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SB 157: "An Act relating to the regulation of small loan and retail installment transactions."

00SENATE BILL NO. 157 01 "An Act relating to the regulation of small loan and retail installment 02 transactions." 03 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF ALASKA: 04 * Section 1. AS 06.20.030(a) is amended to read: 05 (a) Investigation expenses incurred by the department in processing an 06 application for licensure shall be charged to and paid by the applicant under 07 AS 06.01.010. At the time of submitting the application to the commissioner, the 08 applicant shall pay to the department $1,000 [$400] in partial payment of those 09 investigation expenses incurred by the department. [IF THE INVESTIGATION 10 EXPENSES INCURRED BY THE DEPARTMENT DO NOT EXCEED $400, THE 11 REMAINDER SHALL BE PROMPTLY REFUNDED TO THE APPLICANT.] 12 * Sec. 2. AS 06.20.030(b) is amended to read: 13 (b) An applicant shall pay to the department at the time of submitting an 14 application a sum, in addition to that specified in (a) of this section, of $500 for a

01 single office license, or $2,000 for a multiple office license [$200] as an annual 02 license fee for a period terminating on the last day of the current calendar year. [IF 03 THE APPLICATION IS FILED AFTER JUNE 30, THE ADDITIONAL SUM IS 04 $100.] 05 * Sec. 3. AS 06.20.040 is amended to read: 06 Sec. 06.20.040. LIQUID ASSETS REQUIRED. An applicant shall prove, in 07 form satisfactory to the department, that the applicant has available for the operation 08 of the business at the location specified in the application, liquid assets of at least 09 $25,000, or, in the case of a multiple office license, that the equivalent amount is 10 available to each office from a central account maintained by the applicant 11 [$20,000]. 12 * Sec. 4. AS 06.20.050 is amended to read: 13 Sec. 06.20.050. BOND. The applicant shall file with the application a bond 14 to be approved by the department in which the applicant shall be the obligor, in the 15 sum of $25,000 [$5,000] with one or more sureties. The bond shall be for the use of 16 the state and any person who may have a cause of action against the obligor under this 17 chapter. The bond must state that the obligor will faithfully conform to and abide by 18 the provisions of this chapter and of all regulations lawfully adopted by the 19 department, and will pay to the state and to any person all money that may become 20 due or owing to the state or to the person from the applicant under this chapter. 21 * Sec. 5. AS 06.20.060 is amended to read: 22 Sec. 06.20.060. ISSUANCE OF LICENSE. Upon the filing of the application, 23 the payment of the fees and the approval of the bond, the department shall issue a 24 license to the applicant if it finds upon investigation that (1) the financial 25 responsibility, experience, character, and general fitness of the applicant and of its 26 members if the applicant is a copartnership or association, and of its officers and 27 directors if the applicant is a corporation, are such as to command the confidence of 28 the community and to warrant belief that the business will be operated honestly, fairly, 29 and efficiently within the purposes of this chapter, and (2) allowing the applicant to 30 engage in business at the location will provide accessibility and [PROMOTE THE] 31 convenience for borrowers of money [AND ADVANTAGE OF THE COMMUNITY

01 IN WHICH THE BUSINESS IS TO BE CONDUCTED], and (3) the applicant has 02 available for the operation of the business at the specific location liquid assets of at 03 least $25,000, or, in the case of a multiple office license, that the equivalent 04 amount if available to each office from a central account maintained by the 05 applicant [$20,000]. The foregoing facts are conditions precedent to the issuance of 06 a license under this chapter. The license permits the applicant to make loans in 07 accordance with this chapter at the location or locations specified in the application. 08 The license remains in full force and effect until it is surrendered by the licensee or 09 revoked or suspended. If the department denies the application, it shall notify the 10 applicant of the denial, bill the applicant for any outstanding expenses incurred by the 11 department during the investigation and return the bond if those expenses have been 12 paid. The department shall approve or deny every application for license within 60 13 days from the filing of the application with the fees and the approved bond. If the 14 application is denied, the department shall, within 20 days thereafter, serve upon the 15 applicant a copy of the written decision and findings. The decision and findings may 16 be reviewed in the manner provided in AS 44.62.560 and 44.62.570 (Administrative 17 Procedure Act). 18 * Sec. 6. AS 06.20.090 is amended to read: 19 Sec. 06.20.090. PLACES OF BUSINESS. (a) A licensee may maintain only 20 one place of business under a single office [THE] license, or up to 10 places of 21 business under each multiple office license. The department may issue more than 22 one license to the same licensee upon compliance with the provisions of this chapter 23 governing the original issuance of a license. 24 (b) If a licensee changes the place of business to another location within the 25 same municipality, the licensee shall give written notice to the department in advance. 26 Upon approval, the department shall issue an amended license for [THE 27 DEPARTMENT SHALL ATTACH THE WRITTEN NOTICE OF THE CHANGE TO 28 THE LICENSE TOGETHER WITH THE DATE. THEREAFTER THE LICENSEE 29 MAY OPERATE THE BUSINESS UNDER THE LICENSE AT] the new location. 30 A licensee may not change the place of business to a location outside the municipality 31 in which the licensee is authorized to do business.

01 * Sec. 7. AS 06.20.180 is amended to read: 02 Sec. 06.20.180. BOOKS AND RECORDS OF LICENSEES. Each licensee 03 shall keep and use in the licensed premises [BUSINESS] those books, accounts, and 04 records that will enable the department to determine whether the licensee is complying 05 with this chapter and with the regulations lawfully adopted by the department under 06 this chapter. The maintenance of separate books and records for another business 07 authorized by the department under AS 06.20.210 is not required. The method 08 of tracking and numbering the loans shall be determined by the licensee, as long 09 as the system enables the department to perform the department's obligations 10 under this title. The licensee shall preserve the books, accounts, and records, 11 including cards used in the card system, if any, for two years after making the final 12 entry on any recorded loan. 13 * Sec. 8. AS 06.20.250 is amended by adding new subsections to read: 14 (d) Loan contracts must provide for substantially equal payments, and the 15 payments must be due at least once a month, with the first payment beginning not later 16 than 45 days from the date the loan is made. 17 (e) If the irregular payment is confirmed in writing by the borrower, and the 18 method of repayment is consistent with the maximum term and annual interest rate 19 provided in this chapter, and if a borrower demonstrates sufficient seasonal or 20 extraordinary income to support repayment of a loan, the loan contract may provide 21 for irregular payments and first payment loan extensions greater than 45 days from the 22 date the loan is made. 23 * Sec. 9. AS 06.20.260(a) is amended to read: 24 (a) A further or other charge or amount for an examination, service, brokerage 25 commission, expense, fee, bonus, or other thing may not be directly or indirectly 26 charged, contracted for, or received except 27 (1) lawful fees actually paid out by the licensee to a public officer for 28 filing, recording, or releasing any instrument securing the loan, or premiums payable 29 for insurance in place of perfecting a security interest if the premiums do not 30 exceed the fees that would otherwise normally be incurred for perfecting the 31 security interest, or for transferring certificate of title to a motor vehicle securing the

01 lien or noting a lien on that certificate; 02 (2) premiums actually paid out for insurance on any one or combination 03 of the following: pledged property of the borrower, credit life insurance on the life of 04 one or more borrowers, credit loss of income insurance, or credit disability insurance 05 to provide indemnity for payments becoming due on the indebtedness; 06 (3) taxable costs and expenses to which the licensee becomes entitled 07 under general law in any court proceedings to collect a loan or to realize on the 08 security after default; 09 (4) for loans over $10,000, reasonable costs and fees paid by a 10 licensee for appraisals, surveys, [AND] title insurance or reports, and credit reports 11 [IF THE LOAN IS SECURED BY AN INTEREST IN REAL ESTATE]; 12 (5) a late payment fee of not more than 10 percent of the payment that 13 is due or $25 [$15], whichever is less; 14 (6) a fee for dishonored checks in an amount established by the 15 department based on existing commercial rates then in effect; 16 (7) reasonable attorney fees, actual expenses, and costs incurred in 17 connection with the collection of a delinquent debt, a repossession, or a 18 foreclosure if the collection, repossession, or foreclosure is referred for collection 19 to an attorney who is not a salaried employee of the licensee and the balance then 20 owing on the debt exceeds $5,000. 21 * Sec. 10. AS 45.10.080(a) is amended to read: 22 (a) If authority to do so is contained in the contract or agreement and 23 agreed to by the parties, the [THE] holder of a retail installment contract or retail 24 charge agreement may [NOT] collect any delinquency, [OR] collection or 25 dishonored check charges, [CHARGE OTHER THAN] attorney fees, court costs, 26 and disbursements [UNLESS THE CONTRACT SO PROVIDES]. In this case, the 27 charge must [SHALL] be reasonable, and no attorney fee may be recovered unless the 28 contract is referred for collection to an attorney not a salaried employee of the holder. 29 * Sec. 11. AS 45.10.120 is amended to read: 30 Sec. 45.10.120. EXTENT OF SERVICE CHARGE. (a) The service charge 31 must [SHALL] include all charges incident to investigating and making the retail

