LRBs0234/2
MDK:cjs&nwn:rs
2009 - 2010 LEGISLATURE
ASSEMBLY SUBSTITUTE AMENDMENT 1,
TO 2009 ASSEMBLY BILL 447
February 9, 2010 - Offered by Representatives Fields, Hintz, Jorgensen, Seidel,
Smith and Zepnick.
AB447-ASA1,1,7
1An Act to amend 20.144 (1) (g); and
to create 20.144 (1) (j), 138.09 (8) (f), 138.09
2(8) (g), 138.09 (8) (h), 138.14 and 138.15 of the statutes;
relating to: regulating
3payday loan providers, requiring reporting of certain loans to credit reporting
4agencies, prohibiting balloon payments for certain loans, prohibiting certain
5motor vehicle title loans, providing an exemption from emergency rule
6procedures, granting rule-making authority, making an appropriation, and
7providing a penalty.
Analysis by the Legislative Reference Bureau
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 (division) in the Department of Financial Institutions (DFI) to assess a
finance charge greater than 18 percent per year. This type of lender is generally
referred to as a "licensed lender." Current law also contains numerous provisions
regulating consumer loans, which are generally loans of $25,000 or less made to
individuals for personal, family, or household purposes.
This substitute amendment prohibits a licensed lender from making or offering
a motor vehicle title loan. The substitute amendment defines "motor vehicle title
loan" as a loan of $25,000 or less to a borrower that is, or is to be, secured by a
nonpurchase money security interest in the borrower's motor vehicle and that has
an original term of not more than three months. Under the substitute amendment,
a "borrower" is an individual who obtains or seeks to obtain a motor vehicle title loan
for personal, family, or household purposes.
This substitute amendment also creates certain requirements applicable to
payday loan transactions. Under the substitute amendment, a "payday loan
provider" is a licensed lender that makes payday loans. A "payday loan" is a
transaction between an individual with an account at a financial establishment and
the payday loan provider in which the provider agrees to either: 1) accept from the
individual one or more checks, hold the checks for a period of time before negotiating
them, and, before negotiating the checks, loan the individual an agreed amount for
a term of 90 days or less; or 2) accept the individual's authorization to initiate one
or more electronic fund transfers (EFTs) from the individual's account, wait for a
period of time before initiating the EFTs, and, before initiating the EFTs, loan the
individual an agreed amount for a term of 90 days or less. The foregoing definitions
apply regardless of whether a payday loan provider is physically located in this state.
The substitute amendment imposes certain restrictions on payday loans. The
substitute amendment prohibits a payday loan provider from making a payday loan
that exceeds, in principal amount and interest, $600 or 35 percent of the applicant's
gross biweekly income, whichever is less. The substitute amendment does not
otherwise affect the amount of interest that a payday loan provider charges, as long
as the provider complies with the foregoing prohibition. In addition, the substitute
amendment prohibits a payday loan provider from making a payday loan to an
applicant who is liable for repayment on a payday loan made by another payday loan
provider. A payday loan provider also may not make a payday loan if less than 24
hours have elapsed since the applicant repaid another payday loan in full or, if
certain repayment requirements that are described below apply, less than one pay
period of an applicant has elapsed since the applicant repaid the loan in full under
those requirements. The substitute amendment also prohibits a payday loan
provider from rolling over a payday loan that it has made to an individual. The
substitute amendment defines "roll over" as the refinancing, renewal, amendment,
or extension of a payday loan beyond its original maturity date, including the
consolidation of payday loans and any transaction in which a payday loan is repaid
with the proceeds of another payday loan made by the same payday loan provider.
In addition, the substitute amendment provides that a payday loan may not
accrue interest after the loan maturity date and may not include any penalty arising
from the customer's prepayment, default, or late payment except that a payday loan
provider may charge a fee not to exceed $15 if the customer's payment method is
dishonored for insufficient funds. A payday loan provider may present a customer's
check for payment, or initiate an EFT from the customer's account, only once. A
payday loan provider may not accept from a customer a check or authorization to
initiate an EFT if the amount of the check or authorization exceeds the limit for
principal and interest described above. In addition, a customer has a right to rescind
a payday loan, without incurring any fee, by returning the payday loan proceeds to
the payday loan provider by the close of business on the next business day after the
payday loan is made. Also, if a customer fails to repay a payday loan in full at the
end of the loan term, the payday loan provider must offer the customer the
opportunity to repay the outstanding balance in four equal installments with due
dates coinciding with the customer's pay period schedule. However, if a payday loan
provider makes such an offer to a customer, then, for 12 months following the offer,
no payday loan provider, including the payday loan provider making the offer, is
required to make another offer to the customer. A payday loan provider may not
impose any penalty on a customer who repays a loan in such a manner.
