HOUSE BILL NO. 206

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H0206aa.......................................................by STATE AFFAIRS
PAYDAY LOAN SERVICES - Adds to existing law to require licensure for persons
providing payday loan services; to set forth qualifications for licensure; to
provide for denial, suspension or revocation of a license; to require
reporting and the maintenance of records; to provide for examinations and
investigations by the administrator; to apply the Idaho Administrative
Procedure Act; and to set forth payday loan procedures and business practices.
                                                                        
02/07    House intro - 1st rdg - to printing
02/10    Rpt prt - to Bus
02/24    Rpt out - to Gen Ord
02/26    Rpt out amen - to engros
02/27    Rpt engros - 1st rdg - to 2nd rdg as amen
02/28    2nd rdg - to 3rd rdg as amen
03/03    3rd rdg as amen - PASSED - 66-2-2
      AYES -- Andersen, Barraclough, Barrett, Bauer, Bedke, Bell, Bieter,
      Black, Block, Boe, Bolz, Bradford, Campbell, Cannon, Clark, Collins,
      Crow, Cuddy, Deal, Denney, Douglas, Eberle, Edmunson, Ellsworth,
      Eskridge, Field(18), Field(23), Garrett, Harwood, Henbest, Jaquet,
      Jones, Kellogg, Lake, Langford, Langhorst, Martinez, McGeachin, Meyer,
      Miller, Mitchell, Moyle, Naccarato, Nielsen, Raybould, Ridinger, Ring,
      Ringo, Roberts, Robison, Rydalch, Sayler, Schaefer, Shepherd, Shirley,
      Skippen, Smith(30), Smith(24), Smylie, Snodgrass, Stevenson, Tilman,
      Trail, Wills, Wood, Mr. Speaker
      NAYS -- Kulczyk, Sali
      Absent and excused -- Gagner, McKague
    Floor Sponsor - Black
    Title apvd - to Senate
03/04    Senate intro - 1st rdg - to Com/HuRes
03/13    Rpt out - rec d/p - to 2nd rdg
03/14    2nd rdg - to 3rd rdg
03/20    3rd rdg - PASSED - 34-0-1
      AYES -- Andreason, Bailey, Bunderson, Burkett, Burtenshaw,
      Calabretta(Wilson), Cameron, Compton, Darrington, Davis, Gannon, Geddes,
      Goedde, Hill, Ingram, Kennedy, Keough, Little, Lodge, Malepeai, Marley,
      McKenzie, McWilliams, Noble, Noh, Pearce, Richardson, Schroeder,
      Sorensen, Stegner, Stennett, Sweet, Werk, Williams
      NAYS -- None
      Absent and excused -- Brandt
    Floor Sponsor - Goedde
    Title apvd - to House
03/21    To enrol
03/24    Rpt enrol - Sp signed
03/25    Pres signed
03/26    To Governor
03/31    Governor signed
         Session Law Chapter 182
         Effective: 07/01/03

Bill Text


                                                                        
                                                                        
  ||||              LEGISLATURE OF THE STATE OF IDAHO             ||||
 Fifty-seventh Legislature                 First Regular Session - 2003
                                                                        
                                                                        
                              IN THE HOUSE OF REPRESENTATIVES
                                                                        
                                     HOUSE BILL NO. 206
                                                                        
                                 BY STATE AFFAIRS COMMITTEE
                                                                        
  1                                        AN ACT
  2    RELATING TO PAYDAY LOANS; AMENDING CHAPTER 46, TITLE 28, IDAHO  CODE,  BY  THE
  3        ADDITION  OF  A  NEW  PART  4, CHAPTER 46, TITLE 28, IDAHO CODE, TO DEFINE
  4        TERMS, TO REQUIRE LICENSURE, TO SET FORTH QUALIFICATIONS FOR LICENSURE, TO
  5        PROVIDE FOR LICENSE APPLICATIONS, TO PROVIDE FOR DENIAL OF A  LICENSE,  TO
  6        SET  FORTH  PROVISIONS  RELATING  TO  THE  TRANSFERABILITY OF LICENSES AND
  7        CHANGE IN CONTROL OF LICENSEES, TO PROVIDE FOR SUSPENSION OR REVOCATION OF
  8        A LICENSE, TO REQUIRE REPORTS, TO PROVIDE FOR THE MAINTENANCE  OF  RECORDS
  9        AND  TO REQUIRE ANNUAL REPORTS, TO PROVIDE FOR EXAMINATIONS AND INVESTIGA-
 10        TIONS BY THE ADMINISTRATOR, TO APPLY THE  IDAHO  ADMINISTRATIVE  PROCEDURE
 11        ACT AND TO SET FORTH PAYDAY LOAN PROCEDURES AND BUSINESS PRACTICES.
                                                                        
 12    Be It Enacted by the Legislature of the State of Idaho:
                                                                        
 13        SECTION  1.  That  Chapter  46,  Title 28, Idaho Code, be, and the same is
 14    hereby amended by the addition thereto of a NEW PART, to be known  and  desig-
 15    nated as Part 4, Chapter 46, Title 28, Idaho Code, and to read as follows:
                                                                        
 16                                       PART 4.
 17                                     PAYDAY LOANS
                                                                        
 18        28-46-401.  DEFINITIONS.  (1)  As  used  in  this  act, unless the context
 19    otherwise requires, "payday loan" means a transaction pursuant  to  a  written
 20    agreement between a creditor and the maker of a check whereby the creditor:
 21        (a)  Accepts a check from the maker;
 22        (b)  Agrees  to  hold the check for a period of time prior to negotiation,
 23        deposit or presentment; and
 24        (c)  Pays to the maker of the check the amount of the check, less the  fee
 25        permitted by this chapter.
 26        (2)  Payday loans are regulated consumer credit transactions, and all pro-
 27    visions  of  the Idaho credit code relating to regulated loans apply to payday
 28    loans and to persons engaged in the business of payday loans except  for  part
 29    3, chapter 46, title 28, Idaho Code.
 30        (3)  As  used in this section, "check" refers to a check or the electronic
 31    equivalent of a check.
                                                                        
