2009 Regular Session
To: Banking and Financial Services
By: Representative Moak (By Request)
AN ACT TO CREATE THE "MISSISSIPPI ALTERNATIVE LOAN ACT"; TO DEFINE CERTAIN TERMS; TO PROHIBIT ANY PERSON FROM ENGAGING IN THE BUSINESS OF LENDING MONEY, EXCEPT AS AUTHORIZED BY THIS ACT; TO PROVIDE FOR APPLICATIONS FOR A LICENSE FOR SUCH LOANS; TO AUTHORIZE LICENSING FEES; TO PROVIDE FOR THE REVOCATION OR SUSPENSION OF LICENSES BY THE COMMISSIONER OF BANKING AND CONSUMER FINANCE; TO AUTHORIZE AN EXAMINATION FEE; TO PROVIDE RECORD KEEPING REQUIREMENTS; TO AUTHORIZE THE COMMISSIONER OF BANKING AND CONSUMER FINANCE TO PROMULGATE RULES AND REGULATIONS FOR ADMINISTRATION OF THIS ACT; TO AUTHORIZE CERTAIN LOAN CHARGES BY THE LICENSEE; TO PRESCRIBE CERTAIN TERMS OF THE LOAN CONTRACT; TO REQUIRE ALL BORROWER CONTRACTS AND RECORDS OF THE LICENSEE TO BE OPEN TO THE INSPECTION OF THE COMMISSIONER OR HIS DULY AUTHORIZED REPRESENTATIVES; TO PROVIDE THAT CERTAIN FINANCE CHARGES CONTRACTED FOR OR RECEIVED IN EXCESS OF THAT AUTHORIZED BY THIS ACT SHALL BE FORFEITED AND MAY BE RECOVERED; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. This act shall be known and may be cited as the "Mississippi Alternative Loan Act."
SECTION 2. The Legislature finds and declares as follows:
(1) There exists among citizens of this state a demand for loans in amounts less than One Thousand Dollars ($1,000.00). The scope and intensity of this demand have been increased progressively by many social and economic forces;
(2) The expense of making and collecting loans in those certain amounts, which are usually made on comparatively unsubstantial security to wage earners, salaried employees and other persons, is necessarily high in relation to the amounts lent;
(3) Such loans cannot be made profitably under the limitations imposed by existing laws relating to interest and usury. These limitations have tended to exclude lawful enterprises from the small loan field;
(4) It is the intent of the Legislature in enacting this law to provide for an act to permit and govern an alternative loan offering to the citizens of this state in order to meet the demands described herein.
SECTION 3. The following words and phrases, when used in this act, shall have the following meanings, except where the context clearly describes and indicates otherwise:
(a) "Person" means and includes every natural person, firm, corporation, partnership, joint-stock or other association or organization, and any other legal entity whatsoever.
(b) "License" means a license issued under the authority of this act to make loans in accordance with the provisions of this act at a single place of business.
(c) "Licensee" means a person to whom one (1) or more licenses have been issued.
(d) "Commissioner" means the Commissioner of Banking and Consumer Finance of the State of Mississippi.
(e) "Department" means the Department of Banking and Consumer Finance of the State of Mississippi.
(f) "Cash advance" means the amount of cash or its equivalent that the borrower actually receives or is paid at his direction or on his behalf.
(g) "Finance charges" mean the total of all acquisition charges and installment account handling charges.
SECTION 4. (1) No person shall engage in the business of lending money except as authorized in this act in the amounts provided herein without being the holder of a valid and subsisting license to engage in such business and furnishing the requisite bond.
(2) Every person engaged in the business of lending money as authorized by this act shall have a physical office located in the State of Mississippi. A separate license is required for each office doing business in the State of Mississippi.
(3) This act shall not apply to any person doing business under the authority of, and as permitted by, any law of this state or of the United States relating to banks, trust companies, savings or building and loan associations, credit unions as defined by law, nor to any Mississippi licensed small loan, pawnbroker or check-cashing business, nor to any person making loans to their tenants engaged in agriculture, nor to loans by agricultural suppliers to persons whose principal business is farming, nor to agricultural credit corporations or associations organized under an act of the Congress of the United States, nor to the business of financing the purchase of motor vehicles, refrigerators or other personal property, nor to loans insured or guaranteed by the United States or any of its agencies.
