House Bill 715

AN ACT TO AMEND SECTION 75-17-21, MISSISSIPPI CODE OF 1972, TO REVISE THE CALCULATION OF THE CLOSING FEE THAT SMALL LOAN LICENSEES MAY CHARGE ON LOANS; TO AMEND SECTION 75-67-121, MISSISSIPPI CODE OF 1972, TO AUTHORIZE SMALL LOAN LICENSEES TO OFFER BORROWERS THE OPPORTUNITY TO PURCHASE AUTO CLUB MEMBERSHIPS, PROVIDED THAT THE PURCHASE IS OPTIONAL AND NOT REQUIRED AS A CONDITION OF RECEIVING ANY LOAN OR OTHER EXTENSION OF CREDIT; AND FOR RELATED PURPOSES.

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

SECTION 1. Section 75-17-21, Mississippi Code of 1972, is amended as follows:

75-17-21. Notwithstanding any provision of law to the contrary, the maximum finance charge which may be contracted for and received for any loan or extension of credit made by a licensee under the Small Loan Regulatory Law (Sections 75-67-101 through 75-67-135) and the Small Loan Privilege Tax Law (Sections 75-67-201 through 75-67-243) may result in a yield not to exceed the following annual percentage rates calculated according to the actuarial method:

(a) Thirty-six percent (36%) per annum for the portion of the unpaid balance of the amount financed that is not greater than One Thousand Dollars ($1,000.00);

(b) Thirty-three percent (33%) per annum for the portion of the unpaid balance of the amount financed in excess of One Thousand Dollars ($1,000.00) but not greater than Two Thousand Five Hundred Dollars ($2,500.00);

(c) Twenty-four percent (24%) per annum for the portion of the unpaid balance of the amount financed in excess of Two Thousand Five Hundred Dollars ($2,500.00) but not greater than Five Thousand Dollars ($5,000.00);

(d) Fourteen percent (14%) per annum for the portion of the unpaid balance of the amount financed in excess of Five Thousand Dollars ($5,000.00).

As an alternative and in lieu of the rates established in paragraphs (a), (b), (c) and (d) of this section, on loans in an amount of Twenty-five Thousand Dollars ($25,000.00) or more, a licensee may contract for and receive a maximum finance charge which will result in a yield not to exceed an annual percentage rate, calculated according to the actuarial method, of eighteen percent (18%) per annum on the unpaid balance of the amount financed.

A licensee may contract for and charge a closing fee not exceeding four percent (4%) of the total payments due on the loan or Twenty-five Dollars ($25.00), whichever is greater, which fee may be made on any type of loan regardless of the loan amount and which shall not be part of the finance charge.

The rates set forth in paragraph (a) of this section may be increased by the number of percentage points by which the discount rate, excluding any surcharge thereon, on ninety-day commercial paper in effect at the Federal Reserve bank in the Federal Reserve district where the lender is located exceeds eight percent (8%), and the rates set forth in paragraphs (b), (c) and (d) of this section may be increased by the number of percentage points by which the discount rate, excluding any surcharge thereon, on ninety-day commercial paper in effect at the Federal Reserve bank in the Federal Reserve district where the lender is located exceeds ten percent (10%).

The finance charges authorized in this section are the maximum rates which may be contracted for or received for any loan or extension of credit made by a licensee under the Small Loan Regulatory Law (Sections 75-67-101 through 75-67-135), and the Small Loan Privilege Tax Law (Sections 75-67-201 through 75-67-243). Nothing in this section shall prohibit lending money or handling, negotiating or arranging loans for a finance charge that is less than that specified herein. This section does not limit or restrict the manner of contracting for the finance charge, whether by way of add-on, discount or otherwise, so long as the annual percentage rate of the finance charge does not exceed that permitted by this section.

SECTION 2. Section 75-67-121, Mississippi Code of 1972, is amended as follows:

75-67-121. Any licensee under this article may charge any borrower on loans of One Hundred Dollars ($100.00) or more the actual cost of recording any instrument executed as security for a loan; any reasonable fee paid to an attorney for investigating the title to any property given as security for a loan; the actual cost of any premium paid for insurance upon any property given as security for a loan, such insurance to be placed with an insurance company agent of the borrower's selection so long as it is licensed to do business in the State of Mississippi; the actual cost of any premium paid for life, health and/or accident insurance on any borrower where the amount of insurance required is not in excess of the amount of the loan and the premium for the insurance is in keeping with that usually and customarily paid for like insurance.

In addition, the licensee may offer the borrower the opportunity to purchase an auto club membership, provided that the purchase is optional and not required as a condition of receiving any loan or other extension of credit. The licensee shall allow the borrower to pay the cost of the membership using funds other than the proceeds of a loan or have the cost deducted from the proceeds of any loan obtained from the licensee.

Whenever he * * * finds it necessary, the commissioner shall have the power to adopt and enforce reasonable rules and regulations to prevent the abuse of this section and the making of excessive charges under this section.

SECTION 3. This act shall take effect and be in force from and after July 1, 2005.