 32        28-46-402.  LICENSE REQUIRED. No person shall engage in  the  business  of
 33    payday  loans,  offer  or  make  a payday loan, or arrange a payday loan for a
 34    third party lender in a payday loan transaction without having first  obtained
 35    a  license  under  this chapter. A separate license shall be required for each
 36    location from which such business is conducted.
                                                                        
 37        28-46-403.  QUALIFICATIONS FOR PAYDAY LOAN LICENSE. (1)  To qualify for  a
 38    license, an applicant shall satisfy the following requirements:
 39        (a)  The  applicant  shall  have  and  maintain  liquid assets of at least
 40        twenty-five thousand dollars ($25,000) per licensed location determined in
                                                                        
                                           2
                                                                        
  1        accordance with generally accepted accounting principles; and
  2        (b)  The financial responsibility, financial condition,  business  experi-
  3        ence, character and general fitness of the applicant shall reasonably war-
  4        rant the administrator's belief that the applicant's business will be con-
  5        ducted lawfully and fairly.  In determining whether this qualification has
  6        been  met,  and for the purpose of investigating compliance with this act,
  7        the administrator may review and approve:
  8             (i)   The relevant business records and the capital adequacy  of  the
  9             applicant;
 10             (ii)  The  competence, experience, integrity and financial ability of
 11             any applicant, and if the applicant is an entity, of any  person  who
 12             is a member, partner, director, senior officer or twenty-five percent
 13             (25%) or more equity owner of the applicant; and
 14             (iii) Any  record of conviction, on the part of the applicant, or any
 15             person referred to in subparagraph (ii) of  this  paragraph,  of  any
 16             criminal activity; any fraud or other act of personal dishonesty; any
 17             act,  omission  or practice which constitutes a breach of a fiduciary
 18             duty; or any suspension, revocation, removal or administrative action
 19             by any agency or department of the United States or any  state,  from
 20             participation in the conduct of any business.
 21        (2)  The requirements set forth in subsection (1) of this section are con-
 22    tinuing in nature and may be reviewed periodically by the administrator.
                                                                        
 23        28-46-404.  APPLICATION  FOR PAYDAY LOAN LICENSE. (1) Each application for
 24    a license shall be in writing and under oath to the administrator, in  a  form
 25    prescribed by the administrator, and shall include at least the following:
 26        (a)  The  legal name, residence and business address of the applicant and,
 27        if the applicant is an entity, of every member, partner, director,  senior
 28        officer  or  twenty-five  percent (25%) or more equity owner of the appli-
 29        cant;
 30        (b)  The location at which the principal place of business of  the  appli-
 31        cant is located; and
 32        (c)  Other data and information the administrator may require with respect
 33        to  the applicant, and if the applicant is an entity, such data and infor-
 34        mation of its members, partners, directors, senior  officers,  or  twenty-
 35        five percent (25%) or more equity owners of the applicant.
 36        (2)  Each application for a license shall be accompanied by an application
 37    and  investigation  fee in an amount prescribed by the administrator. Such fee
 38    shall not be subject to refund.
 39        (3)  The fee set forth in subsection (2) of this section shall be required
 40    for each location for which an application is submitted.
 41        (4)  Within sixty (60) days of the filing of an application in a form pre-
 42    scribed by the administrator, accompanied by the fee  required  in  subsection
 43    (2)  of this section, the administrator shall investigate to ascertain whether
 44    the qualifications prescribed by subsection (1) of  section  28-46-403,  Idaho
 45    Code, have been satisfied.  If the administrator finds that the qualifications
 46    have  been satisfied and approves the documents, the administrator shall issue
 47    to the applicant a license to engage in the payday loan business.
 48        (5)  A license issued pursuant to this section shall remain in  force  and
 49    effect  through  the remainder of the calendar year after its date of issuance
 50    unless earlier surrendered, suspended or revoked pursuant to this act.
                                                                        
 51        28-46-405.  DENIAL OF LICENSE. (1) If the administrator determines that an
 52    applicant is not qualified to  receive  a  license,  the  administrator  shall
 53    notify  the  applicant  in  writing  that the application has been denied, and
                                                                        
                                           3
                                                                        
  1    shall state the basis for denial.
  2        (2)  If the administrator denies an application, or if  the  administrator
  3    fails  to  act  on an application within sixty (60) days after the filing of a
  4    properly completed application, the applicant may make written demand  to  the
  5    administrator  for  a hearing on the question of whether the license should be
  6    granted.  Written demand for a hearing may not be made more than fifteen  (15)
  7    days  after  the administrator has mailed a writing to the applicant notifying
  8    him that the application has been denied and stating the basis for denial.  In
  9    the event of a hearing, the administrator  shall  reconsider  the  application
 10    and, after the hearing, issue a written order granting or denying the applica-
 11    tion.
                                                                        
