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REFERENCE TITLE: consumer credit
lending; military members |
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State of
Arizona House of
Representatives Fifty-fourth
Legislature Second Regular
Session 2020 |
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HB 2512 |
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Introduced by Representatives Butler: Andrade, Blackman, Blanc, Campbell,
Espinoza, Fillmore, Friese, Lawrence, Lieberman, Salman, Terán, Toma |
AN ACT
amending title
6, Arizona Revised Statutes, by adding chapter 18; relating to CONSUMER CREDIT.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Title 6, Arizona Revised Statutes, is amended by adding chapter 18, to read:
CHAPTER 18
TERMS OF CONSUMER CREDIT EXTENDED TO MILITARY MEMBERS AND DEPENDENTS
ARTICLE 1. GENERAL PROVISIONS
6-1801. Definitions
In this chapter, unless the context otherwise
requires:
1. "Annual percentage rate"
has the same meaning as prescribed in section 107 of the Truth in Lending Act
(15 United States Code section 1606) and includes all fees and charges as
described in 32 Code of Federal Regulations section 232.4(c), including fees and charges for single premium credit insurance and
other ancillary products sold in connection with the credit transaction.
2. "Consumer credit":
(a) Means
credit that is offered or extended to a covered borrower primarily for
personal, family or household purposes and that is either subject to a finance
charge or payable by a written agreement in more than four installments.
(b) Does not
include:
(i) A residential mortgage that is any credit transaction and
that is secured by an interest in a dwelling, including a transaction to
finance the purchase or initial construction of the dwelling, any refinance
transaction, home equity loan or line of credit or reverse mortgage.
(ii) A loan procured in the course of purchasing a motor
vehicle or other personal property if that loan is offered for the express
purpose of financing the purchase and is secured by the motor vehicle or
personal property procured.
(iii) Any credit transaction that is an exempt transaction for
the purposes of the truth in lending act (15 United States Code sections 1601
through 1667f), other than a transaction exempt under 12
Code of federal regulations section 1026.29, or otherwise is not subject to
disclosure requirements of the truth in lending act (15 United States Code
sections 1601 through 1667f).
(iv) Any
credit transaction or account for credit for which a creditor determines that a
consumer is not a covered borrower by using a method and by complying with the
recordkeeping requirements pursuant to 32 Code of federal regulations
section 232.5(b).
3. "Covered borrower" means a consumer who at the time the consumer
becomes obligated on a consumer credit transaction or establishes an account
for consumer credit, is a covered member or a dependent of a covered member.
4. "Covered member" or "member" means either:
(a) A member of the armed forces
who is on either of the following:
(i) Active duty under a
call or order that is for more than thirty days.
(ii) Active
guard and reserve duty.
(b) A veteran
who was discharged from the armed forces within the prior twelve months.
5. "Creditor" means a
person who is either of the following:
(a) Engaged in
the business of extending consumer credit.
(b) An assignee
of a person described in subdivision (a) of this
paragraph with respect to any consumer credit extended.
6. "Dependent", with
respect to a covered member, means:
(a) The spouse.
(b) The widow
who is not remarried.
(c) The widower
who is not remarried.
(d) A child who
IS any of the following:
(i) Under
twenty-one years of age.
(ii) Under
twenty-three years of age, is enrolled in a full-time course of study at an
institution of higher learning approved by the superintendent and is, or was at
the time of the member's or former member's death, dependent on the member or
former member for over one-half of the child's support.
(iii) Incapable
of self-support because of a mental or physical incapacity that occurs while a
dependent of a member or former member under item (i) or (ii) of this subdivision and is, or was at the time of the member's or
former member's death, dependent on the member or former member for over
one-half of the child's support.
(e) A
parent or parent-in-law who is, or was at the time of the member's or former
member's death, in fact dependent on the member or former member for over
one-half of the parent's or parent‑in‑law's support and residing in
the member's or former member's household.
(f) The
former spouse who is not married to a member or former member and who meets
both of the following:
(i) On
the date of the final decree of the divorce, dissolution or annulment, had been
married to the member or former member for a period of at least twenty years,
during which period the member or former member performed at least twenty years
of service that is creditable in determining that member's or former member's
eligibility for retired or retainer pay or equivalent pay.
(ii) Does not have medical
coverage under an employer-sponsored health plan.
