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S1321.......................................by COMMERCE AND HUMAN RESOURCES
COMMERCIAL TRANSACTIONS - Amends, repeals and adds to existing law relating
to commercial transactions to revise the list of activities that constitute
a sale, loan or modification of a sale or loan; to revise a definition; to
authorize the director of the Department of Finance to issue certain orders
with respect to unconscionable agreements or fraudulent or unconscionable
conduct; and to strike a prohibition against imposition of certain
statutory civil penalties in regard to unconscionable agreements or
fraudulent or unconscionable conduct; and to provide for the relationship
to other laws.
01/23 Senate intro - 1st rdg - to printing
01/24 Rpt prt - to Com/HuRes
|||| LEGISLATURE OF THE STATE OF IDAHO ||||
Fifty-sixth Legislature Second Regular Session - 2002
IN THE SENATE
SENATE BILL NO. 1321
BY COMMERCE AND HUMAN RESOURCES COMMITTEE
1 AN ACT
2 RELATING TO COMMERCIAL TRANSACTIONS; AMENDING SECTION 28-41-201, IDAHO CODE,
3 TO REVISE THE LIST OF ACTIVITIES THAT CONSTITUTE A SALE, LOAN, OR MODIFI-
4 CATION OF A SALE OR LOAN FOR PURPOSES OF APPLICATION OF CHAPTER 41, TITLE
5 28, IDAHO CODE; AMENDING SECTION 28-41-302, IDAHO CODE, TO REVISE A DEFI-
6 NITION; AMENDING SECTION 28-45-201, IDAHO CODE, TO PROVIDE A CORRECT CODE
7 REFERENCE; AMENDING SECTION 28-46-108, IDAHO CODE, TO AUTHORIZE THE DIREC-
8 TOR OF THE DEPARTMENT OF FINANCE TO ISSUE CERTAIN ORDERS WITH RESPECT TO
9 UNCONSCIONABLE AGREEMENTS OR FRAUDULENT OR UNCONSCIONABLE CONDUCT; AMEND-
10 ING SECTION 28-46-113, IDAHO CODE, TO STRIKE A PROHIBITION AGAINST IMPOSI-
11 TION OF CERTAIN STATUTORY CIVIL PENALTIES IN REGARD TO UNCONSCIONABLE
12 AGREEMENTS OR FRAUDULENT OR UNCONSCIONABLE CONDUCT AND TO MAKE A TECHNICAL
13 CORRECTION; AMENDING THE HEADING TO CHAPTER 49, TITLE 28, IDAHO CODE;
14 REPEALING SECTION 28-49-101, IDAHO CODE; AMENDING CHAPTER 49, TITLE 28,
15 IDAHO CODE, BY THE ADDITION OF A NEW SECTION 28-49-101, IDAHO CODE, TO
16 PROVIDE FOR THE RELATIONSHIP TO OTHER LAWS; AND REPEALING SECTIONS
17 28-49-102, 28-49-103, 28-49-104 AND 28-49-106, IDAHO CODE.
18 Be It Enacted by the Legislature of the State of Idaho:
19 SECTION 1. That Section 28-41-201, Idaho Code, be, and the same is hereby
20 amended to read as follows:
21 28-41-201. TERRITORIAL APPLICATION. (1) Except as otherwise provided in
22 this section, this act applies to sales and loans made in this state and to
23 modifications, including refinancings, consolidations, and deferrals, made in
24 this state, of sales and loans, wherever made. For purposes of this act a
25 sale, loan, or modification of a sale or loan is made in this state if:
26 (a) A sale or modification of a sale agreement is made in this state if
27 the buyer's written agreement evidencing the obligation or offer to pur-
28 chase or to modify of the consumer is received by the seller creditor in
29 this state; and or
30 (b) A loan or modification of a loan agreement is made in consumer who is
31 a resident of this state if a writing signed by the debtor and evidencing
32 the debt is received by the lender in this state enters into the transac-
33 tion with a creditor who has solicited or advertised in this state by any
34 means including, but not limited to, mail, brochure, telephone, print,
35 radio, television, internet or any other electronic means.
36 (2) With respect to sales made pursuant to open-end credit, this act
37 applies if the buyer's communication or indication of his intention to estab-
38 lish the account is received by the seller in this state. If no communication
39 or indication of intention is given by the buyer before the first sale, this
40 act applies if the seller's communication notifying the buyer of the privilege
41 of using the account is mailed or personally delivered in this state Notwith-
42 standing subsection (1)(b) of this section, unless made subject to this act by
43 agreement of the parties, a sale, loan, or modification of a sale or loan is
2
1 not made in this state if a resident of this state enters into the transaction
2 while physically present in another state.
3 (3) With respect to loans made pursuant to a lender credit card or simi-
4 lar arrangement, this act applies if the debtor's communication or indication
5 of his intention to establish the arrangement with the lender is received by
6 the lender in this state. If no communication or indication of intention is
7 given by the debtor before the first loan, this act applies if the lender's
8 communication notifying the debtor of the privilege of using the arrangement
9 is mailed or personally delivered in this state.
10 (4) The part on limitations on creditors' remedies, part 1 of the chapter
11 on remedies and penalties, chapter 45, applies to actions or other proceedings
12 brought in this state to enforce rights arising from regulated credit sales or
13 regulated loans, or extortionate extensions of credit, wherever made.
14 (54) If a regulated credit sale or regulated loan, or modification
15 thereof, is made in another state to a person who is a resident of this state
16 when the sale, loan, or modification is made, the following provisions apply
17 as though the transaction occurred in this state:
18 (a) A seller, lender, or assignee of his rights, may not collect charges
19 through actions or other proceedings in excess of those permitted by the
20 chapter on finance charges and related provisions; and
21 (b) A seller, lender, or assignee of his rights, may not enforce rights
22 against the buyer or debtor, with respect to the provisions of agreements
23 which violate the provisions on limitations on agreements and practices,
24 part 3 of chapter 43, title 28, Idaho Code.
25 (65) Except as provided in subsection (43), a sale, loan, or modification
26 thereof, made in another state to a person who was not a resident of this
27 state when the sale, loan or modification was made is valid and enforceable
28 according to its terms to the extent that it is valid and enforceable under
29 the laws of the state applicable to the transaction.
30 (76) For the purposes of this act, the residence of a buyer or debtor is
31 the address given by him as his residence in any writing signed by him in con-
32 nection with a credit transaction. Until he notifies the creditor of a new or
33 different address, the given address is presumed to be unchanged.
34 (87) Notwithstanding other provisions of this section:
35 (a) Except as provided in subsection (43), this act does not apply if the
36 buyer or debtor is not a resident of this state at the time of a credit
37 transaction and the parties then agree that the law of his residence
38 applies; and
39 (b) This act applies if the buyer or debtor is a resident of this state
40 at the time of a credit transaction and the parties then agree that the
41 law of this state applies.
42 (98) Except as provided in subsection (87), the following agreements by a
43 buyer or debtor are invalid with respect to regulated credit sales, regulated
44 loans, or modifications thereof, to which this act applies:
45 (a) That the law of another state shall apply;
46 (b) That the buyer or debtor consents to the jurisdiction of another
47 state; and
48 (c) That fixes venue.
49 (109) The following provisions of this act specify the applicable law
50 governing certain cases:
51 (a) Applicability, section 28-46-102, Idaho Code, of the part on powers
52 and functions of administrator, part 1, of the chapter on administration,
53 chapter 46, title 28, Idaho Code; and
54 (b) Applicability, section 28-46-201, Idaho Code, of the part on notifi-
55 cation and fees, part 2, of the chapter on administration, chapter 46,
3
1 title 28, Idaho Code.
2 SECTION 2. That Section 28-41-302, Idaho Code, be, and the same is hereby
3 amended to read as follows:
4 28-41-302. FEDERAL CONSUMER CREDIT PROTECTION ACT -- DEFINED. In this act
5 "Federal Consumer Credit Protection Act" means the consumer credit protection
6 act, Public Law 90-321; 82 Stat. 146, as amended, including, without limita-
7 tion, as amended by the Truth-in-Lending Simplification and Reform Act, Title
8 VI of Public Law 96-221, and as the same may be further amended to and includ-
9 ing January 1, 2002, or a subsequent date if so defined by administrative
10 rule, and includes regulations issued pursuant to that act, as it has been so
11 amended by the Truth-in-Lending Simplification and Reform Act and as the same
12 may be further amended to and including January 1, 2002, or a subsequent date
13 if so defined by administrative rule.