 12        28-46-406.  NONTRANSFERABILITY  --  CHANGE  IN CONTROL. (1) Other than the
 13    transfer of a license to a new location as set forth in subsection (3) of this
 14    section, a license issued pursuant to this  chapter  is  not  transferable  or
 15    assignable.
 16        (2)  The  prior  written approval of the administrator is required for the
 17    continued operation of a payday loan business whenever a change in control  of
 18    a licensee is proposed. Control in the case of an entity means direct or indi-
 19    rect ownership, or the right to vote or otherwise control, twenty-five percent
 20    (25%) or more of the governance interests of the entity, or the ability of any
 21    person  to  elect  a  majority of the directors. The administrator may require
 22    information deemed  necessary  to  determine  whether  a  new  application  is
 23    required.  Costs  incurred  by  the administrator in investigating a change of
 24    control request shall be paid by the licensee requesting such approval.
 25        (3)  A licensee shall notify the administrator in writing at least fifteen
 26    (15) days before any proposed changes in the licensee's business  location  or
 27    name.
                                                                        
 28        28-46-407.  SUSPENSION  OR  REVOCATION  OF LICENSE. (1)  The administrator
 29    may, after notice and hearing, suspend or revoke any license if  the  adminis-
 30    trator finds that the licensee:
 31        (a)  Has  knowingly  or  through  the  lack  of due care failed to pay the
 32        annual fee imposed by this act, or any  examination  fee  imposed  by  the
 33        administrator under the authority of this act;
 34        (b)  Has  committed any fraud, engaged in any dishonest activities or made
 35        any misrepresentations;
 36        (c)  Has violated any provision of this act or any rule or order  lawfully
 37        made  pursuant  to this act or has violated any other law in the course of
 38        the licensee's dealing as a licensee;
 39        (d)  Has made a materially false statement  in  the  application  for  the
 40        license  or  failed to give a true reply to a question in the application;
 41        or
 42        (e)  Has demonstrated incompetence or untrustworthiness to act as a licen-
 43        see.
 44        (2)  If the reason for revocation or suspension of a licensee's license at
 45    any one (1) location is of general application to all locations operated by  a
 46    licensee,  the  administrator  may  revoke or suspend all licenses issued to a
 47    licensee.
                                                                        
 48        28-46-408.  REPORTS TO ADMINISTRATOR. Within  fifteen  (15)  days  of  the
 49    occurrence  of any of the events listed below, a licensee shall file a written
 50    report with the administrator describing such events and their expected impact
 51    on the activities of the licensee in the state:
 52        (1)  The filing for bankruptcy or reorganization by the licensee;
                                                                        
                                           4
                                                                        
  1        (2)  The institution of revocation or suspension proceedings  against  the
  2    licensee by any state or governmental authority;
  3        (3)  Any  felony  indictment  of  the  licensee and, if the licensee is an
  4    entity, of any of its members, partners, directors, senior officers or twenty-
  5    five percent (25%) or more equity owners;
  6        (4)  Any felony conviction of the licensee and,  if  the  licensee  is  an
  7    entity, of any of its members, partners, directors, senior officers or twenty-
  8    five percent (25%) or more equity owners; and
  9        (5)  Such  other events as the administrator may determine and identify by
 10    rule.
                                                                        
 11        28-46-409.  RECORDS -- ANNUAL REPORTS. (1) Every licensee  shall  maintain
 12    records  in conformity with generally accepted accounting principles and prac-
 13    tices in a manner that will enable the administrator to determine whether  the
 14    licensee  is complying with the provisions of this act. The recordkeeping sys-
 15    tem of a licensee shall be sufficient if he  makes  the  required  information
 16    reasonably  available.  The  records need not be kept in the place of business
 17    where payday loans are made if the administrator is given free access  to  the
 18    records  wherever located. The records pertaining to any loan need not be pre-
 19    served for more than two (2) years after the due date of the loan.
 20        (2)  On or before May 31 of each year, every licensee shall file with  the
 21    administrator  a  composite  annual  report for the prior calendar year in the
 22    form prescribed by the administrator relating to all payday loans made by him.
 23    Information contained in annual reports shall be subject to disclosure accord-
 24    ing to chapter 3, title 9, Idaho Code, and may be published only in  composite
 25    form.
                                                                        
 26        28-46-410.  EXAMINATIONS  AND  INVESTIGATIONS. (1) The administrator shall
 27    examine periodically, at intervals he deems appropriate, the loans  and  busi-
 28    ness records of every payday lender. In addition, for the purpose of discover-
 29    ing  violations  of  this  act  or securing information lawfully required, the
 30    administrator may at any time investigate the loans, business and  records  of
 31    any  payday  lender. For these purposes, the administrator shall have free and
 32    reasonable access to the offices, places  of  business,  and  records  of  the
 33    lender.  The  administrator,  for purposes of examination of licensees herein,
 34    shall be paid the cost of examination by the licensee within thirty (30)  days
 35    of  demand  for  payment. The administrator shall, on July 1 of each year, fix
 36    such per diem examination cost.
 37        (2)  If the lender's records are located outside this state,  the  lender,
 38    at  his option, shall make them available to the administrator at a convenient
 39    location within this state or pay the reasonable and  necessary  expenses  for
 40    the  administrator  or  his  representative to examine them at the place where
 41    they are maintained.  The administrator may designate representatives, includ-
 42    ing comparable officials of the state in which the  records  are  located,  to
 43    inspect them on his behalf.
 44        (3)  For  the  purposes  of this section, the administrator may administer
 45    oaths or affirmations and, upon his own motion or upon request of  any  party,
 46    may  subpoena  witnesses,  compel the attendance of witnesses, adduce evidence
 47    and require the production of any matter which is relevant to  the  investiga-
 48    tion,  including  the  existence,  description, nature, custody, condition and
 49    location of any books, documents or other tangible items and the identity  and
 50    location  of  persons  having knowledge of relevant facts, or any other matter
 51    reasonably calculated to lead to the discovery of admissible evidence.
 52        (4)  Upon failure without lawful excuse to obey a subpoena or to give tes-
 53    timony, and upon reasonable notice to all persons affected thereby, the admin-
                                                                        
