2006 Legislation
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HOUSE BILL NO. 784 – Title loan act


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Bill Status

H0784......................................................by STATE AFFAIRS
TITLE LOANS - Adds to existing law relating to title loans to provide a
short title; to define terms; to require licensure; to set forth
requirements applicable to title loan agreements; to provide for
disclosure; to provide for the renewal of title loan agreements; to set
forth default provisions; to prohibit specified actions; and to provide an
03/07    House intro - 1st rdg - to printing
03/08    Rpt prt - to Bus
03/14    Rpt out - rec d/p - to 2nd rdg
03/15    2nd rdg - to 3rd rdg
03/16    3rd rdg - PASSED - 66-0-4
      AYES -- Anderson, Andrus, Barraclough, Barrett, Bayer, Bedke, Bell,
      Bilbao, Black, Block, Boe, Bolz, Brackett, Bradford, Cannon,
      Chadderdon, Clark, Collins, Deal, Denney, Edmunson, Ellsworth,
      Eskridge, Field(18), Field(23), Garrett, Hart, Harwood, Henbest,
      Henderson, Jaquet, Kemp, Lake, LeFavour, Loertscher, Martinez,
      Mathews, McGeachin, McKague, Miller, Mitchell, Moyle, Nielsen,
      Nonini, Pasley-Stuart, Pence, Raybould, Ring, Ringo, Roberts, Rusche,
      Rydalch, Sali, Sayler, Schaefer, Shepherd(2), Shepherd(8), Shirley,
      Skippen, Smith(30), Smith(24), Smylie, Stevenson, Trail, Wills, Mr.
      NAYS -- None
      Absent and excused -- Bastian, Crow, Snodgrass, Wood
    Floor Sponsor - Black
    Title apvd - to Senate
03/17    Senate intro - 1st rdg - to Com/HuRes
03/24    Rpt out - rec d/p - to 2nd rdg
03/27    2nd rdg - to 3rd rdg
03/28    3rd rdg - PASSED - 34-0-1
      AYES -- Andreason, Brandt, Broadsword, Bunderson, Burkett(Clark),
      Burtenshaw, Cameron, Coiner, Compton, Corder, Darrington, Davis,
      Fulcher, Gannon, Geddes, Goedde, Hill, Jorgenson, Kelly, Keough,
      Langhorst, Little, Lodge, Malepeai, Marley, McGee, McKenzie, Pearce,
      Richardson, Schroeder, Stegner, Stennett, Werk, Williams
      NAYS -- None
      Absent and excused -- Sweet
    Floor Sponsor - Goedde
    Title apvd - to House
03/29    To enrol
03/30    Rpt enrol - Sp signed
03/31    Pres signed - To Governor
03/31    Governor signed
         Session Law Chapter 323
         Effective: 07/01/06