14 SECTION 3. That Section 28-45-201, Idaho Code, be, and the same is hereby
15 amended to read as follows:
16 28-45-201. EFFECT OF VIOLATIONS ON RIGHTS OF PARTIES. (1) If a creditor
17 has violated any provision of this act applying to collection of an excess
18 charge or amount or enforcement of rights, subsection (54) of section
19 28-41-201, Idaho Code, authority to make regulated consumer loans, section
20 28-46-301, Idaho Code, restrictions on interests in land as security, section
21 28-43-309, Idaho Code, limitations on the schedule of payments or loan terms
22 for regulated consumer loans, section 28-43-310, Idaho Code, attorney's fees,
23 section 28-43-311, Idaho Code, receipts, statements of account, and evidences
24 of payment, section 28-43-204, Idaho Code, form of insurance premium loan
25 agreement, section 28-43-205, Idaho Code, security in sales, section
26 28-43-301, Idaho Code, no assignments of earnings, section 28-43-304, Idaho
27 Code, certain negotiable instruments prohibited, section 28-43-306, Idaho
28 Code, referral sales, section 28-43-308, Idaho Code, limitations on default
29 charges, section 28-45-301, Idaho Code, assignees subject to claims and
30 defenses, subsection (3) of section 28-45-302, Idaho Code, or assurance of
31 discontinuance, section 28-46-109, Idaho Code, the debtor has a cause of
32 action to recover actual damages and also a right in an action other than a
33 class action, to recover from the person violating this act a penalty in an
34 amount determined by the court not less than one hundred dollars ($100) nor
35 more than one thousand dollars ($1,000). With respect to violations arising
36 from consumer credit sales or consumer loans made pursuant to open-end credit,
37 no action pursuant to this subsection may be brought more than two (2) years
38 after the violations occurred. With respect to violations arising from other
39 regulated consumer credit transactions, no action pursuant to this subsection
40 may be brought more than one (1) year after the scheduled or accelerated matu-
41 rity of the debt.
42 (2) A debtor is not obligated to pay a charge in excess of that allowed
43 by this act and has a right of refund of any excess charge paid. A refund may
44 be made by reducing the debtor's obligation by the amount of the excess
45 charge. If the debtor has paid an amount in excess of the lawful obligation
46 under the agreement, the debtor may recover the excess amount from the person
47 who made the excess charge or from an assignee of that person's rights who
48 undertakes direct collection of payments from or enforcement of rights against
49 debtors arising from the debt.
50 (3) If a creditor has contracted for or received a charge in excess of
4
1 that allowed by this act, or if a debtor is entitled to a refund and a person
2 liable to the debtor refuses to make a refund within a reasonable time after
3 demand, the debtor may recover from the creditor or the person liable in an
4 action other than a class action a penalty in an amount determined by the
5 court not less than one hundred dollars ($100) nor more than one thousand dol-
6 lars ($1,000). With respect to excess charges arising from consumer credit
7 sales or consumer loans made pursuant to open-end credit, no action pursuant
8 to this subsection may be brought more than two (2) years after the violation
9 or passage of a reasonable time for refund occurs. With respect to excess
10 charges arising from other regulated consumer credit transactions, no action
11 pursuant to this subsection may be brought more than one (1) year after the
12 scheduled or accelerated maturity of the debt. For purposes of this subsec-
13 tion, a reasonable time is presumed to be thirty (30) days.
14 (4) Except as otherwise provided, a violation of this act does not impair
15 rights on a debt.
16 (5) If an employer discharges an employee in violation of the provisions
17 prohibiting discharge, section 28-45-105, Idaho Code, the employee within
18 ninety (90) days may bring a civil action for recovery of wages lost as a
19 result of the violation and for an order requiring reinstatement of the
20 employee. Damages recoverable shall not exceed lost wages for six (6) weeks.
21 (6) A creditor is not liable for a penalty under subsection (1) or (3) of
22 this section if he notifies the debtor of a violation before the creditor
23 receives from the debtor written notice of the violation or the debtor has
24 brought an action under this section, and the creditor corrects the violation
25 within forty-five (45) days after notifying the debtor. If the violation con-
26 sists of a prohibited agreement, giving the debtor a corrected copy of the
27 writing containing the violation is sufficient notification and correction. If
28 the violation consists of an excess charge, correction shall be made by an
29 adjustment or refund. The administrator and any official or agency of this
30 state having supervisory authority over a supervised financial organization
31 shall give prompt notice to a creditor of any violation discovered pursuant to
32 an examination or investigation of the transactions, business, records, and
33 acts of the creditor, sections 28-46-305, 28-46-105 and 28-46-106, Idaho Code.