The substitute amendment also requires the division to develop and administer
a database that provides payday loan providers with real-time access, through an
Internet connection, to all payday loan information necessary for payday loan
providers to comply with the requirements of the substitute amendment. The
division is also allowed to contract for the development or administration of the
database. The database must assign a unique identification number for each
customer that must be used each time the customer enters into a payday loan
transaction. Customer identification numbers may not be based on social security
numbers. Each time that a payday loan provider enters into a payday loan
transaction with a customer, the payday loan provider must submit certain
information about the customer and the loan to the database. Also, a payday loan
provider must submit information when a repayment offer described above is made
or a payday loan is paid in full. The division must, by rule, impose a fee of no more
than $1 each time a payday loan provider submits data to the database. DFI must
use the fees to pay for the development and administration of the database and to
promote financial literacy. The substitute amendment allows a payday loan provider
to rely on the information contained in the database as accurate, and provides that
a payday loan provider is not subject to any penalty or liability for relying on
inaccurate information contained in the database. In addition, information
maintained in the database is not subject to inspection or copying under the open
records law. Also, if the division contracts for development or administration of the
database, the contract must ensure the confidentiality of information in the
database.
The substitute amendment also does the following:
1. Requires a payday loan provider, at least 15 minutes before entering into a
payday loan, to disclose to the applicant the total amount of all fees and costs, in
dollars, and the annual percentage rate, to be paid by the applicant assuming that
the loan is paid in full at the end of the loan term and to make other disclosures
regarding the requirements of this substitute amendment.
2. Requires the division to develop written materials about payday loans and
the payday loan industry. A payday loan provider must provider the materials to an
applicant when making the disclosures described above.
3. Requires payday loan providers to make annual reports about their business
to the division.
4. Prohibits a payday loan provider or database contractor from selling to any
person information about customers and payday loans made to customers.
5. Allows a customer to bring an action against a payday loan provider who
makes a payday loan that violates the substitute amendment. In such an action, the
customer may obtain an amount equal to twice the interest charged for the loan, or
the actual damages, whichever is greater, as well as costs and attorney fees.
6. Provides that whoever violates the substitute amendment is subject to a
criminal fine of not more than $500 nor more than $1,000, imprisonment for not more
than 6 months, or both.
7. Requires any licensed lender, upon making a loan for a term of more than
90 days, to report the loan to a credit reporting agency, which is referred to as a
consumer reporting agency under federal law.
8. Prohibits a licensed lender from requiring a schedule of payments by a
borrower under which: 1) any one payment is not equal or substantially equal to all
other payments; or 2) the intervals between any consecutive payments differ
substantially.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB447-ASA1,4,102
20.144
(1) (g)
General program operations. The amounts in the schedule for
3the general program operations of the department of financial institutions. Except
4as provided in pars. (a), (h), (i),
(j), and (u), all moneys received by the department,
5other than by the office of credit unions and the division of banking, and 88% of all
6moneys received by the department's division of banking shall be credited to this
7appropriation, but any balance at the close of a fiscal year under this appropriation
8shall lapse to the general fund. Annually, $200,000 of the amounts received under
9this appropriation account shall be transferred to the appropriation account under
10s. 20.575 (1) (g).
AB447-ASA1, s. 2
11Section
2. 20.144 (1) (j) of the statutes is created to read:
AB447-ASA1,5,212
20.144
(1) (j)
Financial literacy. All moneys received under s. 138.14 (8) (e), for
13developing and administering, or contracting for the development and
1administration of, the database under s. 138.14 (8) and for promoting financial
2literacy.
AB447-ASA1,5,54
138.09
(8) (f) When making a payday loan, as defined in s. 138.14 (1) (g), comply
5with s. 138.14 and rules promulgated under s. 138.14.
AB447-ASA1,5,87
138.09
(8) (g) Upon making a loan for a term of more than 90 days, report the
8loan to a consumer reporting agency, as defined in
15 USC 1681a (f).
AB447-ASA1,5,1310
138.09
(8) (h) Make no loan which requires a schedule of payments by a
11borrower under which any one payment is not equal or substantially equal to all
12other payments, or under which the intervals between any consecutive payments
13differ substantially.
AB447-ASA1,5,15
15138.14 Payday loan providers. (1) Definitions. In this section:
AB447-ASA1,5,1616
(a) "Applicant" means an individual who seeks to obtain a payday loan.
AB447-ASA1,5,1717
(b) "Check" has the meaning given in s. 403.104 (6).
AB447-ASA1,5,1918
(c) "Customer" means an individual who enters into a payday loan with a
19payday loan provider.
AB447-ASA1,5,2120
(d) "Division" means the division of banking in the department of financial
21institutions.
AB447-ASA1,5,2422
(e) "Financial establishment" means any organization that is authorized to do
23business under state or federal law and that holds a demand deposit, savings deposit,
24or other asset account belonging to an individual.
AB447-ASA1,5,2525
(f) "Organization" has the meaning given in s. 19.42 (11).