(4) The provisions of subsection (1) shall apply to any person who seeks to evade its application by any device, subterfuge or pretense whatsoever, including, but not thereby limiting, the generality of the foregoing: The loan, forbearance, use or sale of credit (as guarantor, surety, endorser, comaker or otherwise), money, goods or things in action; the use of collateral or related sales or purchases of goods or services or agreements to sell or purchase, whether real or pretended; and, receiving or charging compensation for goods or services, whether or not sold, delivered or provided and the real or pretended negotiation, arrangement or procurement of a loan through any use of activity of a third person, whether real or fictitious.
(5) Whoever violates, or participates in the violation of, any provision of this section shall be guilty of a misdemeanor and, upon conviction thereof, shall be punishable by a fine of not more than One Thousand Dollars ($1,000.00), or by imprisonment in the county jail for not more than six (6) months, or by both such fine and imprisonment. Any contract of loan, in the making or collection of which any act shall have been done which violates this section, shall be void, and the lender shall have no right to collect, receive or retain any principal or charges whatsoever.
SECTION 5. (1) Application for a license shall be in writing, under oath and in the form prescribed by the commissioner. The application shall give the approximate location where the business will be conducted and shall contain such further relevant information as the commissioner may require, including the names and addresses of the partners, officers, directors or trustees and of such principal owners or members as will provide the basis for the investigations and findings contemplated by Section 6 of this act. At the time of making such application, the applicant shall pay to the commissioner the sum of Seven Hundred Fifty Dollars ($750.00) as a fee for investigating the application and issuing the license. All licensees under this act shall pay an annual license fee of Five Hundred Dollars ($500.00) for each office, branch or place of business of the licensee. Any license issued under this act shall be valid for a period of one (1) year from the date of issuance. Such fee is in addition to any other privilege tax or fee which may be required by law. Within thirty (30) days prior to the expiration of any valid and subsisting license, the licensee, if he desires to continue to engage in business in the State of Mississippi, shall file a renewal application on a form provided by the commissioner.
(2) There shall be presented and filed with the application a good and sufficient bond in the principal amount of One Thousand Dollars ($1,000.00) written by a surety company authorized to do business in the State of Mississippi and subject to the approval of the commissioner. The bond shall be payable to the State of Mississippi and shall be conditioned that the applicant will well and truly operate its business in conformity to and will abide by the laws of this state regulating the handling of loans or lending money, and all regulations promulgated by the department, and all other applicable statutes of the State of Mississippi, and will pay and discharge any and all indebtedness for which such applicant may become liable under the provisions of this act and any other applicable statutes of the State of Mississippi, to the State of Mississippi, or to any county, municipality or other political subdivision thereof, or any person, firm or corporation whatsoever. Suits may be brought on such bond and against the surety thereon by any person having a right of action against the same in the name of the State of Mississippi for the use and benefit of the person having such right of action.
SECTION 6. (1) Upon the filing of such application and the payment of the prescribed fees, the commissioner shall investigate the facts concerning the application and the requirements provided in subsection (2). The commissioner shall grant or deny such application for a license within ninety (90) days from the filing thereof with the required information and fees, unless the period is extended by written agreement between the applicant and the commissioner.
(2) If the commissioner finds that the liquid assets, financial responsibility, experience, character and the general fitness of the applicant are such as to warrant the belief that the business will be operated lawfully, honestly, fairly and efficiently, within the purposes of this act, and that allowing such applicant to engage in the business would promote the convenience and advantage of the community in which the business of the applicant is to be conducted, he shall thereupon enter an order granting such application and file his findings with the department and forthwith issue and deliver a license to the applicant.
(3) If the commissioner shall not so find, he shall notify the applicant in writing who may request a hearing on the application. The request for a hearing shall be within thirty (30) days of the rejection, with the hearing to be held within thirty (30) days of the date of the request. After such hearing or if no hearing is demanded, the commissioner may deny such application by written order accompanied by his findings of fact and shall deliver a copy of such order and findings to the applicant. The investigation fee shall be retained by the commissioner.