34 (7) A creditor may not be held liable in an action brought under this
35 section for a violation of this act if the creditor shows by a preponderance
36 of evidence that the violation was not intentional and resulted from a bona
37 fide error, notwithstanding the maintenance of procedures reasonably adapted
38 to avoid the error.
39 (8) In an action in which it is found that a creditor has violated this
40 act, the court shall award to the debtor the costs of the action and his
41 attorney's fees. In determining the attorney's fees, the amount of the recov-
42 ery on behalf of the debtor is not controlling.
43 SECTION 4. That Section 28-46-108, Idaho Code, be, and the same is hereby
44 amended to read as follows:
45 28-46-108. ADMINISTRATIVE ENFORCEMENT ORDERS. (1) After notice and hear-
46 ing the administrator may order a creditor or a person acting in his behalf to
47 cease and desist from violating this act. A respondent aggrieved by an order
48 of the administrator may obtain judicial review of the order and the adminis-
49 trator may obtain an order of the court for enforcement of his order in the
50 district court. The proceeding for review or enforcement is initiated by fil-
51 ing a petition in the court. Copies of the petition shall be served upon all
52 parties of record.
53 (2) Within thirty (30) days after service of the petition for review upon
5
1 the administrator, or within any further time the court allows, the adminis-
2 trator shall transmit to the court the original or a certified copy of the
3 entire record upon which the order is based, including any transcript of tes-
4 timony, which need not be printed. By stipulation of all parties to the review
5 proceeding, the record may be shortened. After hearing, the court may:
6 (a) Reverse or modify the order if the findings of fact of the adminis-
7 trator are clearly erroneous in view of the reliable, probative, and sub-
8 stantial evidence on the whole record;
9 (b) Grant temporary relief or restraining order it deems just; and
10 (c) Enter an order enforcing, modifying and enforcing as modified, or
11 setting aside in whole or in part the order of the administrator, or
12 remanding the case to the administrator for further proceedings.
13 (3) An objection not urged at the hearing shall not be considered by the
14 court unless the failure to urge the objection is excused for good cause
15 shown. A party may move the court to remand the case to the administrator in
16 the interest of justice for the purpose of adducing additional specified and
17 material evidence and seeking findings thereon upon good cause shown for the
18 failure to adduce this evidence before the administrator.
19 (4) The jurisdiction of the court shall be exclusive and its final judg-
20 ment or decree is subject to review by the supreme court in the same manner
21 and form and with the same effect as in appeals from a final judgment or
22 decree. The administrator's copy of the testimony shall be available at rea-
23 sonable times to all parties for examination without cost.
24 (5) A proceeding for review under this section shall be initiated within
25 thirty (30) days after a copy of the order of the administrator is received.
26 If no proceeding is so initiated, the administrator may obtain an order of the
27 court for enforcement of his order upon showing that his order was issued in
28 compliance with this section, that no proceeding for review was initiated
29 within thirty (30) days after a copy of the order was received, and that the
30 respondent is subject to the jurisdiction of the court.
31 (6) With respect to unconscionable agreements or fraudulent or unconscio-
32 nable conduct by the respondent, the administrator may not issue an order pur-
33 suant to this section, but including a cease and desist order, and may bring a
34 civil action for an injunction, section 28-46-111, Idaho Code, or any other
35 action which the administrator is authorized to bring under this act.
36 SECTION 5. That Section 28-46-113, Idaho Code, be, and the same is hereby
37 amended to read as follows:
38 28-46-113. CIVIL ACTIONS BY ADMINISTRATOR. (1) After demand, the adminis-
39 trator may bring a civil action against a creditor to recover actual damages
40 sustained and excess charges paid by one (1) or more debtors who have a right
41 to recover explicitly granted by this act. In a civil action under this sub-
42 section, penalties may not be recovered by the administrator. The court shall
43 order amounts recovered under this subsection to be paid to each debtor or set
44 off against his obligation. A debtor's action, except a class action, takes
45 precedence over a prior or subsequent action by the administrator with respect
46 to the claim of that debtor. A debtor's class action takes precedence over a
47 subsequent action by the administrator with respect to claims common to both
48 actions, but the administrator may intervene. An administrator's action on
49 behalf of a class of debtors takes precedence over a debtor's subsequent class
50 action with respect to claims common to both actions. Whenever an action takes
51 precedence over another action under this subsection, the latter action may be
52 stayed to the extent appropriate while the precedent action is pending and
53 dismissed if the precedent action is dismissed with prejudice or results in a
6
1 final judgment granting or denying the claim asserted in the precedent action.
