Effective State Changes

INDIANA

In Bulletin 246, the Indiana Insurance Commissioner adjusted credit life and A&H rates effective January 1, 2019. The discount rate used for credit life is 1.99%. The discount rate used for accident and health is 1.59%.

Credit life prima facie rates for monthly outstanding balance are increased to:

• $0.71 per month per $1000 of outstanding insured debt on single life
• $1.18 per month per $1000 of outstanding insured debt on joint life

The adjusted A&H rates represent a 15% reduction in current A&H coverage. The 12-month rate per $100 of Initial Insured Indebtedness will be as follows:

• 14 Retro:  $1.50
• 14 Elim:    $1.05
• 30 Retro:  $1.03
• 30 Elim:    $0.77

Effective January 1, 2019.

SOUTH CAROLINA

On October 31, 2018, the South Carolina Department of Insurance published Order 2018-06 confirming Prima Facie Credit A&H rates for 2019. The A&H rates for 2019 will remain unchanged from their current rates in 2018. The 12-month rate for $100 of Initial Insured Indebtedness will be as follows:

• 14-day Retro: $1.53
• 30-day Retro: $1.44

Pursuant to Order 2018-05, the 3-day retroactive A&H rate will remain at $0.28 per $5.00 of monthly indemnity.

Effective January 1, 2019.

Effective State Changes

CALIFORNIA

California AB 237 was approved by the Governor on September 30, 2018. The Bill amends sections 22365, 22370, 22371, 22379, and 22380 of the Financial Code and adjusts the parameters under California’s “Pilot Program” for small loans.

Under the Bill, the loan limit is increased from $2,500 to $7,500. The applicable interest rate structure remains the same:

* The lesser of 36% or the sum of 32.75% plus the United States prime lending rate on that portion of the unpaid principal balance not in excess of, $1,000.

* The lesser of 35% or the sum of 28.75% plus the United States prime lending rate on that portion of the unpaid principal balance of the loan in excess of $1,000, but less than $7,500.

For loans above $2,500, the loan payment amount is capped at 36% of the borrower’s monthly income. The Lender must reduce the interest rate of subsequent loans under certain conditions.

The Bill sets maximum terms based on the principal balance at origination and specifically allows for an Administrative Fee and Delinquency fees. Effective January 1, 2019.

AB 3163 was signed by the Governor on September 14, 2018. Previously the law allowed a $3 transaction fee to be passed on to the customer and an additional $1 transaction fee for the purposes of submitting motor vehicle registration and titling transactions that could not be passed on to the customer by private industry partners. This bill deletes the prohibition on passing on the allowed additional $1 transaction fee to the customer. The $1 fee may now be passed on to the consumer in addition to the $3 transaction fee. Effective immediately.

AB 3212 was signed by the Governor on September 19, 2018. The Bill expands certain protections to service members and expands the definition of service members who are eligible to benefit under the Bill. The Bill is intended to build on the SCRA. Among the provisions, the bill:

* Extends certain protections related to the collection of student loan debt to one year after the period of military service; and includes student loans to the list of specified obligations that require the option to defer payments.

* Allows a service member to terminate a lease of a motor vehicle, under certain conditions.

Effective January 1, 2019.

MAINE

Maine LD 1894 addresses the treatment of GAP Waivers. Under the Act, GAP Waivers must be treated as a separate charge, not a finance charge or interest. The GAP Waiver must have a cancellation period and in the event of such a cancellation, there must be a pro-rata refund. The Act specifies GAP Waivers are not insurance.

NEW MEXICO

The New Mexico Office of Superintendent of Insurance published Bulletin 2018-011 on July 31, 2018. The Bulletin distinguishes Property and Casualty GAP Insurance, Stand Alone GAP Insurance, and GAP Waivers. It clarifies that the OSI asserts regulatory authority over GAP Insurance but not GAP Waivers.

