DIGEST
The digest printed below was prepared by House Legislative Services. It constitutes no part of the
legislative instrument. The keyword, one-liner, abstract, and digest do not constitute part of the law
or proof or indicia of legislative intent. [R.S. 1:13(B) and 24:177(E)]
HB 793 Original 2016 Regular Session Carmody
Abstract: Creates the Louisiana Installment Loan Act and regulates installment loans.
Proposed law enacts the Louisiana Installment Loan Act.
Proposed law enumerates definitions for the purposes of proposed law in order to provide for
clarification.
Proposed law makes it unlawful for any person to engage in the business of making installment loans
unless the person is licensed to make installment loans pursuant to proposed law.
Proposed law deems a person to be engaged in the business of making installment loans in La. if the
person induces a consumer, while located in La., to enter into an installment loan plan in La. through
the use of facsimile, telephone, Internet, or other means. Proposed law declares that a separate
license shall be required for each location from which the business of making installment loans is
conducted.
Proposed law requires any nonresident person seeking licensure pursuant to proposed law to furnish
the Commissioner ("commissioner") of the Office of Financial Institutions ("OFI") with the name
and address of a resident of La. upon whom notices or orders issued by the commissioner, or process
affecting a licensee pursuant to proposed law may be served.
Proposed law requires any nonresident licensee to promptly notify the commissioner in writing of
any change in its designated agent for service of process, and the change shall not become effective
until approved by the commissioner.
Proposed law requires an applicant for a license to make installment loans to meet the following
requirements:
(1) A tangible net worth that comprises tangible assets, less liabilities, of not less than $50,000 for
each location.
(2) The financial responsibility, financial condition, business experience, character, and general
fitness of the applicant shall reasonably warrant the belief that the applicant's business shall be
conducted, lawfully, honestly, carefully and efficiently. In determining whether these qualifications
have been met, and for the purpose of investigating compliance with this subtitle, the commissioner
may review and approve any of the following: (a) The relevant business records and the capital adequacy of the applicant.
(b) The competence, experience, integrity, and financial ability of any person who is a director, a
shareholder with 10% or more shares of the applicant, or a person who owns or controls the
applicant.
(c) Any record of the applicant or any person referred to in proposed law for any criminal activity,
any fraud or other act of personal dishonesty, any act, omission, or practice that constitutes a breach
of a fiduciary duty, or any suspension, revocation, or removal by any agency or department of the
U.S. or any state, from participation in the conduct of any business.
Proposed law requires the commissioner to periodically review the licensee's compliance with
proposed law.
Proposed law requires each application for a license shall be in a form established by the
commissioner by promulgation of an administrative rule to include the following:
(1) The legal name, residence and business address of the applicant, and if the applicant is a
partnership, association, or corporation, the legal name, residence and business address of every
member, officer, managing employee, and director of the applicant.
(2) Every person licensed pursuant to proposed law shall maintain an agent in La. for service of
process. The name, address, telephone number, and electronic mail address of the agent shall be
filed with the application. The commissioner shall be notified in writing by the licensee at least 5
days prior to any change in the status of an agent.
(3) Other data and information the commissioner may reasonably require about the applicant, its
directors, trustees, officers, members, managing employees, or agents.
Proposed law requires that each application for a license required by proposed law meet the
following requirements or include the following:
(1)(a) A filing fee of $715 and a supervision fee of $500 which shall not be subject to refund unless
the license is granted, and the filing fee shall constitute the license fee for the 1
st
license year or part
thereof.
(b) The filing fee or supervision fee shall be applicable to each location.
(2)(a) An audited financial statement including but not limited to a balance sheet, a statement of
income or loss, and a statement of changes in financial position for the immediately preceding fiscal
year, prepared in accordance with generally accepted accounting principles by a certified public
accountant or public accounting firm, neither of which is affiliated with the applicant.
(b)(i) For a newly created entity, the commissioner may accept only a balance sheet prepared by a
certified public accountant or public accounting firm, neither of which is affiliated with the applicant, accompanied by a projected income statement demonstrating that the applicant will have
adequate capital after payment of start-up costs.
