Senate Bill 2688

AN ACT TO AMEND SECTION 75-67-137, MISSISSIPPI CODE OF 1972, TO PROVIDE REMEDIES AND PENALTIES FOR VIOLATIONS OF THE SMALL LOAN REGULATORY LAW AND VIOLATIONS OF COMMON-LAW DUTIES OF SMALL LOAN LICENSEES; TO PROVIDE THAT THE REMEDIES AND PENALTIES PROVIDED UNDER THIS ACT ARE EXCLUSIVE; TO AMEND SECTION 75-67-127, MISSISSIPPI CODE OF 1972, TO DELETE THE PROVISION WHICH PROVIDES PENALTIES FOR VIOLATING CERTAIN REQUIREMENTS FOR THE MAKING AND PAYMENT OF SMALL LOANS; TO REPEAL SECTION 75-67-119, MISSISSIPPI CODE OF 1972, WHICH PROVIDES CIVIL AND CRIMINAL PENALTIES FOR THE IMPOSITION OF EXCESSIVE FINANCE CHARGES UNDER THE SMALL LOAN REGULATORY LAW; AND FOR RELATED PURPOSES.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:

SECTION 1. Section 75-67-137, Mississippi Code of 1972, is amended as follows:

75-67-137. (1) In addition to the definitions provided in Section 75-67-103 of this article, the following words and phrases when used in this section shall have the following meanings:

(a) "Civil remedies" means civil penalties, attorney's fees and out-of-pocket expenses.

(b) "Good faith error" means errors of law as well as errors of fact made without actual knowledge of the error or without intent to violate the law.

(c) "Multiple violation" means a violation that has recurred more than one hundred (100) times as a result of a common error.

(d) "Noneconomic damages" means subjective, nonpecuniary damages arising from pain, suffering, inconvenience, mental anguish, worry, emotional distress, injury to reputation, humiliation, embarrassment and other nonpecuniary damages. The term "noneconomic damages" shall not include punitive damages.

(e) "Other charges" means any amounts contracted for or received by any licensee or other person in connection with making a consumer loan (including, without limitation, insurance premiums), but not finance charges as defined in Section 75-17-25.

(f) "Punitive damages" means damages awarded in addition to actual damages when the licensee acted with malice or gross negligence or reckless disregard for the rights of the plaintiff.

(g) "Total Amount of Loan" means the sum of payments to be paid by the borrower.

(2) Notwithstanding any provision of law to the contrary, a licensee under this article shall have no liability for any act or practice done or omitted in conformity with (a) any rule or regulation of the commissioner, or (b) any rule, regulation, interpretation or approval of any other state or federal agency or any opinion of the Attorney General, regardless that after such act or omission has occurred the rule, regulation, interpretation, approval or opinion is amended, rescinded, or determined by judicial or other authority to be invalid for any reason.

(3) Notwithstanding any provision of law to the contrary, a licensee under this article, acting in conformity with a written interpretation or approval by an official or employee of any state or federal agency or department, shall be presumed to have acted in accordance with applicable law, regardless that after such act has occurred, the interpretation or approval is amended, rescinded, or determined by judicial or other authority to be incorrect or invalid for any reason.

(4) (a) If a court finds that a licensee has intentionally or as a result of error not in good faith violated the provisions of this article, the complaining borrower is entitled to a refund of all unlawful finance charges or other charges and has the additional right to recover three (3) times the amount of such finance charges or other charges, together with a reasonable attorney's fee. The right to recover the civil penalty in this paragraph (a) accrues only after:

(i) The complaining borrower gives written notice to the licensee by mail addressed to the licensee's place of business in which the consumer credit transaction arose and presents proof of receipt by licensee of such notice;

(ii) The complaining borrower mails a copy of such notice to the licensee's agent for service of process; and

(iii) Thirty (30) days have elapsed since receipt of such notice by the licensee, and the violation has not been corrected.

(b) Except as otherwise provided herein, if the notices provided for in paragraph (a) of this subsection have been given by the complaining borrower, the following shall be presumed to be an intentional violation or a violation not resulting from good faith error: the licensee's failure to return or give credit for an overcharge in the finance charge (in violation of Section 75-17-21) or other charges, or failure to return a deficiency in a refund required by law within the thirty-day time period set forth in subparagraph (iii) of paragraph (a) of this subsection when such overcharge or deficiency exceeds the greater of (i) ten percent (10%) of such finance charge, other charge or refund; or (ii) Twenty-five Dollars ($25.00).