Bill Text

  ]]]]              LEGISLATURE OF THE STATE OF IDAHO             ]]]]
 Fifty-eighth Legislature                   Second Regular Session - 2006
                              IN THE HOUSE OF REPRESENTATIVES
                                     HOUSE BILL NO. 784
                                 BY STATE AFFAIRS COMMITTEE
  1                                        AN ACT
  8    Be It Enacted by the Legislature of the State of Idaho:
  9        SECTION  1.  That  Chapter  46,  Title 28, Idaho Code, be, and the same is
 10    hereby amended by the addition thereto of a NEW PART, to be known  and  desig-
 11    nated as Part 5, Chapter 46, Title 28, Idaho Code, and to read as follows:
 12                                        PART 5
 13                                    TITLE LOAN ACT
 14        28-46-501.  SHORT  TITLE. This part shall be known and may be cited as the
 15    "Title Loan Act."
 16        28-46-502.  DEFINITIONS. As used in this part, unless the  context  other-
 17    wise requires:
 18        (1)  "Title  lender"  means a regulated lender authorized pursuant to this
 19    part to make title loans.
 20        (2)  "Title loan" means a loan for a consumer purpose that is secured by a
 21    nonpurchase money security interest in titled personal property  and  that  is
 22    scheduled  to  be  repaid  in  either  a  single  installment  or  in multiple
 23    installments that are not fully amortized. Title loans are regulated  consumer
 24    loans  and,  except  as otherwise provided in this part, all provisions of the
 25    Idaho credit code relating to regulated consumer loans apply  to  title  loans
 26    and to persons engaged in the business of making title loans.
 27        (3)  "Title  loan  agreement"  means  a  written agreement whereby a title
 28    lender agrees to make a title loan to a debtor, and the debtor agrees to  give
 29    the  title lender a security interest in unencumbered titled personal property
 30    owned by the debtor. Except as otherwise provided in this part, all provisions
 31    of chapter 9, title 28, Idaho Code,  apply  to  title  loans  and  to  persons
 32    engaged in the business of making title loans.
 33        (4)  "Titled  personal property" means any motor vehicle, the ownership of
 34    which is evidenced and delineated by a state issued certificate of title,  but
 35    does not include a motor home, mobile home or manufactured home.
 36        28-46-503.  LICENSE  REQUIRED.  (1) No person shall engage in the business
 37    of making title loans without having first obtained a license from the  admin-
 38    istrator  pursuant  to  this  chapter authorizing the person to make regulated
 39    consumer loans.
 40        (2)  Any title loan made without first having obtained a license is  void,
  1    in  which  case  the  person making the loan forfeits the right to collect any
  2    moneys, including principal, interest, and any other fee paid by the debtor in
  3    connection with the title loan agreement. The person  making  the  title  loan
  4    shall  release  its  security interest in the titled personal property used as
  5    security for the title loan and shall return to the debtor:
  6        (a)  The certificate of title for such titled personal property;
  7        (b)  Such titled personal property if the person making the loan took pos-
  8        session of such property;
  9        (c)  The fair market value of such titled personal property if the  person
 10        making the loan took possession of such property and is not able to return
 11        such property; and
 12        (d)  All principal, interest, and any other fees paid by the debtor.
 13        28-46-504.  TITLE  LOAN  AGREEMENTS.  (1)  Every title lender shall keep a
 14    numbered record of each and every title loan agreement executed by  the  title
 15    lender  and  debtor.  Such  record, as well as the title loan agreement, shall
 16    include the following information:
 17        (a)  The make, model and year of the titled personal property;
 18        (b)  The vehicle identification number, or other comparable identification
 19        number, along with the license plate number, if applicable, of the  titled
 20        personal property;
 21        (c)  The name, residential address and date of birth of the debtor;
 22        (d)  The date the title loan agreement is executed by the title lender and
 23        the debtor; and
 24        (e)  The maturity date of the title loan agreement.
 25        (2)  The  following  information  shall  also be printed on the title loan
 26    agreement:
 27        (a)  The name and physical address of the title loan office;
 28        (b)  In not less than twelve (12) point bold type, the name and address of
 29        the administrator as well as a telephone number  to  which  consumers  may
 30        address complaints;
 31        (c)  The  following statement in not less than twelve (12) point bold type
 32        and in all capitalized letters:
 33             "(1)  This loan is not intended to meet long-term financial needs.
 34             (2)  You should use this loan only to meet short-term cash needs.
 35             (3)  You will be required to pay additional interest and fees if  you
 36             renew this loan rather than pay the debt in full when due.
 37             (4)  This  loan  may  be  a higher interest loan. You should consider
 38             what other lower cost loans may be available to you.