(ii) If the applicant does not have an audited financial statement meeting the requirements, it may
submit a financial statement of its parent if the financial statement is audited in accordance with
generally accepted accounting principles by a certified public accountant or public account firm,
neither of which is affiliated with the applicant.
(3)(a) A surety bond issued by an insurer regulated by the office of the commissioner of insurance
of this state and not affiliated with the applicant, in the amount of $25,000 for each location.
However, the aggregate amount of the surety bond required for a single licensee shall not exceed
$200,000.
(b) In lieu of the surety bond, the applicant shall file an irrevocable letter of credit, in the amount of
the surety bond, issued by any federally insured bank, savings bank, or credit union, none of which
is affiliated with the applicant.
(c) The surety bond or irrevocable letter of credit shall be in a form satisfactory to the office of the
commissioner of insurance and shall be payable to the office of financial institutions for the benefit
of any person who is injured pursuant to an installment loan by the fraud, misrepresentation, breach
of contract, financial failure or violation of any provision of proposed law by a licensee.
(d)(i) In the case of a surety bond, the aggregate liability of the surety bond shall not exceed the
principal sum of the surety bond.
(ii) In the case of an irrevocable letter of credit, applicants shall obtain letters of credit for terms of
not less than 3 years and renew the letters of credit annually.
(e) If the licensee fails to pay a person or the commissioner, as required by proposed law , then a
person may bring suit against the licensee directly on the surety bond or irrevocable letter of credit
in any court of competent jurisdiction, or the commissioner may bring suit in the Parish of East
Baton Rouge ("EBR"), which shall have exclusive venue in all matters relating to proposed law on
behalf of those persons, in either one or successive actions. The surety bond or irrevocable letter of
credit shall be maintained by the licensee for not less than 3 years following the expiration,
revocation, or surrender of the licensee's license.
Proposed law authorizes the commissioner to require an applicant for a license to consent to a
criminal history records check and to provide fingerprints with the application in a form acceptable
to the commissioner. Proposed law authorizes the commissioner to require such consent and
fingerprints from any individual who is a director, officer, or 10+% shareholder of the applicant or
who owns or controls the applicant, as well as from any other individual associated with the
applicant as is reasonably necessary to meet the purposes of proposed law. Proposed law clarifies
that refusal of any person to consent to a criminal history records check or to provide fingerprints
pursuant to proposed law constitutes grounds for the commissioner to deny the applicant a license.
Proposed law requires that any criminal history records check conducted pursuant to proposed law shall be conducted by the La. Bureau of Criminal Id. and Information, the FBI, or both, and the
results of the criminal history records check shall be forwarded to the commissioner.
Proposed law declares that if the commissioner finds that all licensing requirements have been
satisfied and approves the documents, then the commissioner shall issue to the applicant a license
to engage in the business of making installment loans in La.
Proposed law requires that any license shall be conspicuously posted in the licensee's place of
business at all times.
Proposed law declares that a license issued pursuant to proposed law shall remain effective through
the remainder of the year ending on December 31
st
after its date of issuance unless earlier
surrendered, suspended, or revoked pursuant to proposed law.
Proposed law requires the commissioner to provide written notice to any applicant when the
application has been denied, including the basis for denial. Proposed law provides that when the
commissioner denies an application or if the commissioner fails to act on an application within 90
days after the filing of a properly completed application the applicant may make a written demand
to the commissioner for a hearing before the commissioner on the question of whether the license
should be granted. Proposed law requires that any hearing on the denial of a license shall be
conducted pursuant to the Administrative Procedure Act ("APA"). Proposed law provides that the
burden of proof that the applicant is entitled to a license shall be on the applicant. Proposed law
further clarifies that any decision of the commissioner following any hearing on the denial of a
license is subject to review pursuant to the provisions of the APA.