(c) If the licensee fails to return or give credit for an overcharge or deficiency as provided in paragraph (b) of this subsection, in addition to the penalties in paragraph (a) of this subsection, the borrower who executed the consumer credit transaction and gave the required notices shall be entitled to collect from the licensee not more than One Hundred Dollars ($100.00) of such borrower's actual documented out-of-pocket expenses incurred as a direct result of the licensee's failure to act.

(d) In the case of multiple violations involving an overcharge in the finance charge or other charges or a deficiency in a refund of the size described in paragraph (b) of this subsection, the licensee must notify the commissioner of the licensee's receipt of written notice of the multiple violations and must give the commissioner a reasonable description of the multiple violations within thirty (30) days after the receipt of the written notice from the complaining borrower, and the licensee must correct the multiple violations as to each borrower affected thereby within thirty (30) days of the receipt of the written notice from the complaining borrower. Upon good cause shown, the commissioner may grant not more than two (2) thirty-day extensions within which the licensee must correct the violations. If the licensee fails to give the commissioner the required notice or fails to correct the multiple violations as required herein, then from the failure it shall be presumed that the multiple violations were intentional or not in good faith.

(5) (a) If a violation of this article is not intentional or is made in good faith on the part of the licensee, the court may require the licensee to correct the violation, but the complaining borrower is not entitled to the civil remedies granted by this section.

(b) If the complaining borrower gives the licensee written notice of an alleged violation as provided in subsection (4)(a)(i) and (ii) of this section, although the violation was unintentional or resulted from good faith error or did not in fact exist, the licensee must give the complaining borrower a reasonable response to the complaint in writing within thirty (30) days of the receipt of written notice from the complaining borrower. If the licensee fails to give the response timely, the complaining borrower shall be entitled to collect from the licensee not more than One Hundred Dollars ($100.00) of the complaining borrower's actual documented out-of-pocket expenses incurred as a direct result of the failure of the licensee to comply with the provisions hereof.

(6) (a) A licensee has no liability for the civil remedies granted by this section in all instances other than multiple violations and whether intentional or resulting from good faith error or not, if: (i) within fifteen (15) days after discovering a violation and prior to receipt of written notice of the violation from a borrower, or (ii) within fifteen (15) days after the occurrence of the violation, regardless of receipt of such notice from a borrower, the licensee gives written notice to the borrower or the borrower's designated agent of the violation and corrects the violation. Violations discovered by the licensee in the manner described in subparagraphs (i) and (ii) above are referred to in this section as "self-discovered" violations. If the self-discovered violation consists of a prohibited agreement, the licensee shall correct the violation by giving the borrower a corrected copy of the writing that contained the violation. If the self-discovered violation consists of an excessive charge, the licensee shall correct the violation by an adjustment or refund.

(b) In the case of all self-discovered multiple violations by a licensee, whether intentional or resulting from good faith error or not, the licensee shall have no liability for the civil remedies granted by this section if: (i) within fifteen (15) days after discovering the multiple violations the commissioner is notified of the existence of the multiple violations and given a reasonable description thereof, and (ii) the multiple violations are corrected as to each borrower affected thereby within thirty (30) days after the licensee discovers the multiple violations. Upon good cause shown, the commissioner may grant not more than two (2) thirty-day extensions within which the licensee may correct the multiple violations. If a borrower delivers written notice of any such violation at any time after the commissioner is notified by the licensee, it shall not affect the rights of the licensee to be relieved of liability as provided herein.

(7) (a) Except as otherwise provided herein, any written notice required in this section shall be given by registered, certified or first-class mail at the sender's option. Proof of receipt by the licensee may consist of a return receipt executed by an employee of the licensee. Proof of receipt by the borrower may be a return receipt executed by the borrower. Proof of mailing any written notice may be a postmarked registered mail receipt, a postmarked certified mail receipt, or a post office certificate of mailing.

(b) At a minimum, the written notice shall clearly identify the consumer credit contract at issue, state the names of the licensee and the borrower, and shall include the date and a reasonable description of the violation.

(c) In any case where the licensee must respond in writing to a complaining borrower, the written notice or other required written response shall be mailed to the last address contained in the licensee's file on that borrower, unless the borrower specifies a different address in the borrower's written notice received by the licensee.

(8) Notwithstanding any provision of law to the contrary, any civil action under this section shall be brought within the earliest to occur of: (a) sixty (60) days from the date of final payment of the consumer credit contract at issue, and (b) within one (1) year of the date of the violation, and not thereafter.

