S.B. 162

This document includes Senate 2nd Reading Floor Amendments incorporated into the bill on Tue, Feb 7, 2006 at 3:59 PM by rday. --> 1

DEPARTMENT OF FINANCIAL
2 INSTITUTIONS ENFORCEMENT OF
3 APPLICABLE LAW
4 2006 GENERAL SESSION
5 STATE OF UTAH
6 Chief Sponsor: Lyle W. Hillyard
7 House Sponsor: David Clark
8
9 LONG TITLE
10 General Description:
11 This bill modifies the Financial Institutions Act, Utah Uniform Consumer Credit Act,
12 and the Mortgage Lending and Servicing Act to address enforcement of federal, state,
13 or local law.
14 Highlighted Provisions:
15 This bill:
16 . makes a violation of applicable federal law a violation of the Financial Institutions
17 Act and provides for enforcement;
18 . expands the federal laws enforced under certain registration acts;
19 . clarifies enforcement of federal law under certain registration acts;
20 . clarifies enforcement of rules under certain registration acts;
21 . addresses enforcement under the Utah Uniform Consumer Credit Act including
22 enforcement of federal law;
23 . makes a violation of applicable federal law a violation of the Mortgage Lending and
24 Servicing Act that can be enforced by the department;
25 . repeals language related to banks, bank subsidiaries, and persons employed or
26 appointed by banks or bank subsidiaries; and
27 . makes technical changes.

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- 2 - 28 Monies Appropriated in this Bill:
29 None
30 Other Special Clauses:
31 None
32 Utah Code Sections Affected:
33 AMENDS:
34 7-23-105, as last amended by Chapter 69, Laws of Utah 2003
35 7-23-108, as enacted by Chapter 144, Laws of Utah 1999
36 7-24-202, as enacted by Chapter 236, Laws of Utah 2003
37 7-24-303, as enacted by Chapter 236, Laws of Utah 2003
38 70C-8-104, as enacted by Chapter 159, Laws of Utah 1985
39 70D-1-14, as enacted by Chapter 172, Laws of Utah 1990
40 ENACTS:
41 7-1-325, Utah Code Annotated 1953
42 REPEALS:
43 7-3-3.1, as enacted by Chapter 267, Laws of Utah 1989
44
45 Be it enacted by the Legislature of the state of Utah:
46 Section 1. Section 7-1-325 is enacted to read:
47 7-1-325. Compliance with applicable federal law.
48 (1) As used in this section, "federal law" means:
49 (a) a statute passed by the Congress of the United States; or
50 (b) a final regulation:
51 (i) adopted by an administrative agency of the United States government; and
52 (ii) published in the code of federal regulations or the federal register.
53 (2) (a) An institution subject to the jurisdiction of the department violates this title if
54 the institution violates a federal law:
55 (i) that is applicable to the institution; and
56 (ii) pursuant to the terms of the federal law in effect on the day the institution violates
57 the federal law.
58 (b) The department shall by rule, made in accordance with Title 63, Chapter 46a, Utah

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- 3 - 59 Administrative Rulemaking Act, and consistent with this title, designate which one or more
60 federal laws are applicable to an institution subject to the jurisdiction of the department.
61 (3) Except for criminal penalties, the department may enforce a violation described in
62 Subsection (2) by taking any action:
63 (a) permitted by:
64 (i) this part;
65 (ii) Chapter 2, Possession of Depository Institution by Commissioner;
66 (iii) Chapter 19, Acquisition of Failing Depository Institutions or Holding Companies;
67 (iv) in the case of a check casher, Chapter 23, Check Cashing Registration Act; or
68 (v) in the case of a title lender, Chapter 24, Title Lending Registration Act; and
69 (b) including bringing an action permitted under this title in state court.
70 Section 2. Section 7-23-105 is amended to read:
71 7-23-105. Operational requirements for deferred deposit loans.
72 (1) If a check casher extends a deferred deposit loan, the check casher shall:
73 (a) post in a conspicuous location on its premises that can be viewed by a person
74 seeking a deferred deposit loan:
75 (i) a complete schedule of any interest or fees charged for a deferred deposit loan that
76 states the interest and fees using dollar amounts;
77 (ii) a number the person can call to make a complaint to the department regarding the
78 deferred deposit loan; and
79 (iii) a list of states where the check casher is registered or authorized to offer deferred
80 deposit loans through the Internet or other electronic means;
81 (b) enter into a written contract for the deferred deposit loan;
82 (c) conspicuously disclose in the written contract that, under Subsection (4)(b), the
83 deferred deposit loan may not be rolled over beyond 12 weeks after the day on which the
84 deferred deposit loan is executed;
85 (d) provide the person seeking the deferred deposit loan a copy of the deferred deposit
86 contract;
87 (e) orally review with the person seeking the deferred deposit loan the terms of the
88 deferred deposit loan including:
89 (i) the amount of any interest rate or fee;

