08 LC 34
1565
Senate
Bill 489
By:
Senators Chance of the 16th, Staton of the 18th, Tarver of the 22nd, Thompson of
the 33rd and Rogers of the 21st
A
BILL TO BE ENTITLED
AN ACT
AN ACT
To
amend Title 7 of the Official Code of Georgia Annotated, relating to banking and
finance, so as to enact the "Credit Enhancement Loan Act of 2008"; to provide
for findings of the General Assembly; to provide for a short title; to provide
for purposes; to provide for definitions; to provide for licensing of lenders by
the Department of Banking and Finance; to provide for penalties for violations;
to provide for fees payable to the department; to provide for requirements
necessary for issuance of a license by the department; to provide for the form
and contents of an application; to provide for revocation or suspension of a
license; to provide for amounts of loans and interest rates; to prohibit
multiple loans in certain situations; to provide for enforcement of loan
agreements; to provide for disclosure forms for the customer; to provide for
reports to credit bureaus; to require maintenance of financial records by
licensees; to provide for reports to be filed with the commissioner; to provide
for desist orders; to provide for appeals from actions of the department; to
provide for nonenforcement of credit enhancement loans; to provide for related
matters; to provide for an effective date and applicability; to repeal
conflicting laws; and for other purposes.
BE
IT ENACTED BY THE GENERAL ASSEMBLY OF GEORGIA:
SECTION
1.
Title
7 of the Official Code of Georgia Annotated, relating to banking and finance, is
amended by adding a new chapter to read as follows:
"CHAPTER
6B
7-6B-1.
This
chapter shall be known and may be cited as the 'Credit Enhancement Loan Act of
2008.'
7-6B-2.
The
General Assembly of Georgia finds:
(1)
Customer education for unbanked and underbanked customers is necessary in order
to educate them on the various options for customer credit and financial
services that are available;
(2)
Mainstream banking services should be made available to unbanked customers to
meet their individual financial needs;
(3)
Accurate and understandable disclosure of agreement terms, conditions, and the
cost of obtaining credit is absolutely essential; and
(4)
It is necessary to provide and support ongoing activities to equitably provide
mainstream financial services and credit products to financially underserved
customers while providing a vehicle to bridge the gap of the financial
empowerment divide.
7-6B-3.
The
purpose of this chapter is to:
(1)
Provide a vehicle for banking services and mainstream credit products to build
and rebuild credit histories to enable customers in all segments of the
financial spectrum, especially the financially underserved and unbanked
populations, to improve their credit ratings and qualify for mainstream
financial services;
(2)
Set forth a minimum set of parameters to establish a credit enhancement loan
that other financial institutions may offer to qualified customers; and
(3)
Recognize that oftentimes there is a high cost to a financial institution in
serving this segment of the customer financial marketplace, and therefore a
higher risk based interest rate shall be permitted to cover this higher risk
when a credit enhancement loan is offered.
7-6B-4.
As
used in this chapter, the term:
(1)
'Amount of the extension of credit' means the aggregate of the loan amounts,
service fees, and other charges authorized by this chapter.
(2)
'Commissioner' means the commissioner of banking and finance.
(3)
'Credit enhancement loan' means a short-term loan that complies with all of the
requirements of this chapter.
(4)
'Creditable assets' means cash or bank deposits, loans, or extensions of credit
made as a licensee pursuant to this chapter or any other amounts as the
commissioner may approve, or any combination of two or more of these
amounts.
(5)
'Customer' means any person who borrows money from any licensee or who pays or
obligates himself or herself to pay any money or otherwise furnishes any
valuable consideration to any licensee for any act of the licensee as a
licensee.
(6)
'Department' means the Department of Banking and Finance.
(7)
'Deputy' means a deputy commissioner of banking and finance.
(8)
'License' means the license issued by the commissioner under the authority of
this chapter to issue credit enhancement loans.
(9)
'Licensee' means a person to whom one or more licenses have been
issued.
(10)
'Loans' or 'loan' means a loan made within this state by a licensee pursuant to
this chapter.
(11)
'Person' includes any person, firm, partnership, association, or
corporation.
7-6B-5.
(a)
No person shall engage in the business of offering credit enhancement loans in
amounts of $3,000.00 or less and contract for, exact, or receive, directly or
indirectly, on or in connection with any credit enhancement loan, any charges
whether for interest, compensation, consideration, or expense, or any other
purpose whatsoever, which in the aggregate are greater than authorized by this
chapter and without first having obtained a license from the commissioner. The
term 'lending' as used in this Code section shall include, but shall not be
limited to, endorsing or otherwise securing extensions of credit or contracts
for the repayment of extensions of credit.