SECTION 7. (1) Each license shall state the address at which the business is to be conducted and shall state fully the name of the licensee and, if the licensee is a partnership, limited liability company or association, the names of the members thereof and, if a corporation, the date and place of its incorporation. Each license shall be kept conspicuously posted in the licensed place of business and shall not be transferable or assignable.
(2) Each license shall remain in full force and effect for one (1) year or until surrendered, revoked or suspended as provided in this act.
SECTION 8. (1) Not more than one (1) place of business shall be maintained under the same license, but the commissioner may issue additional licenses to the same licensee upon his compliance with all the provisions of this act governing the issuance of the first or original license.
(2) No change in the place of business of a licensee to a location outside of the original licensed location shall be permitted under the same license. When a licensee wishes to change his place of business, he shall give written notice thereof to the commissioner who shall investigate the facts and, if he finds the proposed location is reasonably accessible to borrowers under existing loan contracts, shall enter an order permitting the change and shall amend the license accordingly. If the commissioner does not so find, he shall enter an order denying the licensee such permission in the manner specified in and subject to the provisions of Section 6 of this act.
(3) Nothing in this act shall be construed to restrict the loans of any licensee to residents of the community in which the licensed place of business is situated.
SECTION 9. (1) The commissioner shall, upon ten (10) days' written notice to the licensee stating the contemplated action and in general the grounds therefor and upon reasonable opportunity to be heard, revoke any license issued under this act if he finds that:
(a) The licensee has failed to pay the annual license fee;
(b) The licensee, either knowingly or without the exercise of due care to prevent the same, has violated any provisions of this act or any regulation or order lawfully made pursuant to and within the authority of this act;
(c) Any fact or condition exists which, if it had existed or had been known to exist at the time of the original application for such license, clearly would have justified the commissioner in refusing originally to issue such license; except, that the license shall not be revoked because of convenience and advantage; or
(d) The licensee is guilty of using unreasonable collection tactics.
(2) If the commissioner finds that probable cause for revocation of any license exists and that enforcement of the act requires immediate suspension of such license pending investigation, he may, upon three (3) days' written notice and a hearing, enter an order suspending such license for a period not exceeding thirty (30) days.
(3) Whenever the commissioner revokes or suspends a license, he shall enter an order to that effect and forthwith notify the licensee of the revocation or suspension. Within five (5) days after the entry of such an order he shall file with the department his findings and a summary of the evidence supporting them, and he shall forthwith deliver a copy thereof to the licensee.
(4) Any licensee may surrender any license by delivering it to the commissioner with written notice of its surrender, but such surrender shall not affect his civil or criminal liability for acts committed prior thereto.
(5) No revocation, suspension or surrender of any license shall impair or affect the obligation of any preexisting contract between the licensee and any borrower.
(6) The commissioner may reinstate suspended licenses or issue new licenses to a person whose license or licenses have been revoked if no fact or condition then exists which clearly would have justified the commissioner in refusing originally to issue such license under this act.
(7) The commissioner shall, upon sworn complaint of any borrower, investigate or cause to be investigated any alleged violation of this act.
SECTION 10. (1) The commissioner may charge the licensee an examination fee in an amount not less than Three Hundred Dollars ($300.00) nor more than Six Hundred Dollars ($600.00) for each office or location within the State of Mississippi, plus any actual expenses incurred while examining the licensee's records or books that are located outside the State of Mississippi. However, in no event shall the licensee be examined more than once in a two-year period unless for cause shown based upon consumer complaint and/or other exigent reasons as determined by the commissioner.
(2) All expense fees paid to the commissioner shall be deposited to the commissioner in the State Treasury in a special and separate fund designated by the State Treasurer.
(3) For the purpose of discovering violations of this act or of securing information lawfully required hereunder, the commissioner or his duly authorized representatives may at any time investigate the business and examine the books, accounts, papers and records used therein of: (a) any licensee; (b) any other person engaged in the business described in Section 4(1) of this act or participating in such business as principal, agent, broker or otherwise; and (c) any person who the commissioner has reasonable cause to believe is violating or is about to violate any provisions of this act, whether or not the person shall claim to be within the authority or beyond the scope of this act. For purposes of this section, any person who shall advertise for, solicit or hold himself out as willing to make loan transactions in the amount of less than One Thousand Dollars ($1,000.00) under this act shall be presumed to be engaged in the business described in Section 4(1) of this act, unless exempted by Section 4(3) of this act.
