Raised Bill No. 5419
February Session, 2012
LCO No. 1676
Referred to Committee on Banks
AN ACT CONCERNING CASH ADVANCE CONTRACTS.
Be it enacted by the Senate and House of Representatives in General Assembly convened:
Section 1. (NEW) (Effective October 1, 2012) (a) As used in this section:
(1) "Cash advance contract" means any financial transaction resulting in an advance of compensation to a consumer who has a pending personal injury or wrongful death claim or civil action in exchange for the contractual right to receive any funds in excess of the amount of that advance from the proceeds of any realized settlement, judgment or verdict resulting from such claim or action, including, but not limited to, any nonrecourse capital advances made for such purposes.
(2) "Consumer" means any person, estate, legal representative or assignee of a person or estate, who has any financial interest in a pending personal injury or wrongful death claim or civil action or has a reasonable expectation of the receipt of compensation from such a claim or action.
(3) "Cash advance company" means a person or entity that offers to provide or provides to a consumer in this state a nonrecourse capital advance, based on the consumer's status as a plaintiff in a pending personal injury or wrongful death claim or civil action.
(b) All cash advance companies, their employees, agents, subsidiaries, successors and assigns, who enter into cash advance contracts with consumers, shall comply with the following: (1) All cash advance contracts shall comply with sections 42-152 to 42-158, inclusive, of the general statutes; and (2) such contracts shall be filled in completely and contain the following disclosures on the first page, in twelve-point or larger bold type, with a heading entitled "Disclosure Statement" and in a form approved by the Department of Consumer Protection: (A) The total amount to be advanced to the consumer; (B) itemization of all fees; (C) percentage fee or rate of return, and stated on an annualized basis, including frequency of compounding; and (D) the total amount to be repaid by the consumer, calculated at six-month intervals, carried forward to thirty-six months, including all fees and any minimum required payment amount.
(c) (1) All cash advance contracts shall provide that the consumer may cancel the contract within five business days following the consumer's receipt of funds, without penalty or further obligation. Such contracts shall contain the following notice, written in a clear and conspicuous manner: "CONNECTICUT CONSUMER'S RIGHT TO CANCELLATION: YOU MAY CANCEL THIS CONTRACT WITHOUT PENALTY OR FURTHER OBLIGATION NOT LATER THAN FIVE BUSINESS DAYS AFTER THE DATE YOU RECEIVE FUNDING AFTER (insert the name of the cash advance company).". (2) Such contracts shall specify that, in order for the cancellation to be effective, the consumer must either (A) return the full amount of the disbursed funds to the cash advance company by delivering the cash advance company's uncashed check to the office address designated on the disclosure statement, or (B) mail a notice of cancellation and include with the mailing a return of the full amount of disbursed funds, in the form of the cash advance company's check, a registered or certified check or a money order, by insured, registered or certified United States mail, postmarked within five business days of receiving the funds from the cash advance company, at the address specified for such cancellation in the cash advance contract.
(d) The consumer shall initial each page of a cash advance contract. All cash advance contracts shall contain a legend, immediately above the consumer's signature, in twelve-point or larger bold type, reading: "DO NOT SIGN THIS CASH ADVANCE CONTRACT BEFORE YOU READ IT COMPLETELY OR IF IT CONTAINS ANY BLANK SPACE. YOU SHOULD OBTAIN THE ADVICE OF AN ATTORNEY BEFORE YOU SIGN THIS CONTRACT. YOU ARE ENTITLED TO A COMPLETELY FILLED IN COPY OF THIS CONTRACT.".
(e) All cash advance contracts shall contain a written certification by the consumer's attorney of record stating the attorney has reviewed the contract and explained its terms to the consumer, including the annualized rate of return used to calculate the amount to be paid by the consumer.
(f) Except when oral negotiations are conducted in another language, all cash advance contracts shall be printed in both English and Spanish. In the event oral negotiations are conducted in any other language (1) the principal terms of the contract shall be translated in writing into the consumer's native language; (2) the consumer shall sign the translated document containing the principal terms and initial each page; and (3) the translator shall sign a notarized affirmation confirming that the principal terms have been presented to the consumer in his or her native language and acknowledged by the consumer, in writing. For purposes of this subsection, "principal terms" includes all of the items required by subsections (b) to (e), inclusive, of this section.
(g) If a cash advance contract provides for attorney's fees and costs in the case of a breach of the contract by either party, the contract shall provide that such attorney's fees and costs shall be reasonable and may be recovered by the prevailing party. Any limitation placed on such attorney's fees and costs shall apply equally to both parties.
(h) A cash advance contract shall not require mandatory arbitration to resolve disputes between the parties.
(i) A cash advance company shall register its name, address and principal place of business with the Department of Consumer Protection and shall submit any proposed cash advance contract form to be used in this state to the Commissioner of Consumer Protection at least ninety days before entering into the contract with a consumer.
(j) A cash advance contract shall be considered a loan and subject to the provisions of section 37-4 of the general statutes.
(k) Any action on the part of a cash advance company that arises out of a cash advance contract with a Connecticut consumer shall be subject to the jurisdiction of this state.
(l) Failure to comply with any provision of subsections (a) to (k), inclusive, of this section shall (1) be an unfair trade practice pursuant to subsection (a) of section 42-110b of the general statutes, and (2) render the cash advance contract void with regard to any rights or claims of the cash advance company.
This act shall take effect as follows and shall amend the following sections:
October 1, 2012
Statement of Purpose:
To regulate cash advance contracts and prohibit a cash advance company from charging a consumer a rate of interest on a cash advance contract that is greater than twelve per cent per annum.
[Proposed deletions are enclosed in brackets. Proposed additions are indicated by underline, except that when the entire text of a bill or resolution or a section of a bill or resolution is new, it is not underlined.]