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S.B. 162 Enrolled

             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 Code,
             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 Code 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 compliance with other applicable law related to banks,
             26      bank subsidiaries, and persons employed or appointed by banks or bank
             27      subsidiaries; and
             28          .    makes technical changes.
             29      Monies Appropriated in this Bill:


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


             58      the federal law.
             59          (b) The department shall by rule, made in accordance with Title 63, Chapter 46a, Utah
             60      Administrative Rulemaking Act, and consistent with this title, designate which one or more
             61      federal laws are applicable to an institution subject to the jurisdiction of the department.
             62          (3) Except for criminal penalties, the department may enforce a violation described in
             63      Subsection (2) by taking any action:
             64          (a) permitted by:
             65          (i) this part;
             66          (ii) Chapter 2, Possession of Depository Institution by Commissioner;
             67          (iii) Chapter 19, Acquisition of Failing Depository Institutions or Holding Companies;
             68          (iv) in the case of a check casher, Chapter 23, Check Cashing Registration Act; or
             69          (v) in the case of a title lender, Chapter 24, Title Lending Registration Act; and
             70          (b) including bringing an action permitted under this title in state court.
             71          Section 2. Section 7-23-105 is amended to read:
             72           7-23-105. Operational requirements for deferred deposit loans.
             73          (1) If a check casher extends a deferred deposit loan, the check casher shall:
             74          (a) post in a conspicuous location on its premises that can be viewed by a person
             75      seeking a deferred deposit loan:
             76          (i) a complete schedule of any interest or fees charged for a deferred deposit loan that
             77      states the interest and fees using dollar amounts;
             78          (ii) a number the person can call to make a complaint to the department regarding the
             79      deferred deposit loan; and
             80          (iii) a list of states where the check casher is registered or authorized to offer deferred
             81      deposit loans through the Internet or other electronic means;
             82          (b) enter into a written contract for the deferred deposit loan;
             83          (c) conspicuously disclose in the written contract that, under Subsection (4)(b), the
             84      deferred deposit loan may not be rolled over beyond 12 weeks after the day on which the
             85      deferred deposit loan is executed;


             86          (d) provide the person seeking the deferred deposit loan a copy of the deferred deposit
             87      contract;
             88          (e) orally review with the person seeking the deferred deposit loan the terms of the
             89      deferred deposit loan including:
             90          (i) the amount of any interest rate or fee;
             91          (ii) the date on which the full amount of the deferred deposit loan is due; and
             92          (iii) the fact that the deferred deposit loan may not be rolled over beyond 12 weeks
             93      after the day on which the deferred deposit loan is executed; and
             94          (f) comply with the following as in effect on the date the deferred deposit loan is
             95      extended:
             96          (i) Truth in Lending Act, 15 U.S.C. Sec. 1601 et seq., and its implementing federal
             97      regulations;
             98          (ii) Equal Credit Opportunity Act, 15 U.S.C. Sec. 1691, and its implementing federal
             99      regulations;
             100          (iii) Bank Secrecy Act, 12 U.S.C. Sec. 1829b, 12 U.S.C. Sec. 1951 through 1959, and
             101      31 U.S.C. Sec. 5311 through 5332, and its implementing regulations; and
             102          [(iii)] (iv) Title 70C, Utah Consumer Credit Code.
             103          (2) If a check casher extends a deferred deposit loan through the Internet or other
             104      electronic means, the check casher shall provide the information described in Subsection (1)(a)
             105      to the person receiving the deferred deposit loan in a conspicuous manner prior to the
             106      completion of the deferred deposit loan.
             107          (3) A check casher that engages in a deferred deposit loan shall permit a person
             108      receiving a deferred deposit loan to:
             109          (a) make partial payments in increments of at least $5 on the principal owed on the
             110      deferred deposit loan at any time prior to maturity without incurring additional charges above
             111      the charges provided in the written contract; and
             112          (b) rescind the deferred deposit loan without incurring any charges by returning the
             113      deferred deposit loan amount to the check casher on or before 5 p.m. the next business day


             114      following the loan transaction.
             115          (4) A check casher that engages in a deferred deposit loan may not:
             116          (a) collect additional interest on a deferred deposit loan with an outstanding principal
             117      balance 12 weeks after the day on which the deferred deposit loan is executed;
             118          (b) rollover a deferred deposit loan if the rollover requires a person to pay the amount
             119      owed by the person under a deferred deposit loan in whole or in part more than 12 weeks from
             120      the day on which the deferred deposit loan is first executed; or
             121          (c) threaten to use or use the criminal process in any state to collect on the deferred
             122      deposit loan.
             123          (5) Notwithstanding Subsections (4)(a) and (4)(c), a check casher that is the holder of a
             124      check, draft, order, or other instrument that has been dishonored may use the remedies and
             125      notice procedures provided in [Title 7,] Chapter 15, Dishonored Instruments.
             126          Section 3. Section 7-23-108 is amended to read:
             127           7-23-108. Penalties.
             128          (1) A person who violates this chapter or who files materially false information with a
             129      registration or renewal under Section 7-23-103 is:
             130          (a) guilty of a class B misdemeanor, except for a violation of:
             131          (i) Subsection 7-23-105 (1)(f)(i), (ii), or (iii); or
             132          (ii) rules made under Subsection 7-23-106 (3); and
             133          (b) subject to revocation of a person's registration under this chapter.
             134          (2) Subject to Title 63, Chapter 46b, Administrative Procedures Act, if the department
             135      determines that a person is engaging in the business of cashing checks in violation of this
             136      chapter, the department may:
             137          (a) revoke that person's registration under this chapter;
             138          (b) issue a cease and desist order from committing any further violations; or
             139          (c) prohibit the person from continuing to engage in the business of a check casher.
             140          Section 4. Section 7-24-202 is amended to read:
             141           7-24-202. Operational requirements for title loans.


             142          (1) A title lender shall:
             143          (a) post in a conspicuous location on its premises that can be viewed by a person
             144      seeking a title loan:
             145          (i) a complete schedule of any interest or fees charged for a title loan that states the
             146      interest and fees:
             147          (A) as dollar amounts; and
             148          (B) as annual percentage rates; and
             149          (ii) a telephone number a person may call to make a complaint to the department
             150      regarding a title loan;
             151          (b) enter into a written contract for the title loan containing:
             152          (i) the name of the person receiving the title loan;
             153          (ii) the transaction date;
             154          (iii) the amount of the title loan; and
             155          (iv) a statement of the total amount of any interest or fees that may be charged for the
             156      title loan, expressed as:
             157          (A) a dollar amount; and
             158          (B) an annual percentage rate;
             159          (c) provide the person seeking the title loan a copy of the written contract described in
             160      Subsection (1)(b);
             161          (d) prior to the execution of the title loan:
             162          (i) orally review with the person seeking the title loan the terms of the title loan
             163      including:
             164          (A) the amount of any interest rate or fee, expressed as:
             165          (I) a dollar amount; and
             166          (II) an annual percentage rate; and
             167          (B) the date on which the full amount of the title loan is due; and
             168          (ii) provide the person seeking the title loan a copy of the disclosure form adopted by
             169      the department under Section 7-24-203 ; and


             170          (e) comply with the following as in effect on the date the title loan is extended:
             171          (i) Truth in Lending Act, 15 U.S.C. Sec. 1601 et seq., and its implementing federal
             172      regulations;
             173          (ii) Equal Credit Opportunity Act, 15 U.S.C. Sec. 1691, and its implementing federal
             174      regulations;
             175          (iii) Bank Secrecy Act, 12 U.S.C. Sec. 1829b, 12 U.S.C. Sec. 1951 through 1959, and
             176      31 U.S.C. Sec. 5311 through 5332, and its implementing regulations; and
             177          [(iii)] (iv) Title 70C, Utah Consumer Credit Code.
             178          (2) If a title lender extends a title loan through the Internet or other electronic means,
             179      the title lender shall:
             180          (a) provide the information described in Subsection (1)(a) to the person receiving the
             181      title loan in a conspicuous manner prior to the completion of the title loan; and
             182          (b) in connection with the disclosure required under Subsection (2)(a), provide a list of
             183      states where the title lender is registered or authorized to offer title loans through the Internet or
             184      other electronic means.
             185          (3) A title lender may not:
             186          (a) rollover a title loan unless the person receiving the title loan requests a rollover of
             187      the title loan;
             188          (b) extend more than one title loan on any vehicle at one time;
             189          (c) extend a title loan that exceeds the fair market value of the vehicle securing the title
             190      loan; or
             191          (d) extend a title loan without regard to the ability of the person seeking the title loan to
             192      repay the title loan, including the person's:
             193          (i) current and expected income;
             194          (ii) current obligations; and
             195          (iii) employment.
             196          (4) A title lender has met the requirements of Subsection (3)(d) if the person seeking a
             197      title loan provides the title lender with a signed acknowledgment that:


             198          (a) the person has provided the title lender with true and correct information
             199      concerning the person's income, obligations, and employment; and
             200          (b) the person has the ability to repay the title loan.
             201          Section 5. Section 7-24-303 is amended to read:
             202           7-24-303. Penalties.
             203          (1) A person who violates this chapter or who files materially false information with a
             204      registration or renewal under Section 7-24-201 is:
             205          (a) guilty of a class B misdemeanor except for a violation of:
             206          (i) Subsection 7-24-202 (1)(e)(i), (ii), or (iii); or
             207          (ii) rules made under Subsection 7-24-301 (3); and
             208          (b) subject to revocation of a person's registration under this chapter.
             209          (2) Subject to Title 63, Chapter 46b, Administrative Procedures Act, if the department
             210      determines that a person is extending title loans in violation of this chapter, the department
             211      may:
             212          (a) revoke that person's registration under this chapter;
             213          (b) issue a cease and desist order from committing any further violations; or
             214          (c) prohibit the person from continuing to extend title loans.
             215          (3) A person is not subject to the penalties under this section for a violation of this
             216      chapter that was not willful or intentional, including a violation resulting from a clerical error.
             217          Section 6. Section 70C-8-104 is amended to read:
             218           70C-8-104. Enforcement proceedings.
             219          (1) [If the] (a) The department may take an action described in Subsection (1)(b) if the
             220      department determines that any party engaging in activities subject to this title is violating or
             221      has violated or the department has reasonable cause to believe is about to violate:
             222          (i) any applicable provision of this title[, or];
             223          (ii) any rule[, regulation,] or order[, or] under this title;
             224          (iii) any condition imposed in writing in connection with the granting of any
             225      application or other request by the party[,]; or


             226          (iv) any federal statute[, rule,] or regulation pertaining to consumer credit[, the] in
             227      effect at the time of the determination described in Subsection (1)(a).
             228          (b) If the department makes a determination described in Subsection (1)(a), the
             229      department may:
             230          (i) order the party to cease and desist from committing any further violations[,]; and
             231          (ii) in the most serious instances [may], prohibit a party from making further
             232      extensions of credit to consumers.
             233          (c) The department shall by rule, made in accordance with Title 63, Chapter 46a, Utah
             234      Administrative Rulemaking Act, and consistent with this chapter, designate which one or more
             235      federal statutes or regulations are federal statutes or regulations pertaining to consumer credit
             236      for purposes of this Subsection (1).
             237          (2) The department shall afford an opportunity for hearing upon request of any party
             238      [alleged to have violated this title] described in Subsection (1)(a) if the request is filed with the
             239      department within 30 days after the party requesting the hearing first receives notice of the
             240      allegations.
             241          (3) (a) If the department determines that a practice [which] that it has alleged is
             242      unlawful should be enjoined during the pendency of any proceedings incident to that allegation,
             243      [it] the department may issue a temporary order:
             244          (i) at the commencement of the proceedings; or
             245          (ii) at any time [thereafter which shall be] after commencement of the proceeding.
             246          (b) The temporary order described in this Subsection (3) is fully binding on the party to
             247      whom the temporary order is directed until:
             248          (i) the proceedings are concluded; or
             249          (ii) the temporary order is modified or dissolved by the department.
             250          (c) Any party to whom a temporary order is directed may request a hearing concerning
             251      the order, which shall be held:
             252          (i) at the earliest mutually convenient time, but in no event more than ten days, after
             253      the party's request is received by the department; or


             254          (ii) at any other time the parties may mutually agree upon.
             255          (d) Every temporary order shall include findings and conclusions in support of [it] the
             256      order. [No]
             257          (e) A temporary order may not be issued unless the department finds from specific
             258      facts supported by sworn statement or the records of a party subject to the order that consumers
             259      are otherwise likely to suffer immediate and irreparable injury, loss, or damage before
             260      proceedings, incident to a final order, can be completed.
             261          (4) The department may not award damages or penalties against a creditor.
             262          (5) (a) Any order issued by the department under authority of this title shall:
             263          (i) be in writing[,];
             264          (ii) be delivered to or served upon the party affected[,]; and
             265          (iii) specify its effective date, which may be immediate or at a later date. [The]
             266          (b) An order described in Subsection (5)(a) shall remain in effect until:
             267          (i) withdrawn by the department; or [until]
             268          (ii) terminated by a court order. [The]
             269          (c) (i) An order of the department, upon application made on or after the effective date
             270      of the order by the department to a court of general jurisdiction in the county in which an office
             271      or the residence of the party is located, may be enforced ex parte and without notice by an order
             272      to comply entered by the court.
             273          (ii) If the proceeding involves more than one party and each of the parties do not have
             274      an office or residence in one county, the department may file its application in any county of
             275      this state where one of the parties has an office or residence.
             276          (iii) If no party to the proceeding has an office or residence in the state [of Utah then],
             277      the department's application shall be filed in the Third District Court.
             278          Section 7. Section 70D-1-14 is amended to read:
             279           70D-1-14. Enforcement by department -- Rulemaking -- Federal loan.
             280          (1) The department has the power, within the limitations provided by Title 63, Chapter
             281      46b, [the] Administrative Procedures Act, to:


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


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


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