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Indiana Statute of Limitations on Bad Checks

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Indiana Statute of Limitations on Bad Checks document sample

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									               Indiana Department of
                Financial Institutions

 30 South Meridian Street
 Suite 300
 Indianapolis, Indiana 46204-2759
 (317) 232-3955, (800) 382-4880
 FAX (317) 232-7655

May 11, 2004
Opening Remarks

Charles Phillips,

May 11, 2004
Opening Remarks

J. Philip Goddard,
Deputy Director and General Counsel

May 11, 2004

Mark Tarpey,
Division Supervisor

May 11, 2004
Definitions and Income

Donna Kaye,
Assistant to Division Supervisor

May 11, 2004
IC 24-4.5-7 Chapter 7

Changed “consumer” to “borrower” in all
subsections of Chapter 7.

Clarifies that written authorization to debit
borrower’s account is allowed.

May 11, 2004
Definition “small loan”

Changed principal loan amount to at least
fifty dollars ($50) and not more than five
hundred dollars ($500).

See IC 24-4.5-7-104

May 11, 2004
“monthly gross income”
Changed definition from net to “monthly
  gross income”;
Income received by the borrower in the
  thirty (30) day period preceding the
  borrower’s application.
Exclusive of any income other than regular
  gross pay received.
See IC 24-4.5-7-110
May 11, 2004
Consumer Income Requirements

Total payable amount of the small loan
 cannot exceed 15% of gross monthly

See IC 24-4.5-7-402

May 11, 2004
Renewal - now prohibited

A lender shall not enter into a renewal
with a borrower. If a loan is paid in full, a
  subsequent loan is not a renewal.
See IC 24-4.5-7-402(6)
Each loan must be paid in full by cash, deposit of
  check, or debit of the borrower’s account.

The borrower can still make payments prior to

May 11, 2004
Finance Charges, Fees,

Rick Bane,
Field Supervisor

May 11, 2004
Small Loan Finance Charges

15% on the first $250 of a small loan;
13% on the amount of a small loan greater than
  $250 and less than or equal to $400; and,
10% of the amount over ($400) and less than or
  equal to five hundred dollars ($500).

See IC 24-4.5-7-201

May 11, 2004
 Rates Applied to Principal

Rates are applied to the amount financed, or
 principal, to determine the finance charge.

The rates are not applied to the face amount
 of the check or authorization to debit the
 account of the borrower, which already
 includes finance charges.

May 11, 2004
Maximum Rate on Principal

       Principal            Rate
       $50 to $250                 15%
       $250.01 to $400.00          13%
       $400.01 to $500.00          10%

May 11, 2004
Small Loan Finance Charges
Effective July 1, 2004
                        Maximum     Annual         Gross
        Amount Of       Finance     Percentage     Income
        Loan            Charge      Rate*          Required
         $      50.00   $    7.50        391.07%   $ 383.33
         $     100.00   $   15.00        391.07%   $ 766.67
         $     150.00   $   22.50        391.07%   $ 1,150.00
         $     200.00   $   30.00        391.07%   $ 1,533.33
         $     250.00   $   37.50        391.07%   $ 1,916.67
         $     300.00   $   44.00        382.38%   $ 2,293.33
         $     350.00   $   50.50        376.17%   $ 2,670.00
         $     400.00   $   57.00        371.52%   $ 3,046.67
         $     450.00   $   62.00        359.21%   $ 3,413.33
         $     500.00   $   67.00        349.36%   $ 3,780.00
                                    *14 Day Term

May 11, 2004
Monthly Gross Income

15% of monthly gross income is the limit for
  the total repayable on a small loan.

See IC 24-4.5-7-402

May 11, 2004
Additional Fees

Delinquency Charge was removed.

The only additional fee that may be
  contracted for and received by the lender
  on a small loan is a charge not to exceed
  twenty dollars ($20) for each NSF item.
See IC 24-4.5-7-202

May 11, 2004
NSF Fee Limitations

The NSF charge can be assessed only one
 time regardless of how many times a check
 or electronic debit is submitted by the

May 11, 2004
Disclosure of “Warning”

Removes language related to “Renewing”
Added language related to pamphlet approved by
  the department that describes:
       (a) the availability of debt management and
  credit counseling services; and
       (b) the borrower's rights and responsibilities
  in the transaction.
See IC 24-4.5-7-301

May 11, 2004
Limitations of Loans

Robert Benbow,
Field Supervisor

May 11, 2004
Term of a Small Loan            1

A small loan may not be made for a term of
 less than 14 days - remains the same.