(g) A person who meets
both of the following:
(i) Is
the former spouse who is not married to a member or former member and who
performed at least twenty years of service that is creditable in determining
the member or former member's eligibility for retired or retainer pay or
equivalent pay, and on the date of the final decree of the divorce, dissolution
or annulment before April 1, 1985, had been married to the member or former
member for a period of at least twenty years, at least fifteen but less than
twenty of which were during the period that the member or former member
performed service that is creditable in determining the member or former
member's eligibility for retired or retainer pay or equipment pay.
(ii) Does not have medical
coverage under an employer-sponsored health plan.
(h) A person who would
qualify as a dependent under subdivision (g) of this paragraph but for the
fact that the date of the final decree of the divorce, dissolution or annulment
of the person is on or after April 1, 1985. The person is not a
dependent after the end of the one‑year period beginning on the date of
that final decree.
(i) An unmarried person
who meets all of the following:
(i) is placed in the legal
custody of the member or former member as a result of an order of a court of
competent jurisdiction in the United States or a possession of the United
States for a period of at least twelve consecutive months.
(ii) Is
under twenty-three years of age and is enrolled in a full‑time course of
study at an institution of higher learning approved by the superintendent, is
under twenty-one years of age or is Incapable of self‑support because of
a mental or physical incapacity that occurred while the person was considered a
dependent of the member or former member under this subdivision.
(iii) Is
dependent on the member or former member for over one-half of the person's
support.
(iv) Resides
with the member or former member unless separated by the necessity of military
service or to receive institutional care as a result of a disability or
incapacitation or under other circumstances as the superintendent prescribes by
rule.
(v) Is
not a dependent of a member or a former member under any other subdivision of
this paragraph.
7. "Interest" Includes all costs associated with the extension of credit, including fees, service charges, renewal charges, credit insurance premiums, any ancillary product sold with any extension of credit to a covered member or the covered member's dependent, as applicable, and any other charge or premium with respect to the extension of consumer credit.
6-1802. Interest
A creditor who extends consumer credit to a covered member or a dependent of the covered member may not require the member or dependent to pay interest with respect to the extension of the credit, except as agreed to under the terms of the credit agreement or promissory note, as authorized by applicable State or Federal law and as not specifically prohibited by this chapter.
6-1803. Annual percentage rate
A creditor may not impose an annual percentage rate of interest greater than thirty-six percent with respect to the consumer credit extended to a covered member or a dependent of a covered member.
6-1804. Mandatory loan disclosures
A. For any extension of consumer
credit, including any consumer credit originated or extended through the
internet, to a covered member or a dependent of a covered member, a creditor
shall provide to the member or dependent the following information verbally and
in writing before the issuance of the credit:
1. A statement of the annual
percentage rate of interest applicable to the extension of credit.
2. Any disclosures required under the
Truth in Lending Act (15 United States Code sections 1601 through 1667f).
3. A clear description of the payment
obligations of the member or dependent, as applicable.
B. A creditor shall provide to the
covered borrower the disclosures prescribed by subsection A of this section
before or at the time the covered borrower becomes obligated on the transaction
or establishes an account for the consumer credit. The information described in subsection A of
this section is not required to be provided to a covered borrower more than
once for the transaction or the account established for consumer credit with
respect to that covered borrower. If a
transaction involves more than one creditor, only one of those creditors must
provide the disclosures. The creditors
may agree among themselves which creditor will provide the information.
C. A creditor may satisfy the
requirement of subsection A, paragraph 1 of this section by describing the
charges the creditor may impose pursuant to this chapter and subject to the
terms and conditions of the agreement, relating to the consumer credit to
calculate the annual percentage rate. A creditor is not required to
describe the annual percentage rate as a numerical value or the total dollar
amount of all charges in the annual percentage rate that apply to the extension
of consumer credit.
D. A creditor may include a statement
of the annual percentage rate applicable to the consumer credit in the
agreement with the covered borrower involving the consumer credit
transaction. A creditor is not required
to include a statement of the annual percentage rate applicable to an extension
of consumer credit in any advertisement relating to the consumer credit.
E. A statement substantially similar to the
following statement may be used for the purpose of subsection A, paragraph 1 of
this section:
Federal and state law provide important
protections to members of the Armed Forces and their dependents relating to
extensions of consumer credit. In
general, the cost of consumer credit to a member of the Armed Forces and his or
her dependent may not exceed an annual percentage rate of thirty‑six
percent. This rate must include, as applicable to the credit
transaction or account, The costs associated with credit insurance premiums,
fees for ancillary products sold in connection with the credit transaction, any
application fee charged (other than certain application fees for specified
credit transactions or accounts) and any participation fee charged (other than
certain participation fees for a credit card account).