                                           5
                                                                        
  1    istrator may apply to the district court for an order compelling compliance.
                                                                        
  2        28-46-411.  APPLICATION OF ADMINISTRATIVE PROCEDURE ACT. Except as  other-
  3    wise provided, the Idaho administrative procedure act, as set forth in chapter
  4    52,  title  67,  Idaho  Code, applies to and governs all administrative action
  5    taken by the administrator pursuant to this act.
                                                                        
  6        28-46-412.  PAYDAY LOAN PROCEDURES. (1) Each payday  loan  must  be  docu-
  7    mented  in a written agreement signed by the borrower. The loan agreement must
  8    include the name of the licensee, the loan date, the principal amount  of  the
  9    loan,  and  a  statement of the total amount of fees charged as a condition of
 10    making the loan, expressed both as a dollar amount and as an annual percentage
 11    rate (APR).
 12        (2)  The maximum principal amount of any payday loan is one thousand  dol-
 13    lars ($1000).
 14        (3)  A  licensee may charge a fee for each payday loan.  Such fee shall be
 15    deemed fully earned as of the date of the transaction and shall not be  deemed
 16    interest  for  any  purpose  of law. No other fee or charges may be charged or
 17    collected for the payday loan except as specifically set forth in this act.
 18        (4)  Each licensee shall conspicuously post in each  licensed  location  a
 19    notice  of  the  fees,  expressed  as  a dollar amount per one hundred dollars
 20    ($100), charged for payday loans.
 21        (5)  Before disbursing funds pursuant to a payday loan, a  licensee  shall
 22    provide written notice to the borrower indicating the following:
 23        (a)  A  payday  loan  is  intended  to  address short-term, not long-term,
 24        financial needs.
 25        (b)  The borrower will be required to pay additional fees  if  the  payday
 26        loan is renewed rather than paid in full when due.
 27        (c)  The borrower has the right to rescind the payday loan, at no cost, no
 28        later than the end of the next business day following the day on which the
 29        payday loan is made.
 30        (6)  (a)  A  payday loan may be made pursuant to a transaction whereby the
 31        licensee:
 32             (i)   Accepts a check from a borrower who is the maker of the  check;
 33             and
 34             (ii)  Agrees  not  to  negotiate, deposit or present the check for an
 35             agreed upon period of time and pays to the maker the  amount  of  the
 36             check, less the fees permitted by this act.
 37        (b)  In such a transaction, the licensee may accept only one (1) postdated
 38        check  for  each  loan  as  security for the loan. Before the licensee may
 39        negotiate or present a check for payment, the check shall be endorsed with
 40        the actual name under which the licensee is doing business.  The  borrower
 41        shall  have  the  right  to redeem the check from the licensee at any time
 42        prior to the presentment or deposit of the check by making payment to  the
 43        licensee  of the full amount of the check in cash or immediately available
 44        funds.
 45        (7)  The amount advanced to the borrower by the licensee in a payday  loan
 46    may  be  paid  to  the  borrower  in the form of cash, the licensee's business
 47    check, a money order, an electronic funds transfer to the borrower's  account,
 48    or  other  reasonable  electronic payment mechanism, provided however, that no
 49    additional fee may be charged to the borrower by a licensee to access the pro-
 50    ceeds of the payday loan.
 51        (8)  A payday loan may be repaid by the borrower in cash,  by  negotiation
 52    of  the  borrower's  check in a transaction pursuant to subsection (6) of this
 53    section or, with the agreement of the licensee,  a  debit  card,  a  cashier's
                                                                        
                                           6
                                                                        
  1    check,  an  electronic funds transfer from the borrower's bank account, or any
  2    other reasonable electronic payment mechanism to which the parties may agree.
                                                                        
  3        28-46-413.  PAYDAY LOAN BUSINESS PRACTICES.  (1)  No  licensee  or  person
  4    related  to a licensee by common control may have outstanding at any time to a
  5    single borrower a loan or loans with an aggregate principal balance  exceeding
  6    one thousand dollars ($1,000), plus allowable fees.
  7        (2)  No payday loan shall be repaid by the proceeds of another payday loan
  8    made  by  the same licensee or a person related to the licensee by common con-
  9    trol.
 10        (3)  If the borrower's check is returned unpaid to  the  licensee  from  a
 11    payor  financial  institution,  the  licensee  shall have the right to collect
 12    charges authorized by section 28-22-105, Idaho Code, provided such charges are
 13    disclosed in the loan agreement.  A licensee may not charge treble damages. If
 14    the borrower's obligation is assigned to any third party for  collection,  the
 15    provisions of this section shall apply to such third party collector.
 16        (4)  A  licensee  shall  not threaten a borrower with criminal action as a
 17    result of any payment deficit.
 18        (5)  No licensee shall engage in unfair or deceptive  acts,  practices  or
 19    advertising in the conduct of a payday loan business.
 20        (6)  A licensee may renew a payday loan no more than three (3) consecutive
 21    times,  after which the payday loan shall be repaid in full by the borrower. A
 22    borrower may enter into a new loan transaction with the licensee at  any  time
 23    after  a  prior  loan  to  the  borrower  is  completed.  A  loan secured by a
 24    borrower's check is completed when the check is presented or deposited by  the
 25    licensee  or  redeemed by the borrower pursuant to section 28-46-412(6), Idaho
 26    Code.
 27        (7)  Other than a borrower's check in a transaction  pursuant  to  section
 28    28-46-412(6),  Idaho  Code, a licensee shall not accept any property, title to
 29    property, or other evidence of ownership as collateral for a payday loan.
 30        (8)  A licensee may conduct other business at a location where it  engages
 31    in  payday lending unless it carries on such other business for the purpose of
 32    evading or violating the provisions of this act.
 33        (9)  A borrower may rescind the payday loan at no cost at any  time  prior
 34    to  the  close of business on the next business day following the day on which
 35    the payday loan was made by paying the principal amount of  the  loan  to  the
 36    licensee in cash or other immediately available funds.