(9) If any finance charge or other charge is contracted for or received that exceeds the maximum finance charge or other charge authorized by law by more than one hundred percent (100%), the licensee and the several members, officers, directors, agents and employees thereof who shall have participated in the violation shall be guilty of a misdemeanor and, upon conviction thereof, shall be punished by a fine of not more than One Thousand Dollars ($1,000.00) and not less than One Hundred Dollars ($100.00), in the discretion of the court; and, further, the commissioner shall forthwith cite the licensee to show cause why its license should not be revoked and proceedings thereon shall be as specifically provided in the Small Loan Privilege Tax Law (Sections 75-67-201 through 75-67-243).

(10) Attorney fees awarded under this section shall be determined by the court, not the jury, based upon the time reasonably expended and the work performed by the borrower's attorney, and not by the amount of recovery or a percentage of the recovery.

(11) (a) Notwithstanding any provision of law to the contrary, including, without limitation, Section 11-1-65, in any civil action for injury, if the trier of fact finds a licensee liable in tort or liable for other common-law violations, the plaintiff shall not be awarded noneconomic damages and/or punitive damages that total, in the aggregate, more than four (4) times the "Total Amount of Loan" of any unlawful loan that the licensee made to the plaintiff. Nothing in this paragraph (a) shall be construed to impose a limitation on actual documented out-of-pocket expenses incurred by the plaintiff as a direct result of the licensee's tort or other common-law violation.

(b) The jury shall not be advised of the limitations imposed by paragraph (a) of this subsection, and the judge shall appropriately reduce any award of noneconomic damages or punitive damages, as the case may be.

(12) The remedies and penalties provided in this section shall be the exclusive remedies and penalties for all claims against a licensee for: (a) contracting for or receiving any finance charge in violation of any applicable statutory or common-law duty, including, without limitation, Section 75-17-21; (b) a violation of any provision of this article or any rule or regulation promulgated under this article or any provision of Title 75, Chapter 17, Mississippi Code of 1972; (c) contracting for or receiving, or participating in contracting for or receiving, other charges in violation of any applicable statutory or common-law duty, or which are otherwise unlawful; or (d) any common-law tort violation or violation of any other common-law duty related to the licensee's business.

SECTION 2. Section 75-67-127, Mississippi Code of 1972, is amended as follows:

75-67-127. (1) Every licensee shall:

(a) At the time any loan is made, deliver to the borrower, or if there are two (2) or more borrowers to one (1) of them, a statement in the English language, disclosing (i) the date of the loan, (ii) the amount of the loan, (iii) the schedule of payments or a description thereof, (iv) the type of the security, which may be by mortgage or deed of trust upon real estate or personal property, or both, (v) the name and address of the licensed office and of each person primarily obligated on the note, and (vi) the total amount of finance charges expressed as a dollar amount and as an annual percentage rate.

(b) For each payment made on account of any such loan, give to the person making it at the time the payment is made a receipt specifying in plain, clear and simple terms the amount of the payment and the balance owing on the combined principal and finance charges after credit for each payment. When payment is made by check or money order, the licensee shall not be required to furnish a receipt. Compliance with the Federal Truth in Lending Act shall constitute compliance with this section.

(c) When loans made or handled by a licensee under the provisions of the Small Loan Privilege Tax Law are paid in full prior to maturity, after July 1, 1974, whether by cash, renewal or otherwise, refund to the borrower the finance charge exceeding One Dollar ($1.00) calculated on the rule of the sum of the digits, commonly known as the "Rule of 78ths." The refund shall be based and calculated on the number of days by which the loan is paid in advance, less twenty (20) days.

(d) Upon repayment of the loan in full, release any mortgage or security agreement and restore any pledge unless such mortgage, security agreement or pledge continues to secure an obligation to the licensee, and cancel and return any note and any assignment given to the licensee for the loan which is repaid.

(2) No licensee shall:

(a) Take any confession of judgment or any power of attorney running to himself or to any third person to confess judgment or to appear for the borrower in a judicial proceeding; nor

(b) Take any note, promise to pay, or instrument of security that does not disclose the amount of the loan before the addition of precomputed charges, a schedule of payments or a description thereof, the agreed rate of charge, nor any instrument in which blanks are left to be filled in after the loan is made.

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SECTION 3. Section 75-67-119, Mississippi Code of 1972, which provides civil and criminal penalties for the imposition of excessive finance charges under the Small Loan Regulatory Law, is hereby repealed.

SECTION 4. This act shall take effect and be in force from and after July 1, 2004.