SB396: Bill Text

Disclosure requirements for open-end credit plans under the consumer act

Currently, a creditor under an open-end credit plan (typically, a credit card) that is within the scope of the consumer act must make certain disclosures with regard to the open-end credit plan. These disclosures include, among other things, information relating to the rate of the finance charge under the plan, any annual fee charged under the plan, and any other charges or fees assessed under the plan.

This bill requires certain creditors to make two additional disclosures. First, if the open-end credit plan includes a fixed introductory rate of finance charge that, after a specified period of time, increases or becomes a variable rate, the creditor must provide the customer with a separate notice to that effect before the customer enters into a transaction under the plan and with each subsequent billing statement, until the rate ceases to increase or becomes variable. The bill specifies the content and format of the notice and the manner in which it must be delivered to the customer.

Second, if the creditor furnishes the customer with a periodic statement that states a minimum monthly payment due under the open-end credit plan, the creditor must include, as part of or along with the periodic statement, a notice indicating the total amount of finance charges the customer would pay if he or she paid off the debt owing under the open-end credit plan as of the date of the statement by making only the minimum monthly payment every month. If the customer is unable to pay off the debt owing under the open-end credit plan by making the minimum monthly payment every month, the notice must indicate that fact.

Arbitration of consumer claims

Currently, the parties to any contract, including a contract that evidences a consumer credit transaction, generally may agree to settle by arbitration any controversy that arises out of the contract or out of the refusal to perform as required under the contract. This bill limits the ability of the parties to a consumer credit transaction to agree in advance to arbitrate a controversy that arises out of the transaction. Under the bill, no agreement between the parties to a consumer credit transaction may require the parties to arbitrate any controversy that arises out of the transaction, or out of a failure to perform as required under the transaction, and that arises after the date of the transaction. However, under the bill, the parties to a consumer credit transaction may agree in writing to submit a controversy to arbitration, if the parties enter into the agreement after the date on which the controversy arises.

Fraudulent representations and deceptive advertising

Under current law, no person may distribute an untrue statement in an advertisement with the intent to induce the public to enter into any contract with the person. In addition to this general prohibition on deceptive advertising, no merchant may advertise any statement or representation with regard to the extension of consumer credit that is false, misleading, or deceptive. The department of agriculture, trade and consumer protection (DATCP) may prosecute a person who distributes deceptive advertising. With certain exceptions, a person who distributes deceptive advertising may be fined not less than $50 nor more than $200. In addition, a person injured by deceptive advertising may sue and generally may recover any pecuniary loss together with reasonable attorney fees. Furthermore, a consumer who enters into a transaction resulting from a misleading statement with regard to the extension of credit may sue to void the transaction, recover amounts paid pursuant to the transaction, and recover reasonable attorney fees.

This bill specifies that certain representations regarding an open-end credit plan are both deceptive advertising and false, misleading, or deceptive statements regarding consumer credit. Under this bill, a merchant may not indicate to a consumer that the merchant has preapproved an extension of credit to the consumer under an open-end credit plan and then extend credit to the consumer under terms that are less financially favorable to the consumer than those indicated. In addition, this bill prohibits a merchant from refusing to extend credit after indicating preapproval of an extension of credit under an open-end credit plan. It is not a defense to a violation of this bill for the merchant to indicate that its preapproval of an extension of credit is subject to the merchant's investigation of the consumer's financial information. However, under this bill it is not a violation for the merchant to extend credit on different terms, or refuse to extend credit, because of an adverse change in the financial circumstances of the consumer.

A violation of these provisions would be subject to a forfeiture of not less than $50 nor more than $200. In addition, this bill retains the private cause of action and the authority of DATCP to prosecute violations in current law.

Currently, the law that generally prohibits fraudulent representations and deceptive advertising does not apply to the insurance business or, in certain circumstances, licensed real estate brokers or salespersons. This bill repeals these exemptions. Thus, under this bill, persons engaged in the business of insurance or real estate are subject to the law that generally prohibits fraudulent representations and deceptive advertising.