(b)
The provisions of subsection (a) of this Code section shall apply to any person
who seeks to avoid its application by any device, subterfuge, or pretense
whatsoever.
(c)
Any person not exempt from this chapter who fails to comply with or who
otherwise violates any of the provisions of this chapter or any regulation of
the department adopted pursuant to this chapter shall be guilty of a
misdemeanor. Each violation shall be considered a separate offense. It shall
be the duty of the commissioner to provide the district attorney of the court
having jurisdiction of any offense under this chapter with facts and evidence in
his or her actual or constructive possession and to testify as to those facts
upon the trial of any person for any offense under this chapter.
(d)
Any contract for the extension of credit the making or collecting of which
violates any provision of this chapter or regulation issued pursuant to this
chapter, except as a result of accidental or bona fide error of computation,
shall be void; and the licensee or any other party in violation shall have no
right to collect, receive, or retain any principal or charges whatsoever with
respect to that extension of credit.
7-6B-6.
Each
licensee, for the purpose of defraying necessary expenses of the commissioner
and his or her agents, shall pay to the commissioner the fees prescribed in Code
Section 7-6B-7 at the times specified therein.
7-6B-7.
(a)
No person shall engage in or offer to engage in the business of credit
enhancement loans regulated by this chapter unless and until a license has been
issued by the commissioner. The commissioner shall issue a license under this
chapter if he or she finds that the applicant has, on a consolidated basis and
computed in accordance with generally accepted accounting principles, a net
worth of not less than $1 million at the time of application for a
license.
(b)
Upon the receipt of an application, the commissioner shall start an
investigation. The commissioner shall approve or deny every application for a
license within 90 days from the date a complete application is submitted. This
period may be extended by the written consent of the applicant. The
commissioner shall notify the applicant of the date when the application is
deemed complete. In the absence of approval or denial of the application, or
consent to the extension of the 90 day period, the application shall be deemed
approved and the commissioner shall issue the license effective as of the first
day after the 90 day or extended period has elapsed. If the commissioner
reasonably determines from a preliminary investigation that the applicant does
not satisfy the condition set forth in subsection (a) of this Code section, the
commissioner shall so notify the applicant in writing and offer specific
findings of fact as to the provisions of this Code section that have not been
met. The applicant shall then be entitled to an informal hearing on the
decision that the applicant does not satisfy the conditions set forth in this
Code section, provided that the applicant requests an informal hearing in
writing within 30 days after the commissioner has mailed the notification of
failure to the applicant. In the event of an informal hearing, to be held in
the offices of the commissioner, the commissioner shall reconsider the
application and, after the hearing, issue a written order granting or denying
the application.
(c)
Each licensee shall continue at all times to have available for the operation of
the business on a consolidated basis and computed in accordance with generally
accepted accounting principles a net worth of not less than $1 million. The
requirement of this subsection shall be maintained throughout the period of the
license, and failure to maintain this requirement shall be grounds for the
revocation of a license under the provisions of Code Section
7-6B-10.
7-6B-8.
(a)
The application for license shall be made on a form prepared and furnished by
the commissioner and shall state all of the following:
(1)
The fact that the applicant desires to engage in business under this
chapter;
(2)
Whether the applicant is an individual, partnership, association, or
corporation;
(3)
The name and address of the person who will manage and be in immediate control
of the business;
(4)
The names and addresses of the owners of the business and their percentage of
equity in the business, unless the commissioner deems it not feasible to furnish
the information because of the number of stockholders involved. This paragraph
shall not apply to publicly held corporations and their operating subsidiaries;
and
(5)
When the applicant proposes to commence doing business.
(b)
The statements made in this application shall be sworn to by the applicant or
the persons making the application on the applicant´s behalf.
(c)
At the time of making an application, the applicant shall pay the department
$2,500.00 as a fee for investigating the application, which shall be retained
whether or not a license is granted to the applicant.
7-6B-9.
(a)
A licensee may conduct and carry on its business only at the location or
locations that are approved by the commissioner, and no changes shall be made
from one location to another without prior notice to the
commissioner.
(b)
The commissioner may issue more than one license to the same licensee for
multiple places of business upon compliance with all the provisions of this
chapter governing issuance of a license.