01 installment contract or charge agreement and for the privilege of making the 02 installment payments under the contract or agreement. Another [NO OTHER] fee, 03 expense, or charge may not be taken, received, reserved, or contracted for investigating 04 and making the contract or agreement, or for the privilege of making the payments, 05 except for insurance premiums, delinquency charges, attorney fees, court costs, 06 official fees, or other charges contracted for and agreed to by the parties under 07 AS 45.10.080. 08 (b) A seller or holder of a retail installment contract may charge, receive, and 09 collect a service charge, which may [SHALL] not exceed one and one-half percent 10 a month [THE FOLLOWING RATES MULTIPLIED BY THE NUMBER OF 11 MONTHS], including a fraction of a month in excess of 15 days as one month, 12 elapsing between the date of the contract and the due date of the last installment [, 13 (1)] on [SO MUCH OF] the unpaid balance [AS DOES NOT EXCEED 14 $1,000, FIVE-SIXTHS OF ONE PER CENT; 15 (2) IF THE UNPAID BALANCE EXCEEDS $1,000, ON SO MUCH 16 OF THE UNPAID BALANCE AS EXCEEDS $1,000, TWO-THIRDS OF ONE PER 17 CENT; 18 (3) IF THE TOTAL SERVICE CHARGE SO COMPUTED IS LESS 19 THAN $12, BUT IF THE DUE DATE OF THE LAST INSTALLMENT OF THE 20 CONTRACT IS EIGHT MONTHS OR LESS AFTER ITS EFFECTIVE DATE, $10]. 21 (c) A seller or holder of a retail charge agreement, revolving charge agreement, 22 or other retail charge agreement may charge, receive, and collect a service charge not 23 to exceed one and one-half percent a month [THE FOLLOWING RATES] computed 24 on the outstanding balances from month to month [, 25 (1) ON SO MUCH OF THE OUTSTANDING BALANCE AS DOES 26 NOT EXCEED $1,000, ONE AND ONE-HALF PER CENT PER MONTH; 27 (2) IF THE OUTSTANDING BALANCE IS MORE THAN $1,000, 28 ONE-TWELFTH OF THE ANNUAL RATE PERMITTED UNDER AS 45.45.010(b) 29 PER MONTH ON THE EXCESS OVER $1,000 OF THE OUTSTANDING 30 BALANCE; 31 (3) IF THE SERVICE CHARGE SO COMPUTED IS LESS THAN $1

01 FOR ANY MONTH, $1; 02 (4) THE SERVICE CHARGE MAY BE COMPUTED ON A 03 SCHEDULE OF FIXED AMOUNTS IF AS SO COMPUTED IT IS APPLIED TO 04 ALL AMOUNTS OF OUTSTANDING BALANCES EQUAL TO THE FIXED 05 AMOUNT MINUS A DIFFERENTIAL OF NOT MORE THAN $5 PROVIDED 06 THAT IT IS ALSO APPLIED TO ALL AMOUNTS OF OUTSTANDING 07 BALANCES EQUAL TO THE FIXED AMOUNT PLUS AT LEAST THE SAME 08 DIFFERENTIAL]. 09 * Sec. 12. AS 45.10.220(3) is amended to read: 10 (3) "official fees" means the amount of the fees set by law for filing, 11 recording, or otherwise perfecting and releasing or satisfying a retained title, lien, or 12 other security interest created by a retail installment transaction or premiums payable 13 for insurance in place of perfecting a security interest if the premiums do not 14 exceed the fees that would otherwise normally be incurred for perfecting the 15 security interest;