Payday loans

Under current law, a lender other than a bank, savings bank, savings and loan association, or credit union generally must obtain a license from the division of banking in DFI in order to assess a finance charge greater than 18%. This type of lender is generally referred to as a "licensed lender." With certain limited exceptions, current law provides no maximum finance charge for a loan entered into by a licensed lender.

Currently, a lender who makes payday loans is typically required to be a licensed lender. In a standard payday loan transaction, the lender accepts a personal check from the borrower, pays the borrower the amount of the check less any applicable finance charge, and agrees to wait a short time, such as two weeks, before depositing the check. Current law does not specifically regulate payday loan transactions.

This bill creates requirements and prohibitions that apply specifically to payday loan transactions. Under this bill, a lender, other than a bank, saving bank, savings and loan association, or credit union, who makes payday loans in the regular course of business (payday loan provider), may not assess fees or interest in a payday loan transaction in an aggregate amount that exceeds 5% of the amount of the payday loan. In addition, a payday loan provider may not make a payday loan with a term of less than 30 days. The bill also requires a payday loan provider to give each borrower copies of educational brochures prepared by DFI regarding the operation and potential costs of payday loans, to make annual reports to the division of banking in DFI, and to annually pay any reasonable filing fee imposed by the division of banking in DFI.

Unauthorized use of ATM card

Currently, DFI rules limit at $50 the liability of a customer of a bank, savings bank, savings and loan association, or credit union (financial institution) for unauthorized use of the customer's automatic teller machine (ATM) card or other means of access to the customer's account through an ATM. This limit may be a lesser amount under these rules if the financial institution is aware of circumstances which lead to the belief that unauthorized access may be obtained. The rules specify that a customer who furnishes another person with an ATM card or other means of access to the customer's account through an ATM is deemed to have authorized the use of that card or means of access, until the customer gives actual notice to the depository institution that further transactions are unauthorized. This bill incorporates these rules into the statutes.

Unauthorized disclosure of medical information by insurer

Current law provides requirements related to the disclosure of personal medical information for use in connection with insurance transactions. An insurer may disclose personal medical information concerning an individual only as provided by the individual's signed disclosure authorization, except for purposes and in situations specified in the statute, such as disclosure for the purpose of pursuing a subrogation claim or to a health care provider for the purpose of verifying insurance coverage. This bill provides that an insurer that discloses personal medical information concerning an individual in a manner that is inconsistent with the requirement under the statute is liable to the individual for actual damages, exemplary (punitive) damages of not more than $25,000, costs, and reasonable actual attorney fees.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

SB396, s. 1 Section 1. 51.30 (4) (a) of the statutes is amended to read:

SB396,7,3 51.30 (4) (a) Confidentiality of records. Except as otherwise provided in this chapter and ss. 118.125 (4), 610.70 (3) and (5) (ac), 905.03, and 905.04, all treatment records shall remain confidential and are privileged to the subject individual. Such records may be released only to the persons designated in this chapter or ss. 118.125 (4), 610.70 (3) and (5) (ac), 905.03, and 905.04, or to other designated persons with the informed written consent of the subject individual as provided in this section. This restriction applies to elected officials and to members of boards appointed under s. 51.42 (4) (a) or 51.437 (7) (a).

SB396, s. 2 Section 2. 100.18 (10v) of the statutes is created to read:

SB396,7,5 100.18 (10v) (a) Definitions. In this subsection:

SB396,7,7 1. "Customer" means a person other than an organization who seeks or acquires credit for personal, family, or household purposes.

SB396,7,9 2. "Directly" means in person, by mail or electronic mail addressed to the receiver, or by telephone.

SB396,7,10 3. "Merchant" has the meaning given in s. 421.301 (25).

SB396,7,11 4. "Open-end credit plan" has the meaning given in s. 421.301 (27).

SB396,7,12 5. "Organization" has the meaning given in s. 421.301 (28).

SB396,7,19 (b) Deceptive preapproved rates, terms, or conditions. 1. It is deceptive advertising for a merchant to directly communicate to a customer, or cause to be directly communicated to a customer, that the merchant has preapproved an extension of credit to the customer under an open-end credit plan and then, pursuant to the customer's response to the communication, to make an extension of credit to the customer under an open-end credit plan with rates, terms, or conditions that are less financially favorable to the customer than those communicated.