(4) For the purposes of this act, the commissioner or his duly authorized representatives shall have and be given free access to the offices and places of business, files, safes and vaults of all such persons and may require the attendance of any person and to examine him under oath relative to the loans or the business or to the subject matter of any examination, investigation, or hearing.
(5) Whenever the commissioner has reasonable cause to believe that any person is violating or is threatening to or intends to violate any provision of this act, he may, in addition to all actions provided for in this act and in addition to all other remedies that he may have at law and without prejudice thereto, enter an order requiring such person to desist or to refrain from such violation, and an action may be brought on behalf of the Attorney General or commissioner to enjoin the person from engaging in or continuing the violation or from doing any act or acts in furtherance thereof. In any action, an order or judgment may be entered awarding the preliminary or final injunction as may be deemed proper. In addition to all other means provided by law for the enforcement of a restraining order or injunction, the court in which the action is brought shall have the power and jurisdiction to impound and to appoint a receiver for the property and business of the defendant, including books, papers, documents and records pertaining thereto or so much thereof as the court may deem reasonably necessary to prevent violations of this act through or by means of the use of the property and business. The receiver, when appointed and qualified, shall have such powers and duties as to custody, collection, administration, winding up and liquidation of the property and business as shall from time to time be conferred upon him by the court.
(6) Reports of examinations and investigations of the commissioner, and the books and records of licensees are to be held strictly confidential, and may not be produced, reproduced, or otherwise made available by the department to any persons other than those within the department unless pursuant to a lawfully issued subpoena. This subsection does not apply to disclosures in proceedings brought by the commissioner pursuant to this act.
SECTION 11. (1) Each licensee shall keep and use in his business such books, accounts and records as will enable the commissioner to determine whether such licensee is complying with the provisions of this act and with the orders and regulations lawfully made by the commissioner hereunder. Each licensee shall preserve such books, accounts and records for at least two (2) years after making the final entry on any loan recorded therein.
(2) Each licensee shall annually, on or before May 1, file a report with the commissioner as to each licensed place of business under this act, covering the preceding calendar year.
(3) Such report shall be made under oath and shall be in the form prescribed by the commissioner who shall make and publish annually an analysis and recapitulation of such reports.
SECTION 12. The commissioner shall have the power and authority to adopt, promulgate and issue such rules and regulations, not inconsistent with this act or some other statute, as he deems necessary for the purpose of the administration of the act. A copy of every rule and regulation promulgated by the commissioner shall be filed in accordance with the Administrative Procedures Law, Section 25-43-1 et seq.
SECTION 13. (1) No licensee or other person subject to this act shall advertise, display, distribute or broadcast or cause to permit to be advertised, displayed, distributed or broadcast in any manner whatsoever any false, misleading or deceptive statement or representation with regard to the rates, terms or conditions for loans in the amount of less than One Thousand Dollars ($1,000.00) under this act. The commissioner may require that charges or rates of charge, if stated by a licensee, be stated fully and clearly in such manner as he may deem necessary to prevent misunderstanding thereof by prospective borrowers. The commissioner may permit or require licensees to refer in their advertising to the fact that their business is under state supervision, subject to conditions imposed by him to prevent an erroneous impression as to the scope or degree of protections provided by this act.
(2) Each licensee shall conspicuously display in each licensed place of business a full and accurate schedule of the rates of charge upon all classes of loans currently to be made by him.
SECTION 14. (1) Every licensee under this act may contract for and receive charges on any loan of money less than One Thousand Dollars ($1,000.00) in an amount at a rate not exceeding the following:
(a) A licensee may charge an acquisition charge for making the loan in an amount not in excess of ten percent (10%) of the amount of the principal.
(b) A licensee may charge an installment account handling charge in an amount no greater than the following:
(i) Twelve Dollars ($12.00) per month on any loan of an amount of One Hundred Dollars ($100.00), but not more than Three Hundred Dollars ($300.00).
(ii) Fourteen Dollars ($14.00) per month on any loan of an amount in excess of Three Hundred Dollars ($300.00), but not more than Four Hundred Dollars ($400.00).