Proposed law declares that licenses issued pursuant to proposed law shall expire on December 31
st
annually. Proposed law provides that any license may be renewed for the ensuing 12 month period
upon submission of an application by the license holder showing continued compliance with the
requirements of proposed law. Proposed law requires an annual license renewal fee of $290 to be
submitted to the commissioner by December 1
st
annually. Proposed law provides that a licensee
making timely and complete application for renewal of its license shall be permitted to continue to
operate pursuant to its existing license until its application is approved or denied.
Proposed law declares that any license issued pursuant to proposed law is not transferable or
assignable. Proposed law requires that the prior written approval of the commissioner is required
for the continued operation of an installment loan business whenever a change in control of a
licensee is proposed, and the commissioner may require information deemed necessary to determine
whether a new application is required. Proposed law provides that reasonable and actual costs
incurred by the commissioner in investigating a change of control request shall be paid by the person
requesting approval. Proposed law mandates that
if the person acquiring control of a licensee is already licensed pursuant to proposed law, the person
must notify the commissioner 30 days prior to the acquisition. Proposed law states that whenever
control is acquired or exercised in violation of proposed law , the license shall be deemed revoked
as of the date of the unlawful acquisition of control, and the licensee or its controlling person shall
surrender the license to the commissioner on demand. Proposed law requires any licensee to notify the commissioner 30 days before any change in the licensee's principal place of business, branch
office, or name.
Proposed law authorizes licensees to make installment loans pursuant to proposed law may charge
and collect fees in a manner consistent with proposed law. Proposed law authorizes a licensee to
charge and collect a periodic interest rate not to exceed 20% per month. Proposed law limits the
maximum principal loan amount of an installment loan to $1,500 and adjusted every other year by
the commissioner to reflect the percentage changes in the Consumer Price Index published by the
Bureau of Labor Statistics of the Dept. of Labor.
Proposed law further restricts a licensee from making an installment loan if the total of scheduled
payments coming due in a month exceeds 20% of the borrower's gross monthly income. Proposed
law declares that, for the purpose of determining a borrower's gross monthly income pursuant to
proposed law, a lender shall obtain and maintain third party verification of all income considered in
making the determination. Proposed law clarifies that a "month" means a period extending from a
given date in one calendar month to the same date in the succeeding calendar month, or if there is
no same date in the succeeding calendar month, the last day of the succeeding calendar month.
Proposed law requires certain forms of payments on or before the due date of each billing cycle.
Proposed law establishes procedure for circumstances in which a customer defaults pursuant to the
terms of an installment loan plan. Regarding customer default, proposed law authorizes licensees
to refer the customer's account to an attorney for collection and do any of the following:
(1) If the installment loan so provides, charge and collect from the customer a reasonable attorney
fee.
(2) If the installment loan, or in the case of secured plans, the security agreement or similar
instrument, so provides, recover from the customer all collection and court costs, including, in the
case of secured plans, all costs of enforcing the security agreement or similar instrument actually
incurred by the licensee, including those incurred on appeal.
(3) Dispose of property after default shall occur in a commercially reasonable manner in accordance
with law.
Proposed law provides that if a check is returned to a licensee from a payor financial institution due
to insufficient funds, no licensee shall have the authority to assess a handling charge against the
maker or drawer of the returned check.
Proposed law requires licensees to provide each customer a written explanation, in clear,
understandable language, of the fees and charges to be charged by the licensee. The style, content
and method of executing the required written explanation shall comply with federal truth-in-lending
laws and shall contain a statement that the customer may prepay the unpaid balance in whole or in
part at any time without penalty. Proposed law requires installment loans to include a
next-business-day customer's right of rescission for any installment loan and a notice informing the
customer that complaints may be made to the commissioner, including the telephone number and
address of OFI. Proposed law states that an installment loan may not be refinanced more than 1 time. Proposed law restricts refinanced installment loans by stating that the loan amount may not
be for a greater than the original installment loan amount and must have payments less than the
originally scheduled installment loan payments.