SB396,7,23 2. Except as provided under subd. 3., it is not a defense to a violation of subd. 1. that the merchant's preapproval of an extension of credit to the customer is made subject to the merchant's review of the customer's financial information, credit worthiness, credit standing, or credit capacity.

SB396,8,4 3. Subdivision 1. does not apply to an extension of credit under an open-end credit plan with different rates, terms, or conditions than those communicated to the customer, if the difference in rates, terms, or conditions resulted from an adverse change in the financial circumstances of the customer between the date on which the merchant communicates preapproval and the date on which the merchant makes the extension of credit.

SB396,8,9 (c) Deceptive preapproval. 1. It is deceptive advertising for a merchant to refuse to extend credit to a customer under an open-end credit plan if the customer requests the extension of credit in response to a direct communication from the merchant, or a direct communication caused by the merchant, indicating that the merchant, has preapproved the extension of credit to the customer under an open-end credit plan.

SB396,8,13 2. Except as provided under subd. 3., it is not a defense to a violation of subd. 1. that the merchant's preapproval of an extension of credit to the customer is made subject to the merchant's review of the customer's financial information, credit worthiness, credit standing, or credit capacity.

SB396,8,18 3. Subdivision 1. does not apply to a refusal to extend credit under an open-end credit plan, if the refusal resulted from an adverse change in the financial circumstances of the customer between the date on which the merchant communicates preapproval and the date on which the merchant refuses to extend credit.

SB396, s. 3 Section 3. 100.18 (11) (b) 2. of the statutes is amended to read:

SB396,9,5 100.18 (11) (b) 2. Any person suffering pecuniary loss because of a violation of this section by any other person may sue in any court of competent jurisdiction and shall recover such pecuniary loss, together with costs, including reasonable attorney fees, except that no attorney fees may be recovered from a person licensed under ch. 452 while that person is engaged in real estate practice, as defined in s. 452.01 (6). Any person suffering pecuniary loss because of a violation by any other person of any injunction issued under this section may sue for damages therefor in any court of competent jurisdiction and shall recover twice the amount of such pecuniary loss, together with costs, including reasonable attorney fees, except that no attorney fees may be recovered from a person licensed under ch. 452 while that person is engaged in real estate practice, as defined in s. 452.01 (6).

SB396, s. 4 Section 4. 100.18 (12) of the statutes is repealed.

SB396, s. 5 Section 5. 100.26 (4) of the statutes is amended to read:

SB396,9,10 100.26 (4) Any person who violates s. 100.18 (1) to (8) or, (10), or (10v) or 100.182 is subject to a civil forfeiture of not less than $50 nor more than $200 for each violation.

SB396, s. 6 Section 6. 138.052 (9) of the statutes is renumbered 138.052 (9) (a) and amended to read:

SB396,9,18 138.052 (9) (a) Chapters 421 to 428 do not apply to the refinancing, modification, extension, renewal, or assumption of a loan which had an original principal balance in excess of $25,000 if the unpaid principal balance of the loan has been reduced to $25,000 or less and the refinancing, modification, extension, renewal, or assumption takes place before the effective date of this paragraph .... [revisor inserts date].

SB396, s. 7 Section 7. 138.052 (9) (b) of the statutes is created to read:

SB396,9,25 138.052 (9) (b) Chapters 421 to 428 do not apply to the refinancing, modification, extension, renewal, or assumption of a loan which had an original principal balance in excess of $50,000 if the unpaid principal balance of the loan has been reduced to $50,000 or less and the refinancing, modification, extension, renewal, or assumption takes place on or after the effective date of this paragraph .... [revisor inserts date].

SB396, s. 8 Section 8. 138.09 (title) of the statutes is repealed and recreated to read:

SB396,10,2 138.09 (title) Licensed lenders.