2 A defense available to a creditor in a civil action brought by a debtor is
3 available to him in a civil action brought under this subsection.
4 (2) The administrator may bring a civil action against a creditor or a
5 person acting in his behalf to recover a civil penalty of no more than five
6 thousand dollars ($5,000) for repeatedly and intentionally violating this act.
7 A civil penalty pursuant to this subsection may not be imposed for a violation
8 of this act occurring more than two (2) years before the action is brought. or
9 for making unconscionable agreements or engaging in a course of fraudulent or
10 unconscionable conduct.
11 (3) The administrator may bring a civil action against a creditor for
12 failure to file notification in accordance with the provisions on notifica-
13 tion, section 28-46-202, Idaho Code, or to pay fees in accordance with the
14 provisions on fees, section 28-46-203, Idaho Code, to recover the fees the
15 defendant has failed to pay and a civil penalty in an amount determined by the
16 court not exceeding the greater of three (3) times the amount of fees the
17 defendant has failed to pay or one thousand dollars ($1,000), plus the
18 administrator's costs and attorney's fees.
19 SECTION 6. That the heading for Chapter 49, Title 28, Idaho Code, be, and
20 the same is hereby amended to read as follows:
21 CHAPTER 49
22 RELATIONSHIP TO OTHER LAWS, EFFECTIVE DATE, REPEALER,
23 AND OVERRIDE OF FEDERAL PREEMPTION
24 SECTION 7. That Section 28-49-101, Idaho Code, be, and the same is hereby
25 repealed.
26 SECTION 8. That Chapter 49, Title 28, Idaho Code, be, and the same is
27 hereby amended by the addition thereto of a NEW SECTION, to be known and des-
28 ignated as Section 28-49-101, Idaho Code, and to read as follows:
29 28-49-101. RELATIONSHIP TO OTHER LAWS. (1) All political subdivisions of
30 this state shall be prohibited from enacting and enforcing ordinances, resolu-
31 tions and regulations pertaining to the financial or lending activities of
32 persons who:
33 (a) Are subject to the jurisdiction of the department of finance of the
34 state of Idaho, including activities subject to this chapter;
35 (b) Are subject to the jurisdiction or regulatory supervision of the
36 board of governors of the federal reserve system, the office of the comp-
37 troller of the currency, the office of thrift supervision, the national
38 credit union administration, the federal deposit insurance corporation,
39 the federal trade commission or the United States department of housing
40 and urban development; or
41 (c) That originate, purchase, sell, assign, securitize or service prop-
42 erty interests or obligations created by financial transactions or loans
43 made, executed or originated by persons referred to in subsection (1)(a)
44 or (1)(b) of this section or assist or facilitate such transactions.
45 (2) The requirements of this section shall apply to all ordinances, reso-
46 lutions and regulations pertaining to financial or lending activities, includ-
47 ing any ordinances, resolutions or regulations disqualifying persons from
48 doing business with a political subdivision based upon financial or lending
49 activities or imposing reporting requirements or any other obligations upon
50 persons regarding financial or lending activities.
7
1 SECTION 9. That Sections 28-49-102, 28-49-103, 28-49-104 and 28-49-106,
2 Idaho Code, be, and the same are hereby repealed.
STATEMENT OF PURPOSE
RS 11419 C#2
The purposes of this legislation are (1) to expand the
jurisdiction of the Idaho Credit Code to lenders who solicit or
advertise in Idaho, thereby providing the Code’s protections to
Idaho residents who enter into loans with out-of-state companies,
(2) enable the Department to issue Cease and Desist Orders to
address unconscionable conduct, and (3) enable the Department
to request fines for unconscionable conduct in actions brought
in District Court.
FISCAL IMPACT
No fiscal impact.
CONTACT
Name: Mary E. Hughes
Agency: Finance, Dept. of
Phone: 208-332-8060
Statementof Purpose/Fiscal Impact S 1321