1997 Regular Session
To: Banks and Banking
By: Representative Guice
House Bill 1611
AN ACT TO CREATE THE MISSISSIPPI TITLE PLEDGE ACT; TO DEFINE CERTAIN TERMS; TO AUTHORIZE THE DEPARTMENT OF BANKING AND CONSUMER FINANCE TO LICENSE AND REGULATE TITLE PLEDGE LENDERS; TO PROVIDE APPLICATION PROCEDURES; TO PROVIDE GROUNDS FOR SUSPENSION, REVOCATION AND SURRENDER OF LICENSES; TO PROVIDE FOR RECORDKEEPING REQUIREMENTS; TO PRESCRIBE THE MAXIMUM SERVICE CHARGE; TO PROHIBIT CERTAIN ACTS; TO PROVIDE THAT THE ORIGINAL PLEDGOR HAS THE RIGHT TO REDEEM THE PLEDGED PROPERTY; TO PROVIDE CIVIL AND CRIMINAL PENALTIES FOR VIOLATIONS OF THE ACT; 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 Title Pledge Act."
SECTION 2. The following words and phrases shall have the following meanings:
(a) "Appropriate law enforcement official" means the sheriff of the county in which the title pledge office is located, or, in case of a title pledge office located within a municipality, the police chief of the municipality in which the title pledge office is located; however, any sheriff or police chief may designate as the appropriate law enforcement official before the county or municipality, as applicable, any law enforcement officer working for the department headed by that sheriff or police chief.
(b) "Department" means the Department of Banking and Consumer Finance of the State of Mississippi.
(c) "Identification" means a government issued photographic identification.
(d) "Net worth" means total assets less total liabilities.
(e) "Person" means an individual, partnership, corporation, joint venture, trust, association or other legal entity.
(f) "Pledged property" means any personal property certificate of title that is deposited with a title pledge lender in the course of the title pledge lender's business and is the subject of a title pledge agreement.
(g) "Title pledge agreement" means a thirty-day written agreement whereby a title pledge lender agrees to make a loan of money to a pledgor, and the pledgor agrees to give the title pledge a security interest in unencumbered titled personal property owned by the pledgor. The pledgor shall agree for the title pledge lender to keep possession of the certificate of title. The pledgor shall have the exclusive right to redeem the certificate of title by repaying the loan of money in full and by complying with the title pledge agreement. When the certificate of title is redeemed, the title pledge lender shall release the security interest in the titled personal property and return the personal property certificate of title to the pledgor. The title pledge agreement shall provide that upon failure by the pledgor to redeem the certificate of title at the end of the original thirty-day agreement period, or at the end of any thirty-day extension(s) thereof, the title pledge lender shall be allowed to take possession of the titled personal property. The title pledge lender shall retain physical possession of the certificate of title for the entire length of the title pledge agreement, but shall not be required to retain physical possession of the titled personal property at any time. A title pledge lender may only hold unencumbered certificates of title for pledge.
(h) "Title pledge lender" means any person engaged in the business of making title pledge agreements with pledgors.
(i) "Title pledge office" means the location at which, or premises in which, a title pledge lender regularly conducts business.
(j) "Title pledge service charge" means a charge for investigating the title, appraising the titled personal property to which the pledged property relates, documenting and closing the title pledge agreement transaction, making required reports to appropriate law enforcement officials, and for all of the services provided by the title pledge lender.
(k) "Title pledge transaction form" means the instrument on which a title pledge lender records title pledge agreements pursuant to Section 8 of this act.
(l) "Titled personal property" means any personal property the ownership of which is evidenced and delineated by a state-issued certificate of title.
SECTION 3. (1) A person may not engage in business as a title pledge lender unless the person has a valid license issued by the Department of Banking and Consumer Finance. A separate license is required for each title pledge office. The department shall issue more than one (1) license to a person if that person complies with the requirements under this act for each license.
(2) When a licensee wishes to move a title pledge office to another location, the licensee shall give thirty (30) days prior written notice to the department by certified or registered mail, return receipt requested, and the department shall then amend the license accordingly. The licensee shall also give such thirty (30) days prior written notice to the appropriate law enforcement official.
(3) Each license shall remain in full force and effect until relinquished, suspended, revoked or expired. Each licensee shall
annually pay the department a fee not to exceed Three Hundred Dollars ($300.00) for each license held. If the annual license fee remains unpaid for thirty (30) days after written notice of delinquency has been given to the licensee by the department, the license shall thereupon expire on the expiration date specified in the registration certificate.
