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North Carolina Changes Retail Installment Sales Act Default Fee
On June 12, the General Assembly of North Carolina ratified Senate Bill 577, which amends the North Carolina Retail Installment Sales Act. Specifically, Senate Bill 577 modifies the late charge on an installment sale contract to be a flat fee of fifteen dollars, which is an increase from the prior limit of the lesser of five percent of the installment payment amount or six dollars. The amendment became effective on June 26 and applies to defaults from that day forward.
Texas Passes Law Repealing Vehicle Protection Product Regulatory Act
On June 15, Texas Governor Greg Abbott signed SB 2065. The law modifies a number of motor vehicle-related regulations and licensing requirements. Specifically, the law:
- eliminates the Vehicle Protection Product Act;
- abolishes the Vehicle Protection Product Warrantor Advisory Board;
- requires the warrantor of a vehicle protection product to pay expenses to the person who purchases the product or system if loss or damage occurs due to failure of the product or system;
- prohibits a retail seller from requiring a vehicle buyer—“as a condition of a retail installment transaction or the cash sale of a commercial vehicle”—to buy a vehicle protection product that is not installed on the vehicle at the time of the transaction, classifying this violation as a “false, misleading, or deceptive act or practice” actionable under the Deceptive Trade Practices-Consumer Protection Act; and
- eliminates the licensing requirements for boot operators and boot companies, but requires a booting company to remove a boot within an hour of being contacted by the owner or forfeit all removal fees.
The law takes effect September 1.
Florida Adds Virtual Currency to Anti-Money Laundering Law
On June 23, Florida Governor Rick Scott signed H.B. 1379, which will incorporate virtual currency into the Florida Money Laundering Act. Specifically, the Bill adds virtual currency to the list of currency and negotiable instruments classified as “monetary instruments” under the Act. In addition, virtual currency will be included in the definitions section as a “medium of exchange in electronic or digital format that is not a coin or currency of the United States or any other country.” The law goes into effect on July 1.
Ohio Enacts Consumer Installment Loan Act
On June 13, Ohio Governor John R. Kasich signed into law S.B. 24, the Ohio Consumer Installment Loan Act (CILA). According to a blog post on the Ohio senate majority caucus’ website, CILA aims to “clarify Ohio's installment lending laws to help eliminate confusion for consumers and lenders as well as simplify the role of industry regulators.” CILA applies to loans that, among other requirements, exceed a term of six months, generally require equal monthly payments, are not secured by real property, are not covered by any other Ohio loan laws, and have a maximum interest rate of 25 percent (or 28 percent for an open-end loan). CILA also provides for regulation and lender licensing by the state’s Division of Financial Institutions in the Department of Commerce. The law goes into effect on July 1.
Iowa Enacts Amendments to Consumer Credit Code
Two amendments to the Iowa Consumer Credit Code (ICCC) recently signed into law by Iowa Governor Terry Branstad will go into effect July 1. The ICCC applies to, among others, consumer credit transactions, retail installment sales, lending transactions, and motor vehicle financing.
Senate File 502, which relates to banks, credit unions, and specific consumer credit transactions, adds a new subsection 2A to the ICCC, which states a supervised loan made in violation of subsection 2 is void and “the consumer is not obligated to pay either the amount financed or the finance charge.” Additionally, “[i]f the consumer has paid any part of the amount financed or the finance charge, the consumer has the right to recover the payment from the [lender] . . . or from an assignee . . . who undertakes direct collection of payments or enforcement of rights arising from the debt.” Open-end loans have a statute of limitations of two years from the date of the violation, and closed-end loans have a statute of limitations of one year after the due date of the last scheduled payment. Other changes under Senate File 502 include a removal of the ban prohibiting returned check fees, an increase in the maximum late fee applied to transactions, and a clause that allows credit reporting charges to be excluded from finance charges.
Senate File 503, which concerns “the deferral of unpaid installments and deferral charges for certain interest-bearing consumer credit transactions,” contains the following changes, among others: (i) parties may agree in writing to the deferral of unpaid installments before or after default, and (ii) deferral charges are permitted on closed-end, interest-bearing transactions and limited to $30.
Gap Waiver Act Promulgated in Maine
On June 12, Maine Governor Paul LePage signed into law S.P. 531, “An Act To Amend the Usage and Consumer Protections of Guaranteed Asset Protection [GAP] Waivers.” The Act applies to finance agreements for motor vehicles in which the creditor offers, for a separate charge, to “cancel or waive all or part of the amount due on a borrower’s finance agreement . . . in the event of a total physical damage loss or unrecovered theft.” The GAP waiver agreement must either be included in the auto finance agreement or attached to it as an addendum, and the waiver remains part of the finance contract when the contract is assigned, sold, or transferred. Additionally, the Act provides that the waiver may be sold in the state for a single or monthly payment, but “may not be considered a finance charge or interest” when disclosed in compliance with the Truth in Lending Act.
A required disclosure with a GAP waiver is a “free-look” period during which the borrower can cancel the waiver agreement and receive a full refund of costs paid for the waiver as long as no waiver benefits have been provided. The waiver contract must also provide clear instructions for the borrower to follow in order to obtain waiver benefits, and the method for calculating the amount of the refund due if the contract is cancelled or terminated early.
The law takes effect on January 1, 2018.
Maine Amends Fair Debt Collection Practices Act to Enact Debt Collection Requirements for Debt Buyers
On June 16, Maine Governor Paul LePage signed into law amendments (H.P. 836) to the state’s Fair Debt Collection Practices Act (Maine FDCPA) to promote the fiscally responsible collection of purchased debts. Changes affect the definitions of charge-off, debt buyer and resolved debt, as well as licensing and documentation requirements, transferring debt ownership, collection actions, and civil penalties.