Amendment


                                                                        
                                                                        
  ||||              LEGISLATURE OF THE STATE OF IDAHO             ||||
 Fifty-seventh Legislature                 First Regular Session - 2003
                                                                        
                                                                        
                                                     Moved by    Douglas             
                                                                        
                                                     Seconded by Deal                
                                                                        
                                                                        
                              IN THE HOUSE OF REPRESENTATIVES
                              HOUSE AMENDMENT TO H.B. NO. 206
                                                                        
                                                                        
  1                               AMENDMENTS TO SECTION 1
  2        On page 1 of the printed bill, in line 39, delete "and  maintain";  delete
  3    line 40 and insert: "thirty thousand dollars ($30,000) determined in"; on page
  4    2, in line 1, following "principles" insert: ", provided that applicants seek-
  5    ing to engage in the business of payday loans at more than one (1) location in
  6    the  state  shall  have  liquid assets of at least an additional five thousand
  7    dollars ($5,000) for each additional location in the state up to a maximum  of
  8    seventy-five thousand dollars ($75,000) for all locations in the state".

Engrossed Bill (Original Bill with Amendment(s) Incorporated)


                                                                        
                                                                        
  ||||              LEGISLATURE OF THE STATE OF IDAHO             ||||
 Fifty-seventh Legislature                 First Regular Session - 2003
                                                                        
                                                                        
                              IN THE HOUSE OF REPRESENTATIVES
                                                                        
                               HOUSE BILL NO. 206, As Amended
                                                                        
                                 BY STATE AFFAIRS COMMITTEE
                                                                        
  1                                        AN ACT
  2    RELATING TO PAYDAY LOANS; AMENDING CHAPTER 46, TITLE 28, IDAHO  CODE,  BY  THE
  3        ADDITION  OF  A  NEW  PART  4, CHAPTER 46, TITLE 28, IDAHO CODE, TO DEFINE
  4        TERMS, TO REQUIRE LICENSURE, TO SET FORTH QUALIFICATIONS FOR LICENSURE, TO
  5        PROVIDE FOR LICENSE APPLICATIONS, TO PROVIDE FOR DENIAL OF A  LICENSE,  TO
  6        SET  FORTH  PROVISIONS  RELATING  TO  THE  TRANSFERABILITY OF LICENSES AND
  7        CHANGE IN CONTROL OF LICENSEES, TO PROVIDE FOR SUSPENSION OR REVOCATION OF
  8        A LICENSE, TO REQUIRE REPORTS, TO PROVIDE FOR THE MAINTENANCE  OF  RECORDS
  9        AND  TO REQUIRE ANNUAL REPORTS, TO PROVIDE FOR EXAMINATIONS AND INVESTIGA-
 10        TIONS BY THE ADMINISTRATOR, TO APPLY THE  IDAHO  ADMINISTRATIVE  PROCEDURE
 11        ACT AND TO SET FORTH PAYDAY LOAN PROCEDURES AND BUSINESS PRACTICES.
                                                                        
 12    Be It Enacted by the Legislature of the State of Idaho:
                                                                        
 13        SECTION  1.  That  Chapter  46,  Title 28, Idaho Code, be, and the same is
 14    hereby amended by the addition thereto of a NEW PART, to be known  and  desig-
 15    nated as Part 4, Chapter 46, Title 28, Idaho Code, and to read as follows:
                                                                        
 16                                       PART 4.
 17                                     PAYDAY LOANS
                                                                        
 18        28-46-401.  DEFINITIONS.  (1)  As  used  in  this  act, unless the context
 19    otherwise requires, "payday loan" means a transaction pursuant  to  a  written
 20    agreement between a creditor and the maker of a check whereby the creditor:
 21        (a)  Accepts a check from the maker;
 22        (b)  Agrees  to  hold the check for a period of time prior to negotiation,
 23        deposit or presentment; and
 24        (c)  Pays to the maker of the check the amount of the check, less the  fee
 25        permitted by this chapter.
 26        (2)  Payday loans are regulated consumer credit transactions, and all pro-
 27    visions  of  the Idaho credit code relating to regulated loans apply to payday
 28    loans and to persons engaged in the business of payday loans except  for  part
 29    3, chapter 46, title 28, Idaho Code.
 30        (3)  As  used in this section, "check" refers to a check or the electronic
 31    equivalent of a check.
                                                                        
 32        28-46-402.  LICENSE REQUIRED. No person shall engage in  the  business  of
 33    payday  loans,  offer  or  make  a payday loan, or arrange a payday loan for a
 34    third party lender in a payday loan transaction without having first  obtained
 35    a  license  under  this chapter. A separate license shall be required for each
 36    location from which such business is conducted.
                                                                        
 37        28-46-403.  QUALIFICATIONS FOR PAYDAY LOAN LICENSE. (1)  To qualify for  a
 38    license, an applicant shall satisfy the following requirements:
 39        (a)  The  applicant  shall  have liquid assets of at least thirty thousand
 40        dollars  ($30,000)  determined  in  accordance  with  generally   accepted
                                                                        
