Initiative No. 164 (I-164)
BALLOT LANGUAGE FOR INITIATIVE NO. 164 (I-164)
INITIATIVE NO. 164
A LAW PROPOSED BY INITIATIVE PETITION
Under Montana law, deferred deposit (payday) lenders may charge fees equaling one-fourth of the loan, which, as an annual interest rate could range from 300 percent to 650 percent. Title lenders may charge similar interest rates. I-164 reduces the interest, fees, and charges that payday lenders, title lenders, retail installment lenders, and consumer loan licensees may charge to an annual interest rate of 36 percent. It prohibits businesses from structuring other transactions to avoid the rate limit. It also revises statutes applicable to pawn brokers and junk dealers.
I-164 reduces the licenses and examination fee revenue paid to the State because certain lenders may not renew their licenses.
[ ] FOR reducing the annual interest, fees, and charges payday, title, and retail installment lenders and consumer loan licensees may charge on loans to 36 percent.
[ ] AGAINST reducing the annual interest, fees, and charges payday, title, and retail installment lenders and consumer loan licensees may charge on loans to 36 percent.
THE COMPLETE TEXT OF INITIATIVE NO. 164 (I-164)
BE IT ENACTED BY THE PEOPLE OF THE STATE OF MONTANA:
NEW SECTION. Section 1. Findings. The people of Montana find that some lenders are charging Montanans over 400% interest annually, that excessive interest rates can lead Montana families into a debt trap of repeat borrowing, that the United States congress has enacted laws capping interest rates on loans to military families at 36% annually, and that responsible small loans are available at interest rates of 36% annually or less.
Section 2. Section 31-1-112, MCA, is amended to read:
“31-1-112. Interest rate limitation exemption -- regulated lenders -- merchant finance. (1) A regulated lender, except for a deferred deposit loan licensee, title loan licensee, or consumer loan licensee, is exempt from all limitations on the rate of interest that it may charge and is exempt from the operation and effect of all usury statutes.
(2) A finance operation that finances transactions between merchants, as defined in 30-2-104, is also exempt from usury limits.”
Section 3. Section 31-1-203, MCA, is amended to read:
“31-1-203. Penalties. (1) Any person who knowingly violates a provision of this part or engages in the business of a sales finance company in this state without a license as provided in this part is guilty of a misdemeanor and upon conviction shall be punished by a fine of not more than $500 or by imprisonment for not more than 6 months, or both.
(2) Any person violating 31-1-231 through 31-1-243, except as the result of an accidental and bona fide error of computation, shall be barred from recovery of any finance, delinquency, or collection charge on the contract. In addition to other penalties provided by law, a violation of subsection (3) and a contract made in violation of the finance charge limitations imposed by 31-1-241 is a violation of title 30, chapter 14, part 1.
(3) A person may not engage in any device or subterfuge intended to evade the requirements of this chapter including assisting a borrower to obtain a loan at a rate of interest prohibited by Montana law, making loans disguised as personal property sales and leaseback transactions, or disguising loan proceeds as cash rebates for the pretextual installment sale of goods or services.
Section 4. Section 31-1-241, MCA, is amended to read:
“31-1-241. Finance charge limitation. (1)
Notwithstanding the provisions of any other law, the The finance charge included in a retail installment contract must be at a rate agreed upon by the retail seller and the buyer, but the finance charge may not exceed 36% per annum.
Notwithstanding the provisions of any other law, the The finance charge included in a retail charge account agreement must be at a rate agreed upon by the retail seller and the buyer, but the finance charge may not exceed 36% per annum.
(3) The finance charge must be computed from month to month (which need not be a calendar month) or over another regular billing cycle period by using either:
(a) the average daily balance in the account in the billing cycle period; or
(b) the ending balance of the account as of the last day of the billing cycle period less the amount of total purchases charged to the account during that billing cycle.
(4) A seller may change the terms of a revolving charge account whether or not the change is authorized by prior agreement. The seller shall give the buyer written notice of any change in the billing cycle prior to the effective date of the change.