Proposed law requires each licensee to keep and use in its business any books, accounts and records
the commissioner may require to effectuate the provisions of proposed law. Proposed law requires
licensees to preserve the books, accounts, and records for at least 4 years but provides that any
licensee, after receiving the prior written approval of the commissioner, may maintain records at a
location within or outside La. Proposed law prohibits unfair or deceptive acts, practices, or
advertising in the conduct of the licensed business. Proposed law prohibits the use any device or
agreement, including agreements with affiliated licensees, with the intent to obtain greater charges
than otherwise would be authorized by proposed law. Proposed law enumerates multiple provisions
of present law
for the purpose of restricting the businesses of licensees. Proposed law prohibits installment loans
from doing any of the following:
(1) Provide that the law of a jurisdiction other than this state applies.
(2) Provide that the customer consents to the jurisdiction of another state or foreign country.
(3) Establish venue.
(4) Waive any provision of this Chapter.
Proposed law clarifies that any prohibited provision as described in proposed law shall be void and
not enforceable as a matter of public policy.
Proposed law clarifies the scope of the authority of proposed law and provides licensees with limited
liability for adherence to the provisions of proposed law.
Proposed law clarifies that, for the purpose of discovering violations of proposed law and
determining whether persons are subject to proposed law, the commissioner is authorized to
investigate persons licensed pursuant to proposed law and persons reasonably suspected by the
commissioner of conducting business that requires a license pursuant to proposed law. Proposed law
authorizes the commissioner to summon witnesses and examine them under oath or affirmation and
compel the production of books and records that may be relevant to the examination or investigation.
Proposed law provides that a licensee or unlicensed person subject to proposed law, who is examined
or investigated in accordance with proposed law, shall pay to the commissioner the reasonable and
actual expenses of the investigation or examination. Proposed law clarifies that the expenses shall
be payable in addition to all other fees, taxes, and costs required by law.
Proposed law requires the commissioner to appoint an independent hearing examiner to conduct all
administrative hearings involving alleged violations of proposed law. Proposed law requires that
the independent hearing examiner shall have authority to exercise all powers granted by the APA in conducting hearings. Proposed law requires the independent hearing examiner to recommend
penalties authorized by proposed law and issue proposed orders with proposed findings of fact and
proposed conclusions of law to the commissioner pursuant to the APA. Proposed law requires the
commissioner to review the proposed order and issue a final agency order in accordance with the
APA. Proposed law clarifies that the costs of the hearing examiner may be assessed by the hearing
examiner against the respondent, unless the respondent is the prevailing party. Proposed law
authorizes any person aggrieved by a final agency order of the commissioner to obtain judicial
review in accordance with the APA. Proposed law declares that the jurisdiction and venue of any
such action shall be in the district court of the Parish of East Baton Rouge. Proposed law authorizes
the commissioner to, after notice and hearing, suspend or revoke any license if a licensee has
knowingly or through lack of due care done any of the following:
(1) Failed to pay any fees, expenses, or costs imposed by the commissioner pursuant to proposed
law.
(2) Committed any fraud, engaged in any dishonest activities, or made any misrepresentations.
(3) Violated any provision of proposed law , any administrative rule promulgated pursuant to
proposed law, or any other law in the course of the licensee's dealings as a licensee.
(4) Made a false statement in the application for the license or failed to give a true reply to a question
in the application.
(5) Demonstrated incompetency or untrustworthiness to act as a licensee.
Proposed law clarifies that if the reason for revocation or suspension of a licensee's license at any
one location is of general application to all locations operated by a licensee, the commissioner may
revoke or suspend all licenses issued to a licensee. Proposed law requires that a hearing shall be held
on written notice given at least 20 days prior to the date of the hearing and shall be conducted in
accordance with the APA.
Proposed law establishes grounds for penalties that may include one or more of the following:
(1) Ordering the person to cease and desist violating proposed law or any administrative rule
promulgated pursuant thereto.
(2) Requiring the refund of any fees collected by the person in violation of proposed law.
(3) Ordering the person to pay to OFI a civil penalty of not more than $1,000 for each transaction
in violation of proposed law or for each day that a violation occurs or continues.
Proposed law authorizes the commissioner to impose the following when such penalties are in the
public interest:
(1) Censure of the violator. (2) Suspension of the violator for a period not to exceed 12 months.
