Raised Bill No. 5512
February Session, 2014
LCO No. 2251
Referred to Committee on BANKS
AN ACT CONCERNING PAYDAY LOANS.
Be it enacted by the Senate and House of Representatives in General Assembly convened:
Section 1. (Effective October 1, 2014) (a) (1) "Financial institution" means any bank or credit union chartered or licensed under the laws of this state or the United States and having its main office in this state or any similar out-of-state institution having a branch in this state;
(2) "Payday lender" means any person who offers or makes a payday loan to a borrower, arranges a payday loan for a third party or acts as an agent for a third party, regardless of whether approval, acceptance or ratification by the third party is necessary to create a legal obligation for the third party; and
(3) "Payday loan" means a loan, as defined in section 36a-2 of the general statutes, other than a secured loan, made (A) primarily for personal, family or household purposes, and (B) in accordance with a loan agreement that provides that the borrower writes a postdated check to the lender, authorizes the lender to debit the borrower's account or authorizes the lender to execute a wage garnishment.
(b) No payday lender shall:
(1) Make or renew a payday loan in this state at a rate of interest that exceeds twelve per cent per annum, excluding a one-time origination fee for a new payday loan;
(2) Charge during the term of a new payday loan, including all renewals of the loan, more than one origination fee of ten dollars per one hundred dollars of the loan amount or thirty dollars, whichever is less;
(3) Charge the borrower more than one fee, not to exceed twenty dollars, per loan transaction for dishonored checks or insufficient funds, regardless of how many checks or debit agreements the lender obtains from the borrower for the transaction;
(4) Make or renew a payday loan for a term of less than thirty-one days;
(5) Charge a borrower any fee or interest other than a fee or interest described in subdivisions (1) to (3), inclusive, of this subsection;
(6) Include in a payday loan agreement:
(A) A hold-harmless clause;
(B) A confession of judgment or other waiver of the right to notice and the opportunity to be heard in an action;
(C) An agreement by the borrower not to assert any claim or defense arising out of the agreement against the lender or any holder in due course; or
(D) An executory waiver or a limitation of exemption from attachment, execution or other process on real or personal property held by, owned by or due to the borrower, unless the waiver or limitation applies only to property subject to a security interest executed in connection with the loan;
(7) Conduct a payday loan business where liquor or lottery tickets are sold or where gambling devices, as defined in section 53-278a of the general statutes, are located;
(8) Renew an existing payday loan more than two times; or
(9) Make a new payday loan to a borrower during the seven-day period after the day a previous payday loan expired.
(c) For purposes of this section, a payday loan is made or renewed in this state if the loan is made to a borrower who resides in or maintains a domicile in this state and the borrower:
(1) Negotiates or agrees to the terms of the loan in person, by mail, by telephone or via the Internet while physically present in this state;
(2) Enters into or executes a loan agreement with the lender in person, by mail, by telephone or via the Internet while physically present in this state; or
(3) Makes a payment on the loan in this state.
(d) For purposes of this section, a borrower makes a payment on a loan in this state if a payday lender debits an account the borrower holds in a branch of a financial institution or if the borrower makes a payment with a negotiable instrument drawn on an account at a financial institution.
(e) Whenever it appears to the Banking Commissioner that any payday lender has violated, is violating or is about to violate this section, the commissioner may take action against such lender in accordance with sections 36a-50 and 36a-52 of the general statutes.
This act shall take effect as follows and shall amend the following sections:
October 1, 2014
Statement of Purpose:
To regulate payday lenders in this state.
[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.]