CHAPTER 398

FORMERLY

HOUSE BILL NO. 480

AS AMENDED BY HOUSE AMENDMENT NO. 3

AN ACT TO AMEND TITLE 5 OF THE DELAWARE CODE RELATING TO FINANCIAL INSTITUTIONS.

BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF DELAWARE :

Section 1. Amend §961 of Title 5 of the Delaware Code by adding thereto the following new subsections to read:

"(4) 'Short-term consumer loan' means a loan of $500 or less made to an individual borrower that charges interest and/or fees for which the stated repayment period is less than 60 days and is not secured by title to a motor vehicle.

(5) 'Rollover' means, with respect to any short-term consumer loan, the extension of an outstanding and unpaid indebtedness beyond the stated repayment period solely on the basis of the payment of a fee, without approval of a new loan application.

(6) 'Workout agreement' means an agreement between an individual borrower and a bank, trust company, or savings bank for the repayment of an outstanding and unpaid indebtedness which requires a net reduction of not less than 10% of such indebtedness per payment period.

(7) 'Right of recission' means, with respect to any short-term consumer loan, the right to return any amount borrowed, in full, on or before the close of business of the business day following the day on which such sum has been disbursed or advanced, without the incursion of any fee or other charges.

(8) 'Business day' means, with respect to recission under §976 of this subchapter, all calendar days except Sundays and legal public holidays.

(9) 'Conspicuously displayed' means highlighted through the use of capitalization, bold print, underlining, or some combination thereof.".

Section 2. Amend Chapter 9 of Title 5 of the Delaware Code by redesignating §976 and §977 as §977 and §978 respectively, and by adding thereto a new section to read:

"§976. Short-term consumer loans.

(a) In addition to such other limitations and requirements as are imposed pursuant to other provisions of this subchapter, short-term consumer loans shall be subject to the following:

(1) No bank, trust company, or savings bank shall make more than four (4) rollovers of an existing short-term consumer loan. A bank, trust company, or savings bank may, following not more than the maximum allowable number of rollovers, enter into a workout agreement with the borrower or take such other actions as are lawful to collect any outstanding and unpaid indebtedness.

(2) No bank, trust company, or savings bank shall make a short-term consumer loan, unless such loan is subject to a right of recission on the part of the individual borrower.

(3) No bank, trust company, or savings bank shall pursue or threaten to pursue criminal action against an individual borrower in connection with the non-payment of any amount due, including the unpaid return of any check or automated clearinghouse transaction.

(b) In addition to such other disclosure requirements as are imposed pursuant to other provisions of this subchapter, short-term consumer loans shall be subject to the following: No bank, trust company, or savings bank shall make a short-term consumer loan unless the application for such loan, which application shall be written in both English and Spanish, contains a written disclosure, conspicuously displayed, that

(1) the loan is designed as a short-term cash flow solution and not designed as a solution for longer term financial problems;

(2) additional fees may accrue if the loan is rolled over; and

(3) credit counseling services are available to consumers experiencing financial problems.

(c) Nothing in this section prohibits a lender from refinancing the principal amount of a short-term consumer loan, subject to the limitations and requirements imposed herein.

(d) The Commissioner is authorized to promulgate rules and regulations to exempt certain loans or classes of loans from the requirements of this section.".

Section 3. Amend §2227 of Title 5 of the Delaware Code by adding thereto the following new subsections to read:

"(3) 'Short-term consumer loan' means a loan of $500 or less made to an individual borrower that charges interest and/or fees for which the stated repayment period is less than 60 days and is not secured by title to a motor vehicle.

(4) 'Rollover' means, with respect to any short-term consumer loan, the extension of an outstanding and unpaid indebtedness beyond the stated repayment period solely on the basis of the payment of a fee, without approval of a new loan application.

(5) 'Workout agreement' means an agreement between an individual borrower and a licensee for the repayment of an outstanding and unpaid indebtedness which requires a net reduction of not less than 10% of such indebtedness per payment period.

(6) 'Right of recission' means, with respect to any short-term consumer loan, the right to return any amount borrowed, in full, on or before the close of business of the business day following the day on which such sum has been disbursed or advanced, without the incursion of any fee or other charges.

(7) 'Business day' means, with respect to recission under §2235A of this subchapter, all calendar days except Sundays and legal public holidays.

(8) 'Conspicuously displayed' means highlighted through the use of capitalization, bold print, underlining, or some combination thereof.".

Section 4. Amend Chapter 22 of Title 5 of the Delaware Code by adding thereto a new section to read:

"§2235A. Short-term consumer loans.

(a) In addition to such other limitations and requirements as are imposed pursuant to other provisions of this subchapter, short-term consumer loans shall be subject to the following:

(1) No licensee shall make more than four (4) rollovers of an existing short-term consumer loan. A licensee may, following not more than the maximum allowable number of rollovers, enter into a workout agreement with the borrower or take such other actions as are lawful to collect any outstanding and unpaid indebtedness.

(2) No licensee shall make a short-term consumer loan, unless such loan is subject to a right of recission on the part of the individual borrower.

(3) No licensee shall pursue or threaten to pursue criminal action against an individual borrower in connection with the non-payment of any amount due, including the unpaid return of any check or automated clearing house transaction.

(b) In addition to such other disclosure requirements as are imposed pursuant to other provisions of this subchapter, short-term consumer loans shall be subject to the following: No licensee shall make a short-term consumer loan unless the application for such loan, which application shall be written in both English and Spanish, contains a written disclosure, conspicuously displayed, that

(1) the loan is designed as a short-term cash flow solution and not designed as a solution for longer term financial problems;

(2) additional fees may accrue if the loan is rolled over; and

(3) credit counseling services are available to consumers who are experiencing financial problems.

(c) Nothing in this section prohibits a licensee from refinancing the principal amount of a short-term consumer loan, subject to the limitations and requirements imposed herein.

(d) The Commissioner is authorized to promulgate rules and regulations to exempt certain loans or classes of loans from the requirements of this section.".

Approved July 09, 2002