 39             (5)  You are placing at risk your continued ownership of  the  titled
 40             personal property you are using as security for this loan.
 41             (6)  If you default under this loan the title lender may take posses-
 42             sion  of  the titled personal property used as security for this loan
 43             and sell the property in the manner provided by law.
 44             (7)  If you enter into a title loan agreement, you have a legal right
 45             of rescission. This means you may cancel your contract at no cost  to
 46             you  by  returning  the  money  you borrowed by the next business day
 47             after the date of your loan.
 48             (8)  If you believe that the title lender has violated the provisions
 49             of the Idaho Title Loan Act, you have the right  to  file  a  written
 50             complaint  with  the  Idaho  Department of Finance and the Department
 51             will investigate your complaint."
 52        (d)  The statement that "The debtor represents and warrants, to  the  best
 53        of the debtor's knowledge, that the titled personal property is not stolen
 54        and  has  no liens or encumbrances against it, the debtor has the right to
  1        enter into this transaction and will not apply for a duplicate certificate
  2        of title while the title loan agreement is in effect."
  3        (3)  The debtor shall sign the title loan agreement and shall be  provided
  4    with  a  copy of such agreement. The title loan agreement shall also be signed
  5    by the title lender or the title lender's employee or agent. If the debtor has
  6    been issued a social security number, the title lender shall keep on file  the
  7    social security number of the debtor.
  8        28-46-505.  DISCLOSURE.  (1)  Notwithstanding  the  provisions  of section
  9    28-46-103, Idaho Code, or any other law to the contrary,  in  accordance  with
 10    the  Idaho administrative procedure act, chapter 52, title 67, Idaho Code, the
 11    administrator may promulgate rules requiring each  title  lender  to  issue  a
 12    standardized consumer notification and disclosure form in compliance with fed-
 13    eral  truth-in-lending  laws  prior to entering into any title loan agreement.
 14    The required style, content and method of executing the form may be prescribed
 15    by the rule and shall be designed to ensure that the debtor, prior to entering
 16    into such agreement, receives and acknowledges an accurate and complete  noti-
 17    fication  and  disclosure  of  the itemized and total amounts of all interest,
 18    fees, charges and other costs that will or potentially could be imposed  as  a
 19    result of such agreement.
 20        (2)  A title lender shall conspicuously post in each licensed location the
 21    statements listed in section 28-46-504(2)(c), Idaho Code.
 22        28-46-506.  RENEWAL  OF  TITLE  LOAN AGREEMENTS. (1) Title loan agreements
 23    shall not exceed thirty (30) days in length. However, such agreements may pro-
 24    vide for renewals, which may occur automatically, unless one (1) of  the  fol-
 25    lowing has occurred:
 26        (a)  The  debtor  has paid all principal and finance charges due in accor-
 27        dance with the title loan agreement;
 28        (b)  The debtor has surrendered possession, title and all  other  interest
 29        in and to the titled personal property to the title lender; or
 30        (c)  The  title  lender  has notified the debtor in writing that the title
 31        loan agreement is not to be renewed.
 32        (2)  A debtor has the right to cancel the debtor's obligation to make pay-
 33    ments under a title loan agreement until the close of the  next  business  day
 34    after  the  day  when  the  debtor  signs a title loan agreement if the debtor
 35    returns the original check or cash to the location where the loan  was  origi-
 36    nated.  For the purpose of this section, "business day" means any day that the
 37    title loan office is open for business.
 38        (3)  Notwithstanding any provision of this part 5 to the contrary,  begin-
 39    ning  with the third renewal or continuation and at each successive renewal or
 40    continuation thereafter, the debtor shall be required to make a payment of  at
 41    least  ten percent (10%) of the principal amount of the original title loan in
 42    addition to any finance charges that are due. Finance charges due at each suc-
 43    cessive renewal or continuation shall be calculated on the outstanding princi-
 44    pal balance. Principal payments in excess of the ten  percent  (10%)  required
 45    principal  reduction shall be credited to the outstanding principal on the day
 46    received. If at the maturity of any renewal requiring a  principal  reduction,
 47    the  debtor has not made previous principal reductions adequate to satisfy the
 48    current required principal reduction, and the debtor cannot repay at least ten
 49    percent (10%) of the original principal balance and  any  outstanding  finance
 50    charges,  the  title  lender  may,  but  shall  not be obligated to, defer any
 51    required principal payment until a future date. No further finance charges may
 52    accrue on any such principal amount thus deferred.
 53        (4)  Within fourteen  (14)  days  after  a  title  loan  is  automatically
  1    renewed,  the  title  lender  shall  provide  the debtor written notice of the
