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A bill to be entitled

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An act relating to credit enhancement loans; providing for

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the licensure of lenders by the Department of Financial

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Services; providing penalties for violations; providing

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for licensure fees, payable to the department; providing

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licensure requirements; providing the form and contents of

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a licensure application; requiring that the licensee

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maintain a minimum net worth; providing for the revocation

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or suspension of a license; providing loan and interest

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rate limits; authorizing a licensee to charge certain fees

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in addition to interest charges; prohibiting multiple

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loans in certain situations; providing for enforcement of

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loan agreements; providing for disclosure forms for the

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customer; providing for reports to credit bureaus;

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requiring the maintenance of financial records by

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licensees; prohibiting a licensee from accepting an

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assignment of earnings from a customer or requiring a

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customer to execute a confession of judgment; requiring

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that a licensee maintain records for a specified period

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and allow the department to examine its records; requiring

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that certain reports be filed with the department;

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authorizing the department to adopt rules; authorizing the

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department to issue subpoenas and compel testimony;

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providing for desist orders and injunctions; providing for

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appeals from actions of the department; providing that

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certain credit enhancement loans are not enforceable;

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providing an effective date.

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Be It Enacted by the Legislature of the State of Florida:

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     Section 1. Credit enhancement loans; license required.--

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     (1)(a) A person may not engage in the business of offering

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credit enhancement loans in amounts of $3,000 or less or contract

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for or receive in connection with any credit enhancement loan any

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fees that, in the aggregate, are greater than authorized by this

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section. A person may not engage in the business of offering

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credit enhancement loans without being licensed. The Department

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of Financial Services shall regulate the credit enhancement loan

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business and is responsible for the licensure and regulation of

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persons who offer credit enhancement loans.

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     (b) A person who violates this section commits a

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misdemeanor of the second degree for a first offense, punishable

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as provided in s. 775.082 or s. 775.083, Florida Statutes, and

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commits a misdemeanor of the first degree for a second or

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subsequent offense, punishable as provided in s. 775.082 or s.

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775.083, Florida Statutes. Each violation of this section is a

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separate offense.

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     (c) Any contract for the extension of credit, the making or

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collecting of which violates this section, except as a result of

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an accidental error or error of computation, is void. The

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licensee or any other party in violation has no right to receive

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or retain any principal or charges pursuant to the transaction.

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     (2) The Department of Financial Services shall issue a

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license to engage in the credit enhancement loan business to any

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person who:

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     (a) Has, on a consolidated basis and computed in accordance

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with generally accepted accounting principles, a minimum net

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worth of not less than $1 million;

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     (b) Submits a complete application; and

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     (c) Submits a nonrefundable application fee of $2,500.

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     (3) The application for licensure shall be made on a

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departmental form, sworn to, and shall state:

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     (a) That the applicant desires to engage in the credit

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enhancement loan business;

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     (b) Whether the applicant is an individual, partnership,

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association, corporation, or other legal entity;

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     (c) The name and address of the person who will manage and

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be in immediate control of the business;

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     (d) Except for publicly held corporations and their

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operating subsidiaries, the names and addresses of the owners of

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the business and their percentage of equity in the business; and

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     (e) The date upon which the applicant proposes to commence

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operations.

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     (4)(a) The department shall act on a completed license

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application within 90 days after the application is submitted.

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The department shall notify the applicant when the application is

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complete and may extend the 90-day period with the written

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consent of the applicant. If the department does not approve,

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deny, or grant an extension within 90 days, the application is

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deemed approved and the department shall issue the license

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immediately thereafter.

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     (b) If the applicant does not satisfy the conditions for

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licensure, the department shall notify the applicant in writing

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of the denial, specifying the findings of fact and reasons for

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the denial. The applicant may request an informal hearing on the

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decision, in writing, within 30 days after receipt of the

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notification. The department shall reconsider the application

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and, after the hearing, shall issue a written order granting or

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denying the application.

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     (5) A licensee shall maintain, on a consolidated basis, a

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minimum net worth of $1 million at all times. The failure to

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maintain this minimum net worth is grounds for revocation of a

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license.

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     (6) A licensee may operate only at locations that are

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approved by the department. A change of location may not be made

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without prior written notice to and approval by the department.

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The department may issue more than one license to the same

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licensee for multiple business locations.

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     (7) If a change occurs in the name or address of the

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licensee, the legal agent of a licensed corporation, or the

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ownership of more than 5 percent of a licensee that is not a

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natural person, the licensee shall file a sworn statement of the

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change with the department within 30 days after such change.

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     (8)(a) The department may revoke or suspend a license if it

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finds, after due notice and a hearing, that the licensee or an

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officer, director, agent, or employee of the licensee:

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     1. Materially failed to comply with any rule or order of

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the department;

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     2. Materially failed or refused to make any required

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report;

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     3. Failed to pay any required fee; or

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     4. Knowingly furnished false or misleading information to

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the department.

