SB530: Bill Text

SB530, s. 11 Section 11. 138.10 (15) of the statutes is amended to read:

SB530,8,9 138.10 (15) Exception. This section does not apply to any person that is licensed under s. 138.09 or 138.14.

SB530, s. 12 Section 12. 138.14 of the statutes is created to read:

SB530,8,11 138.14 Consumer small loans. (1) Definitions. In this section:

SB530,8,14 (a) "Affiliate" means, with respect to a person, another person who owns or controls, is owned or controlled by, or is under common ownership or control with, such person. In this paragraph "control" means any of the following:

SB530,8,17 1. For a corporation, direct or indirect ownership of, or the right to control, 10 percent or more of the voting shares of the corporation, or the ability of a person to elect a majority of the directors or otherwise effect a change in policy.

SB530,8,19 2. For any entity other than a corporation, the ability to change the active or passive principals of the organization.

SB530,8,20 (b) "Check" has the meaning given in s. 403.104 (6).

SB530,8,23 (c) "Consumer small loan" means an unsecured consumer loan, including an indebtedness evidenced by a promissory note or an agreement to defer presenting a check or debiting a consumer's bank account for a fee.

SB530,8,24 (d) "Database" means the statewide database described in sub. (14).

SB530,9,3 (e) "Database provider" means a 3rd-party provider with whom the department contracts to operate the database or, if the division elects to operate the database, the division.

SB530,9,4 (f) "Department" means the department of financial institutions.

SB530,9,5 (g) "Division" means the division of banking.

SB530,9,6 (h) "General order" means an order that is not a special order.

SB530,9,8 (i) "Licensee" means a person holding a license issued by the division under sub. (5).

SB530,9,10 (j) "Maturity date" means the date specified when originating a consumer small loan on which the loan is required to be paid in full.

SB530,9,11 (k) "Special order" means an order against a person.

SB530,9,18 (2) License required. A person may not originate or service a consumer small loan involving a Wisconsin resident without first having obtained from the division a license under sub. (5) for each place of business at which the person originates or services consumer small loans involving Wisconsin residents. Such a license is required for, and this section applies to, all consumer small loans made to a Wisconsin resident, regardless of whether the loan is made by face-to-face contact, mail, telephone, Internet, or any other means.

SB530,9,20 (3) Exemptions. This section does not apply to banks, savings banks, savings and loan associations, trust companies, credit unions, or any of their affiliates.

SB530,9,23 (4) Applications; fees; bond. (a) 1. Application for licenses under sub. (5) shall be made to the division in writing in the form and manner prescribed by the division and shall include all of the following:

SB530,9,25 a. Except as provided in subd. 3., if the applicant is an individual, the applicant's social security number.

SB530,10,2 b. If the applicant is not an individual, the applicant's federal employer identification number.

SB530,10,4 2. The division may not disclose any information received under subd. 1. a. or b. to any person except as follows:

SB530,10,7 a. The division may disclose information under subd. 1. a. or b. to the department of revenue for the sole purpose of requesting certifications under s. 73.0301.

SB530,10,10 b. The division may disclose information under subd. 1. a. to the department of workforce development in accordance with a memorandum of understanding under s. 49.857.

SB530,10,16 3. If an applicant who is an individual does not have a social security number, the applicant, as a condition of applying for a license, shall submit a statement made or subscribed under oath or affirmation to the division that the applicant does not have a social security number. The form of the statement shall be prescribed by the department of workforce development. Any license issued in reliance upon a false statement submitted by an applicant is invalid.

SB530,10,21 (b) At the time of making application, an applicant for a license shall pay to the division a nonrefundable $300 fee for investigating the application and a $500 annual license fee. If the cost of the investigation exceeds $300, the applicant shall upon demand of the division pay to the division the amount by which the cost of the investigation exceeds the nonrefundable fee.

SB530,10,25 (c) The division shall require any applicant or licensee to file and maintain in force a bond in a sum not to exceed $5,000 for each place of business at which the applicant or licensee makes consumer small loans to a Wisconsin resident. The bond shall be in a form prescribed by and acceptable to the division.

SB530,11,9 (5) Licenses. (a) Upon the filing of an application under sub. (4) and the payment of the required fees, the division shall investigate the relevant facts. Except as provided in par. (b), if the division finds that the character and general fitness and the financial responsibility of the applicant, and the members thereof if the applicant is a partnership, limited liability company, or association, and the officers and directors thereof if the applicant is a corporation, warrant the belief that the business will be operated in compliance with this section, the division shall issue a license to the applicant. If the division does not make such finding, the division shall deny the application.

