The Indiana General Assembly reached its halfway point early last week. The House finished all first-half legislative work on Monday, while the Senate finished its first-half work by Tuesday evening. Of the 1,349 bills that were filed by both the House and Senate combined, 213 Senate bills and 196 House bills survive, having received affirmative third reading votes. These bills now move from to the opposite chamber for review, debate and possible alteration. House and Senate committees have over five weeks to hear bills that have been sent to their respective committees from the chamber of origin.
The IMBA Legislative Team worked to ensure that several bills did not receive committee hearings, due to concerns with the approach of the legislation. The IMBA also worked to amend multiple bills during the first half of session, ensuring that they were in acceptable condition if they were to move through the legislative process. Many of those bills are still alive. In addition, there are several bills/language the IMBA is supporting, including bills that: change the current installment rule under the Uniform Consumer Credit Code; change the Do Not Call list; and address municipal utility lien issues, among other topics.
The following summary highlights recent notable changes to several bills the IMBA is following through the process.
BILLS OF IMPORTANCE
Senate Bill 104 - Small Loan Finance Charges
Author: Sen. Greg Walker, R-Columbus
Summary: Changes the current incremental finance charge limits that apply to a small loan to a maximum annual rate. Prohibits making, or taking other actions with respect to, a small loan with a greater rate or amount of interest, or other fees and charges, than allowed under the statute governing small loans. Prohibits a credit services organization from providing certain functions with respect to a small loan and makes a violation a deceptive act.
What you need to know: The bill would have placed an APR cap of 36% on the small dollar loan (payday) product allowable under the Uniform Consumer Credit Code, which would effectively drive the payday lending product from the Indiana market.
Latest action: The bill failed to pass the Senate by a vote of 22-27.
Senate Bill 613 - Installment Small Loans
Author: Sen. Andy Zay, R-Huntington
Summary: Makes the following changes to the Uniform Consumer Credit Code (UCCC): (1) Repeals a provision specifying a reference base index for use by the Department of Financial Institutions (department) in adjusting specified dollar amounts designated as subject to change throughout the UCCC. (2) Replaces: (A) the tiered credit service charge authorized for consumer credit sales; and (B) the 25% loan finance charge authorized for consumer loans; with a flat charge of 36% per year on the unpaid balances. (3) Increases the: (A) minimum credit service charge for consumer credit sales; and (B) minimum loan finance charge for consumer loans; from $30 (subject to indexing) to $50 (not subject to indexing). (4) Eliminates indexing of the authorized $5 delinquency charge for consumer credit sales and consumer loans. (5) Provides that a seller in a consumer credit sale may take a security interest in goods sold if the debt secured is at least $1,500 (not subject to indexing), versus $300 (subject to indexing) in current law. (6) Changes the authorized nonrefundable prepaid finance charge for consumer loans not secured by an interest in land from $50 to $150. (7) Provides that if a consumer loan is paid in full by a new loan from the same lender: (A) less than 61 days (versus three months under current law) after the date of the prior loan, the lender may not charge a new nonrefundable prepaid finance charge; or (B) more than 60 days after the date of the prior loan, the lender may charge a new $150 prepaid finance charge. (8) Specifies that the prohibition in current law against a lender assessing more than two nonrefundable prepaid finance charges to the same debtor applies if the new loans are used to pay a previous loan from the lender. (9) Repeals: (A) the definition of "supervised loan"; and (B) the provision establishing the authorized loan finance charge for supervised loans. Makes conforming amendments throughout the UCCC and the Indiana Code. (10) Provides that for a consumer loan: (A) with a loan finance charge greater than 25%; and (B) in which the principal is $4,000 or less (not subject to indexing); a lender may not contract for an interest in land as security. (Current law prohibits a lender from contracting for an interest in land as security if the loan principal is $4,000 or less (subject to indexing) without regard to the loan's finance charge.) (11) Provides that consumer loans having a loan finance charge exceeding 25% and in which the principal is $4,000 or less are payable over a period of not more than: (A) 37 months if the principal is more than $1,100 (versus $300, subject to indexing, in current law) but not more than $4,000; or (B) 25 months if the principal is $1,100 (versus $300, subject to indexing, in current law) or less. (Current law specifies these maximum loan terms for loans with a principal amount of $4,000 or less (subject to indexing) without regard to the loan's finance charge.) (12) Provides that a creditor in a consumer loan transaction may not contract for or receive a separate charge for property casualty insurance unless the amount financed exclusive of charges for the insurance is at least $1,000 (versus $300, subject to indexing, in current law), and the value of the property is at least $1,000 (versus $300, subject to indexing, in current law). Authorizes a lender that is licensed by the department to make small loans under the UCCC to make unsecured consumer installment loans under the same license. Defines an "unsecured consumer installment loan" as a loan: (1) with a principal amount that is: (A) more than $605 and not more than $1,500; and (B) payable in three or more substantially equal periodic payments; and (2) in which the lender holds one or more checks of the borrower for a specific period, or is authorized to debit the borrower's account on one or more occasions for a specific period, before the lender deposits the check or debits the account. Requires that the loan term for an unsecured consumer installment loan be at least six months but not more than 12 months. Provides for the following with respect to unsecured consumer installment loans: (1) An authorized finance charge and monthly maintenance fee. (2) An annual fee assessed on lenders of $1,000 per license and $1,000 per Indiana branch location, for financial education programs. Prohibits: (1) the renewal of an unsecured consumer installment loan; and (2) a borrower from having: (A) a small loan and an unsecured consumer installment loan; or (B) more than one unsecured consumer installment loan; outstanding at the same time. Establishes requirements for the licensure and conduct of persons issuing small dollar loans. Defines "small dollar loan" as a loan with a maximum loan amount of $4,000 and a term of at least 180 days. Provides that with respect to a small dollar loan, a lender may contract for a loan finance charge of not more than 99%. Specifies that a "rate," for purposes of the loan-sharking statute, includes a nonrefundable prepaid finance charge.
What you need to know: The bill makes significant changes to UCCC related to the payday lending industry and general consumer finance related matters. SB 613 was amended in the Senate Commerce and Technology Committee to include the full bill version of SB 587. This new broad consumer finance bill includes: language that creates a new payday lending product; language that eliminates the tiered interest rate calculation applying a flat 36%; and language that increases origination fees to $150 on consumer loans under the broader UCCC, among other changes. The IMBA is monitoring the bill closely.
Latest action: The bill passed the Senate by a vote of 26-23.
House Bill 1495 - Real Estate Land Contracts
Author: Rep. Vanessa Summers, D-Indianapolis
Summary of legislation: This bill defines "principal dwelling land contract" (contract) as a land contract for the sale of real property: (1) designed for the occupancy of one to four families; and (2) that will be occupied by the buyer as the buyer's principal dwelling. The bill provides that the seller under a contract must provide the buyer with an FHA appraisal of the property, a description of any liens encumbering the property, and make certain other disclosures to the buyer at least 10 days before the contract is executed. It requires a contract to provide for the payment of preexisting liens, and specifies that all preexisting liens must be satisfied by the end of the contract term. The bill also prohibits penalties or additional charges for prepayment, and requires the buyer to record the contract within 30 days of execution. This bill requires the Indiana Real Estate Commission (commission), in consultation with the Department of Financial Institutions (DFI), to adopt a standard contract form and standard disclosure forms, and requires a seller to use these forms after December 31, 2019. It requires a contract to include a notice informing the buyer of certain protections for contract transactions under Indiana law, and requires a seller to provide a similar disclosure in the event of a default by the buyer. The bill specifies that the seller must provide the buyer with an annual statement of account. It establishes remedies for violations. The bill requires the commission, in consultation with the DFI, to adopt rules to implement the new provisions. The bill also provides that a buyer who has completed the buyer's obligations under the contract is entitled to the homestead deduction regardless of whether the seller has conveyed title.
What you need to know: The IMBA was concerned about the unintended impact on lenders with this legislation. The IMBA sought an amendment to exempt financial institutions from the application of the bill. The amendment was adopted in committee.
Latest action: The bill passed the House by a vote of 82-14.