Payday loan providers, providing an exemption from emergency rule procedures, granting rule-making authority, and providing a penalty

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 a check, hold the check for at least three days before negotiating it, and before negotiating the check pay the individual an agreed amount; or 2) accept the individual's authorization to initiate an electronic fund transfer (EFT) from the individual's account, wait for at least three days before initiating the EFT, and before initiating the EFT pay the individual an agreed amount. The bill requires a payday loan provider, at least 15 minutes before entering into a payday loan with an applicant, to: 1) disclose to the applicant the total amount of all fees and costs, in dollars, and the annual percentage rate (APR), to be paid by the applicant assuming that the loan is paid in full at the end of the loan term; 2) provide to the applicant a copy of certain written informational materials, described below, developed by the division; and 3) disclose to the applicant that he or she has the right to rescind the payday loan transaction by the end of the business day after the loan is made. The payday loan provider must retain, for at least three years after the origination date of the payday loan, a record of compliance with these requirements.

The bill also imposes certain restrictions on payday loans. A payday loan may not accrue interest after the loan maturity date and may not include any penalty arising from the customer's 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 two times and the second time only if certain conditions are satisfied. A payday loan 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 principal amount of the payday loan plus the finance charge on the payday loan. A payday loan provider may not rollover a payday loan unless the customer enters into a new payday loan transaction, including issuing a new check or executing a new authorization to initiate an electronic fund transfer. 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.

The bill requires the division to develop written informational materials, designed to educate, on payday loans and the payday loan industry. These informational materials must include: 1) a clear and conspicuous notice to payday loan applicants containing specified information; 2) certain aggregated information from reports submitted to the division by payday loan providers; and 3) a summary of actions that the payday loan provider may take against a payday loan customer if the customer defaults on the loan or the customer's payment method is dishonored for insufficient funds.

The bill also requires each payday loan provider to report annually to the division and pay a report filing fee. The report covers the payday loan provider's business in the preceding calendar year and must include information required by the division. The report must also contain specified information, aggregated for all customers, including: 1) the number of payday loans originated, the number of payday loans rolled over, and the average number of times a rolled-over payday loan was rolled over; 2) the average total fees and costs, and average APR, for all payday loans of the payday loan provider, categorized by loans that were not rolled over and loans that were rolled over; 3) the number of payday loans resulting in the customer's default; and 4) the number of payday loans on which the customer's payment method was dishonored for insufficient funds. The bill defines "rollover" or "rolled 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.

Under the bill, a payday loan provider that violates these disclosure or reporting requirements may be required to forfeit not more than $200. The bill also requires the division to promulgate rules and prescribe forms related to the provisions of the bill.