(iii) Sixteen Dollars ($16.00) per month on any loan of an amount in excess of Four Hundred Dollars ($400.00), but not more than Five Hundred Dollars ($500.00).
(iv) Seventeen Dollars ($17.00) per month on any loan in excess of Five Hundred Dollars ($500.00), but not more than Eight Hundred Dollars ($800.00).
(v) Twenty Dollars ($20.00) per month on any loan of an amount in excess of Eight Hundred Dollars ($800.00), but less than One Thousand Dollars ($1,000.00).
(2) (a) When any loan contract is paid in full by cash, a new loan, renewal or otherwise, one (1) month or more before the final installment date, the licensee shall refund or credit the borrower with that portion of the installment account handling charge which shall be due the borrower as determined by schedules prepared under the rule of seventy-eighths or sum of digit principal as follows: The amount of the refund or credit shall be as great a proportion of the total charges originally contracted for as the sum of the periodic time balances of the contract scheduled to follow the date of prepayment bears to the sum of all the periodic time balances of the contract, both sums to be determined according to the payment schedule originally contracted for. No refund of less than One Dollar ($1.00) need be made. The acquisition charge shall not be subject to refund.
(b) In the event the borrower shall repay the loan in full within three (3) business days following the date of the loan, then all charges of every kind shall be refunded including the acquisition charge.
(3) If the contract so provides, when a scheduled payment is in default or delinquent for ten (10) or more days, the licensee shall charge and collect an additional late charge not to exceed the greater of Ten Dollars ($10.00) or five percent (5%) of the amount of the scheduled payment in default. Each of the late charges permitted under this subsection may be collected only once on any scheduled payment, regardless of the period during which the payment remains in default or is delinquent.
(4) In addition to the general authority granted to him by Section 12 of this act, the commissioner may make such rules and regulations as he may deem necessary or advisable to insure that rebates and default charges are so computed, paid to or collected from borrowers that the total charges collected by licensees under this section are substantially equivalent to charges authorized to be collected by licensees under this section.
(5) The licensee may collect from the borrower the actual fees paid a public official or agency of the state for filing, recording or releasing any instrument securing the loan.
(6) The minimum term of any loan made under this act is three (3) months and the maximum term of any loan made under this act is twelve (12) months. Every loan contract shall require payment of the cash advance and charges in installments which shall be payable at approximately equal periodic intervals. The scheduled payments shall be in amounts equal to or greater than Forty Dollars ($40.00) per month, inclusive of the installment account handling charge. The acquisition charge and the installment account handling charge may be calculated for the term of the contract and added to the amount of the principal. The acceptance or payment of charges on loans made under this act shall not be deemed to constitute payment, deduction or receipt thereof in advance nor compounding under this act. No installment contracted for shall be substantially larger than any preceding installment.
(7) Licensee may require, within the contract, payment by the debtor of any actual accessed court costs in any civil action brought by licensee to enforce the contract.
(8) Any licensee hereunder who receives a check, draft, negotiable order of withdrawal or like instrument drawn on a bank or other depository institution given by any person in full or partial payment of a loan or other extension of credit may, if such instrument is not paid or is dishonored by such institution, charge and collect from the borrower or person to whom the credit was extended, a bad check charge in an amount not to exceed the sum of Fifteen Dollars ($15.00). This charge may be made only once with respect to the same instrument, and after the nonpayment or dishonor of the instrument, it shall be returned by the licensee to the borrower or person to whom credit was extended. This charge shall not be deemed to be a finance charge or other charge made as an incident to or as a condition to the grant of the loan or other extension of credit and shall not be included in determining the limit on charges which may be made in connection with the loan or extension of credit as provided in this act or in any other law of this state.
(9) No insurance charge, nor any other charge of any nature whatsoever, is permitted for loans made pursuant to the rate structure of this section, except for those charges and fees permitted in this section.
(10) The loan charges allowed under this section may not be imposed on more than one (1) outstanding loan to a borrower with the licensee and upon which loan charges were imposed under this section.
(11) No licensee shall file a claim against a decedent borrower's estate for any unpaid indebtedness for a loan made pursuant to this section.
SECTION 15. (1) Every licensee shall:
(a) At the time a loan is made deliver to the borrower a copy of the loan contract, executed by the borrower, in the English language showing in clear and distinct terms:
(i) The name and address of the lender and the borrower on the loan.
(ii) The date of the loan contract and the period of time for which the loan is extended.
(iii) Schedule of installments or description thereof.
(iv) The cash advance.
(v) The total amount of the note evidencing the loan.
(vi) The finance charges allowed by this act.
(vii) The amount collected or paid for filing or other fees allowed by this act.
(viii) The collateral or security for the loan.
(ix) The federal annual percentage rate.
(b) Give to the person making any cash payment on the account of any loan, a receipt at the time the payment is made which receipt need only show the total amount of the cash payment. No receipt shall be required in the case of payments made by the borrower's check or money order, and the use of a coupon book system shall be deemed in compliance with this section.
(c) Permit the payment to be made in advance in any amount on any contract of loan at any time during a licensee's regular business hours.
(d) Upon repayment of the loan in full, mark plainly every obligation and security signed by any borrower with the word "Paid" or "Cancelled," and release any lien and cancel and return any note and any assignment given to the licensee.
(2) No licensee shall take any note or promise to pay that does not disclose the total amount to be repaid, a schedule of payments or a description thereof and the agreed rate or aggregate amount of charge, nor any instrument in which blanks are left to be filled in after execution.
(3) Every loan contract shall provide for repayment of principal and charges at approximately equal periodic intervals of time, which shall be so arranged that no installment is substantially greater in amount than any preceding installment.
(4) Absent other factors, a loan transaction does not create a confidential relationship between the borrower and the licensee nor does it give rise to or create a fiduciary duty on the part of the licensee.
SECTION 16. All borrower contracts and records of the licensee shall be open to the inspection of the commissioner or his duly authorized representatives at all times during regular business hours. Such records shall be kept for a period of twenty-four (24) months after the final transaction on such loan. Any suit brought against a licensee by any person on account of the violation or alleged violation of any of the provisions of this act with reference to any loan transaction shall be brought within twenty-four (24) months after the date of the final maturity date of the loan, and not thereafter.
SECTION 17. (1) No licensee shall conduct the business of making loans provided for by this act under any name or at any place of business within this state other than stated in the license. Nothing in this section shall prevent the making of loans by mail nor prohibit accommodations to individual borrowers when necessitated by sickness or other emergency situations.
(2) No licensee shall take a lien upon real estate as security for any loan made under this act, except such lien as is created by law through the entry or recording of a judgment.
SECTION 18. In addition to any other remedy he may have, any licensee and any person considering himself aggrieved by any act or order of the commissioner under this act may, within thirty (30) days from the entry of the order complained of, or within sixty (60) days of the act complained of if there is no order, petition the Chancery Court of the First Judicial District of Hinds County for review of such act or order; provided, that such petition shall be docketed, heard and tried in the same manner as other extraordinary writs issued by the court and a copy of the petition and order setting the same for hearing shall be served on the commissioner, giving him such notice of the time and place of the hearing as may be directed by the court.
SECTION 19. Except where other specific remedies are provided in this act for violations, in which event those remedies shall apply, any provision of a loan contract which violates this act shall be unenforceable by the licensee to the extent, but only to the extent, of the violation, and the other remaining provisions and agreements shall be enforceable and shall not be void and shall not be affected by the violation.
SECTION 20. This act or any part thereof may be modified, amended or repealed so as to effect a cancellation or alteration of any license or right of a licensee hereunder; provided, that such cancellation or alteration shall not impair or affect the obligation of any preexisting lawful contract between any licensee and any borrower.
SECTION 21. If any finance charge in excess of that expressly permitted by Section 14 of this act is contracted for or received, all finance charges and other charges shall be forfeited and may be recovered, whether the contract be executed or executory. If any finance charge is contracted for or received that exceeds the maximum finance charge authorized by law by more than one hundred percent (100%), the principal and all finance charges and other charges shall be forfeited and any amount paid may be recovered by suit; and, in addition, the licensee and the several members, officers, directors, agents and employees thereof who shall have participated in such 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 of Banking and Consumer Finance shall forthwith cite such licensee to show cause why its license should not be revoked.
SECTION 22. This act shall take effect and be in force from and after July 1, 2009.