(3) Barring a person from any position of employment, management, or control of a licensee when
the violator has done one of the following:
(a) Been convicted or pled guilty to, or pled nolo contendere to, any crime.
(b) Been held liable by final judgment or any administrative judgment by any public agency, when
the criminal, civil, or administrative judgment involved any offense reasonably related to the
qualifications, functions, or duties of a person engaged in the business of making installment loans
pursuant to proposed law.
Proposed law prohibits persons suspended or barred pursuant to proposed law from participating in
any business activity of a licensee and from engaging in any business activity on the premises where
a licensee is conducting its business. Proposed law shall not be construed to prohibit suspended or
barred persons from having their personal transactions processed by a licensee.
Proposed law authorizes the commissioner to enter into a consent order at any time with any person
to resolve any matter arising pursuant to proposed law. Proposed law requires a consent order to be
signed by the person to whom it is issued, or a duly authorized representative, and shall indicate
agreement to the terms contained in the order. Proposed law declares that a consent order need not
constitute an admission by any person that any provision of proposed law or any administrative rule
or order promulgated or issued pursuant to proposed law has been violated nor need it constitute a
finding by the commissioner that the person has violated proposed law. Proposed law declares that,
notwithstanding the issuance of a consent order, the commissioner may seek civil or criminal
penalties concerning matters encompassed by the consent order. Proposed law authorizes the
commissioner to take any enforcement action authorized by proposed law without providing the
opportunity for a prior hearing in cases involving extraordinary circumstances requiring emergency
action. However, proposed law requires the commissioner to promptly afford a subsequent hearing
upon an application to rescind the action taken that is filed with the commissioner within 20 days
after receipt of the notice of the commissioner's emergency action.
Proposed law authorizes any person aggrieved by the conduct of a licensee pursuant to proposed law,
in connection with the licensee's regulated activities, to file a written complaint with the
commissioner who may investigate the complaint. Proposed law empowers the commissioner to do
any of the following:
(1) Subpoena witnesses.
(2) Administer oaths.
(3) Examine any individual under oath or affirmation.
(4) Compel the production of records, books, papers, contracts, or other documents relevant to the
investigation. Proposed law declares that if any person fails to comply with a subpoena of the commissioner or fails
to testify concerning any matter about which the person may be interrogated, the commissioner may
petition any court of competent jurisdiction for enforcement. Proposed law authorizes the
commissioner to suspend the license of any licensee who fails to comply with a subpoena of the
commissioner. Proposed law declares that the commissioner shall have exclusive administrative
power to investigate and enforce any and all complaints relating to the business of making
installment loans filed by any person that are not criminal in nature.
Proposed law requires that within fifteen days of any one of the following events, a licensee shall
file a written report with the commissioner describing the event and its expected impact on the
activities of the licensee in this state:
(1) The filing for bankruptcy or reorganization by the licensee.
(2) Revocation or suspension proceedings instituted against the licensee by any state or governmental
authority.
(3) The denial of the opportunity to engage in the business of making loans by any state or
governmental authority.
(4) Any felony indictment of the licensee or any of its directors, officers, or principals.
(5) Any felony conviction of the licensee or any of its directors, officers, or principals.
(6) Other events that the commissioner may determine and identify by administrative regulation.
Proposed law provides for annual reports by requiring each licensee to file an annual report with the
commissioner on the date of the renewal application as required pursuant to proposed law containing
the following information:
(1) The names and addresses of persons owning a controlling interest in each licensee.
(2) The location of all places of business operated by the licensee and the nature of the business
conducted at each location.
(3) The names and addresses of all affiliated entities regulated pursuant to proposed law doing
business in La.
(4) An audited financial statement including but not limited to a balance sheet, statement of income
or loss, and statement of changes in financial position for the immediately preceding fiscal year end
prepared in accordance with generally accepted accounting principles by a certified public accountant
or public accounting firm, neither of which is affiliated with the licensee.
(5) If the licensee is a corporation, the names and addresses of its officers and directors; if the licensee is a partnership, the names and addresses of the partners; or if the licensee is a limited
liability company, the names and addresses of the board of governors or managers of the limited
liability company.
Proposed law allows composite reports if the licensee holds 2 or more licenses or is affiliated with
other licensees, but a composite report shall not be required. Proposed law requires annual reports
to be filed in a form reasonably required by the commissioner and shall be sworn to by a responsible
officer of the licensee. Proposed law states that the annual reports shall be confidential.
Proposed law authorizes the commissioner to require persons to be licensed through a multi-state
automated licensing system. Pursuant to this authority, the commissioner may do any of the
following:
(1) Promulgate administrative rules that are reasonably necessary for participation in, transition to,
or operation of a multi-state automated licensing system.
(2) Establish relationships or enter into agreements that are reasonably necessary for participation
in, transition to, or operation of a multi-state automated licensing system. The agreements may
include but are not limited to operating agreements, information sharing agreements, interstate
cooperative agreements, and technology licensing agreements.
(3) Require that applications for licensing and renewals of such licenses be filed with a multi-state
automated licensing system.
(4) Require that any fees required be paid through a multi-state automated licensing system.
(5) Establish deadlines for transitioning licensees to a multi-state automated licensing system.
(6) Deny any applications or renewal applications not filed with a multi-state automated licensing
system after such deadlines have passed, notwithstanding any dates established elsewhere in this
Chapter; however, the commissioner shall provide reasonable notice of any transition deadlines to
licensees.
(7) Take such further actions as are reasonably necessary to give effect to proposed law .
Proposed law maintains the scope of authority of the commissioner as provided for in proposed law.
Proposed law requires applicants for and holders of licenses to pay all costs associated with
submitting an application to or transitioning a license to a multi-state automated licensing system,
as well as all costs required by a multi-state automated licensing system for maintaining and
renewing any license issued by the commissioner on a multi-state automated licensing system.
Proposed law authorizes the commissioner to use a multi-state automated licensing system as an
agent for channeling information, whether criminal or noncriminal in nature, whether derived from
or distributed to the U.S. Dept. of Justice or any other state or federal governmental agency, or any
other source, that the commissioner is authorized to request from, or distribute to, pursuant to proposed law.
Proposed law requires the following provisions to apply to the information or material after the
information or material has been disclosed to a multi-state automated licensing system:
(1) Any requirements pursuant to any federal or state law regarding the privacy or confidentiality of
any information or material provided to a multi-state automated licensing system, and any privilege
arising pursuant to federal or state law, including the rules of any federal or state court with respect
to such information or material.
(2) Any such information or material may be shared with all state and federal regulatory officials
with consumer credit oversight authority without the loss of privilege or the loss of confidentiality
protections provided by federal or state law, including the protection available pursuant to state law.
Proposed law authorizes the commissioner to enter into agreements or sharing agreements with
other governmental agencies, the Conference of State Bank Supervisors, or other associations
representing governmental agencies as established by rule or order of the commissioner. Proposed
law exempts information or material that is subject to a privilege or confidential pursuant to
proposed law from any of the following:
(1) Disclosure pursuant to any federal or state law governing the disclosure to the public of
information held by an officer or any agency of the federal government or the respective state.
(2) Subpoena, discovery, or admission into evidence in any private civil action or administrative
process, unless with respect to any privilege held by a multi-state automated licensing system
applicable to such information or material, the person to whom such information or material pertains
waives that privilege, in whole or in part, in the discretion of such person.
Proposed law shall supersede any inconsistent provisions of law pertaining to the records open to
public inspection. Proposed law shall not apply with respect to information or material relating to
publicly adjudicated disciplinary and enforcement actions against persons subject to proposed law
that is included in a multi-state automated licensing system for access by the public.
Proposed law declares that local government units including but not limited to cities, towns, and
counties shall have no authority to regulate installment plan loans.
Proposed law directs OFI to promulgate any rules and regulations in accordance with the
Administrative Procedure Act necessary to implement the provisions of proposed law.
Effective January 1, 2017.
(Adds R.S. 6:1371-1395)