SB396, s. 9 Section 9. 138.09 (3) (e) 1. a. of the statutes is amended to read:

SB396,10,9 138.09 (3) (e) 1. a. A business engaged in making loans for business or agricultural purposes or, loans before the effective date of this subdivision 1. a. .... [revisor inserts date], exceeding $25,000 in principal amount, or loans on or after the effective date of this subdivision 1. a. .... [revisor inserts date], exceeding $50,000 in principal amount, except that all such loans having terms of 49 months or more are subject to sub. (7) (gm) 2. or 4.

SB396, s. 10 Section 10. 138.14 of the statutes is created to read:

SB396,10,11 138.14 Payday loan providers. (1) Definitions. In this section:

SB396,10,12 (a) "Check" has the meaning given in s. 403.104 (6).

SB396,10,13 (b) "Department" means the department of financial institutions.

SB396,10,14 (c) "Division" means the division of banking.

SB396,10,15 (d) "Payday loan" means any of the following:

SB396,10,19 1. A transaction between a person and the issuer of a check in which the person agrees to accept a check from the issuer, hold the check for a period of time before negotiating or presenting the check for payment, and pay to the issuer, upon accepting the check, the amount of the check less any applicable fee.

SB396,10,20 2. A refinancing or consolidation of a transaction described in subd. 1.

SB396,10,23 (e) "Payday loan provider" means a person, other than a bank, savings bank, savings and loan association, or credit union, who makes payday loans in the ordinary course of business.

SB396,11,2 (2) Maximum fees and interest for payday loans. Notwithstanding ss. 138.09 and 422.201 (9), no payday loan provider may charge, contract for, or receive fees and interest for a payday loan in an aggregate amount that exceeds 5% of the amount of the payday loan.

SB396,11,4 (3) Minimum term for payday loans. No payday loan provider may make a payday loan with a term of less than 30 days.

SB396,11,8 (4) Disclosure requirements. (a) Except as provided in par. (b), before disbursing funds pursuant to a payday loan, a payday loan provider shall provide the person obtaining the payday loan with a copy of each brochure provided by the department under sub. (6).

SB396,11,10 (b) Paragraph (a) does not apply if the person obtaining the payday loan has previously received a copy of each brochure from the payday loan provider.

SB396,11,23 (5) Reporting and recordkeeping. (a) On or before March 15, every payday loan provider shall make an annual report to the division and shall pay any reasonable filing fee imposed by the division. The report shall cover business relating to payday loans made by the payday loan provider during the preceding calendar year and shall include any relevant information required by the division. The report shall be made upon forms provided by the division and shall be signed and verified by the oath or affirmation of the payday loan provider if an individual, one of the partners if a partnership, a member or manager if a limited liability company, or an officer of the corporation or association if a corporation or association. A payday loan provider that is licensed under s. 138.09 may include the information required to be reported under this paragraph in the payday loan provider's report under s. 138.09 (3) (f), if the information required under this paragraph is stated separately in the report from information relating to the payday loan provider's other business.

SB396,12,3 (b) Every payday loan provider shall keep the records relating to payday loans made by the payday loan provider separate from the records of any other business of the payday loan provider.

SB396,12,9 (6) Educational brochures. The department shall provide brochures to educate individuals regarding the operation and potential costs of payday loans and regarding the laws of this state relating to consumer credit. Upon the request of a payday loan provider, the department shall supply the payday loan provider with copies of the brochures provided under this subsection. The department shall charge a payday loan provider a reasonable fee for brochures supplied under this subsection.

SB396,12,11 (7) Penalty. Any person who violates sub. (2), (3), (4), or (5) may be fined not more than $500 or imprisoned not more than 6 months or both.

SB396, s. 11 Section 11. 146.82 (2) (b) of the statutes is amended to read:

SB396,12,16 146.82 (2) (b) Except as provided in s. 610.70 (3) and (5) (ac), unless authorized by a court of record, the recipient of any information under par. (a) shall keep the information confidential and may not disclose identifying information about the patient whose patient health care records are released.