SB530,11,11 (b) The division may not issue a license to an applicant if any of the following applies:

SB530,11,12 1. The applicant fails to provide any information required under sub. (4) (a).

SB530,11,14 2. The department of revenue certifies under s. 73.0301 that the applicant is liable for delinquent taxes.

SB530,11,18 3. The applicant fails to comply, after appropriate notice, with a subpoena or warrant issued by the department of workforce development or a county child support agency under s. 59.53 (5) and related to paternity or child support proceedings.

SB530,11,22 4. The applicant is delinquent in making court-ordered payments of child or family support, maintenance, birth expenses, medical expenses, or other expenses related to the support of a child or former spouse, as provided in a memorandum of understanding entered into under s. 49.857.

SB530,12,2 (c) A license shall remain in force and effect until suspended or revoked in accordance with this section or surrendered by the licensee, and a licensee shall, on or before each December 10, pay to the division the annual license fee for the next succeeding calendar year.

SB530,12,4 (d) A license is not assignable and permits operation under it only at or from the place of business specified in the license.

SB530,12,7 (e) A licensee shall conspicuously post a license at the place of business where the licensee makes consumer small loans, or if conducting business through the Internet, on the licensee's Web site so that the license is easily viewed by a consumer.

SB530,12,14 (6) Relocation; other business. (a) Whenever a licensee changes the address of its place of business to another location within the same city, village, or town, the licensee shall give written notice thereof, in a form and manner prescribed by the division, to the division within 10 business days of the relocation and the division shall replace the original license with an amended license showing the new address. No change in the place of business of a licensee to a different city, village, or town is permitted under the same license.

SB530,12,17 (b) 1. Except as provided in subd. 2., a licensee may conduct, and permit others to conduct, at the place of business specified in its license, one or more of the following businesses not subject to this section:

SB530,12,18 a. A currency exchange under s. 218.05.

SB530,12,19 b. A seller of checks business under ch. 217.

SB530,12,20 c. A loan business under s. 138.09.

SB530,12,21 d. A sales finance company under ss. 218.0101 to 218.0163.

SB530,12,24 2. A licensee may not sell merchandise or conduct other business at the place of business specified in the license unless written authorization is granted to the licensee by the division.

SB530,13,5 (7) Records; reports. (a) Except as provided in par. (b), a licensee shall keep such books and records in the licensee's place of business that, in the opinion of the division, will enable the division to determine compliance with this section. A licensee shall preserve the records of final entry used in such business for a period of at least 2 years after the making of any loan recorded therein.

SB530,13,9 (b) A licensee may keep the books and records specified in par. (a) at a single location inside or outside of this state if the books and records are kept at a place of business licensed under this section. A licensee shall organize the books and records by the place of business where the records originated.

SB530,13,12 (c) A licensee shall keep the books and records affecting loans made pursuant to this section separate and distinct from the records of any other business of the licensee.

SB530,13,17 (d) A licensee shall make an annual report to the division for each calendar year on or before March 15 of the following year. The report shall include business transacted by the licensee under this section and shall give all reasonable and relevant information that the division may require. The reports shall be made in the form and manner prescribed by the division.

SB530,13,19 (8) Powers of the division. (a) The division may issue any general or special order in execution of or supplementary to this section.

SB530,13,22 (b) The division may promulgate such rules as it considers necessary for the administration of this section, including rules establishing database transaction fees and other fees considered reasonable and necessary by the division.

SB530,13,24 (c) The division shall have the same power to conduct hearings, take testimony, and secure evidence as is provided in ss. 217.17 and 217.18.

SB530,14,8 (d) The division for the purpose of discovering violations of this section may investigate the business of a licensee transacted under this section, and shall investigate convictions reported to the division by any district attorney for violation by a licensee of this section. The place of business, books of account, papers, records, safes, and vaults of a licensee shall be open to inspection and examination by the division for the purpose of such investigation and the division may examine under oath all persons whose testimony the division may require relative to such investigation.

SB530,14,13 (e) The cost of any investigation, examination, or hearing, including witness fees or any other expenses, conducted by the division under this section involving a licensee shall be paid by the licensee within 30 days after demand therefore by the division, and the state may maintain an action for the recovery of such costs and expenses.