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(ii) the date on which the full amount of the deferred deposit loan is due; and
91 (iii) the fact that the deferred deposit loan may not be rolled over beyond 12 weeks
92 after the day on which the deferred deposit loan is executed; and
93 (f) comply with the following as in effect on the date the deferred deposit loan is
94 extended:
95 (i) Truth in Lending Act, 15 U.S.C. Sec. 1601 et seq. and its implementing federal
96 regulations;
97 (ii) Equal Credit Opportunity Act, 15 U.S.C. Sec. 1691 and its implementing federal
98 regulations;
99 (iii) Bank Secrecy Act, 12 U.S.C. Sec. 1829b, 12 U.S.C. Sec. 1951 through 1959, and
100 31 U.S.C. Sec. 5311 through 5332 S. , and its implementing regulations .S ; and
101 [(iii)] (iv) Title 70C, Utah Consumer Credit Code.
102 (2) If a check casher extends a deferred deposit loan through the Internet or other
103 electronic means, the check casher shall provide the information described in Subsection (1)(a)
104 to the person receiving the deferred deposit loan in a conspicuous manner prior to the
105 completion of the deferred deposit loan.
106 (3) A check casher that engages in a deferred deposit loan shall permit a person
107 receiving a deferred deposit loan to:
108 (a) make partial payments in increments of at least $5 on the principal owed on the
109 deferred deposit loan at any time prior to maturity without incurring additional charges above
110 the charges provided in the written contract; and
111 (b) rescind the deferred deposit loan without incurring any charges by returning the
112 deferred deposit loan amount to the check casher on or before 5 p.m. the next business day
113 following the loan transaction.
114 (4) A check casher that engages in a deferred deposit loan may not:
115 (a) collect additional interest on a deferred deposit loan with an outstanding principal
116 balance 12 weeks after the day on which the deferred deposit loan is executed;
117 (b) rollover a deferred deposit loan if the rollover requires a person to pay the amount
118 owed by the person under a deferred deposit loan in whole or in part more than 12 weeks from
119 the day on which the deferred deposit loan is first executed; or
120 (c) threaten to use or use the criminal process in any state to collect on the deferred

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- 5 - 121 deposit loan.
122 (5) Notwithstanding Subsections (4)(a) and (4)(c), a check casher that is the holder of a
123 check, draft, order, or other instrument that has been dishonored may use the remedies and
124 notice procedures provided in Title 7, Chapter 15, Dishonored Instruments.
125 Section 3. Section 7-23-108 is amended to read:
126 7-23-108. Penalties.
127 (1) A person who violates this chapter or who files materially false information with a
128 registration or renewal under Section 7-23-103 is:
129 (a) guilty of a class B misdemeanor, except for a violation of:
130 (i) Subsection 7-23-105 (1)(f)(i), (ii), or (iii); or
131 (ii) rules made under Subsection 7-23-106 (3); and
132 (b) subject to revocation of a person's registration under this chapter.
133 (2) Subject to Title 63, Chapter 46b, Administrative Procedures Act, if the department
134 determines that a person is engaging in the business of cashing checks in violation of this
135 chapter, the department may:
136 (a) revoke that person's registration under this chapter;
137 (b) issue a cease and desist order from committing any further violations; or
138 (c) prohibit the person from continuing to engage in the business of a check casher.
139 Section 4. Section 7-24-202 is amended to read:
140 7-24-202. Operational requirements for title loans.
141 (1) A title lender shall:
142 (a) post in a conspicuous location on its premises that can be viewed by a person
143 seeking a title loan:
144 (i) a complete schedule of any interest or fees charged for a title loan that states the
145 interest and fees:
146 (A) as dollar amounts; and
147 (B) as annual percentage rates; and
148 (ii) a telephone number a person may call to make a complaint to the department
149 regarding a title loan;
150 (b) enter into a written contract for the title loan containing:
151 (i) the name of the person receiving the title loan;

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(ii) the transaction date;
153 (iii) the amount of the title loan; and
154 (iv) a statement of the total amount of any interest or fees that may be charged for the
155 title loan, expressed as:
156 (A) a dollar amount; and
157 (B) an annual percentage rate;
158 (c) provide the person seeking the title loan a copy of the written contract described in
159 Subsection (1)(b);
160 (d) prior to the execution of the title loan:
161 (i) orally review with the person seeking the title loan the terms of the title loan
162 including:
163 (A) the amount of any interest rate or fee, expressed as:
164 (I) a dollar amount; and
165 (II) an annual percentage rate; and
166 (B) the date on which the full amount of the title loan is due; and
167 (ii) provide the person seeking the title loan a copy of the disclosure form adopted by
168 the department under Section 7-24-203 ; and
169 (e) comply with the following as in effect on the date the title loan is extended:
170 (i) Truth in Lending Act, 15 U.S.C. Sec. 1601 et seq. and its implementing federal
171 regulations;
172 (ii) Equal Credit Opportunity Act, 15 U.S.C. Sec. 1691 and its implementing federal
173 regulations;
174 (iii) Bank Secrecy Act, 12 U.S.C. Sec. 1829b, 12 U.S.C. Sec. 1951 through 1959, and
175 31 U.S.C. Sec. 5311 through 5332 S. , and its implementing regulations .S ; and
176 [(iii)] (iv) Title 70C, Utah Consumer Credit Code.
177 (2) If a title lender extends a title loan through the Internet or other electronic means,
178 the title lender shall:
179 (a) provide the information described in Subsection (1)(a) to the person receiving the
180 title loan in a conspicuous manner prior to the completion of the title loan; and
181 (b) in connection with the disclosure required under Subsection (2)(a), provide a list of
182 states where the title lender is registered or authorized to offer title loans through the Internet or

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184 (3) A title lender may not:
185 (a) rollover a title loan unless the person receiving the title loan requests a rollover of
186 the title loan;
187 (b) extend more than one title loan on any vehicle at one time;
188 (c) extend a title loan that exceeds the fair market value of the vehicle securing the title
189 loan; or
190 (d) extend a title loan without regard to the ability of the person seeking the title loan to
191 repay the title loan, including the person's:
192 (i) current and expected income;
193 (ii) current obligations; and
194 (iii) employment.
195 (4) A title lender has met the requirements of Subsection (3)(d) if the person seeking a
196 title loan provides the title lender with a signed acknowledgment that:
197 (a) the person has provided the title lender with true and correct information
198 concerning the person's income, obligations, and employment; and
199 (b) the person has the ability to repay the title loan.
200 Section 5. Section 7-24-303 is amended to read:
201 7-24-303. Penalties.
202 (1) A person who violates this chapter or who files materially false information with a
203 registration or renewal under Section 7-24-201 is:
204 (a) guilty of a class B misdemeanor except for a violation of:
205 (i) Subsection 7-24-202 (1)(e)(i), (ii), or (iii); or
206 (ii) rules made under Subsection 7-24-301 (3); and
207 (b) subject to revocation of a person's registration under this chapter.
208 (2) Subject to Title 63, Chapter 46b, Administrative Procedures Act, if the department
209 determines that a person is extending title loans in violation of this chapter, the department
210 may:
211 (a) revoke that person's registration under this chapter;
212 (b) issue a cease and desist order from committing any further violations; or
213 (c) prohibit the person from continuing to extend title loans.

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(3) A person is not subject to the penalties under this section for a violation of this
215 chapter that was not willful or intentional, including a violation resulting from a clerical error.
216 Section 6. Section 70C-8-104 is amended to read:
217 70C-8-104. Enforcement proceedings.
218 (1) [If the] (a) The department may take an action described in Subsection (1)(b) if the
219 department determines that any S. [ [ ] party [ ] person ] .S engaging in activities subject to this
219a title is
220 violating or has violated or the department has reasonable cause to believe is about to violate:
221 (i) any applicable provision of this title[, or];
222 (ii) any rule[, regulation,] or order[, or] under this title;
223 (iii) any condition imposed in writing in connection with the granting of any
224 application or other request by the S. [ [ ] party [ ,] person ] .S; or
225 (iv) any federal statute[, rule,] or regulation pertaining to consumer credit[, the] in
226 effect at the time of the determination described in Subsection (1)(a).
227 (b) If the department makes a determination described in Subsection (1)(a), the
228 department may:
229 (i) order the party to cease and desist from committing any further violations[,]; and
230 (ii) in the most serious instances [may] S. , .S prohibit a party from making further
230a extensions
231 of credit to consumers.
232 (c) The department shall by rule, made in accordance with Title 63, Chapter 46a, Utah
233 Administrative Rulemaking Act, and consistent with this chapter, designate which one or more
234 federal statutes or regulations are federal statutes or regulations pertaining to consumer credit
235 for purposes of this Subsection (1).
236 (2) The department shall afford an opportunity for hearing upon request of any [party
237 alleged to have violated this title] S. [ person ] party .S described in Subsection (1)(a) if the
237a request is filed
238 with the department within 30 days after the S. [ [ ] party [ ] person ] .S requesting the hearing first
238a receives
239 notice of the allegations.
240 (3) (a) If the department determines that a practice [which] that it has alleged is
241 unlawful should be enjoined during the pendency of any proceedings incident to that allegation,
242 [it] the department may issue a temporary order:
243 (i) at the commencement of the proceedings; or
244 (ii) at any time [thereafter which shall be] after commencement of the proceeding.

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(b) The temporary order described in this Subsection (3) is fully binding on the
245a S. [ [ ] party [ ] ]
246 [ person ] .S to whom the temporary order is directed until:
247 (i) the proceedings are concluded; or
248 (ii) the temporary order is modified or dissolved by the department.
249 (c) Any S. [ [ ] party [ ] person ] .S to whom a temporary order is directed may request a
249a hearing
250 concerning the order, which shall be held:
251 (i) at the earliest mutually convenient time, but in no event more than ten days, after
252 the S. [ [ ] party's [ ] person's ] .S request is received by the department; or
253 (ii) at any other time the parties may mutually agree upon.
254 (d) Every temporary order shall include findings and conclusions in support of [it] the
255 order. [No]
256 (e) A temporary order may not be issued unless the department finds from specific
257 facts supported by sworn statement or the records of a S. [ [ ] party [ ] person ] .S subject to the
257a order that
258 consumers are otherwise likely to suffer immediate and irreparable injury, loss, or damage
259 before proceedings, incident to a final order, can be completed.
260 (4) The department may not award damages or penalties against a creditor.
261 (5) (a) Any order issued by the department under authority of this title shall:
262 (i) be in writing[,];
263 (ii) be delivered to or served upon the party affected[,]; and
264 (iii) specify its effective date, which may be immediate or at a later date. [The]
265 (b) An order described in Subsection (5)(a) shall remain in effect until:
266 (i) withdrawn by the department; or [until]
267 (ii) terminated by a court order. [The]
268 (c) (i) An order of the department, upon application made on or after the effective date
269 of the order by the department to a court of general jurisdiction in the county in which an office
270 or the residence of the party is located, may be enforced ex parte and without notice by an order
271 to comply entered by the court.
272 (ii) If the proceeding involves more than one party and each of the parties do not have
273 an office or residence in one county, the department may file its application in any county of
274 this state where one of the parties has an office or residence.
275 (iii) If no party to the proceeding has an office or residence in the state [of Utah then],

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277 Section 7. Section 70D-1-14 is amended to read:
278 70D-1-14. Enforcement by department -- Rulemaking -- Federal loan.
279 (1) The department has the power, within the limitations provided by Title 63, Chapter
280 46b, [the] Administrative Procedures Act, to:
281 (a) (i) receive and act on complaints;
282 (ii) take action designed to obtain voluntary compliance with this chapter; or
283 (iii) commence proceedings on its own initiative to enforce compliance with this
284 chapter;
285 (b) counsel persons and groups on their rights and duties under this chapter;
286 (c) adopt, amend, and repeal rules to:
287 (i) restrict or prohibit lending or servicing practices which are misleading, unfair, or
288 abusive;
289 (ii) promote or assure fair and full disclosure of the terms and conditions of agreements
290 and communications between mortgage lenders or servicers and borrowers; or
291 (iii) promote or assure uniform application of or to resolve ambiguities in applicable
292 state or federal laws or federal regulations; and
293 (d) employ hearing examiners, clerks, and other employees and agents as necessary to
294 perform its duties under this chapter.
295 (2) [No] A rule or any part of a rule adopted by the department pursuant to this chapter
296 may not be determined by any judicial or other authority to be invalid in whole or in part unless
297 the judicial or other authority expressly finds that the rule or a part of it:
298 (a) is arbitrary, capricious, constitutes an abuse of discretion[,];
299 (b) exceeds the authority granted to the department by this chapter[,]; or
300 (c) is otherwise unlawful.
301 (3) (a) A person subject to this chapter violates this chapter if the person violates a
302 federal law:
303 (i) that is applicable to the person because of the activities that make the person subject
304 to this chapter; and
305 (ii) pursuant to the terms of the federal law in effect on the day the person violates the
306 federal law.

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308 Administrative Rulemaking Act, and consistent with this chapter, designate which one or more
309 federal laws are applicable to a person described in Subsection (3)(a).
310 (c) (i) Notwithstanding the other provisions of this chapter, only the department may
311 enforce or bring an action under this chapter for a violation described in this Subsection (3).
312 (ii) The department may bring an action under this Subsection (3) in state court.
313 Section 8. Repealer.
314 This bill repeals:
315 Section 7-3-3.1, Compliance with other applicable law.

Legislative Review Note
as of 1-19-06 3:46 PM

Based on a limited legal review, this legislation has not been determined to have a high
probability of being held unconstitutional.

Office of Legislative Research and General Counsel