SB396, s. 12 Section 12. 224.15 of the statutes is created to read:

SB396,13,5 224.15 Liability for unauthorized, remote access to customer's account. (1) Definitions. (a) "Automatic teller machine" means a terminal or other facility or installation, attended or unattended, that is not located at the principal place of business or at a branch or remote facility of a depository institution and through which customers and depository institutions may engage, by means of either the direct transmission of electronic impulses to and from a depository institution or the recording of electronic impulses or other indicia of a transaction for delayed transmission to a depository institution, in transactions that are incidental to the conduct of the business of a depository institution and that are otherwise permitted by law. "Automated teller machine" also includes all equipment, regardless of location, that is interconnected with an automated teller machine and that is necessary to transmit, route, and process electronic impulses in order to enable the automated teller machine to perform any function for which it is designed.

SB396,13,7 (b) "Depository institution" means a bank, savings bank, savings and loan association, or credit union.

SB396,13,11 (2) Limitation of liability. (a) The liability of a customer of a depository institution for the unauthorized use of a plastic card or other means of providing the customer access to the customer's account through an automated teller machine may not exceed the lesser of the following:

SB396,13,12 1. Fifty dollars.

SB396,13,19 2. The amount of any money, property, or services obtained by the unauthorized use of the plastic card or other means of access prior to the time the depository institution is notified of, or otherwise becomes aware of, circumstances that lead to the belief that unauthorized access to the customer's account may be obtained. Notice is sufficient when the customer takes such steps as may reasonably be required in the ordinary course of business to provide the depository institution with the pertinent information.

SB396,13,24 (b) A customer who furnishes another person with a plastic card or other means of providing access to the customer's account through an automated teller machine shall be deemed to authorize all transactions that may be accomplished by that means, until the customer gives actual notice to the depository institution that further transactions are unauthorized.

SB396, s. 13 Section 13. 411.103 (1) (e) of the statutes is renumbered 411.103 (1) (e) (intro) and amended to read:

SB396,14,7 411.103 (1) (e) (intro.) "Consumer lease" means a lease that a lessor regularly engaged in the business of leasing or selling makes to a lessee who is an individual and who takes under the lease primarily for a personal, family, or household purpose, if the total payments to be made under the lease contract, excluding payments for options to renew or buy, do not exceed $25,000. the following:

SB396, s. 14 Section 14. 411.103 (1) (e) 1. of the statutes is created to read:

SB396,14,10 411.103 (1) (e) 1. For a lease entered into before the effective date of this subdivision .... [revisor inserts date], $25,000.

SB396, s. 15 Section 15. 411.103 (1) (e) 2. of the statutes is created to read:

SB396,14,13 411.103 (1) (e) 2. For a lease entered into on or after the effective date of this subdivision .... [revisor inserts date], $50,000.

SB396, s. 16 Section 16. 421.202 (6) of the statutes is renumbered 421.202 (6) (a) and amended to read:

SB396,14,21 421.202 (6) (a) Consumer credit transactions in which the amount financed exceeds $25,000, motor vehicle consumer leases in which the total lease obligation exceeds $25,000, or other consumer transactions in which the cash price exceeds $25,000;, if the consumer credit transaction, motor vehicle consumer lease, or other consumer transaction was entered into before the effective date of this paragraph .... [revisor inserts date].

SB396, s. 17 Section 17. 421.202 (6) (b) of the statutes is created to read:

SB396,15,3 421.202 (6) (b) Consumer credit transactions in which the amount financed exceeds $50,000, motor vehicle consumer leases in which the total lease obligation exceeds $50,000, or other consumer transactions in which the cash price exceeds $50,000, if the consumer credit transaction, motor vehicle consumer lease, or other consumer transaction was entered into on or after the effective date of this paragraph .... [revisor inserts date].

SB396, s. 18 Section 18. 422.201 (3) of the statutes is amended to read:

SB396,15,9 422.201 (3) For Notwithstanding sub. (2), for licensees under s. 138.09 and under ss. 218.0101 to 218.0163 and for payday loan providers under s. 138.14, the finance charge, calculated according to those sections, may not exceed the applicable maximums permitted in and calculated under ss. 138.09 , 138.14, and 218.0101 to 218.0163, respectively.

SB396, s. 19 Section 19. 422.308 (2g) of the statutes is created to read: