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Louisiana Amends Consumer Credit Provisions – House Bill 766
by: Louis Danastorg
Louisiana’s legislature amended and enacted provisions governing licensees of consumer credit and deferred presentment transactions relating to contract nullification, license requirements, record retention and loan payment plans.
R.S. 9:3518.4 nullifies, voids, or otherwise makes unenforceable any consumer credit transaction made by a creditor that has not obtained a Louisiana license. An unlicensed creditor shall forfeit all transactional proceeds paid in association with the loan, and upon borrower request, must return any property taken as collateral within thirty days. The creditor must reimburse the borrower the current or fair market value, or other commercially reasonable amount, should the collateral property be disposed of before the borrower makes the request. Any person attempting to enforce or collect on a loan made by an unlicensed creditor will be subject to fines and penalties imposed at the discretion of the Commissioner. This section does not apply to any non-recourse consumer financial transaction or to any creditor not required to be licensed with the Office of Financial Institutions.
R.S. 9:3557 restricts unlicensed creditors from taking assignments, undertaking direct payment collection or enforcing rights against consumers, but allows the collection and enforcement of consumer loan obligations the creditor has taken assignment of without a license for three months. The creditor must first provide the Commissioner written notification within ten days of his or her intention to take consumer loan assignments, including: proposed assignee and assignor contact information, the amount of assignment and any other information the Commissioner requires. Then, so that the assignment may remain valid, the creditor must promptly apply for a license, which is not subsequently denied.
R.S. 9:3560 exempts certain persons from the consumer loan licensing requirements. This section has been amended to include those conducting lending activities that involve federally related mortgage loans, and who are subject to the licensing and supervisory regulations of any federal regulatory authorities. These lenders are permitted to make second or junior loans and mortgages on one-to-four family residential properties within Louisiana; however, these loans must be made concurrently with a federally related mortgage loan or as part of a mortgage revenue bond loan program, or sold on the secondary market. Further, the lender may only sell ten or fewer of such loans during any calendar year.
R.S. 9:3561 requires each licensee that makes loans to Louisiana residents must maintain consumer loan records at the location specifically stated on the license, as only one place of business may be maintained under the any one license. The Commissioner has the discretion to issue additional licenses to a duly licensed lender having complied with all relevant provisions for license application and issuance. R.S. 9:3561.2 requires any person subject to the consumer credit transaction licensing provisions be duly registered with the Secretary of State and have possession of a certificate of authority to conduct business before submitting an application.
R.S. 9:3578.4 relates to changes to finance charge and fee restrictions. If a loan remains unpaid at contractual maturity a licensee may no longer charge a one-time delinquency charge, as that language in the statute has been repealed. However, licensees may charge a rate of 36% per annum for a period not to exceed one year, beginning one year after contractual maturity.
R.S. 9:3578.4.1 creates a mechanism, the extended payment plan, for consumers who are unable to repay their consumer loans to avoid default and pay off the outstanding balance. Under the extended payment plan a consumer may elect to repay the licensee the amount due in installments; however, consumers may only elect to do so once in any twelve month period (measured from the execution date of the extended payment plan). Consumers shall request to enter into an extended payment plan prior to the outstanding balance’s due date to meet eligibility requirements. The licensee and consumer must then execute a written agreement to modify the terms of the original loan and establish the extended payment plan terms. Once a consumer has entered into an extended payment plan they may not enter into any subsequent consumer loan or deferred presentment transactions until the extended payment plan is fully repaid.
Extended payment plan terms must: 1) allow consumers to repay the outstanding balance including any fees in at least four installments; 2) not contain any prepayment penalties; 3) prohibit any interest charges or fees during the duration of the plan; 4) give the consumer at least thirty days before the first installment is due. Each installment must also be a substantially similar amount and the due dates evenly spread throughout the plan.
Upon receiving any payment under the extended payment plan, the licensee must immediately provide the consumer with receipts, which must state the remaining balance after each payment. If the consumer fails to pay any installment, they shall be in default and the licensee may immediately accelerate payment. Upon default, however, the licensee may only collect the remaining balance due at default.
Licensees must prominently display at each physical location and on its homepage a public notice that informs consumers that if they are unable to repay on a consumer credit transaction they may enter into an extended payment plan. Such notice must be printed on the first page of any consumer credit transaction to notify the individual consumer (statutory language provided at R.S. 9:3578.4.1 G.(2)a). Consumers must then sign and acknowledge a statement confirming receipt of the extended payment plan disclosures (statutory language provided at R.S. 9:3578.4.1 G.(2)b).
R.S. 9:3578.7 requires licensees to conspicuously post any notices issued by the Commissioner, including the Commissioner’s Office toll-free number, alongside the list of allowable fees applicable to the licensee.
These amendments become effective January 1, 2015.
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