(5) If the retail seller increases the finance charge on a retail charge account agreement, then the increased rate may only be applied to the balance consisting of purchases on other charges incurred on or after the effective date of the increase.
(6) For purposes of determining the balance to which the increased rate applies, all payments may be considered to be applied to the balance existing prior to the change in rate until that balance is paid in full.
(7) If the finance charge determined pursuant to subsection (3) for a monthly period is less than 50 cents, a maximum finance charge not in excess of 50 cents may be charged and collected for the period.”
Section 5. Section 31-1-401, MCA, is amended to read:
“31-1-401. Interest pawnbrokers may receive -- civil enforcement -- prohibited activities. (1) A person may not carry on the business of pawnbroker or junk dealer by receiving goods pawned or in pledge for loans at any rate of interest above 10% a year without first obtaining a license. A pawnbroker or junk dealer or the pawnbroker’s or junk dealer’s employees or agents may not charge a fee of more than 25% of the amount of the loan for a 30-day period. The fee for extending a pawn agreement for 30 days may not exceed 25% of the amount of the loan. For purposes of this section, a fee includes all costs or fees charged, including but not limited to interest, commission, discount, storage, care of property, and purchase option.
(2) The taking, receiving, reserving, or charging of a fee greater than that allowed under subsection (1) is considered a forfeiture of a sum double the amount of the fee for storage or caring that was agreed to be paid.
(3) (a) When a rate or charge greater than that provided for in subsection (1) has been paid, the person by whom it has been paid may recover from the pawnbroker or junk dealer reasonable attorney fees and an amount double the amount of the fee paid.
(b) An action under this
section subsection (3) must be brought within 2 years after the payment of the fee. Before a suit may be brought, the party bringing suit shall make written demand for return of the fee paid.
(4) Unless licensed as a consumer loan licensee, deferred deposit loan licensee, or title loan licensee, a pawnbroker or junk dealer may not;
(a) cash or advance money for a postdated or deferred presentment check in exchange for a fee or finance charge;
(b) use a check, authorization for electronic access, or other method of access to a deposit account, savings account, or other financial or asset account as a condition of or security for an extension of credit;
(c) receive the title to a motor vehicle for the purpose of a pawn transaction or in pledge for a loan; or
(d) engage in any device or subterfuge intended to evade the requirements of this chapter including assisting a borrower to obtain a loan at a rate of interest prohibited by Montana law, making loans disguised as personal property sales and leaseback transactions, or disguising loan proceeds as cash rebates for the pretextual installment sale of goods or services.
(5) In addition to other penalties provided by law, a violation of subsection (4) is a violation of title 30, chapter 14, part l.”
Section 6. Section 31-1-722, MCA, is amended to read:
“31-1-722. Prohibited and permitted fees -- attorney fees and costs. (1) A licensee may not charge or receive, directly or indirectly, any interest, fees, or charges except those specifically authorized by this section.
(2) A licensee may not charge a fee for
each deferred deposit loan entered into with a consumer that exceeds 25% of the principal amount of the deferred deposit loan that is advanced or, in the case of an electronic transaction, 25% of the principal amount of the deferred deposit loan. making or carrying each deferred deposit loan authorized by this part that exceeds 36% per annum, exclusive of the insufficient funds fees authorized in subsections (3) and (4).
(3) If there are insufficient funds to pay a check on the date of presentment, a licensee may charge a fee, not to exceed $30. Only one fee may be collected pursuant to this subsection with respect to a particular check even if it has been redeposited and returned more than once. A fee charged pursuant to this subsection is a licensee’s exclusive charge for late payment. A licensee or any collection agency acting as an agent of a licensee, as a holder in due course of a licensee, or under an agreement with a licensee to collect amounts due or asserted to be due may not collect damages under 27-1-717(3) for an insufficient funds check.
(4) If the loan involves an electronic deduction and there are insufficient funds to deduct on the date on which the payment is due, a licensee may charge a fee, not to exceed $30. Only one fee may be collected pursuant to this subsection with respect to a particular loan even if the licensee has attempted more than once to deduct the amount due from the consumer’s account. A fee charged pursuant to this subsection is a licensee’s exclusive charge for late payment. A licensee or any collection agency acting as an agent of a licensee, as a holder in due course of a licensee, or under an agreement with a licensee to collect amounts due or asserted to be due may not collect damages under 27-1-717(3) for an electronic deduction for which there are insufficient funds.