See IC 24-4.5-7-401

May 11, 2004
Term of a Small Loan            2

After the borrower's initial loan, and five
 subsequent consecutive small loans,
 another small loan may not be made to the
 borrower within seven days after the due
 date of the fifth consecutive small loan.
Note: the balance must be paid in full by
 cash, deposit of check, or debit of the
 borrower’s account.
May 11, 2004
Term of a Small Loan                3

After the borrower's fifth consecutive small loan,
  the balance must be paid in full or the borrower
  and lender may agree to enter into a simple
  interest loan, payable in installments, under
  IC 24-4.5-3-508 (maximum APR of 36%) within
  seven (7) days after the due date of the fifth
  consecutive small loan.

May 11, 2004
Term of a Small Loan           4

The maximum Annual Percentage Rate is
 36%, on amounts up to $990.00, as of July
 1, 2004

Note: currently 36% APR on amounts up to

May 11, 2004
Payable in Installments

“Payable in installments” means that
  payment is required or permitted by written
  agreement to be made in more than four (4)
  installments, not including a down
See IC 24-4.5-1-301(13)

May 11, 2004
Consecutive Small Loan

No change
A new small loan agreement that the lender
  enters with the same borrower not later
  than seven (7) calendar days after a
  previous small loan made to that borrower
  is paid in full.
See IC 24-4.5-7-108

May 11, 2004
Commercially reasonable
method of verification
One (1) or more private consumer credit reporting
 services that the department determines to be
 capable of providing a lender with adequate
 verification information necessary to ensure
 compliance with subsection (4). (Borrower
 makes written statement regarding other loans
 and lender verifies)

See IC 24-4.5-7-404
May 11, 2004
Endorsed/Approved Vendors

DFI has not endorsed/approved any specific
 vendor. DFI will continue to monitor the
 issue of a third party reporting service
 useable by all payday lenders, similar to a
 typical credit reporting agency. At a
 minimum, lenders must be able to check all
 of their own, and affiliates, locations to
 ensure customers’ loans comply with
 IC 24-4.5-7-404(3).
May 11, 2004
Loan with another lender

Changed total loan amounts allowed from
 four hundred dollars ($400) to five
 hundred dollars ($500) when face amount
 of checks written, or debits authorized, are
 combined into a single sum.

May 11, 2004
Change - with any other lender

Another lender, an affiliate of the lender or
 another lender, or a separate entity
 involved in a business association with the
 lender or another lender in making small

May 11, 2004
Method of verification.

Commercially reasonable means

was changed to,

a commercially reasonable method of

May 11, 2004
Private consumer credit
reporting services
The department shall monitor the
 effectiveness in Reporting. If methods of
 verification are available the DFI will:
 Provide notice to all lenders identifying
 methods, and
 Require lenders to use one method to
 comply with requirements.

May 11, 2004
Renewal or refinancing

Renewals are not allowed effective March
17, 2004, under IC 24-4.5-7-410(l)),
Renewal sections repealed as of July 1,
See IC 24-4.5-7-407 and 7-408.

May 11, 2004
Department Compliance
The DFI will allow renewals until July 1,
 2004, because of conflict in current statute
 and new statute.

Renewal enforcement will have the July 1

May 11, 2004
Restrictions and Enforcement

Generally speaking, under 7-409 there is;
 No Surcharge after dishonor
 No Penalty for stopping payment
 No Treble damages in civil actions
 No Attorney’s Fees

May 11, 2004
Civil Penalties for Violations
under 7-409(4)
A person who violates this Chapter is subject
  to a civil penalty up to $2,000.00 imposed
  by the department, and
Is liable to the borrower for actual damages,
  statutory damages of $2,000.00 per

May 11, 2004
Limitations         1

A lender making small loans shall not
  commit acts;
Using a device the department determines
  would have the effect of charging or
  collecting more than allowed by this
See IC 24-4.5-7-410(f)

May 11, 2004
Limitations         2

Includes new language under (f)(iv);
Entering into transactions in which a
  customer receives a purported cash rebate
  that is advanced by someone offering
  Internet content services, or some other
  product or service, when the cash rebate
  does not represent a discount or an
  adjustment of the purchase price for the
  product or service;
May 11, 2004
Examination Issues &

Mark Tarpey,
Division Supervisor

May 11, 2004
General Reminders              1

Intent of Chapter 7 was to restrict bad check
  charges on payday loans.
Finance Charges permitted under Chapter 7
  were to cover collection costs.
Small claims court actions can be used to
  enforce the terms of the loan agreements.
  Court costs and post judgment interest can
  be awarded.

May 11, 2004
General Reminders                   2

Bad check laws generally do not apply to payday
Bad check laws allow retail merchants, who have
  no agreement with customers as lenders do, some
Licensee must maintain detailed records of
  collection activity, including all details of small
  claims court proceedings.
SEE IC 24-4.5-3-506

May 11, 2004
 Questions and Answers

May 11, 2004

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