(4) The department may issue a temporary license authorizing the operation of a title pledge office upon receipt of an application to transfer a license from one (1) person to another, or upon the receipt of an application for a license involving principals and owners that are substantially identical to those of an existing license. The temporary license shall be effective until the permanent license is issued or denied.
(5) A person must apply to the department for a new license or for a temporary license upon any change, directly or beneficially, in the ownership of any title pledge office. An application for a license or an application to transfer an existing license is not required upon any change, directly or beneficially, in the ownership of a title pledge office if one or more of the holders of at least ninety percent (90%) of the outstanding equity interest in the title pledge office before the change in ownership continued to hold at least ninety percent (90%) of the outstanding equity interest after the change in ownership.
SECTION 4. (1) To be eligible for a title pledge lending license, an applicant shall:
(a) Be of good moral character.
(b) File with the department a bond in the amount of One Hundred Thousand Dollars ($100,000.00) for each license with a surety company qualified to do business in this state. In lieu of the bond required in this section, the applicant may establish a certificate of deposit or an irrevocable letter of credit in a banking institution in the amount of the bond. The original bond, certificate or deposit or letter of credit shall be filed with the department, and the department shall be the beneficiary to such document. The bond, certificate of deposit or letter of credit shall be in favor of the department for the use and benefit of any consumer who is injured by the fraud, misrepresentation, breach of contract, financial failure or violation of any provision of this act by the title pledge lender. Such liability may be enforced either by proceeding in an administrative action or by filing a judicial suit at law in a court of competent jurisdiction. However, in such court suit, the bond, certificate of deposit or letter of credit posted with the department shall not be amenable or subject to any judgment or other legal process issuing out of or from such court in connection with such lawsuit, but such bond, certificate of deposit or letter of credit shall be amenable to and enforceable only by and through administrative proceedings before the department. It is the intent of the Legislature that such bond, certificate of deposit or letter of credit shall be applicable and liable only for the payment of claims duly adjudicated by order of the department. The bond, certificate of deposit or letter of credit shall be payable on a pro rata basis as determined by the department, but the aggregate amount may not exceed the amount of the bond, certificate of deposit or letter of credit.
(c) Not have been convicted of a felony within the last ten (10) years and not be acting as a beneficial owner for someone who has been convicted of a felony within the last ten (10) years.
(d) Not have been convicted, and not be acting as a beneficial owner for someone who has been convicted, of a crime that the department finds directly relates to the duties and responsibilities of a title pledge lender within the last ten (10) years.
(2) If an applicant for a title pledge lending license is an entity, the eligibility requirements of this section, except for the requirements of paragraph (c) of subsection (1), apply to each operator, to each direct or beneficial owner of at least ten percent (10%) of the outstanding equity interest of such entity and, as to a corporation, to each officer and director.
SECTION 5. (1) An application for a new title pledge lending license, the transfer of an existing license, or the approval of a change in the ownership of a licensee's title pledge office shall be under oath and shall state the full name and place of residence of the applicant, the place where the business is to be conducted, and other relevant information required by the agency. If the applicant is an entity, the application shall state the full name and address of each direct or beneficial owner of at least a ten percent (10%) equity interest in such entity. If the applicant is a corporation, the application shall also state the full name and address of each officer and director.
(2) Notwithstanding the foregoing, the application need not state the full name and address of each officer, director and shareholder if the applicant is owned directly or beneficially by a person which as an issuer has a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934, or pursuant to Section 15(d) thereof is an issuer of securities which is required to file reports with the Securities and Exchange Commission, if the person files with the agency any information, documents and reports required by that act to be filed with the Securities and Exchange Commission.
(3) Each application for a license must be accompanied by an application fee set by the department not to exceed Fifty Dollars ($50.00) and a license fee for the first year's operation in the amount of Three Hundred Dollars ($300.00), plus the actual cost for fingerprint analysis for each owner reflected on the application, to cover the costs of investigating the applicant. The application fee is nonrefundable.
(4) When an application and the required fees are received, the department shall investigate the facts and shall approve an application and issue to the applicant a license that will evidence the authority to do business under the provisions of this act if the department finds that the eligibility requirements for the license are satisfied. The license must be prominently displayed at the front desk or counter at the title pledge office.
SECTION 6. (1) The department may, after notice and a hearing, suspend or revoke any license upon a finding that:
(a) The licensee, either knowingly or without the exercise of due care to prevent the same, has violated this act.
(b) A fact or condition exists which, if it had existed or had been known to exist at the time of the original issuance of the license, would have justified the department in refusing a license.
(c) The licensee has aided, abetted or conspired with an individual or person to circumvent or violate the requirements of this act.
(2) The department may conditionally license or place on probation a person whose license has been suspended or may reprimand a licensee for a violation of this act.
(3) Any licensee may surrender a license by delivering it to the department with written notice of its surrender by certified or registered mail, return receipt requested. The surrender shall not affect the civil or criminal liability of the licensee for acts committed prior to surrendering of the license.
(4) No revocation, suspension or surrender of a license shall impair or affect the obligation of any pre-existing lawful contract between the licensee and any pledgor. Any title pledge agreement made without benefit of a license is voidable, in which case the person forfeits the right to collect any monies, including principal and any charges, from the pledgor in connection with such agreement and is obligated to return to the pledgor the pledged property in connection with such agreement.
(5) The department 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 would have justified the department in originally refusing to issue a license.
SECTION 7. (1) The department may enter an order imposing one or more of the penalties set forth in subsection (2) if the department finds that a title pledge lender:
(a) Violated or is operating in violation of any of the provisions of this act or of the rules adopted or orders issued thereunder;
(b) Made a material false statement in any application, document or record required to be submitted or retained under this act;
(c) Refused or failed, or any of its principal officers has refused or failed, after notice, to produce any document or records or disclose any information required to be produced or disclosed under this act or the rules of the department;
(d) Made a material false statement in response to any request or investigation by the agency or the state attorney; or
(e) Has intentionally defrauded the public through dishonest or deceptive means.
(2) Upon a finding as set forth in subsection (1), the department may enter an order doing one or more of the following:
(a) Imposing an administrative fine not to exceed Five Thousand Dollars ($5,000.00) for each act which constitutes a violation of this act or a rule or an order.
(b) Directing that the title pledge lender cease and desist specified activities.
(c) Refusing to grant a license or revoking or suspending a license.
(d) Placing the licensee on probation for a period of time, subject to such conditions as the department may specify.
(e) Issuing a letter of concern.
(3) (a) When the department, if a violation of this act occurs, has reasonable cause to believe that a person is operating in violation of this act, the department may bring a civil action in the appropriate court for temporary or permanent injunctive relief and may seek other appropriate civil relief, including a civil penalty not to exceed Five Thousand Dollars ($5,000.00) for each violation, restitution and damages for injured customers, court costs and reasonable attorneys' fees.
(b) The department may terminate any investigation or action upon agreement by the offender to pay a stipulated civil penalty, to make restitution or pay damages to customers, or to satisfy any other relief authorized herein and requested by the agency.
(4) The remedies provided for in this section shall be in addition to any other remedy provided by law.
SECTION 8. (1) At the time the title pledge lender enters into each title pledge agreement, the title pledge lender shall complete a consecutively numbered title pledge transaction form for such transaction, and the pledgor shall sign such completed form. The department shall approve the design and format of the title pledge transaction form, which shall elicit the information required under this section. In completing the title pledge transaction form, the title pledge lender shall record the following information, which shall be typed or written indelibly and legibly in English.
(a) The make,model and year of the titled personal property to which the pledged property relates.
(b) The Vehicle Identification Number, or other comparable identification number, along with the license plate number, if applicable, of the titled personal property to which the pledged property relates.
(c) The name, address, date of birth, physical description and Social Security number of the pledgor.
(d) The date of the transaction.
(e) The identification number and the type of identification (including the issuing agency) accepted from the pledgor.
(f) The amount of money advanced, which shall be designated as the "Amount Financed."
(g) The maturity date of the title pledge agreement, which shall be thirty (30) days after the date of the transaction.
(h) The total title pledge service charge payable on the maturity date, designated as the "Finance Charge."
(i) The total amount (Amount Financed plus Finance Charge) which must be paid to redeem the pledged property on the maturity date, designated as the "Total of Payments."
(j) The Annual Percentage Rate, computed in accordance with the regulations adopted by the Federal Reserve Board pursuant to the Federal Truth-in-Lending Act.
(2) The following information shall also be printed on all title pledge transaction forms:
(a) The name and address of the title pledge office.
(b) The statement that:
(i) The pledgor is not obligated to redeem the pledged certificate of title.
(ii) If the pledgor does not redeem the pledged certificate of title before the maturity date of the title pledge agreement, the title pledge lender may repossess the titled personal property to which the certificate of title relates. The title pledge lender must then retain possession of the titled personal property for a thirty-day holding period. If the pledgor does not redeem the titled personal property and certificate of title within such thirty-day holding period by paying all outstanding principal, interest and other fees, including the title pledge lender's actual repossession costs, then the pledgor shall forfeit all right, title and interest in and to the titled personal property and certificate of title to the title pledge lender, who shall thereby acquire an absolute right of title and ownership to the titled personal property.
(iii) If this title pledge transaction form is lost, destroyed or stolen, the pledgor should immediately so advise the issuing title pledge lender in writing.
(c) The statement that "The pledgor represents and warrants that the titled personal property to which the pledged property relates is not stolen, it has no liens or encumbrances against it, and the pledgor has the right to enter into this transaction."
(d) Immediately above the signature of the pledgor or seller, the statement that "I, the pledgor declare under penalty of perjury that I have read the foregoing document and that, to the best of my knowledge and belief, the facts contained in it are true and correct."
(e) A blank line for the signature of the pledgor.
(3) At the time of the transaction, the title pledge lender shall deliver to the pledgor an exact copy of the completed title pledge transaction form.
SECTION 9. (1) The title pledge lender shall maintain the original copy of each completed title pledge transaction form on the title pledge office premises, and shall not obliterate, discard or destroy any such original copy, for a period of at least two (2) years from the date of the transaction. By the end of each business day, the title pledge lender shall deliver to the appropriate law enforcement official a copy of the title pledge transaction form for each of the title pledge agreement transactions occurring the previous business day, unless other arrangements have been agreed upon between the title pledge lender and the appropriate law enforcement official.
SECTION 10. (1) A title pledge lender may contract for and receive a title pledge service charge in lieu of interest or other charges for all services, expenses, cost and losses of every nature not to exceed twenty-five percent (25%) of the principal amount, per month, advanced in the title pledge transaction.
(2) Any interest, charge or fees contracted for or received, directly or indirectly, in excess of the amount permitted under subsection (1) of this section shall be uncollectible and the title pledge transaction shall void. The title pledge service charge allowed under subsection (1) of this section shall be deemed earned, due and owing as of the date of the title pledge transaction and a like sum shall be deemed earned, due and owing on the same day of the succeeding month.
(3) By agreement of the parties, the maturity date of the title pledge transaction may be extended or continued for thirty-day periods, provided that the service charges as specified in subsection (1) are not exceeded. All extensions or continuations of the title pledge transaction shall be evidenced in writing. No accrued interest shall be capitalized or added to the original principal of the title pledge transaction during any extension or continuation. After three (3) extensions or continuations, the original principal of the title pledge transaction shall be reduced by ten percent (10%) for each successive renewal or continuation. Failure to pay by the pledgor the ten percent (10%) of the original principal of the title pledge transaction at the time of each such successive renewal or continuation shall render the title pledge transaction void.
SECTION 11. (1) Upon the pledgor's failure to redeem the pledged property on or before the maturity date of the title pledge agreement, the title pledge lender has the right to take possession of the titled personal property. In taking possession, the title pledge lender or his agent may proceed without judicial process if this can be done without breach of the peace; or, if necessary, may proceed by action to obtain judicial process. After taking possession of the titled personal property, the title pledge lender shall retain possession of the titled personal property and the certificate of title for a thirty-day holding period commencing on the date of repossession.
(2) If, during the thirty-day holding period, the pledgor pays the repossession fee, and redeems the titled personal property and certificate of title by paying all outstanding principal, interest and other customary fees, the pledgor shall be given possession of the titled personal property and the certificate of title without further charge.
(3) If the pledgor fails to redeem the titled personal property and certificate of title during the thirty-day holding period, then the pledgor shall thereby forfeit all right, title and interest in and to the titled personal property and certificate of title, to the title pledge lender, who shall thereby acquire an absolute right of title and ownership to the titled personal property. The title pledge lender shall then have the sole right and authority to sell or dispose of the unredeemed titled personal property.
SECTION 12. A title pledge lender, or any agent or employee of such title pledge lender, shall not:
(a) Falsify or intentionally fail to make an entry of any material matter in a title pledge lender transaction form.
(b) Refuse to allow the department, the appropriate law enforcement official, state attorney, or any of their designated representatives having appropriate jurisdiction, to inspect completed title pledge transaction forms or pledged property during the ordinary hours of the title pledge lender's business or other times acceptable to both parties.
(c) Enter into a title pledge agreement with a person under the age of eighteen (18) years.
(d) Make any agreement requiring or allowing the personal liability of a pledgor or the waiver of any of the provisions of this act.
(e) Knowingly enter into a title pledge agreement with any person who is under the influence of drugs or alcohol when such condition is visible or apparent, or with any person using a name other than his own name or the registered name of his business.
(f) Enter into a title pledge agreement in which the amount of money loaned in consideration of the pledge of any single certificate of title exceeds Two Thousand Five Hundred Dollars ($2,500.00).
(g) Fail to exercise reasonable care in the safekeeping of pledged property or of titled personal property repossessed pursuant to this act.
(h) Fail to return pledged property or repossessed titled personal property to a pledgor, with any and all of the title pledge lender's liens on the property properly released, upon payment of the full amount due the title pledge lender, unless the property has been seized or impounded by an authorized law enforcement agency, taken into custody by a court, or otherwise disposed of by court order.
(i) Sell or otherwise charge for insurance in connection with a title pledge agreement.
SECTION 13. (1) Any person presenting identification of himself and presenting the pledgor's copy of the title pledge transaction form to the title pledge lender is presumed to be entitled to redeem the pledged property described in the title pledge lender transaction form; provided, however, that if the title pledge lender determines that the person is not the original pledgor, the title pledge lender is not required to allow the redemption of the pledged property by such person. The person redeeming the pledged property must sign the pledgor's copy of the title pledge transaction form, which the title pledge lender may retain to evidence such person's receipt of the pledged property. If the person redeeming the pledged property is not the original pledgor, that person must show identification to the title pledge lender, and the title pledge lender shall record the person's name and address on the title pledge transaction form retained by the title pledge lender. The pawnbroker shall not be liable to the original pledgor for having allowed the redemption of the pledged goods by another person pursuant to this subsection (1).
(2) If the pledgor's copy of the title pledge transaction form is lost, destroyed or stolen, the pledgor must notify the title pledge lender in writing by certified or registered mail, return receipt requested, or in person evidenced by a signed receipt, and receipt of this notice shall invalidate such title pledge transaction form if the pledged property has not previously been redeemed. Before delivering the pledged property or issuing a new title pledge transaction form, the title pledge lender shall require the pledgor to make a written statement of the loss, destruction or theft of the pledgor's copy of the title pledge transaction form. The title pledge lender shall record on the written statement the type of identification and the identification number accepted from the pledgor, the date the statement is given and the number of the title pledge transaction form lost, destroyed or stolen. The statement shall be signed by the title pledge lender or the title pledge office employee who accepts the statement from the pledgor. A title pledge lender is entitled to a fee not to exceed Two Dollars ($2.00) in connection with each such lost, destroyed or stolen title pledge transaction form and the taking of a properly prepared written statement.
(3) No sales tax shall be deemed due or collectible in connection with the redemption of pledged property under this act.
SECTION 14. The title pledge lender shall be required to record his or her security interest in the titled personal property to which the pledged property relates by noting the lien on the certificate of title for all title pledge agreement transactions.
SECTION 15. (1) Any person who engages in the business of operating a pawnshop without first securing a license prescribed by this act shall be guilty of a misdemeanor and upon conviction thereof, shall be punishable by a fine not in excess of One Thousand Dollars ($1,000.00) or by confinement in the county jail for not more than one (1) year, or both.
(2) In addition to any other penalty which may be applicable, any licensee or employee who willfully violates any provision of this act, or who willfully makes a false entry in any record specifically required by this act, shall be guilty of a misdemeanor and, upon conviction thereof, shall be punishable by a fine not in excess of One Thousand Dollars ($1,000.00) per violation or false entry.
(3) Compliance with the criminal provisions of this act shall be enforced by the appropriate law enforcement agency who may exercise for such purpose any authority conferred upon such agency by law.
(4) When the department has reasonable cause to believe that a person is violating any provision of this act, the department, in addition to and without prejudice to the authority provided elsewhere in this act, may enter an order requiring the person to stop or to refrain from the violation. The department may sue in any circuit court of the state having jurisdiction and venue to enjoin the person from engaging in or continuing the violation or from doing any act in furtherance of the violation. In such an action, the court may enter an order or judgment awarding a preliminary or permanent injunction.
SECTION 16. The Department of Public Safety, on request, shall supply to the department any arrest and conviction records in its possession of an individual applying for or holding a license under this act.
SECTION 17. This act shall take effect and be in force from and after July 1, 1997.