(5) If the loan agreement in 31-1-721 requires, reasonable attorney fees and court costs may be awarded to the party in whose favor a final judgment is rendered in any action on a deferred deposit loan entered into pursuant to this part.”
Section 7. Section 31-1-817, MCA, is amended to read:
“31-1-817. Interest rates -- fees charged. (1) The maximum rate of interest
that a title lender may contract for and receive for making and carrying any title loan authorized by this part may not exceed : 36% per annum exclusive of the recording costs and service charges provided for in subsections (2) and (3).
(a) 25% for each 30-day period for the portion of a loan that does not exceed $2,000;
(b) 18% for each 30-day period for the portion of a loan exceeding $2,000 but not exceeding $4,000; and
(c) 10% for each 30-day period, plus fees, on the portion of a loan that exceeds $4,000. (2) Title lenders may charge their actual costs of recording liens on borrowers’ certificates of title.
(3) Title lenders may charge a service charge, as provided in 27-1-717, if there are insufficient funds to pay a check on the date of presentment. Title lenders may not collect damages under 27-1-717(3) based upon the presentment of an insufficient funds check.”
Section 8. Section 32-5-301, MCA, is amended to read:
“32-5-301. Fees charged to consumers. (1) A licensee may contract for and receive
, interest on any loan of money , interest as provided under 31-1-112. Such interest, including fees and charges incurred in the making of the loan but excluding the fees authorized in subsections (2) and (3), may not exceed 36% per annum.
(2) If provided for in the contract, an additional fee may be charged for any amount past due according to the original terms of the contract, whether by reason of default or extension agreement. The fee charged may be the greater of $15 or 5% of the amount past due, not to exceed $50. The fee charged for any past-due amount may be charged only once. Except as provided in subsection (3), other fees may not be charged for default or extension of the contract by the borrower.
(3) (a) If provided for in the contract, a licensee may grant a deferral at any time. A deferral postpones the scheduled due date of the earliest unpaid installment and all subsequent installments as originally scheduled or as previously deferred for a period equal to the agreed-upon deferral period. The deferral period is that period during which an installment is not scheduled to be paid by reason of the deferral.
(b) A licensee may charge an additional fee for each deferral. The fee charged may be the greater of $15 or 5% of the amount currently due, not to exceed $50.
(c) Other fees may not be charged by the lender for any deferrals granted by the lender.
(4) The licensee may include in the principal amount of any loan:
(a) the actual fees paid a public official or agency of the state for filing, recording, or releasing any instrument securing the loan;
(b) the premium for insurance in lieu of filing or recording any instrument securing the loan to the extent that the premium does not exceed the fees that would otherwise be payable for filing, recording, or releasing any instrument securing the loan;
(c) bona fide fees or charges related to real estate security paid to third parties;
(d) fees or premiums for title examination, title insurance, or similar purposes, including survey;
(e) fees for preparation of a deed, settlement statement, or other documents;
(f) fees for notarizing deeds and other documents;
(g) appraisal fees;
(h) fees for credit reports; and
(i) fees paid to a trustee for release of a trust deed.
(5) (a) Other fees may not be directly or indirectly contracted for or received by any licensee except those specifically authorized by this chapter. A licensee may not divide into separate parts any contract made for the purpose of or with the effect of obtaining fees in excess of those authorized by this chapter. If any amount in excess of the fees permitted by this chapter is charged, contracted for, or received, the licensee shall forfeit to the borrower a sum that is double the amount that is in excess of the fees authorized by this chapter.
(b) This section does not apply to fees for services rendered in connection with a loan after the loan has been consummated and if the borrower’s participation in the services is strictly voluntary.”
NEW SECTION. Section 9. Effective Date. [This act] applies to all transactions governed hereby entered into on or after January 1, 2011.