SB530,14,15 (f) Actual costs incurred by the division to examine books and records maintained outside of this state shall be paid by the licensee.

SB530,14,17 (9) Revocation and suspension of licenses. (a) The division may suspend or revoke any license issued under this section if the division finds any of the following:

SB530,14,19 1. That the licensee has violated any provision of this section, any rule promulgated thereunder, or any lawful order of the division made thereunder.

SB530,14,20 2. That the licensee has violated any of the provisions of chs. 421 to 427.

SB530,14,23 3. That any fact or condition exists which, if it had existed at the time of the original application for such license, would have warranted the division in refusing to issue such license.

SB530,14,25 4. That the licensee made a material misstatement in an application for a license or in information furnished to the division.

SB530,15,2 5. That the licensee has failed to pay the annual license fee or to maintain in effect the bond required under sub. (4) (c).

SB530,15,14 (b) The division shall restrict or suspend a license issued under this section if the division finds that the licensee is an individual who fails to comply, after appropriate notice, with a subpoena or warrant issued by the department of workforce development or a county child support agency under s. 59.53 (5) and related to paternity or child support proceedings or who is delinquent in making court-ordered payments of child or family support, maintenance, birth expenses, medical expenses, or other expenses related to the support of a child or former spouse, as provided in a memorandum of understanding entered into under s. 49.857. A licensee whose license is restricted or suspended under this paragraph is entitled to a notice and hearing only as provided in a memorandum of understanding entered into under s. 49.857 and is not entitled to any other notice or hearing under this section.

SB530,15,20 (c) The division shall revoke a license issued under this section if the department of revenue certifies under s. 73.0301 that the licensee is liable for delinquent taxes. A licensee whose license is revoked under this paragraph for delinquent taxes is entitled to a notice under s. 73.0301 (2) (b) 1. b. and a hearing under s. 73.0301 (5) (a) but is not entitled to any other notice or hearing under this section.

SB530,16,2 (d) Except as provided in pars. (b) and (c), no license shall be revoked or suspended except after a hearing under this section. A complaint stating the grounds for suspension or revocation together with a notice of hearing shall be delivered to the licensee at least 5 days in advance of the hearing. In the event the licensee cannot be found, complaint and notice of hearing may be left at the place of business stated in the license,which shall be considered the equivalent of delivering the notice of hearing and complaint to the licensee.

SB530,16,5 (10) Interest and fees. (a) Interest. 1. This section imposes no limit on the interest that a licensee may charge before the maturity date of a consumer small loan.

SB530,16,16 2. If a consumer small loan is not paid in full on or before the maturity date, a licensee may charge, after the maturity date, interest at a rate not exceeding 2.75 percent per month, except that if a licensee makes a subsequent consumer small loan to the borrower under sub. (12) (a), and the borrower does not pay the subsequent loan in full on or before the maturity date of the subsequent loan, the licensee may charge, after the maturity date of the subsequent loan, interest at a rate not exceeding 2.75 percent per month on the subsequent loan and the licensee may not charge any interest under this subdivision on the prior loan. Interest earned under this subdivision shall be calculated at the rate of one-thirtieth of the monthly rate charged for each calendar day that the balance of the loan is outstanding. Interest cannot be assessed on any interest earned under this subdivision.

SB530,16,18 (b) Fees. 1. A licensee may not assess a borrower any fee or charge for database access or usage.

SB530,16,22 2. A licensee may charge a fee not to exceed $15 for each check presented for payment to the licensee which is returned unsatisfied because the drawer does not have an account with the drawee, does not have sufficient funds in his or her account, or does not have sufficient credit with the drawee.

SB530,16,24 (11) Prepayment. (a) A customer may pay a consumer small loan in whole or in part prior to the maturity date of the loan.

SB530,17,5 (b) Upon prepayment in full, a refund of the unearned portion of any interest assessed by the licensee must be allowed. The amount of such refund shall not be less than the difference between the interest charged and the interest earned at the agreed rate computed upon the unpaid principal balance of the loan from time to time outstanding prior to repayment in full.

SB530,17,14 (12) Prohibitions. (a) A borrower may repay a consumer small loan with the proceeds of a subsequent consumer small loan made by the same or another licensee or an affiliate of the same or another licensee, but if the borrower does so, the borrower may not repay the subsequent consumer small loan with the proceeds of another consumer small loan made by the same or another licensee or an affiliate of the same or another licensee. A repayment of a subsequent consumer small loan and the origination of a new consumer small loan from the same or another licensee or an affiliate of the same or another licensee within a 24-hour period shall be considered proof of violation of the prohibition under this paragraph.