(c)
If any change occurs in the primary name and address of the licensee, the legal
agent of a licensed corporation, or in the membership of any licensed
partnership, a full statement of the change, sworn to as required by subsection
(b) of Code Section 7-6B-8 for an original application, shall be filed with the
commissioner within 30 days.
7-6B-10.
(a)
The commissioner may issue an order revoking or suspending the right of a
licensee and an officer, agent, employee, or representative to do business in
Georgia as a licensee if the commissioner finds, after due notice and hearing,
or opportunity for hearing, that the licensee or an officer, agent, employee, or
representative of that licensee has done any of the following:
(1)
Materially failed to comply with the rules, regulations, instructions, or orders
issued by the department;
(2)
Materially failed or refused to make its reports to the
commissioner;
(3)
Failed to pay the fees for its examination and supervision that are validly due
and owed; or
(4)
Knowingly furnished false information to the commissioner or the
department.
Upon
receipt of an order revoking or suspending the right of that licensee to do
business in Georgia from the commissioner, the licensee shall immediately
surrender his or her license to the commissioner. Within five days after the
entry of an order to cease business in Georgia, the commissioner shall place on
file his or her findings of fact and mail or otherwise deliver a copy to the
licensee. Any licensee who fails to make any extension of credits during any
period of one year after being licensed shall surrender his or her license to
the commissioner.
(b)
Any licensee may surrender any license by delivering it to the commissioner with
written notice of the surrender, but the surrender shall not affect the
licensee´s civil or criminal liability for acts committed prior to the
surrender of the license.
(c)
No revocation, suspension, or surrender of any license shall impair or affect
the obligation of any preexisting lawful contract between the licensee and any
obligor.
(d)
The commissioner, in his or her discretion, may reinstate suspended licenses or
issue new licenses to a person whose license or licenses have been revoked or
surrendered if and when he or she determines no fact or condition exists which
clearly would have justified the commissioner in refusing originally to issue
the license under this chapter.
(e)
The licensee shall be entitled to a formal appeal and hearing as prescribed in
Code Section 7-6B-20.
7-6B-11.
(a)
Every licensee under this chapter shall make credit available through credit
enhancement loans in an amount not exceeding $3,000.00 at a maximum interest
rate of up to 19.9 percent per annum. Interest shall be contracted for and
collected at the single simple interest rate applied to the outstanding balance
that would earn the same amount of interest as the initial rate for payment
according to schedule.
(b)
Interest on credit enhancement loans made pursuant to this Code section shall
not be paid, deducted, or received in advance. Interest shall not be
compounded, but interest on extension of credits shall:
(1)
Be computed and paid only as a percentage of the unpaid principal balance or
portion of the unpaid principal balance; and
(2)
Be computed on the basis of the number of days actually elapsed.
If,
however, part or all of the consideration for a credit enhancement loan is the
unpaid principal balance of a prior credit enhancement loan, then the principal
amount payable under the new credit enhancement loan may include any unpaid
interest on the prior credit enhancement loan which has accrued within 90 days
before the making of the new credit enhancement loan. For the purpose of
computing interest, a day shall equal 1/365 of a year. Any payment made on a
credit enhancement loan shall be applied first to any accrued interest and then
to principal. Any portion or all of the principal balance on a credit
enhancement loan may be prepaid at any time without penalty.
(c)
Minimum payment requirements on a credit enhancement loan shall be 4 percent of
the loan amount or $25.00, whichever is greater. Customers shall be billed
monthly, at a minimum.
(d)
A maximum one-time underwriting fee shall not exceed $10.00.
(e)
The maximum monthly maintenance fee shall not exceed $30.00.
(f)
The maximum fee for a late payment on a credit enhancement loan shall be
$25.00.
(g)
The maximum fee charged for a returned check from a borrower shall be
$30.00.
(h)
The minimum term of a credit enhancement loan shall be three
months.
(i)
Every licensee under this chapter shall report, on a periodic basis based on
accepted industry standards, credit related data, as incurred, and without
discrimination, to major credit bureaus to assist customers who pay in a timely
manner in building or rebuilding their credit histories.
(j)
Every licensee under this chapter shall graduate customers to better interest
rates and other terms based on positive payment histories in a manner submitted
by the licensee to the commissioner and approved by the
commissioner.
(k)
Every licensee under this chapter shall offer and encourage customers to
participate in programs designed to enhance financial literacy.
