The text of Engrossed 2009 Assembly Bill 447, as passed by the assembly on
February 16, 2010, consists of the following documents adopted in the assembly on
February 16, 2010: Assembly Substitute Amendment 1 as affected by Assembly
Amendment 2. The text also includes the February 10, 2010, chief clerk's correction
to the substitute amendment.

Under current law, a lender other than a bank, savings bank, savings and loan
association, or credit union generally must obtain a license from the Division of
Banking (division) in the Department of Financial Institutions (DFI) to assess a

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finance charge greater than 18 percent per year. This type of lender is generally
referred to as a "licensed lender." Current law also contains numerous provisions
regulating consumer loans, which are generally loans of $25,000 or less made to
individuals for personal, family, or household purposes.

This bill prohibits a licensed lender from making or offering a motor vehicle title
loan. The bill defines "motor vehicle title loan" as a loan of $25,000 or less to a
borrower that is, or is to be, secured by a nonpurchase money security interest in the
borrower's motor vehicle. Under the bill, a "borrower" is an individual who obtains
or seeks to obtain a motor vehicle title loan for personal, family, or household
purposes.

This bill also creates certain requirements applicable to payday loan
transactions. Under the bill, a "payday loan provider" is a licensed lender that makes
payday loans. A "payday loan" is a transaction between an individual with an
account at a financial establishment and the payday loan provider in which the
provider agrees to either: 1) accept from the individual one or more checks, hold the
checks for a period of time before negotiating them, and, before negotiating the
checks, loan the individual an agreed amount for a term of 90 days or less; or 2) accept
the individual's authorization to initiate one or more electronic fund transfers (EFTs)
from the individual's account, wait for a period of time before initiating the EFTs,
and, before initiating the EFTs, loan the individual an agreed amount for a term of
90 days or less. The foregoing definitions apply regardless of whether a payday loan
provider is physically located in this state.

The bill imposes certain restrictions on payday loans. The bill prohibits a
payday loan provider from making a payday loan that exceeds, in principal amount,
interest, and all other fees and charges, $600 or 35 percent of the applicant's gross
biweekly income, whichever is less. The bill does not otherwise affect the amount of
interest that a payday loan provider charges, as long as the provider complies with
the foregoing prohibition. In addition, the bill prohibits a payday loan provider from
making a payday loan to an applicant who is liable for repayment on a payday loan
made by another payday loan provider. A payday loan provider also may not make
a payday loan if less than 24 hours have elapsed since the applicant repaid another
payday loan in full or, if certain repayment requirements that are described below
apply, less than one pay period of an applicant has elapsed since the applicant repaid
the loan in full under those requirements. The bill also prohibits a payday loan
provider from rolling over a payday loan that it has made to an individual. The bill
defines "roll over" as the refinancing, renewal, amendment, or extension of a payday
loan beyond its original maturity date, including the consolidation of payday loans
and any transaction in which a payday loan is repaid with the proceeds of another
payday loan made by the same payday loan provider.

In addition, the bill provides that a payday loan may not accrue interest after
the loan maturity date and may not include any penalty arising from the customer's
prepayment, default, or late payment except that a payday loan provider may charge
a fee not to exceed $15 if the customer's payment method is dishonored for
insufficient funds. A payday loan provider may present a customer's check for
payment, or initiate an EFT from the customer's account, only once. A payday loan

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provider may not accept from a customer a check or authorization to initiate an EFT
if the amount of the check or authorization exceeds the limit for principal, interest,
and fees and charges described above. In addition, a customer has a right to rescind
a payday loan, without incurring any fee, by returning the payday loan proceeds to
the payday loan provider by the close of business on the next business day after the
payday loan is made or by 5 p.m. on the next business day, if the place of business
is open 24 hours. Also, if a customer fails to repay a payday loan in full at the end
of the loan term, the payday loan provider must offer the customer the opportunity
to repay the outstanding balance in four equal installments with due dates
coinciding with the customer's pay period schedule. However, if a payday loan
provider makes such an offer to a customer, then, for 12 months following the offer,
no payday loan provider, including the payday loan provider making the offer, is
required to make another offer to the customer. A payday loan provider may not
impose any penalty on a customer who repays a loan in such a manner.

The bill also requires the division to develop and administer a database that
provides payday loan providers with real-time access, through an Internet
connection, to all payday loan information necessary for payday loan providers to
comply with the requirements of the bill. The division is also allowed to contract for
the development or administration of the database. The database must assign a
unique identification number for each customer that must be used each time the
customer enters into a payday loan transaction. Customer identification numbers
may not be based on social security numbers. Each time that a payday loan provider
enters into a payday loan transaction with a customer, the payday loan provider
must submit certain information about the customer and the loan to the database.
Also, a payday loan provider must submit information when a repayment offer
described above is made or a payday loan is paid in full. The division must, by rule,
impose a fee each time a payday loan provider submits data to the database. DFI
must use the fees to pay for the development and administration of the database and
to promote financial literacy. The bill allows a payday loan provider to rely on the
information contained in the database as accurate, and provides that a payday loan
provider is not subject to any penalty or liability for relying on inaccurate
information contained in the database. In addition, information maintained in the
database is not subject to inspection or copying under the open records law. Also, if
the division contracts for development or administration of the database, the
contract must ensure the confidentiality of information in the database.

The bill also does the following:

1. Requires a payday loan provider, before entering into a payday loan, to
disclose to the applicant the total amount of all fees and costs, in dollars, and the
annual percentage rate, to be paid by the applicant assuming that the loan is paid
in full at the end of the loan term and to make other disclosures regarding the
requirements of this bill.

2. Requires the division to develop written materials about payday loans and
the payday loan industry. A payday loan provider must provider the materials to an
applicant when making the disclosures described above.

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3. Requires payday loan providers to make annual reports about their business
to the division.

4. Prohibits a payday loan provider or database contractor from selling or, with
certain exceptions, providing to any person information about customers and payday
loans made to customers.

5. Allows a customer to bring an action against a payday loan provider who
makes a payday loan that violates the bill. In such an action, the customer may
obtain an amount equal to twice the interest, fees, and charges charged for the loan,
or the actual damages, whichever is greater, as well as costs and attorney fees.

6. Provides that whoever violates the bill is subject to a criminal fine of not less
than $500 nor more than $1,000, imprisonment for not more than 6 months, or both.

7. Requires any licensed lender, upon making a loan for a term of more than
90 days, to report the loan to a credit reporting agency, which is referred to as a
consumer reporting agency under federal law.

8. Prohibits a licensed lender from requiring a schedule of payments by a
borrower under which: 1) any one payment is not equal or substantially equal to all
other payments; or 2) the intervals between any consecutive payments differ
substantially.