SB530,17,17 (b) No licensee may make a consumer small loan to a borrower that results in the borrower having an outstanding aggregate liability of more than $900 to all licensees who have made consumer small loans to the borrower.

SB530,17,22 (c) No licensee may make a consumer small loan to a borrower if the licensee determines, knows, or should have known, that the social security number the borrower provided to the licensee is invalid, was issued within a period of time specified by the division preceding the date of the inquiry, or is issued to a deceased individual.

SB530,17,24 (d) No licensee may take a note, promise to pay, or any other instrument, in which blanks are left to be filled in after the consumer small loan has been made.

SB530,18,6 (e) No licensee may advertise, print, display, publish, distribute, or broadcast, or cause to be printed, displayed, published, distributed, or broadcast, in any manner, any statement with regard to the rates, terms, or conditions of a consumer small loan that is false or calculated to deceive. With respect to matters specifically governed by s. 423.301, compliance with such section satisfies the requirements of this paragraph.

SB530,18,12 (f) If a check held by a licensee as a result of a consumer small loan is returned to the licensee from a payor financial institution due to insufficient funds, a closed account, or a stop payment order, the licensee may bring an action to collect the amount of the check, but may not threaten or pursue criminal action against a debtor as a result of the debtor's check being returned unpaid or the debtor's consumer small loan not being paid.

SB530,18,15 (13) Other provisions. (a) All consumer small loans shall be governed by chs. 421 to 427, but to the extent that chs. 421 to 427 are inconsistent with this section, this section shall govern.

SB530,18,22 (b) A licensee shall deliver to the borrower, at the time a consumer small loan is made, a statement in the English and Spanish languages including all the disclosures required by the federal Consumer Credit Protection Act. The statement shall disclose that the borrower may prepay the borrower's loan in whole or in part and that if the loan is prepaid in full the borrower will receive a refund of interest as provided by this section. The statement shall also clearly and conspicuously indicate the percentage per year of interest charged for the consumer small loan.

SB530,18,25 (c) A licensee shall give to the borrower a plain and complete receipt for all cash payments made on account of any consumer small loan at the time such payments are made.

SB530,19,9 (d) No consumer small loan, wherever made, for which a greater rate or amount of interest than is allowed under sub. (10) (a) 2. has been contracted for or received, may be enforced in this state, and every person in any way participating therein in this state shall be subject to this section. If a licensee makes an excessive charge of such interest as the result of an unintentional mistake, but upon demand makes correction of such mistake, the loan shall be enforceable and treated as if no violation occurred at the agreed rate. Nothing in this paragraph shall limit any greater rights or remedies afforded in chs. 421 to 427 to a customer in a consumer credit transaction.

SB530,19,13 (14) Database. (a) The division or a database provider shall develop, implement, and maintain a single statewide database that has real-time access through an Internet connection, is accessible at all times to licensees and the division, and otherwise meets the requirements of this section.

SB530,19,17 (b) The division may operate the database or may contract with a single 3rd-party provider to operate the database. If the division contracts with a 3rd-party provider for the operation of the database, the division shall do all the following:

SB530,19,19 1. Ensure that the 3rd-party provider operates the database according to the provisions of this section.

SB530,19,21 2. In selecting a 3rd-party provider, consider the cost of providing the service and the 3rd-party provider's ability to meet all the requirements of this section.

SB530,19,23 3. In selecting a 3rd-party provider, give strong consideration to all of the following:

SB530,20,3 a. The 3rd-party provider's ability to prevent fraud, abuse, and other unlawful activity associated with consumer small loan transactions, and to provide additional tools for the administration and enforcement of this section.

SB530,20,5 b. Whether the provider is currently providing a similar service for another state.

SB530,20,6 (c) The database shall do all of the following:

SB530,20,11 1. Allow a licensee accessing the database to check a customer's social security number, or other unique identification number specified by the division, and report to the division or licensee if that social security number is invalid, was issued within a period of time specified by the division preceding the date of the inquiry, or is issued to a deceased individual.

SB530,20,13 2. Allow a licensee accessing the database to determine if making a new consumer small loan would cause a violation of this section.