(l)
If a money judgment is obtained against any party on any credit enhancement loan
made under the provisions of this Code section, neither the judgment nor the
credit enhancement loan shall carry, from the date of the judgment, any interest
in excess of 8 percent per annum.
(m)
Every licensee under this chapter shall charge only those fees and interest as
authorized in this Code section and filed with the commissioner.
(n)
Every licensee under this chapter shall determine the credit worthiness of a
customer applying for a credit enhancement loan based on industry accepted or
proprietary credit models.
7-6B-12.
(a)
A licensee shall not make credit enhancement loans in one office to any customer
who already has an outstanding credit enhancement loan in another office
operated by the same entity or by another licensee that is an affiliate, parent,
subsidiary, or under the same ownership, management, or control, whether partial
or complete.
(b)
A licensee shall take every reasonable precaution to prevent granting credit
enhancement loans in violation of subsection (a) of this Code
section.
(c)
A licensee may service credit enhancement loans and modify the terms of the
loans within the limits authorized by Code Section 7-6B-13 at any office
operated by that licensee regardless of where the credit enhancement loan was
originated.
7-6B-13.
(a)
A licensee may not take an assignment of earnings of the customer for payment or
as security for payment of a credit enhancement loan. An assignment of earnings
in violation of this Code section shall be unenforceable by the assignee of the
earnings and shall be revocable by the customer. However, nothing in this Code
section shall restrict a licensee and customer from entering into an agreement
whereby repayment of a credit enhancement loan can be made through automatic
payroll deductions, direct withdrawal from a checking account, or other
automatic repayment plans.
(b)
An agreement between a licensee and a customer pursuant to a credit enhancement
loan under this chapter pertaining to default by the customer shall be
enforceable only to the extent that the customer fails to make a payment as
required by the agreement.
(c)
No licensee shall deny any credit enhancement loan or discriminate in the fixing
of the amount, duration, application procedures, or other terms or conditions of
any credit enhancement loan or services because of the race, color, religion,
national origin, sex, or marital status of the applicant or any other person
connected with the transaction.
(d)
With respect to a credit enhancement loan or services made pursuant to the
provisions of this chapter, the agreement shall not provide for payment by the
customer of attorney´s fees.
(e)
No licensee shall make any credit enhancement loan within this state which shall
in any way be secured by real property.
(f)
No licensee shall engage in any unfair method of competition or unfair or
deceptive trade practices in the conduct of making or providing any credit
enhancement loans or services to customers pursuant to this chapter or in
collecting or attempting to collect any money alleged to be due and owing by a
customer.
7-6B-14.
(a)
At the time a credit enhancement loan is made available to a customer, the
licensee shall deliver to the customer or, if there are two or more customers to
such a loan, a copy of a written statement, showing in clear and distinct terms
all of the following:
(1)
The name and address of the licensee and one of the primary obligors on the
credit enhancement loan;
(2)
The date of the contract;
(3)
A schedule or description of required payments;
(4)
All applicable interest rates; and
(5)
Any financial literacy materials available to the customer.
(b)
At each of its places of business in Georgia, the licensee shall make readily
available to the customer, in a form prescribed by the commissioner, a full and
accurate schedule of charges on all credit enhancement loans currently being
made available by the licensee.
(c)
A copy of that schedule required by subsection (b) of this Code section shall be
filed in the office of the commissioner.
(d)
No licensee shall require the customer to agree to or execute any confession of
judgment or power of attorney in favor of any licensee or in favor of any third
person, and any confession of judgment or power of attorney taken in violation
of this subsection shall be absolutely void.
7-6B-15.
No
licensee subject to this chapter shall advertise, display, distribute, telecast,
or broadcast or cause or permit to be advertised, displayed, distributed,
telecast, or broadcast in any manner whatsoever any false, misleading, or
deceptive statement or representation with regard to the rates, terms, or
conditions of credit enhancement loans. The commissioner may require that
charges or rates of charge, if stated by a licensee, be stated fully and clearly
in any manner that the commissioner deems necessary to prevent misunderstanding
by prospective customers. The commissioner may permit or require licensees to
refer in their advertising to the fact that their business is under state
supervision, subject to any conditions required by the commissioner to prevent
an erroneous impression as to the scope or degree of protection provided by this
chapter.
7-6B-16.
