House of Representatives

HB 2248

deferred presentment companies

Sponsors: Representative May, Kraft

DPA S/E	Committee on Financial Institutions & Insurance
DPA	Caucus and COW
X	Third Read	This bill as introduced contains a PROP 108 clause.
	As Passed the House

HB 2248 establishes a consumer loan education fund for the development of a brochure used to inform consumers about the actual costs of deferred presentment loans. The information also directs consumers to credit counseling and financial services within the community.

Current Status

A strike-everything amendment was adopted in the Committee on Financial Institutions and Insurance. The strike-everything amendment to HB 2248 was adopted in the Committee of the Whole with the following changes:

· Eliminates the consumer loan education fund and assessment of deferred presentment companies, thereby removing the Proposition 108 clause.

History

Laws 2000, Chapter 141, contained numerous provisions relating to the regulation and licensing of deferred presentment companies. Deferred presentment companies, often known as payday lenders, offer short-term loans to individuals who can verify an active checking account and current employment or steady source of income. The loans are usually less than $500 for a period of less than 30 days. The customer signs a disclosure agreement then writes a post-dated personal check for the loan amount, plus the applicable fee. At the end of the loan period, the lender presents the check for payment, as previously agreed. A customer may rollover or extend the loan period at that time. The customer may pay a portion of the loan amount, and some lenders require the consumer to pay off the fees due prior to extending the loan. The proposed legislation expands the consumer disclosure requirements to better educate customers about the actual costs associated with deferred presentment loans.

Provisions

· Specifies that notice provided to consumers regarding deferred presentment transactions shall be written in English and Spanish.

· Establishes a consumer loan education fund to be administered by the Superintendent of the Banking Department. Monies from an assessment of an additional four hundred dollars per licensee and two hundred dollars per licensee's branch are to be deposited into the fund.

· Requires the Superintendent to develop the customer education brochure and distribute the material free of charge. The Banking Department shall supply the brochure to all licensees for duplication and distribution at each deferred presentment location.

· Stipulates that the brochures include a chart illustrating the actual costs and the annual percentage rate applied at the time of the loan. Costs associated with extending the loan must also be provided. Information relating to credit counseling, financial services and filing complaints with the Banking Department shall be provided.

· Requires licensees to distribute the brochure to all customers at the time of a transaction, or to other parties upon request.

· Contains a Proposition 108 clause.

HB 2248 was amended in the Financial Institutions and Insurance Committee as follows:

The committee adopted a strike-everything amendment with the provisions stated above.

The Financial Institutions and Insurance Committee amendment was adopted in the Committee of the Whole and the bill was further amended as follows:

· Eliminates the consumer loan education fund and assessment of deferred presentment companies, thereby removing the Proposition 108 clause.

---------- DOCUMENT FOOTER ---------

45th Legislature

Second Regular Session 2 March 22, 2002

---------- DOCUMENT FOOTER ---------