The law now considers a “debt buyer” to be a debt collector, and defines a debt buyer as a person “regularly engaged in the business of purchasing charged-off consumer debt for collection purposes, whether the person collects the debt or hires a [third] party, which many include an attorney-at-law, in order to collect the debt.” Notably, the definition excludes supervised financial organizations or a person that “acquires charged-off consumer debt incidental to the purchase of a portfolio predominantly consisting of consumer debt that has not been charged off.” Debt buyers must comply with existing licensing requirements and criminal background checks under the provisions of Maine FDCPA Section 11031.
The law will apply to a debt buyer with respect to debt sold to the debt buyer on or after January 1, 2018. Furthermore, it will not “affect the validity of any collection actions taken, civil actions or arbitration actions commenced or judgments entered into prior to January 1, 2018.”
Texas Governor Passes Legislation Related to Vehicle Installment Contracts, Documentary Fees, and Deferred Presentment Transactions for Military Borrowers
On June 9, Texas Governor Greg Abbott signed legislation (H.B. 2339) amending the state’s Finance Code provisions governing trade-in credit agreements related to motor vehicle retail installment contracts. The law now authorizes a seller—upon execution of a contract—to offer to sell to a buyer a “trade-in credit agreement,” which is “a contractual arrangement under which a retail seller agrees to provide a specified amount as a motor vehicle trade-in credit for the diminished value of the motor vehicle that is the subject of the retail installment contract in connection with which the trade-in credit agreement is offered if the motor vehicle is damaged but not rendered a total loss as a result of a collision accident, with the credit to be applied toward the purchase or lease of a different motor vehicle from the retail seller or an affiliate of the retail seller.” Specifically, a trade-in credit agreement is separate from a retail installment contract, not a term of the retail installment contract, and not insurance. The law further outlines changes related to the amount charged for a trade-in credit agreement as well as terms and conditions of the retail installment contract. The law takes effect September 1, 2017.
On June 15, the governor signed legislation (H.B. 2949) relating to the maximum amount a retail seller of motor vehicles can charge for a documentary fee. Under the changed provisions, a seller is now required to provide written notice to the finance commission of the amount it intends to charge unless the documentary fee is considered reasonable, which is established as an amount “less than or equal to the amount of the documentary fee presumed reasonable . . . by rule of the finance commission.” In determining whether a fee is reasonable, the commissioner considers the resources a retail seller may need to employ to perform its duties when handling and processing documents related to the sale and financing of the vehicle. The law takes effect September 1, 2017.
Separately on June 15, the governor signed legislation (H.B 2008) amending the Texas Finance Code to require a lender that enters into a deferred presentment transaction with a military servicemember or a dependent of a servicemember to comply with the Military Lending Act (MLA) (10 U.S.C. § 987) and its implementing regulation. The MLA prohibits creditors from extending consumer credit if the “creditor rolls over, renews, repays, refinances, or consolidates any consumer credit extended to the covered borrower by the same creditor with the proceeds of other consumer credit extended by that creditor to the same covered borrower.” Creditors engaged in deferred presentment transactions or similar payday loan transactions are subject to these limitations “provided however, that the term does not include a person that is chartered or licensed under Federal or State law as a bank, savings association, or credit union.” The law takes effect September 1, 2017.
Illinois Finalizes Digital Currency Regulatory Guidance
On June 13, the Illinois Department of Financial and Professional Regulation (IDFPR) issued final guidance on the regulatory treatment of digital currencies with an emphasis on decentralized digital currencies. (See IDFPR news release here). As previously covered in InfoBytes, the IDFPR requested comments on its proposed guidance in December of last year in order to devise the proper regulatory approach to digital currency in compliance with money transmission definitions in the Illinois Transmitters of Money Act, 205 Ill. Comp. Stat. 657/1, et seq. (TOMA).
The “Digital Currency Regulatory Guidance” clarifies that digital currencies are not money under TOMA, and therefore, those engaged in the transmission of digital currencies are not generally required to obtain a TOMA license. The IDFPR noted, however, that “should transmission of digital currencies involve money in a transaction, that transaction may be considered money transmission” and suggested persons engaging in such transactions request a determination regarding whether or not the activity will require a TOMA license.
To provide additional clarity, the guidance includes examples of common types of digital currency transactions that qualify as money transmissions, as well as examples of activities that do not qualify as money transmission.
Nevada Passes Bill Revising Motor Vehicle Technology Device Provisions, Assigns Responsibility to Creditors and Lessors
On June 12, Nevada Governor Brian Sandoval signed into law SB 350, which amends deceptive trade practices provisions to prohibit certain creditors and lessors of motor vehicles from installing or requiring installation of certain GPS and starter interrupt devices without written notice. Specifically, the bill requires creditors or long-term lessors to either provide advance written notice to, or obtain written agreement from, the consumer purchasing or leasing the vehicle before installing or requiring the installation of GPS devices. Additionally, the creditor/lessor must receive a written agreement from the consumer consenting to installation and use of a starter interrupt device. The bill outlines requirements and restrictions on the use of these technology devices, and provides that “such technology devices generally are the responsibility of a creditor or long-term lessor or, if applicable, any successor in interest or another secured party . . . .” It further specifies that “such responsibility includes paying for certain costs associated with, and any damage to a motor vehicle that is caused by, the use of such technology devices.” With the passage of SB 350, any violation of the aforementioned is a “deceptive trade practice.” The law takes effect July 1, 2017.