                                           2
                                                                        
  1        accounting  principles,  provided that applicants seeking to engage in the
  2        business of payday loans at more than one (1) location in the state  shall
  3        have  liquid  assets  of  at  least  an  additional  five thousand dollars
  4        ($5,000) for each additional location in the state up to a maximum of sev-
  5        enty-five thousand dollars ($75,000) for all locations in the state; and
  6        (b)  The financial responsibility, financial condition,  business  experi-
  7        ence, character and general fitness of the applicant shall reasonably war-
  8        rant the administrator's belief that the applicant's business will be con-
  9        ducted lawfully and fairly.  In determining whether this qualification has
 10        been  met,  and for the purpose of investigating compliance with this act,
 11        the administrator may review and approve:
 12             (i)   The relevant business records and the capital adequacy  of  the
 13             applicant;
 14             (ii)  The  competence, experience, integrity and financial ability of
 15             any applicant, and if the applicant is an entity, of any  person  who
 16             is a member, partner, director, senior officer or twenty-five percent
 17             (25%) or more equity owner of the applicant; and
 18             (iii) Any  record of conviction, on the part of the applicant, or any
 19             person referred to in subparagraph (ii) of  this  paragraph,  of  any
 20             criminal activity; any fraud or other act of personal dishonesty; any
 21             act,  omission  or practice which constitutes a breach of a fiduciary
 22             duty; or any suspension, revocation, removal or administrative action
 23             by any agency or department of the United States or any  state,  from
 24             participation in the conduct of any business.
 25        (2)  The requirements set forth in subsection (1) of this section are con-
 26    tinuing in nature and may be reviewed periodically by the administrator.
                                                                        
 27        28-46-404.  APPLICATION  FOR PAYDAY LOAN LICENSE. (1) Each application for
 28    a license shall be in writing and under oath to the administrator, in  a  form
 29    prescribed by the administrator, and shall include at least the following:
 30        (a)  The  legal name, residence and business address of the applicant and,
 31        if the applicant is an entity, of every member, partner, director,  senior
 32        officer  or  twenty-five  percent (25%) or more equity owner of the appli-
 33        cant;
 34        (b)  The location at which the principal place of business of  the  appli-
 35        cant is located; and
 36        (c)  Other data and information the administrator may require with respect
 37        to  the applicant, and if the applicant is an entity, such data and infor-
 38        mation of its members, partners, directors, senior  officers,  or  twenty-
 39        five percent (25%) or more equity owners of the applicant.
 40        (2)  Each application for a license shall be accompanied by an application
 41    and  investigation  fee in an amount prescribed by the administrator. Such fee
 42    shall not be subject to refund.
 43        (3)  The fee set forth in subsection (2) of this section shall be required
 44    for each location for which an application is submitted.
 45        (4)  Within sixty (60) days of the filing of an application in a form pre-
 46    scribed by the administrator, accompanied by the fee  required  in  subsection
 47    (2)  of this section, the administrator shall investigate to ascertain whether
 48    the qualifications prescribed by subsection (1) of  section  28-46-403,  Idaho
 49    Code, have been satisfied.  If the administrator finds that the qualifications
 50    have  been satisfied and approves the documents, the administrator shall issue
 51    to the applicant a license to engage in the payday loan business.
 52        (5)  A license issued pursuant to this section shall remain in  force  and
 53    effect  through  the remainder of the calendar year after its date of issuance
 54    unless earlier surrendered, suspended or revoked pursuant to this act.
                                                                        
                                           3
                                                                        
  1        28-46-405.  DENIAL OF LICENSE. (1) If the administrator determines that an
  2    applicant is not qualified to  receive  a  license,  the  administrator  shall
  3    notify  the  applicant  in  writing  that the application has been denied, and
  4    shall state the basis for denial.
  5        (2)  If the administrator denies an application, or if  the  administrator
  6    fails  to  act  on an application within sixty (60) days after the filing of a
  7    properly completed application, the applicant may make written demand  to  the
  8    administrator  for  a hearing on the question of whether the license should be
  9    granted.  Written demand for a hearing may not be made more than fifteen  (15)
 10    days  after  the administrator has mailed a writing to the applicant notifying
 11    him that the application has been denied and stating the basis for denial.  In
 12    the event of a hearing, the administrator  shall  reconsider  the  application
 13    and, after the hearing, issue a written order granting or denying the applica-
 14    tion.
                                                                        
 15        28-46-406.  NONTRANSFERABILITY  --  CHANGE  IN CONTROL. (1) Other than the
 16    transfer of a license to a new location as set forth in subsection (3) of this
 17    section, a license issued pursuant to this  chapter  is  not  transferable  or
 18    assignable.
 19        (2)  The  prior  written approval of the administrator is required for the
 20    continued operation of a payday loan business whenever a change in control  of
 21    a licensee is proposed. Control in the case of an entity means direct or indi-
 22    rect ownership, or the right to vote or otherwise control, twenty-five percent
 23    (25%) or more of the governance interests of the entity, or the ability of any
 24    person  to  elect  a  majority of the directors. The administrator may require
 25    information deemed  necessary  to  determine  whether  a  new  application  is
 26    required.  Costs  incurred  by  the administrator in investigating a change of
 27    control request shall be paid by the licensee requesting such approval.
 28        (3)  A licensee shall notify the administrator in writing at least fifteen
 29    (15) days before any proposed changes in the licensee's business  location  or
 30    name.
                                                                        
