2002 Legislation
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SENATE BILL NO. 1321 – Commercial trnsactn, sale/loan/etc

SENATE BILL NO. 1321

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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

Bill Text


                                                                        
                                                                        
  ||||              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 / Fiscal Impact


	                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