(a)
Each licensee shall maintain all financial books and records directly relating
to any credit enhancement loans made or provided under this chapter reasonably
required by the commissioner to be kept for two years; and the commissioner, any
deputy, or a duly authorized examiner or agent or employee may examine those
records at any reasonable time to determine whether the licensee is complying
with this chapter and the rules issued to implement this chapter. The required
financial books and records may be maintained in any form authorized by the
commissioner. The financial books and records of each licensed office shall be
clearly segregated. When a licensee maintains its financial books and records
outside of Georgia, the licensee shall make them available for examination at
the place where they are maintained and shall pay for all reasonable and
necessary expenses incurred by the commissioner in conducting any examination.
Where the data processing for any licensee is performed by a person other than
the licensee, the licensee shall provide to the commissioner a copy of a binding
agreement between the licensee and the data processor which allows the
commissioner, any deputy, or a duly authorized examiner or agent or employee to
examine that particular data processor´s activities pertaining to the
licensee to the same extent as if the data processing services were being
performed by the licensee on its own premises; and, when billed by the
commissioner, the licensee shall reimburse the commissioner for all costs and
expenses incurred by the commissioner in an examination under this
subsection.
(b)
Each licensee shall file annually with the commissioner on or before March 31
for the 12 month period ending the preceding December 31 reports on forms
prescribed by the commissioner. These annual reports shall disclose in detail
and under appropriate headings any changes in the information contained in the
original license application and other information necessary to show that the
licensee continues to be in compliance with this chapter. Reports shall be
verified by the oath or affirmation of the owner, manager, president, vice
president, cashier, secretary, or treasurer of the licensee.
(c)
If a licensee conducts another business or is affiliated with other licensees
under this chapter or if any other situation exists under which allocations of
expense are necessary, the licensee or licensees shall make that allocation
according to appropriate and generally accepted accounting
principles.
7-6B-17.
The
department may issue all rules it deems necessary in implementing this chapter
and in providing for the protection of the borrowing public and the efficient
management of licensees under this chapter and to give all necessary
instructions to these licensees for the purpose of interpreting this chapter.
All licensees under this chapter and their officers, agents, and employees shall
comply fully with all of the rules and instructions. When issued, any rule
shall be forwarded by mail to each licensee at its licensed place of business at
least 20 days prior to the rule´s effective date.
7-6B-18.
The
commissioner may issue subpoenas and compel attendance of witnesses, administer
oaths, conduct hearings, and transcribe testimony in making the investigations
and conducting the hearings required by this chapter or in the other discharge
of his or her duties and give any publicity to his or her investigations and
findings as he or she may deem best for the public interest.
7-6B-19.
When
the commissioner has reasonable cause, supported by written evidence, to believe
that any person is violating or is threatening to violate any provision of this
chapter, the commissioner may in addition to all actions provided for in this
chapter and without prejudice to those other actions enter an order requiring a
person to desist or to refrain from a violation; and an action may be brought in
the name of the commissioner to enjoin the person from engaging in or continuing
the violation or from doing any act or acts in furtherance of the violation. In
any action to desist, an order or judgment may be entered awarding any
preliminary or final injunction as may be deemed proper. In addition to all
other means provided by law for the enforcement of a restraining order or
injunction, the court in which the action is brought may impound and appoint a
receiver for the property and business of the defendant, including any books,
papers, documents, and records that the court deems reasonably necessary to
prevent violations of this chapter through or by means of the use of that
property and business. The receiver, when appointed and qualified, shall have
those powers and duties pertaining to custody, collection, administration,
winding up, and liquidation of the property and business as shall from time to
time be conferred upon him or her by the court.
7-6B-20.
Any
person aggrieved by any rule, order, or act of the department may appeal to the
commissioner for review upon giving notice in writing within 60 days after such
rule, order, or act is adopted, issued, or done. Any aggrieved party to a
decision of the department shall be entitled to an appeal pursuant to Chapter 13
of Title 50, the 'Georgia Administrative Procedure Act.'
7-6B-21.
No
credit enhancement loan made after July 1, 2008, that is made outside this state
in the amount of or the value of $3,000.00 or less for which greater
consideration or charges than are authorized by this chapter have been charged,
contracted for, or received shall be enforced in this state. This prohibition
shall not apply to credit enhancement loans in which contractual activities,
including solicitation, discussion, negotiation, offer, acceptance, signing of
documents, or delivery and receipt of funds, occur entirely outside this
state."
SECTION
2.
This
Act shall become effective on July 1, 2008, and apply to all credit enhancement
loans executed on or after that date.
SECTION
3.
All
laws and parts of laws in conflict with this Act are repealed.