F. The creditor shall provide the
information required by subsection A of this section:
1. in writing in a form that the
covered borrower can keep.
2. Verbally. A creditor may satisfy this requirement by
providing the information to the covered borrower in person or by using a
toll-free telephone number to deliver the verbal disclosures to a covered borrower
when the covered borrower contacts the creditor for this purpose. If
applicable, the toll-free telephone number must be included on either:
(a) A form that the creditor directs the covered borrower to
use to apply for the transaction or account involving consumer credit.
(b) A
written disclosure that the creditor provides to the covered borrower pursuant
to paragraph 1 of this subsection.
G. The refinancing or renewal of consumer credit requires new disclosures under this section only when the transaction for that credit would be considered a new transaction that requires disclosures under the truth in lending act (15 United States Code sections 1601 through 1667f).
6-1805. Preemption
A. Except as provided in section 6‑1807,
subsection B, this chapter preempts any state law, including any State usury
law, to the extent that the law is inconsistent with this chapter, except that
this chapter does not preempt any law that provides additional protection to a
covered member or the covered member's dependent.
B. Creditors may not charge covered
members and their dependents annual percentage rates of interest for any
consumer credit or loans higher than the legal limit for residents of this
state.
C. This chapter does not allow the violation or waiver of any state consumer lending protections covering consumer credit for the benefit of residents of this state on the basis of the nonresident or military status of a covered member or dependent of that covered member, regardless of the covered member's or dependent's domicile or permanent home of record.
6-1806. Limitations
A creditor that extends consumer credit to a covered
member or a dependent of that member may not do any of the following:
1. Roll over, renew, repay, refinance
or consolidate any consumer credit extended to the covered borrower by the same
creditor with the proceeds of other credit extended to the same covered member or a dependent.
2. Require the covered borrower to
waive the covered borrower's right to legal recourse under any otherwise
applicable provision of state or federal law.
3. Require the covered borrower to
submit to arbitration or impose onerous legal notice provisions in the case of
a dispute.
4. Demand unreasonable notice from
the covered borrower as a condition for legal action.
5. Use a check or other method of
access to a deposit, savings or other financial account maintained by the
covered borrower or the title of a motor vehicle as security for the
obligation.
6. Require as a condition for the
extension of credit that the covered borrower establish an allotment to repay an
obligation.
7. Prohibit the covered borrower from prepaying the loan or charge a covered borrower a penalty or fee for prepaying all or part of the loan.
6-1807. Violation; classification; remedies; damages; attorney fees; limitation
A. A creditor who knowingly violates
this chapter is guilty of a class 1 misdemeanor.
B. The remedies and rights provided
under this chapter are in addition to and do not preclude any remedy otherwise
available under law to the person claiming relief under this chapter, including
any award for consequential and punitive damages.
C. Any credit agreement, promissory note
or other contract prohibited under this chapter is void from the inception of
the contract.
D. Notwithstanding any other law, an
agreement to arbitrate any dispute involving the extension of consumer credit
is not enforceable against any covered member or dependent of that member, or
any person who was a covered member or dependent of that member when the
agreement was made.
E. A person who violates this chapter
with respect to any person is civilly liable to that person for all of the
following:
1. Any actual damage sustained as a
result, but not less than $500 for each violation.
2. Appropriate punitive damages.
3. Appropriate equitable or
declaratory relief.
4. Any other relief provided by law.
F. In any
successful action to enforce the civil liability described in subsection E of
this section, the person who violates this chapter is also liable for the costs
of the action, together with reasonable attorney fees as determined by the
court.
G. In any successful action by a
defendant under this section, if the court finds the action was brought in bad
faith and for the purpose of harassment, the plaintiff is liable for the
attorney fees of the defendant as determined by the court to be reasonable in
relation to the work expended and costs incurred.
H. A person is not civilly liable
under this section if the person shows by a preponderance of the evidence that
the violation was not intentional and resulted from a bona fide error
notwithstanding the maintenance of procedures reasonably adapted to avoid the
error. Bona fide errors include
clerical, calculation, computer malfunction, programming and printing errors,
except that an error of legal judgment with respect to a person's obligations
under this chapter is not a bona fide error.
I. An action for civil liability
under this section may be brought not later than the earlier of:
1. Two years after the date of
discovery by the plaintiff of the violation that is the basis for the
liability.
2. Five years after the date on which the violation that is the basis for the liability occurs.
6-1808. Rulemaking
The superintendent shall adopt rules necessary
to enforce this chapter.