Institutions, its subsidiaries, and affiliates,12
except as provided by R.S. 9:3578.6(C), or actions or transactions subject to the13
jurisdiction of the Louisiana Public Service Commission or other public utility14
regulatory body, the commissioner of financial institutions, except as provided by15
R.S. 9:3578.6(C), the insurance commissioner, the financial institutions and16
insurance regulators of other states, or federal banking regulators who possess17
authority to regulate unfair or deceptive trade practices.18
* * *19
The original instrument was prepared by Julie J. Baxter. The following
digest, which does not constitute a part of the legislative instrument, was
prepared by Martha Hess.
DIGEST
Nevers (SB 84)
Proposed law provides that, with respect to a consumer credit transaction, an extender of
credit shall not accept a check, as defined by R.S. 9:3516, from the issuer and agree to hold
the check for a period of time in exchange for payment to the issuer.
Present law provides that a creditor having no office in this state offering credit to Louisiana
consumers through the mails and other means of interstate commerce shall be exempt from
the consumer loan licensing requirements under the licensing provisions of the Louisiana
Consumer Credit Law.
Proposed law deletes present law.
Proposed law adds to the definition of "deferred presentment transaction" that no consumer SB NO. 84
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shall enter into more than ten deferred presentment transactions within twelve consecutive
months.
Proposed law requires licensed lenders to independently verify the total number of deferred
presentment transactions entered into by the consumer within the immediately preceding
twelve consecutive months. Verification must include examination of the licensed lender's
records maintained at the location at which the consumer is applying for the transaction and
at other locations within the state that are owned and operated by the licensed lender, as well
as utilization of the real-time access common database approved by the commissioner under
proposed law.
Present law in Louisiana's Deferred Presentment and Small Loan Act defines "partial
payment" as a payment of fifty dollars or more on a deferred presentment transaction or
small loan.
Proposed law deletes the definition of "partial payment" in present law.
Proposed law adds to the definition of "small loans" that no consumer shall enter into more
than ten small loan transactions within twelve consecutive months.
Present law provides that in conjunction with a deferred presentment transaction or small
loan, a licensee may charge a fee not to exceed sixteen and seventy-five one hundredths
percent of the face amount of the check issued or in the case of a small loan, the equivalent
rate of interest, provided however that such fee or interest does not exceed $45.00, regardless
of the name or type of charge. Proposed law retains present law.
Proposed law provides that a licensed lender may charge to the consumer any actual
common database cost incurred in an amount not to exceed $1.00 per loan transaction, which
charge shall be included in, and shall not be in addition to, the amount of fees the licensed
lender is authorized to charge under present law.
Present law provides that upon the prepayment in full of a deferred presentment transaction
or small loan, during the first five days of the term of such transaction or loan only, the
licensee shall refund any and all unearned charges by a method no less favorable to the
consumer than the actuarial method, less $20 of the original fee, which shall be considered
earned and shall not be subject to refund. Present law further provides that, should the
consumer make prepayment after the first five days of the term of the transaction or loan,
the licensee shall not be required to make any refund.
Proposed law provides that upon the prepayment in full of a deferred presentment
transaction or small loan, the licensee shall refund any and all unearned charges by a method
no less favorable to the consumer than the actuarial method.
Present law provides that a licensee under Louisiana's Deferred Presentment and Small Loan
Act shall not renew or roll over a deferred presentment transaction or small loan, but that a
licensee may accept a partial payment of 25% of the amount advanced plus fees charged and
enter into a new deferred presentment transaction or renew the small loan for the remaining
balance owed.
Proposed law provides that a licensee under Louisiana's Deferred Presentment and Small
Loan Act shall not renew or roll over a deferred presentment transaction or small loan.
Proposed law provides that a licensee under Louisiana's Deferred Presentment and Small
Loan Act shall not engage in any device or subterfuge intended to evade the requirements
of the Act through any means, including but not limited to mail, telephone, Internet or any
electronic means, by offering, making, assisting a borrower to obtain, or brokering a deferred
presentment transaction or small loan at a rate of interest prohibited by Louisiana law, or
acting as an agent for a third party in such a transaction; making deferred presentment SB NO. 84
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transactions or small loans disguised as personal property sales, consumer credit sales, and
leaseback transactions; disguising preferred presentment transactions or small loan proceeds
as cash rebates for the pretextual installment sale of goods or services; or disguising a
preferred presentment transaction or small loan as a revolving line of credit, or making or
assisting a borrower to obtain a revolving line of credit for the purpose of avoiding the
requirements of present law.