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     (b) Within 5 days after the entry of an order revoking or

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suspending a license, the department shall file the findings of

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fact and mail a copy to the licensee. Upon receipt of the order,

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the licensee shall immediately surrender the license certificate

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to the department.

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     (9)(a) The license of a licensee who does not make any

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extensions of credit for 1 year after being licensed is

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automatically void and must be surrendered to the department.

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     (b) A licensee may voluntarily surrender a license by

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delivering it to the department with written notice of the

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surrender.

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     (c) The revocation, suspension, or surrender of a license

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does not affect the obligation of any preexisting contract

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between the licensee and an obligor or the licensee's liability

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for acts committed prior to the revocation, suspension, or

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surrender.

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     (d) The department may reinstate a suspended license or

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reissue a license to a person whose license has been revoked if

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it determines that no fact or condition exists which justifies a

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refusal to reissue or reinstate the license.

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     (10) A credit enhancement loan may not exceed $3,000 or

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have an interest rate greater than 19.9 percent per annum and

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must meet the following criteria:

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     (a) Loan interest shall be at the single simple interest

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rate applied to the outstanding balance that would earn the same

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amount of interest as the initial rate for payment, according to

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a schedule.

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     (b) Interest may not be paid or deducted in advance or

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compounded.

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     (c) Interest on extensions of credit shall be computed:

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     1. Only as a percentage of the unpaid principal balance or

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portion of the unpaid principal balance; and

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     2. On the basis of the number of days actually elapsed.

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     (d) If any consideration for the loan is the unpaid

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principal balance of a prior credit enhancement loan, the

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principal amount payable under a new loan may include the unpaid

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interest on the prior loan which accrued within 90 days before

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the new loan was made.

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     (e) For the purpose of computing interest, a day is 1/365

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of a year.

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     (f) Payments shall be applied in order, first to any

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accrued fees, then interest, and then principal. Any part of the

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principal balance of a loan may be prepaid at any time without

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penalty.

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     (g) Minimum principal payment requirements are 4 percent of

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the loan amount or $25, whichever is greater. Customers shall be

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billed monthly, at a minimum.

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     (h) In addition to the interest authorized by this section,

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a credit enhancement loan may have:

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     1. A maximum annual processing fee of $180, amortized in 12

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equal installments;

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     2. A maximum one-time underwriting fee of $10;

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     3. A maximum monthly maintenance fee of $15;

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     4. A maximum late payment fee of $25;

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     5. A maximum returned-check fee of $30; and

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     6. A minimum term of 3 months.

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     (i) A licensee shall report, on a periodic basis and based

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on accepted industry standards, credit-related data as incurred

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and without discrimination to major credit bureaus in order to

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assist customers who pay in a timely manner rebuild their credit

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histories.

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     (j) A licensee shall endeavor to graduate customers to more

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favorable interest rates or terms, based on positive payment

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histories, in a manner submitted by the licensee and approved by

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the department.

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     (k) When a customer applies for a loan, the licensee shall

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provide information about consumer credit enhancement products to

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inform the consumer of the importance of improving his or her

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credit score. The information shall include:

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     1. Information about how making timely payments will help

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raise the consumer's overall credit score and could lead to

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better rates or terms.

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     2. Information about how making payments late will lower

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the consumer's credit score.

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     3. Locations where the consumer can get free financial

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literacy information.

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     (l) A licensee shall offer and encourage its customers to

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participate in programs designed to enhance their financial

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literacy.

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     (m) If a monetary judgment is obtained against any person

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on a credit enhancement loan, neither the judgment nor the loan

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balance may carry, from the date of the judgment, interest in

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excess of 8 percent per annum.

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     (n) A licensee shall determine the credit worthiness of

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each customer applying for a loan according to industry-accepted

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or proprietary credit models.

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     (o) A licensee may not make credit enhancement loans in one

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office to a customer who has an outstanding credit enhancement

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loan from another office operated by the licensee or by another

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licensee that is an affiliate, parent, or subsidiary of the

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licensee, or that is under the same ownership, management, or

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control as the licensee.

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     (p) A licensee may service loans and modify the terms of

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the loans at any office operated by that licensee regardless of

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where the loan was originated.

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     (11)(a) A licensee may not accept an assignment of earnings

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of a customer for payment or as security for payment of a credit

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enhancement loan. Any assignment of earnings is void and

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unenforceable by the assignee and is revocable by the customer.

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However, a customer may agree to repay the loan through automatic

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payroll deduction, direct withdrawal from a checking account, or

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other automatic repayment plan.

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     (b) An agreement between a licensee and a customer pursuant

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to a credit enhancement loan pertaining to default by the

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customer is enforceable only to the extent that the customer

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fails to make a payment as required by the agreement.

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     (c) A licensee may not deny a credit enhancement loan or

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discriminate in the amount, duration, application procedure, or

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other terms or conditions of the loan or services based on the

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race, color, religion, national origin, gender, or marital status

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of the applicant or any other person connected with the

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transaction.