 31        28-46-407.  SUSPENSION  OR  REVOCATION  OF LICENSE. (1)  The administrator
 32    may, after notice and hearing, suspend or revoke any license if  the  adminis-
 33    trator finds that the licensee:
 34        (a)  Has  knowingly  or  through  the  lack  of due care failed to pay the
 35        annual fee imposed by this act, or any  examination  fee  imposed  by  the
 36        administrator under the authority of this act;
 37        (b)  Has  committed any fraud, engaged in any dishonest activities or made
 38        any misrepresentations;
 39        (c)  Has violated any provision of this act or any rule or order  lawfully
 40        made  pursuant  to this act or has violated any other law in the course of
 41        the licensee's dealing as a licensee;
 42        (d)  Has made a materially false statement  in  the  application  for  the
 43        license  or  failed to give a true reply to a question in the application;
 44        or
 45        (e)  Has demonstrated incompetence or untrustworthiness to act as a licen-
 46        see.
 47        (2)  If the reason for revocation or suspension of a licensee's license at
 48    any one (1) location is of general application to all locations operated by  a
 49    licensee,  the  administrator  may  revoke or suspend all licenses issued to a
 50    licensee.
                                                                        
 51        28-46-408.  REPORTS TO ADMINISTRATOR. Within  fifteen  (15)  days  of  the
 52    occurrence  of any of the events listed below, a licensee shall file a written
                                                                        
                                           4
                                                                        
  1    report with the administrator describing such events and their expected impact
  2    on the activities of the licensee in the state:
  3        (1)  The filing for bankruptcy or reorganization by the licensee;
  4        (2)  The institution of revocation or suspension proceedings  against  the
  5    licensee by any state or governmental authority;
  6        (3)  Any  felony  indictment  of  the  licensee and, if the licensee is an
  7    entity, of any of its members, partners, directors, senior officers or twenty-
  8    five percent (25%) or more equity owners;
  9        (4)  Any felony conviction of the licensee and,  if  the  licensee  is  an
 10    entity, of any of its members, partners, directors, senior officers or twenty-
 11    five percent (25%) or more equity owners; and
 12        (5)  Such  other events as the administrator may determine and identify by
 13    rule.
                                                                        
 14        28-46-409.  RECORDS -- ANNUAL REPORTS. (1) Every licensee  shall  maintain
 15    records  in conformity with generally accepted accounting principles and prac-
 16    tices in a manner that will enable the administrator to determine whether  the
 17    licensee  is complying with the provisions of this act. The recordkeeping sys-
 18    tem of a licensee shall be sufficient if he  makes  the  required  information
 19    reasonably  available.  The  records need not be kept in the place of business
 20    where payday loans are made if the administrator is given free access  to  the
 21    records  wherever located. The records pertaining to any loan need not be pre-
 22    served for more than two (2) years after the due date of the loan.
 23        (2)  On or before May 31 of each year, every licensee shall file with  the
 24    administrator  a  composite  annual  report for the prior calendar year in the
 25    form prescribed by the administrator relating to all payday loans made by him.
 26    Information contained in annual reports shall be subject to disclosure accord-
 27    ing to chapter 3, title 9, Idaho Code, and may be published only in  composite
 28    form.
                                                                        
 29        28-46-410.  EXAMINATIONS  AND  INVESTIGATIONS. (1) The administrator shall
 30    examine periodically, at intervals he deems appropriate, the loans  and  busi-
 31    ness records of every payday lender. In addition, for the purpose of discover-
 32    ing  violations  of  this  act  or securing information lawfully required, the
 33    administrator may at any time investigate the loans, business and  records  of
 34    any  payday  lender. For these purposes, the administrator shall have free and
 35    reasonable access to the offices, places  of  business,  and  records  of  the
 36    lender.  The  administrator,  for purposes of examination of licensees herein,
 37    shall be paid the cost of examination by the licensee within thirty (30)  days
 38    of  demand  for  payment. The administrator shall, on July 1 of each year, fix
 39    such per diem examination cost.
 40        (2)  If the lender's records are located outside this state,  the  lender,
 41    at  his option, shall make them available to the administrator at a convenient
 42    location within this state or pay the reasonable and  necessary  expenses  for
 43    the  administrator  or  his  representative to examine them at the place where
 44    they are maintained.  The administrator may designate representatives, includ-
 45    ing comparable officials of the state in which the  records  are  located,  to
 46    inspect them on his behalf.
 47        (3)  For  the  purposes  of this section, the administrator may administer
 48    oaths or affirmations and, upon his own motion or upon request of  any  party,
 49    may  subpoena  witnesses,  compel the attendance of witnesses, adduce evidence
 50    and require the production of any matter which is relevant to  the  investiga-
 51    tion,  including  the  existence,  description, nature, custody, condition and
 52    location of any books, documents or other tangible items and the identity  and
 53    location  of  persons  having knowledge of relevant facts, or any other matter
                                                                        
                                           5
                                                                        
  1    reasonably calculated to lead to the discovery of admissible evidence.
  2        (4)  Upon failure without lawful excuse to obey a subpoena or to give tes-
  3    timony, and upon reasonable notice to all persons affected thereby, the admin-
  4    istrator may apply to the district court for an order compelling compliance.
                                                                        
  5        28-46-411.  APPLICATION OF ADMINISTRATIVE PROCEDURE ACT. Except as  other-
  6    wise provided, the Idaho administrative procedure act, as set forth in chapter
  7    52,  title  67,  Idaho  Code, applies to and governs all administrative action
  8    taken by the administrator pursuant to this act.
                                                                        