Proposed law provides that the performance of one of the prohibited acts under Louisiana's
Deferred Presentment and Small Loan Act shall constitute a violation of Louisiana's Unfair
Trade Practices and Consumer Protection Law.
Proposed law authorizes the commissioner to approve the use of a single common database
with real-time access through an Internet connection for licensed lenders who make deferred
presentment transactions and small loans pursuant to present law. Provides that the database
shall be accessible to the commissioner and to the licensees so that the commissioner shall
be able to verify the number and nature of transactions that are outstanding for a particular
consumer.
Proposed law authorizes the commissioner to allow a charge to be designated by the outside
contractor or third party service not to exceed $1.00 per transaction, which amount may be
charged to the consumer, provided that the amount of this charge is included in, and shall
not be in addition to, the amount of fees the licensee is authorized to charge under present
law. Provides that the licensee shall remit the transaction charge amount directly to the
outside contractor or third party service approved by the commissioner to utilize and
maintain the common database system.
Proposed law provides that no licensee shall engage in lending activity with a consumer who
has taken out more than ten loans under present law in the previous twelve consecutive
month.
Proposed law provides that licensees shall submit such loan transaction data before entering
into each transaction in such format as required by the commissioner, including but not
limited to the borrower's name, social security number of employment authorization alien
number, address, driver's license number, amount of transaction, date of transaction, the date
the transaction is closed, data reporting requirements of R.S. 9:3554(A(6) and such
additional information as required by the commissioner.
Proposed law requires each database provider to indemnify and hold harmless the licensees
for any breach of confidentiality due to the provider's data security and further requires that
each database provider post a $5,000,000 bond to secure any possible liabilities as a result
of a security breach.
Proposed law requires database providers to protect borrower's identity by using a numerical
identification system in lieu of a social security number.
Proposed law removes the exemption in present law for the applicability of the Louisiana
Unfair Trade Practices and Consumer Protection Act to deferred presentment transactions
and small loans.
Effective August 1, 2014.
(Amends R.S. 9:3560(A), 3578.3, 3578.4(A), 3578.5 and 3578.6, and R.S. 51:1406(1); adds
R.S. 9:3537 and 3578.8(E)) SB NO. 84
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Summary of Amendments Adopted by Senate
Committee Amendments Proposed by Senate Committee on Judiciary A to the
engrossed bill
1. Provides that no consumer shall enter into more than ten deferred
presentment transactions within twelve consecutive months.
2. Provides that no consumer shall enter into more than ten small loans within
twelve consecutive months.
3. Deletes proposed definition of "interest".
4. Deletes proposed changes to current finance charges allowed in deferred
presentment transactions and small loans.
5. Adds law providing that the commissioner of the Office of Financial
Institutions shall implement a single common database with real-time access
through an Internet connection for licensed lenders who make deferred
presentment transactions and small loans.
6. Adds that no licensed lender shall engage in lending activity with a consumer
who has taken out more than ten loans under the Louisiana Deferred
Presentment and Small Loans Act in the previous twelve consecutive
months.
7. Removes the current exemption in the Louisiana Unfair Trade Practices and
Consumer Protection Act for deferred presentment transactions and small
loans.
Committee Amendments Proposed by Senate Committee on Finance to the
engrossed bill
1. Requires licensed lenders to independently verify the total number of
deferred presentment transactions entered into by the consumer within the
immediately preceding twelve consecutive months, and provides
requirements of verification.
2. Authorizes licensed lenders to charge the consumer actual common database
cost, not to exceed $1.00 per loan transaction, as part of fees charged under
present law.
3. Authorizes the commissioner to approve the use of a single common
database with real-time access through an Internet connection for licensed
lenders who make deferred presentment transactions and small loans.
4. Authorizes the commissioner to allow outside contractor or third party
service to charge consumer, not to exceed $1.00 per transaction, as part of
fees charged under present law.
5. Requires each database provider to indemnify and hold harmless the
licensees for any breach of confidentiality due to the provider's data security
and to post a $5,000,000 bond to secure any possible liabilities as a result of
a security breach.
6. Requires database providers to protect borrower's identity by using a
numerical identification system in lieu of a social security number.