Finance charges for certain motor vehicle title and payday loans

The bill defines "motor vehicle title loan" as a loan that is secured by an interest, other than a purchase money security interest, in the borrower's motor vehicle, and that has an original term of three months or less. The bill defines "payday loan" as a transaction between a person and an issuer of a check in which all of the following are satisfied: 1) the person agrees to hold the check for a period of time before negotiating or presenting the check for payment; and 2) the person pays the issuer, upon accepting the check, the amount of the check less any finance charge.

Under the bill, a lender, other than a bank, savings bank, savings and loan association, or credit union, who makes motor vehicle title or payday loans in the regular course of business, may not assess a finance charge that exceeds 2 percent per month. In addition, such a lender who makes such loans must obtain the license described above. Also, the bill requires the division to enforce the bill's prohibition.

The bill also allows a borrower to bring an action against a person who violates the bill's requirements to recover damages in an amount equal to the greater of the following: 1) twice the amount of the finance charge in connection with the loan made to the borrower; or 2) the actual damages, including incidental and consequential damages, sustained by the borrower by reason of the violation. In addition, the bill allows the borrower to recover the costs of the action, including reasonable attorney fees.