  2    renewal either by personal delivery to the debtor or by deposit in the regular
  3    mail to the debtor's residential address listed in the title  loan  agreement.
  4    For  the  purpose  of this section, a renewal is any extension of a title loan
  5    for an additional period without any change in the terms  of  the  title  loan
  6    other than extension of the maturity date and a reduction in principal.
  7        28-46-507.  DEFAULT.  (1)  Before  exercising  any  of  its  rights upon a
  8    default by a debtor under a title loan agreement, the title lender shall  mail
  9    a "Notice to Cure Default" to the debtor at the debtor's last address shown in
 10    the  title  lender's  file,  notifying the debtor that the debtor has ten (10)
 11    days from the date of the notice in which to cure the default.
 12        (2)  If the debtor does not cure the default within the ten (10) days, the
 13    title lender may proceed to exercise its rights under  chapter  9,  title  28,
 14    Idaho  Code.  There shall be no further finance charges assessed to the debtor
 15    after the title lender has obtained possession of the  titled  personal  prop-
 16    erty.
 17        (3)  Upon  voluntary  surrender  of  the  titled personal property used as
 18    security for a title loan, the title lender shall have no obligation  to  send
 19    any "Notice to Cure Default" to the debtor.
 20        (4)  Title  lenders  may assess and collect reasonable expenses of collec-
 21    tion and enforcement as authorized by chapter 9, title 28, Idaho Code.
 22        28-46-508.  PROHIBITED ACTIONS. A title lender shall not:
 23        (1)  Enter into a title loan agreement with a person  less  than  eighteen
 24    (18) years of age, or with anyone who appears to be intoxicated;
 25        (2)  Make  any  agreement giving the title lender any recourse against the
 26    debtor other than the title lender's right to take possession  of  the  titled
 27    personal  property  and certificate of title upon the debtor's default, and to
 28    sell or otherwise dispose of the titled personal property in  accordance  with
 29    the  provisions  of  chapter  9, title 28, Idaho Code, except where the debtor
 30    prevented repossession of the vehicle, damaged or committed or permitted waste
 31    on the vehicle or committed fraud;
 32        (3)  Enter into a title loan  agreement  in  which  the  amount  of  money
 33    loaned,  when combined with the outstanding balance of other outstanding title
 34    loan agreements the debtor has with the same  lender  secured  by  any  single
 35    titled  personal  property,  exceeds  the  retail value of the titled personal
 36    property as determined by common motor vehicle appraisal guides;
 37        (4)  Accept any waiver, in writing or otherwise, of any right  or  protec-
 38    tion accorded a debtor under this chapter;
 39        (5)  Fail  to  exercise reasonable care to protect from loss or damage the
 40    certificate of title in the physical possession of the title lender;
 41        (6)  Purchase titled personal property used as security for a  title  loan
 42    made by the title lender;
 43        (7)  Enter  into a title loan agreement unless the debtor presents a clear
 44    title to titled personal property at the time that the loan is  made.  If  the
 45    title  lender  files a lien against such titled personal property without pos-
 46    session of a clear title to such property, the resulting lien shall be void;
 47        (8)  Capitalize or add any accrued interest or fee to the original princi-
 48    pal of the title loan agreement during any renewal of the agreement;
 49        (9)  Require a debtor to provide any additional guaranty as a condition to
 50    entering into a title loan agreement;
 51        (10) Use any device or agreement,  including  agreements  with  affiliated
 52    title  lenders, with the intent to obtain greater charges than otherwise would
 53    be authorized by this part; or
  1        (11) Violate the provisions of this part or any rule promulgated  pursuant
  2    thereto.
  3        28-46-509.  EXEMPTION.  The provisions of this part shall not apply to any
  4    person licensed or chartered under the laws of any  state  or  of  the  United
  5    States  as  a bank, savings and loan association, credit union, insurance com-
  6    pany, or industrial loan company. The terms "bank," "savings and loan associa-
  7    tion," "credit union," "insurance company" and "industrial loan company" shall
  8    include employees and agents of such organizations  as  well  as  wholly-owned
  9    subsidiaries  of such organizations, provided that the subsidiary is regularly
 10    examined by the chartering state or federal  agency  for  consumer  compliance
 11    purposes.

Statement of Purpose / Fiscal Impact

                     STATEMENT OF PURPOSE

                           RS 16210
  This legislation imposes additional regulation on title lenders. 
  Based on American Legislative Exchange Council (ALEC) model
  legislation, it establishes consumer protections by prohibiting
  inappropriate lending practices, requiring certain disclosures
  and limiting interest accruals on title loans.
                         FISCAL NOTE

  This legislation will have no impact on the general fund.

  Name:     Representative Max Black
  Phone:    (208) 332-1000
  STATEMENT OF PURPOSE/FISCAL NOTE                           H 784