  9        28-46-412.  PAYDAY LOAN PROCEDURES. (1) Each payday  loan  must  be  docu-
 10    mented  in a written agreement signed by the borrower. The loan agreement must
 11    include the name of the licensee, the loan date, the principal amount  of  the
 12    loan,  and  a  statement of the total amount of fees charged as a condition of
 13    making the loan, expressed both as a dollar amount and as an annual percentage
 14    rate (APR).
 15        (2)  The maximum principal amount of any payday loan is one thousand  dol-
 16    lars ($1000).
 17        (3)  A  licensee may charge a fee for each payday loan.  Such fee shall be
 18    deemed fully earned as of the date of the transaction and shall not be  deemed
 19    interest  for  any  purpose  of law. No other fee or charges may be charged or
 20    collected for the payday loan except as specifically set forth in this act.
 21        (4)  Each licensee shall conspicuously post in each  licensed  location  a
 22    notice  of  the  fees,  expressed  as  a dollar amount per one hundred dollars
 23    ($100), charged for payday loans.
 24        (5)  Before disbursing funds pursuant to a payday loan, a  licensee  shall
 25    provide written notice to the borrower indicating the following:
 26        (a)  A  payday  loan  is  intended  to  address short-term, not long-term,
 27        financial needs.
 28        (b)  The borrower will be required to pay additional fees  if  the  payday
 29        loan is renewed rather than paid in full when due.
 30        (c)  The borrower has the right to rescind the payday loan, at no cost, no
 31        later than the end of the next business day following the day on which the
 32        payday loan is made.
 33        (6)  (a)  A  payday loan may be made pursuant to a transaction whereby the
 34        licensee:
 35             (i)   Accepts a check from a borrower who is the maker of the  check;
 36             and
 37             (ii)  Agrees  not  to  negotiate, deposit or present the check for an
 38             agreed upon period of time and pays to the maker the  amount  of  the
 39             check, less the fees permitted by this act.
 40        (b)  In such a transaction, the licensee may accept only one (1) postdated
 41        check  for  each  loan  as  security for the loan. Before the licensee may
 42        negotiate or present a check for payment, the check shall be endorsed with
 43        the actual name under which the licensee is doing business.  The  borrower
 44        shall  have  the  right  to redeem the check from the licensee at any time
 45        prior to the presentment or deposit of the check by making payment to  the
 46        licensee  of the full amount of the check in cash or immediately available
 47        funds.
 48        (7)  The amount advanced to the borrower by the licensee in a payday  loan
 49    may  be  paid  to  the  borrower  in the form of cash, the licensee's business
 50    check, a money order, an electronic funds transfer to the borrower's  account,
 51    or  other  reasonable  electronic payment mechanism, provided however, that no
 52    additional fee may be charged to the borrower by a licensee to access the pro-
 53    ceeds of the payday loan.
                                                                        
                                           6
                                                                        
  1        (8)  A payday loan may be repaid by the borrower in cash,  by  negotiation
  2    of  the  borrower's  check in a transaction pursuant to subsection (6) of this
  3    section or, with the agreement of the licensee,  a  debit  card,  a  cashier's
  4    check,  an  electronic funds transfer from the borrower's bank account, or any
  5    other reasonable electronic payment mechanism to which the parties may agree.
                                                                        
  6        28-46-413.  PAYDAY LOAN BUSINESS PRACTICES.  (1)  No  licensee  or  person
  7    related  to a licensee by common control may have outstanding at any time to a
  8    single borrower a loan or loans with an aggregate principal balance  exceeding
  9    one thousand dollars ($1,000), plus allowable fees.
 10        (2)  No payday loan shall be repaid by the proceeds of another payday loan
 11    made  by  the same licensee or a person related to the licensee by common con-
 12    trol.
 13        (3)  If the borrower's check is returned unpaid to  the  licensee  from  a
 14    payor  financial  institution,  the  licensee  shall have the right to collect
 15    charges authorized by section 28-22-105, Idaho Code, provided such charges are
 16    disclosed in the loan agreement.  A licensee may not charge treble damages. If
 17    the borrower's obligation is assigned to any third party for  collection,  the
 18    provisions of this section shall apply to such third party collector.
 19        (4)  A  licensee  shall  not threaten a borrower with criminal action as a
 20    result of any payment deficit.
 21        (5)  No licensee shall engage in unfair or deceptive  acts,  practices  or
 22    advertising in the conduct of a payday loan business.
 23        (6)  A licensee may renew a payday loan no more than three (3) consecutive
 24    times,  after which the payday loan shall be repaid in full by the borrower. A
 25    borrower may enter into a new loan transaction with the licensee at  any  time
 26    after  a  prior  loan  to  the  borrower  is  completed.  A  loan secured by a
 27    borrower's check is completed when the check is presented or deposited by  the
 28    licensee  or  redeemed by the borrower pursuant to section 28-46-412(6), Idaho
 29    Code.
 30        (7)  Other than a borrower's check in a transaction  pursuant  to  section
 31    28-46-412(6),  Idaho  Code, a licensee shall not accept any property, title to
 32    property, or other evidence of ownership as collateral for a payday loan.
 33        (8)  A licensee may conduct other business at a location where it  engages
 34    in  payday lending unless it carries on such other business for the purpose of
 35    evading or violating the provisions of this act.
 36        (9)  A borrower may rescind the payday loan at no cost at any  time  prior
 37    to  the  close of business on the next business day following the day on which
 38    the payday loan was made by paying the principal amount of  the  loan  to  the
 39    licensee in cash or other immediately available funds.

Statement of Purpose / Fiscal Impact



                       STATEMENT OF PURPOSE
                             RS 12931
The purpose of the proposed payday loan legislation is to define
and codify the preferred payday lending business practices in the
State of Idaho.  The act gives the Department of Finance
additional licensing and regulatory authority over payday
lenders.  It gives borrowers the right to rescind a loan at no
cost prior to the end of the following business day.  The act
prohibits onerous collection practices by both the licensee and
its third party collector and prohibits the acceptance of
collateral other than the post-dated check.  Finally, the act
defines the additional disclosures that must be made to more
clearly describe the payday loan and its uses for borrowers.


                          FISCAL IMPACT

None

Contact
Name: Patrick J. Sullivan 
Phone: 208/344-9514




STATEMENT OF PURPOSE/FISCAL NOTE                     H 206