Senate Bill No. 379

Introduced By _______________________________________________________________________________

A Bill for an Act entitled: "An Act generally revising consumer loan laws; specifying that, with respect to loans on which charges are made on an add-on basis, the installment contracted for may not be substantially larger than any preceding installment; specifying that, with respect to loans on which charges are made on an add-on basis, the minimum monthly payments must be made in an amount that would result in the full repayment of the initial loan advance, exclusive of any charges, within a statutorily-specified maximum term; setting a 30-day limit for certain consumer loan licensees to return to certain borrowers a release of the mortgage or a request for reconveyance of the deed of trust or trust indenture on real property taken as security for a loan; and amending sections 32-5-102, 32-5-103, 32-5-203, 32-5-302, 32-5-307, 32-5-503, and 32-5-505, MCA."

Be it enacted by the Legislature of the State of Montana:

Section 1.  Section 32-5-102, MCA, is amended to read:

"32-5-102.   Definitions. Unless the context requires otherwise, in this chapter, the following definitions apply:

(1) (a) "Consumer loan" means credit offered or extended to an individual primarily for personal, family, or household purposes, including loans for purposes that are secured by a mortgage, deed of trust, trust indenture, or other security interest in real estate.

(b) Consumer loans do not include real estate-secured loan transactions that are governed by 12 U.S.C. 1735f-7a, but a consumer loan business may engage in transactions that are governed by 12 U.S.C. 1735f-7a.

(1)(2)  "Consumer type loan business" means the business of making consumer loans generally repayable in substantially equal installments as a licensee under this chapter.

(2)(3)  "Department" means the department of commerce provided for in Title 2, chapter 15, part 18.

(3)(4)  "License" means one or both of the licenses provided for by this chapter.

(4)(5)  "Licensee" means the person holding a license.

(5)(6)  "Person" means individuals, partnerships, associations, corporations, and all legal entities in the loaning business."

Section 2.  Section 32-5-103, MCA, is amended to read:

"32-5-103.   Engaging in business of making consumer loans restricted. (1) Except as provided in subsection (5), a person may not engage in the business of making consumer loans or advances of money on credit in any amount and contract for, charge, or receive directly or indirectly on or in connection with any loan or advance any charges, whether for interest, compensation, consideration, or expense, except as provided in and authorized by this chapter. A person engaged in business as a licensed pawnbroker may not become a licensee under this chapter, nor do any of the. The provisions of this chapter do not apply to any exempted person.

(2)  A licensee may sell its business and assets to a bank, building and loan association, savings and loan association, trust company, credit union, credit association, development credit corporation, or bank holding company organized pursuant to state or federal statutory authority and subject to supervision, control, or regulation by an agency of the state of Montana or an agency of the federal government. All contracts for loans and all other contracts entered into by the licensee pursuant to the provisions of this chapter that are sold and transferred to an acquiring organization continue to be governed by the provisions of this chapter.

(3)  The provisions of subsection (1) apply to any person who seeks to evade its applications by any device, subterfuge, or pretense.

(4)  Any act by a licensee in the making of a contract or in the collection of a loan made under the contract that violates the provisions of this chapter is void. The licensee has no right to collect, receive, or retain any principal, interest, or charges.

(5)  A consumer loan licensee or a person who seeks a regulated lender exemption under 31-1-112 as a consumer loan licensee shall fully comply with this chapter. A regulated lender as defined in 31-1-111, other than a consumer loan licensee, or a lender who complies with the provisions of Title 31, chapter 1, part 1, is not required to comply with this chapter."

Section 3.  Section 32-5-203, MCA, is amended to read:

"32-5-203.   Conduct of other business in same office. A licensee may conduct the business of making consumer loans under this chapter within any office, room, or place of business in which any other business for which a license under this chapter is not required is solicited or engaged in or in association or conjunction therewith with the business unless the department shall find finds, after a hearing, that the other business is of such a nature that such the conduct tends to conceal evasion of this chapter or of the rules made hereunder and shall under this chapter. If the department finds concealment or evasion, it shall order such the licensee in writing to desist from such the conduct."

Section 4.  Section 32-5-302, MCA, is amended to read:

"32-5-302.   Installment payment -- contract period. (1) A licensee may not enter into any contract of loan:

(a)  of $300 or less, exclusive of charges, under which the borrower agrees to make any scheduled repayment of principal more than 21 calendar months from the date of making the contract;

(b)  for more than $300 to and including $1,000, exclusive of charges, under which the borrower agrees to make any scheduled repayment of principal more than 25 calendar months from the date of making; or

(c)  for more than $1,000 to and including $2,500, exclusive of charges, under which the borrower agrees to make any scheduled repayment of principal more than 48 calendar months from the date of making.

(2)  Each loan contract requires payment of principal and charges in installments that are payable at approximately equal periodic intervals, except that payment dates may be omitted to accommodate borrowers with seasonal incomes. An With respect to a loan on which charges are made on an add-on basis, an installment contracted for may not be substantially larger than any preceding installment. When a loan contract provides for monthly installments, the first installment may be payable at any time within 45 days of the date of the loan and the charges for the number of days in excess of 30 from the date of making may be added to the scheduled amount of the installments."

Section 5.  Section 32-5-307, MCA, is amended to read:

"32-5-307.   Records to be kept. Each licensee shall keep or make available in each licensed office such the books, accounts, and records as that the department shall require requires and as that are necessary to enable the department to determine whether the licensee is complying with this chapter and with the rules promulgated thereunder under this chapter. The licensee shall preserve such the records for at least 2 years after making the final entry on any loan recorded thereon in the records."

Section 6.  Section 32-5-503, MCA, is amended to read:

"32-5-503.   Early payment. The borrower may at any time pay all or any part of the unpaid balance in his the borrower's account, or if the account is not in default, the borrower may pay the unpaid principal balance in monthly installments, subject to minimum payment requirements as determined by the licensee and set forth in the open-end loan agreement. Minimum With respect to a loan on which charges are made on an add-on basis, minimum monthly payments shall must be made in such an amount as that would result in the full repayment of the initial loan advance, exclusive of any charges, within the maximum term set forth for other loans of the same amount in 32-5-302(1)."

Section 7.  Section 32-5-505, MCA, is amended to read:

"32-5-505.   Security. A holder of a supplementary license may take a security interest in personal property to secure an open-end loan and may retain any such the security interest until the open-end account is terminated. A holder of a supplementary license may take a security interest in real property to secure an open-end loan and may retain any such the security interest until the open-end account is terminated; however. However, if there is no outstanding balance in the account and there is no commitment by the licensee to make additional advances, the licensee shall, within 10 30 days following written request by the borrower, deliver to the borrower a release of the mortgage or a request for reconveyance of the deed of trust or trust indenture on any real property taken as security for a loan."

NEW SECTION. Section 8.  Saving clause. [This act] does not affect rights and duties that matured, penalties that were incurred, or proceedings that were begun before [the effective date of this act].

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