BCFP ANNUAL DOLLAR THRESHOLD ADJUSTMENTS

Specific dollar threshold adjustments were announced on August 27, 2018 through the Bureau of Consumer Financial Protection. The BCFP is required to make adjustments to dollar thresholds based on annual changes in the Consumer Price Index. Updates to the Ability to Repay/ Qualified Mortgage Rule, (ATR/QM) and Home Ownership Equity Protection Act (HOEPA), among others, were announced and become effective January 1, 2019.

HOEPA Annual Threshold Adjustments:

* The adjusted total amount of the loan threshold will be $21,549, up from $21,032

* The adjusted points and fees trigger will be $1,077, up from $1,052

ATR/QM Threshold Adjustments – To meet qualified mortgage criteria, the combined points and fees can’t exceed the following:

* 8% of total loan amount for loans less than $13,468

* $1,077 for loans greater than or equal to $13,468 but less than $21,549

* 5% of total loan amount for loans greater than or equal to $21,549 but less than $64,648

* $3,232 for loans greater than or equal to $64,648 but less than $107,747

* 3% of total loan amount for loans greater than or equal to $107,747

CONNECTICUT

We reported in the June 2018 Newsletter that Public Act No. 18-173 (HB 5490) modified the maximum annual percentage rates for small loans. Effective October 1, 2018.

* Small loans under $5,000: the maximum APR is the lesser of 36% or the maximum APR permitted with respect to credit extended under the Military Lending Act (currently 36%).

* Small loans between $5,000 and $15,000: the maximum APR is 25%.

OKLAHOMA

SB 1151 was signed by the governor on April 25. The bill allows for a convenience fee for payments made by debit card, electronic transfer, electronic check, or other electronic means. The convenience fee shall not exceed the lesser of actual cost incurred by the lender for accepting and processing payments by electronic means, or 4%. Effective November 1, 2018.

Effective State Changes

CALIFORNIA

California Assembly Bill No. 2521 amends Section 800 of the Military and Veterans Code. The bill allows a reservist called to active duty to defer payments on certain financial obligations for the lesser of either the period of active duty plus 60 calendar days or 180 days. The bill removes the requirement on the service member to provide a signed letter, under penalty of perjury, and instead requires the service member to deliver a written request. Effective January 1, 2019.

OHIO

Ohio House Bill 123, signed by the Governor on July 30, 2018, specifically addresses Small Loans (§§ 1321.01-1321.19), Short-term Loans (§§ 1321.35-1321.48), and Second Mortgage Loans (§§ 1321.51-1321.60).

Under the Act, a Small Loans Licensee shall not make a loan where either (1) the loan is $1,000 or less, or (2) the loan has a duration of one year or less.

A Short-term Loan Licensee must meet the following conditions:

• The total loan amount doesn’t exceed $1,000 (up from $500 previously).
• The maximum duration is one year.
• The minimum duration may be less than 91 days if the total monthly payment on the loan does not exceed the greater of 6% of the borrower’s gross month income or 7% of the borrowers verified net monthly income.
• The loan must be precomputed and payable in substantially equal installments.
• The borrower must be able to rescind or cancel the loan within three business days.
• For loans greater than 91 days, the licensee must recommend the length of the loan based on the borrower’s monthly income.
• The total amount of fees and charges (excluding the check-collection charge, the check-cashing fee, and refinanced interest charges) may not exceed 60% of the original contracted loan amount.

The following additional or revised fees are allowed:

• Interest not exceeding 28%.
• A monthly maintenance fee not exceeding the lesser of 10% of the loan amount or $30 (unless a military exemption applies).
• If the loan amount is $500 or more, a loan origination charge of 2% of the originally contracted amount.
• A check-cashing fee not exceeding $10.

A Short-term Loan Licensee is prohibited from:

• Charging for credit insurance premiums; ancillary products; or additional fees, interest or charges.
• Making a short-term loan to the borrower if there exists an outstanding loan between the borrower and the licensee.
• Making a short-term loan if the loan will result in a total outstanding principal of more than $2,500 in short term loans made by licensee to the borrower at any one time.

The Act also includes provisions regarding: fees included or excluded in the interest or APR calculations, statements that must be given to the borrower, refinancing, refunding for prepayment, restrictions on contacting the borrower, and verifying the borrower’s income.

Under the Act, Second Mortgage Loans may not (1) be in the amount of $1,000 or less, or (2) have a duration of one year or less.

Effective October 28, 2018, but only applicable to loans made after April 26, 2019.

Effective State Changes

CALIFORNIA

California Assembly Bill No. 375 was approved by the Governor on June 28, 2018. The bill enacts the California Consumer Privacy Act of 2018. This bill grants consumers broad rights such as: the right to request a business disclose what information is being collected about the consumer, the identity of third parties to whom the information is sold, and the right to opt out of the sale of personal information by a business. The bill broadly defines “personal information.” Effective January 1, 2020.

INDIANA

Indiana published Emergency Rule LSA Document #18-155(E) which implements certain bracket updates, effective July 1, 2018. These bracket adjustments include:

• The minimum credit service charge increases to $51.00.
• The delinquency charge for sales and loans increases to $19.00.
• The minimum finance charge for loans increases to $51.00.
• The maximum loan term for $1,140 to $4,000 is 37 months.

Effective July 1, 2018.

MISSISSIPPI

As a reminder, the Mississippi Credit Availability Act was originally repealed within the 2016 legislation as of July 1, 2018. However, HB 811 was signed by the Governor on March 19, 2018. HB 811 reenacted the Mississippi Credit Availability Act, effective July 1, 2018.

NEW HAMPSHIRE

New Hampshire HB 1687 The bill removes a reference to how interest must be computed based on a 30-day month. Under the bill, small, title or payday lenders may not take a note or agreement in which there are blanks that are left to be filled in after the loan is made.  The bill further specifies disclosure requirements such as the date, schedule or description of the payments to be made, agreed charges or rate of charge, and the amount of the note or maximum credit line. Effective August 7, 2018.

NORTH CAROLINA

North Carolina HB 347 was enacted after overriding the Governor’s veto. The bill specifically addresses balloon payments when financing motorcycles (Section 5.(a) G.S. 25A-34). The bill specifies that no scheduled payment may be more than 10% larger than the average of earlier payments, except that the final payment may be 25% larger than the average of earlier scheduled payments. But this provision does not apply to the sale of a motorcycle with a purchase price of $7,500 or more. Effective December 1, 2018.

SB 411 expands the required use of the electronic lien system implemented by the Division of Motor Vehicles. Effective immediately, all individuals and lienholders who conduct at least 5 transactions annually must use the electronic lien system. The bill also addresses perfection of a security interest on a certificate of title, assigning or transferring title, and transfer by owner when a certificate is unavailable. Effective June 22, 2018.

Effective State Changes

ALABAMA

The State Banking Department updated Rule No. 155-2-2-.12, regarding Credit Insurance. Under the new rule, joint A&H is now permitted. Joint A&H is authorized up to 185% of the premium rates. Joint IUI is authorized up to 175% of the premium rates. The Credit Life and A&H rates remain unchanged. Effective June 1, 2018.

COLORADO

HB 18-1299 was signed by the governor on May 29, 2018. The act defines third-party providers. The act specifically allows a consumer to be charged the fee that is paid to a third party provider in connection to an electronic registration transaction, lien transaction or titling transaction. Effective July 1, 2019.

CONNECTICUT

Public Act No. 18-173 (HB 5490) was signed by the Governor on June 14, 2018. The Act modifies the maximum annual percentage rates for small loans.

• Small loans under $5,000: the maximum APR is the lesser of 36% or the maximum APR permitted with respect to credit extended under the Military Lending Act (currently 36%).
• Small loans between $5,000 and $15,000: the maximum APR is 25%.

Effective October 1, 2018.

FLORIDA

SB 386 modified the delinquency charge allowed for loans under § 516.031. Previously, a delinquency charge of up to $15 was allowed for each payment in default for at least 10 days. Effective July 1, 2018, the delinquency charges for loan are as follows:

• Monthly payments        up to $15 per payment in default
• Semimonthly payments  up to $7.50 per payment in default
• Biweekly payments up to $7.50 per payment if 2 payments are due in the same month; $5 if 3 payments are due within the same month

Effective July 1, 2018.

INDIANA

The Indiana Department of Financial Institutions published guidance for GAP and Debt Cancellation Administrators on April 2, 2018. Beginning July 1, 2018, the department will no longer approve GAP Waiver forms. Providers no longer require approval. The guidance also specifies prohibitions on refund methods and clarifies that GAP or Debt Cancellation is considered a finance charge, which is subject to the Indiana rate cap. GAP or Debt Cancellation will be considered a finance charge only if the criteria specified in HEA 1397 are not met. Due to the passage of this legislation (HEA 1397), the historical approach regarding these products and the approval given to GAP and DC Administrators by the Department will be changing.  Effective July 1, 2018.

The default charges for loans $55,800 or less will change from $18.50  to $19.00. Effective July 1, 2018.

LOUISIANA

Louisiana HB 522 / Act 592 was signed by the Louisiana Governor on May 28, 2018. The Act relates to motor vehicle service contracts. It provides a specific definition for “service contract” and “warranties” which are excluded from the service contract. The Act specifies certain required disclosures for consumers. Service contracts are not considered insurance under this Act.   Effective February 1, 2019.

MARYLAND

SB 1068/ Chapter 732 and HB 1634/ Chapter 731

SB 1068 was signed by the governor on May 15, 2018 and creates the Financial Consumer Protection Act of 2018. The governor signed a similar bill, HB 1634/Chapter 731 on the same day. The Act requires lenders of covered loans to be licensed in the state. The Act expands the definition of unfair, abusive or deceptive trade practices.  Both laws are effective October 1, 2018.

HB 1297 increases the small loan threshold under the Maryland Consumer Loan Law from $6,000 to $25,000. The bill applies to lenders making loans of $25,000 or less, unless they are exempt under the MCLL. The bill prohibits loans at a rate of interest, charge, discount or other consideration greater than the amount authorized under state law or that violates the MLA. Effective January 1, 2019.

MINNESOTA

The default charges for retail installment sales will change to the greater of 5% of the delinquent installment or $8.58. Effective July 1, 2018.

OKLAHOMA

The default charges for retail installment sales will change to the greater of 5% of the unpaid installment or $25.50. Effective July 1, 2018.

SOUTH CAROLINA

The default charges for retail installment sales will change to the greater of 5% of the unpaid installment, with a maximum of $18.50; or 40% of $7.40. Effective July 1, 2018.

Effective State Changes  MINNESOTA The Minnesota Commerce Department published the periodic adjustment in dollar amounts effective July 1, 2018 through June 30, 2020. The adjustments are based on a 10% increase. The dollar amount adjustments include: §47.59 Subd. 3 Principal Subject to 33% Interest $ 1,238.00 §47.59 Subd. 3 Minimum Refund $        8.25 §47.59 Subd. 6 Default Charges $         8.58 §47.59 Subd. 6 Loan Administration Fee Threshold $ 7,128.00 Effective July 1, 2018. NEBRASKA LB 194 was approved by the governor on April 19, 2018. The bill modifies the Credit Services Organization Act, the Delayed Deposit Services Licensing Act, and the Nebraska Installment Loan Act. The law prohibits brokerage fees or any other fees in connection with a loan governed by the Nebraska Installment Loan Act. LB 194 specifies that the minimum term for a loan contract under the Nebraska Installment Loan Act is six months. Effective January 1, 2019. OKLAHOMA SB 1151 was signed by the governor on April 25. The bill allows for a convenience fee for payments made by debit card, electronic transfer, electronic check, or other electronic means. The convenience fee shall not exceed the lesser of actual cost incurred by the lender for accepting and processing payments by electronic means, or 4%. Effective November 1, 2018. The Department of Consumer Credit published the changes in dollar amounts which will become effective July 1, 2018. Included in the adjustments are the following: Retail Installment Sales, §2-201: The greater of: 30% of the amount financed up to $1,530;  plus 21% of the excess to $5,100; plus 15% of the remainder to $55,800; OR  21% Simple Interest The dollar amounts under §3-508(A) remain the same. For loans subject to § 3-508(B) of the Oklahoma Code the maximum charge structure is: Loan Amount Maximum Charge $1.00 – $152.95 $5.10 for every $25.50 advanced $152.96 – $ 178.50 Flat 10% plus $15.30 $178.51 – $357.00 Flat 10% plus $17.85 $357.01 – $510.00 Flat 10% plus $20.40 $510.01 – $765.00 Flat 10% plus $22.95 $765.01 – $1,530.00 Flat 10% plus $25.50 Effective July 1, 2018. TEXAS The dollar amount brackets and ceilings subject to adjustment in the Texas Financial Code will increase as follows: Consumer Loans – §342.201 (Add-On Rates) $18 per $100 per annum of the cash advance to $2,100 plus, $ 8 per $100 per annum of the excess to $17,500.00 OR (Simple Melded Rates) 30% per annum of the cash advance to $3,500 plus, 24% of the excess to $7,350 plus, 18% of the remainder to $17,500.00 Retail Installment Sales (“Other Goods”) – §345.055 $12 per $100 per annum of the principal balance to $3,500 plus, $10 per $100 per annum of the excess to $7,000 plus, $ 8 per $100 per annum of the remainder. Effective July 1, 2018.

Effective State Changes  ARIZONA HB 2434 was signed by the Governor on March 22, 2018. The bill creates a “regulatory sandbox program” for new and innovative financial products. The law includes requirements for participants in the program, including disclosures for consumers. Effective July 16, 2018. The Governor approved SB 1043 on April 5, 2018. SB 1043 updates the recording fees charged for certain real estate transactions. Effective June 30, 2019. SB 1381 was signed by the Governor on April 5, 2018 and relates to the sale of service contracts in Arizona. The bill modifies the definition of service contract and exempts certain companies from the registration requirements. The bill further provides an extensive list of service contract disclosure requirements. Based on the date of presumed date of adjournment, the Effective Date is expected to be June 15, 2018. FLORIDA SB 386 was signed by the Florida Governor on March 19, 2018. The bill amends Florida’s Consumer Finance Law. Specifically, the bill removes the requirements that installments must be paid monthly and instead states that installments may be due every 2 weeks, semi-monthly, or monthly. The bill also modifies the allowable delinquency charge, as follows: $15 per default for monthly payments $7.50 per default for semi-monthly payments $7.50 per default for payments due every 2 weeks if two payments are due in the same calendar month or $5.00 if three payments are due within the same calendar month. Effective July 1, 2018. SB 920 was approved by the Governor on March 19, 2018. The bill defines and places certain limits on deferred presentment installment transactions. Under the bill, the face amount of the check is limited to $1000 and fees are limited to no more than 8%. The term is defined as 60-90 days. The bill also includes language regarding the calculation of fees, required update notices, and charges for a longer first period. Effective July 1, 2019. IDAHO HB 521 / Chapter 116 provides for state regulation of motor vehicle service contracts. The bill modifies or addresses the following: the definition of a service contract, reimbursement policies, rules for service contracts, recordkeeping requirements, licensing, and violation penalties. Effective July 1, 2018. INDIANA The Governor signed HB 1063 on March 19. Included in the law are provisions relating to records that must be maintained in relation to the sale of a motor vehicle. The records must include, where applicable: finance agreement, sales receipt from auction, title affidavit, interim plates generated in error, and a copy of rebuilt vehicle disclosures. Effective July 1, 2018. HB 1397 was signed by the Governor on March 13, 2018. The act broadly addresses financial institutions and modifies various banking, consumer and financial services laws. The bill adds “electronic funds transfer” to the sources of returned payments that may result in a $25 NSF charge. A lender may charge a “skip-a-payment service fee” not to exceed $25, subject to additional restrictions listed in the bill. And the lender may charge a fee not to exceed $10 for optional “expedited payment service”, subject to additional restrictions. GAP Agreements may be entered into, subject to certain restrictions and disclosures. The bill removes the language that requires the price of GAP waivers to be “reasonable.” Included among these specific requirements are: GAP may not be required by the seller. The charge for the initial term must be disclosed in writing. A shorter term of GAP coverage than sale must be disclosed in writing. The GAP agreement must include certain required descriptions of the motor vehicle and parties related to the transaction. Non-refundable GAP Waivers may not exceed $400. The bill also requires all creditors to process payments on the date the payments are received, except under certain specified circumstance. Effective July 1, 2018. SB 377 was signed by the Governor on March 13, 2018. This bill adds a provision that allows the Department of Financial Institutions to capture and monitor transaction level activity relating to small loans regulated under IC 24-4.5-7. Effective July 1, 2018. MISSISSIPI SB 2929 was approved by the Governor on March 26. The bill clarifies that GAP waivers are not insurance and therefore exempt from state insurance laws. The bill includes a definition of GAP Waiver and requirements for offering GAP waivers. These requirements include specified disclosures and provisions regarding cancellation, exemptions, and enforcement. Effective July 1, 2018. SOUTH CAROLINA The Department of Consumer Affairs released its biannual dollar bracket adjustment effective from July 1, 2018 through June 30, 2020. Among the dollar bracket adjustments are: The consumer credit sale, consumer lease, and consumer loans defined maximum amount changes from $90,000 to $92,500. (§2.104(1)(e), §2.106(1)(b), and §3.104(d), respectively). The maximum delinquency charge for sales and loans transactions changes from $18.00 to $18.50. (§ 2.203(1) and §3.203(1), respectively). The minimum delinquency charge changes from $7.20 to $7.40. (§ 2.203(2)). Effective July 1, 2018. TENNESSEE HB 1944 was signed by the Governor on March 23, 2018. The bill amends provision of the Tennessee Code related to Tennessee Industrial Loan and Thrift Companies. The bill changes the application of the interest rate to the amount financed rather than the total amount of the loan. The rates remain unchanged. The new term applies to loans made on or after March 23. Effective March 23, 2018. WASHINGTON HB 1056 was signed by the Governor on March 22. The bill provides protections for military service members in Washington. The bill expands the definition to include an active member who is either stationed in or a resident of Washington state. The previous language only provided protection for residents. In addition, the bill adds an allowance for costs and reasonable attorney fees for civil actions. Effective June 7, 2018. WEST VIRGINIA HB 4186 was sent to the Governor on March 10, 2018 and became law without the Governor’s signature on March 28. The bill clarifies that GAP Waivers in West Virginia are not insurance. It further provides terms and conditions for the sale of GAP waivers and procedures for borrowers to receive GAP waiver benefits. Effective June 8, 2018. WISCONSIN WI AB 663 / Act 161 as signed by the Governor on March 28. The bill provides that GAP waivers may be offered or sold in connection with a credit sale or lease of a vehicle. The bill also clarifies that a GAP waiver is not insurance. The bill also includes prohibitions on requiring GAP waivers as a condition of a purchase, specified disclosure requirements, procedures for the borrow to follow to receive GAP waiver benefits, and requirements for cancellation. The GAP waiver must be part of a separate addendum to the finance agreement for a motor vehicle. Under the Act, GAP is not to be considered interest or a finance charge. Effective September 1, 2018.

OHIO

HB 199 modifies the Ohio Mortgage Loan Law and creates the Ohio Residential Mortgage Lending Act. The bill limits the application of the Mortgage Loan Law to unsecured loans, and loans secured by property other than residential real estate or a dwelling. The Ohio Residential Mortgage Lending Act regulates all non-depository lending secured by residential real estate. The bill also modifies an exemption to the Consumer Installment Loan Act. The bill clarifies that for a precomputed loan, the Consumer Installment Loan Act also applies when the first installment period exceeds one month by not more than 15 days, and the first installment payment amount is greater than the regular payments for interest charged for the extra days. Effective March 23, 2018.