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     (d) A credit enhancement loan or service made pursuant to

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this section may not provide for payment of attorney's fees by

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the customer.

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     (e) A credit enhancement loan may not be secured by real

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property.

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     (f) A licensee may not engage in any unfair method of

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competition or unfair or deceptive trade practice in providing

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credit enhancement loans or services or in collecting money

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allegedly owed by a customer.

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     (12) At the time a credit enhancement loan is offered to a

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customer, the licensee shall deliver to the customer a written

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statement, showing in clear and distinct terms:

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     (a) The name and address of the licensee and one of the

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primary obligors on the loan;

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     (b) The date of the contract;

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     (c) A schedule of required payments;

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     (d) All applicable interest rates; and

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     (e) Any available financial literacy materials.

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     (13) At each business location a licensee shall have

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available to the customer, on a departmental form, a complete and

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accurate schedule of charges on all credit enhancement loans it

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offers. A copy of the schedule shall be filed with the

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department.

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     (14) A licensee may not require a customer to agree to or

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execute any confession of judgment or power of attorney in favor

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of the licensee or any other person. Any document executed in

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violation of this subsection is void.

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     (15)(a) A licensee may not advertise, display, distribute,

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telecast, or broadcast false, misleading, or deceptive statements

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or representations regarding rates, terms, or conditions of

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credit enhancement loans. Charges or rates, if stated by a

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licensee, shall be stated completely and clearly in a manner that

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the department deems necessary to prevent any misunderstanding by

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a prospective customer.

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     (b) The department may permit or require licensees to refer

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in their advertising to the fact that the credit enhancement loan

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business is under state supervision and subject to conditions

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required by the department in order to prevent an erroneous

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impression as to the scope or degree of protection provided by

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the department or pursuant to this section.

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     (16)(a) A licensee shall maintain for 2 years all financial

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books and records directly relating to credit enhancement loans

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made as reasonably required by the department. The department may

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examine the records at any reasonable time in order to determine

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whether the licensee is complying with this section and the rules

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adopted to administer this section.

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     (b) The required financial books and records may be

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maintained in any form authorized by the department, but the

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books and records of each office shall be clearly segregated. If

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a licensee maintains its financial books and records outside this

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state, the licensee shall make them available for examination at

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the place where they are maintained and shall pay for all

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reasonable and necessary expenses incurred by the department in

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conducting an examination.

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     (c) If the data processing for a licensee is performed by a

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person other than the licensee, the licensee shall execute and

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provide to the department a copy of an agreement between the

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licensee and the data processor which allows the department to

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examine that data processor's activities and records pertaining

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to the licensee to the same extent as if the data processing

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services were performed by the licensee on its premises.

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     (d) A licensee shall reimburse the department for all costs

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and expenses incurred by the department in conducting an

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examination.

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     (e) A licensee shall file an annual report with the

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department on or before March 31 for the 12-month period ending

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the preceding December 31 on departmental forms. The report shall

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disclose in detail and under appropriate headings any changes in

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the information contained in the original license application and

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other information necessary to show that the licensee is in

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compliance with this section. Reports shall be verified by oath

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or affirmation of the owner, manager, president, vice president,

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cashier, secretary, or treasurer of the licensee.

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     (f) If a licensee conducts another business or is

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affiliated with other licensees or if any other situation exists

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under which expense allocations are necessary, the licensee shall

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make that allocation according to appropriate and generally

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accepted accounting principles.

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     (17) The department may adopt rules to administer this

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section.

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     (18) The department may issue subpoenas and compel the

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attendance of witnesses, administer oaths, conduct hearings, and

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transcribe testimony necessary to discharge its duties under this

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section.

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     (19)(a) If the department has reasonable cause, supported

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by credible evidence, to believe that a person is violating this

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section, it may, in addition to all actions authorized in this

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section and without prejudice to those actions, enter an order

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requiring the person to desist or refrain from such violation. An

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action may also be brought to enjoin the person from engaging in

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or continuing the violation. In such action, an order or judgment

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may be entered awarding a preliminary or final injunction.

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     (b) In addition to other means provided by law for the

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enforcement of a restraining order or injunction, the court in

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which the action is brought may impound property and appoint a

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receiver for the property and business of the defendant,

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including any records that the court deems reasonably necessary

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to prevent violations of this section. The receiver shall have

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those powers and duties pertaining to custody, collection,

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administration, winding up, and liquidation of the property and

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business as conferred upon him or her by the court.

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     (20) Any person aggrieved by a rule or order of the

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department may appeal to the department for review upon giving

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notice in writing within 60 days after such rule or order is

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adopted. The appeal shall be conducted pursuant to chapter 120,

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Florida Statutes.

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     (21) A credit enhancement loan made outside this state

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after July 1, 2008, in the amount of or value of $3,000 or less

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which carries greater consideration or charges than authorized by

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this section is not enforceable in this state.

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     Section 2.  This act shall take effect July 1, 2008.