AB447-ASA1,5,26
1(g) "Payday loan" means any of the following:
AB447-ASA1,6,82
1. A transaction between an individual with an account at a financial
3establishment and another person, including a person who is not physically located
4in this state, in which the person agrees to accept from the individual one or more
5checks, to hold the check or checks for a period of time before negotiating or
6presenting the check or checks for payment, and to loan to the individual, for a term
7of 90 days or less, before negotiating or presenting the check or checks for payment,
8an amount that is agreed to by the individual.
AB447-ASA1,6,159
2. A transaction between an individual with an account at a financial
10establishment and another person, including a person who is not physically located
11in this state, in which the person agrees to accept the individual's authorization to
12initiate one or more electronic fund transfers from the account, to wait a period of
13time before initiating the electronic fund transfer or transfers, and to loan to the
14individual, for a term of 90 days or less, before initiating the electronic fund transfer
15or transfers, an amount that is agreed to by the individual.
AB447-ASA1,6,1716
(h) "Payday loan provider" means a person who is required to be licensed under
17s. 138.09 and who makes payday loans.
AB447-ASA1,6,2218
(i) "Rollover" or "rolled over" means the refinancing, renewal, amendment, or
19extension of a payday loan beyond its original date of maturity. "Rollover" or "rolled
20over" includes the consolidation of payday loans and any transaction in which a
21payday loan is repaid with the proceeds of another payday loan made by the same
22payday loan provider.
AB447-ASA1,6,25
23(2) Disclosure requirements. (a) Not less than 15 minutes before any payday
24loan provider enters into a payday loan with an applicant, the payday loan provider
25shall do all of the following:
AB447-ASA1,7,3
11. Disclose to the applicant the total amount of all fees and costs, in dollars, to
2be paid by the applicant for the loan assuming that the loan is paid in full at the end
3of the loan term.
AB447-ASA1,7,54
2. Disclose to the applicant the annual percentage rate to be paid by the
5applicant on the loan assuming that the loan is paid in full at the end of the loan term.
AB447-ASA1,7,76
3. Provide to the applicant a copy of the written informational materials
7specified in sub. (4).
AB447-ASA1,7,98
4. Disclose to the applicant that he or she has the right to rescind the loan
9transaction as provided in sub. (6).
AB447-ASA1,7,1110
5. Disclose to the applicant the service charge that may apply under sub. (3)
11(g).
AB447-ASA1,7,1312
6. Disclose to the applicant the payment requirements that may apply under
13sub. (7) (a) if the loan is not paid in full at the end of the loan term.
AB447-ASA1,7,1514
(b) A payday loan provider shall retain, for at least 3 years after the origination
15date of any payday loan, a record of compliance with par. (a) with respect to the loan.
AB447-ASA1,7,18
16(3) Loan restrictions. (a) No payday loan provider may make a payday loan
17that exceeds, in principal amount and interest, $600 or 35 percent of the applicant's
18gross biweekly income, whichever is less.
AB447-ASA1,7,2519
(b) No payday loan provider may make a payday loan to individual who is liable
20for repayment of any amount on a payday loan made by another payday loan
21provider. No payday loan provider may make a payday loan to an individual if less
22than 24 hours have elapsed since the individual repaid another payday loan in full
23or, if repayment is subject to sub. (7) (a), if less than a time period equal to the
24applicant's pay period has elapsed since the individual repaid the loan in full under
25sub. (7) (a).
AB447-ASA1,8,2
1(c) No payday loan provider may require the payment of any interest on a
2payday loan that accrues after the original maturity date of the payday loan.
AB447-ASA1,8,53
(d) Except as provided in par. (g), no payday loan provider may impose any
4penalty on a customer arising from the customer's prepayment of or default or late
5payment on a payday loan, including any payment under sub. (7) (a).
AB447-ASA1,8,86
(e) No payday loan provider may accept from a customer a check or
7authorization to initiate an electronic fund transfer if the amount of the check or
8authorization exceeds the amount specified in par. (a).
AB447-ASA1,8,99
(f) A payday loan provider may not rollover a payday loan.
AB447-ASA1,8,1610
(g) A payday loan provider may present a customer's check for payment no
11more than once. For each customer authorization to initiate an electronic fund
12transfer from the customer's account, a payday loan provider may initiate an
13electronic fund transfer no more than once. The only charge that a payday loan
14provider may impose for dishonor of a customer's check or denial of the payday loan
15provider's instruction to execute an electronic fund transfer is a service charge that
16does not exceed $15.
AB447-ASA1,8,21
17(4) Informational materials. (a) The division shall develop written
18informational materials on payday loans and the payday loan industry. These
19informational materials shall be designed to educate individuals regarding the
20operation and potential costs of payday loans and of other options for borrowing
21funds that may be available.
AB447-ASA1,8,2522
(b) The informational materials under par. (a) shall include a clear and
23conspicuous notice that a payday loan is not intended to meet long-term financial
24needs and that a payday loan applicant should use a payday loan only to provide
25funds in a financial emergency.
AB447-ASA1,9,3
1(c) The informational materials under par. (a) shall include all of the following
2information, based upon aggregated information from reports submitted under sub.
3(5) for the most recent reporting period: