SB 457 Text

Senate Bill No. 457
(By Senators Hunter, Foster, McCabe and Deem)
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[Introduced February 1, 2006; referred to the Committee
on Banking and Insurance; and then to the Committee on the Judiciary.]
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A BILL to amend the Code of West Virginia, 1931, as amended, by adding thereto a new article, designated § 47-7-1, § 47-7-2 and § 47-7-3, all relating to the Payday Lending Act.

Be it enacted by the Legislature of West Virginia:
That the Code of West Virginia, 1931, as amended, be amended by adding thereto a new section, designated § 47-7-1, § 47-7-2 and § 47-7-3, all to read as follows:

ARTICLE 1. PAYDAY LENDING ACT.

§47-7-1. Short title.

This article is known as the "Payday Lending Act."
§47-7-2.

Findings and purpose.

(a) Finding - The legislature finds that:
(1) Payday lenders typically charge effective interest rates of over four hundred percent per annum.
(2) Payday lenders typically make most of their profits by trapping borrowers in a cycle of revolving debt.
(3) Payday lenders have created schemes to disguise these transactions or cause these transactions to appear to be made by a financial institution chartered in another state.
(4) The problem of predatory payday lending has increased rapidly over the last several years.
(b) Purpose - This law is enacted to protect consumers from predatory terms and tactics employed in the lending and collection of payday loans.
§47-7-3.

Payday lending reform.

(a) Payday lending prohibited. -
(1) It is unlawful for any person to engage in any business that consists, in whole or in part, of making, offering, arranging or acting as an agent in the making of loans of three thousand dollars or less unless:
(A) The lender is a bank regulated by, a credit union regulated by, a residential mortgage lender regulated by; or
(B) The loan is a credit card charge regulated by, a retail installment loan regulated by, a loan for the purchase of a motor vehicle regulated by, a tax refund anticipation loan regulated by, or a pawnbroker's loan regulated by.
(2) It is a violation of this section if a person purports to be the agent of an entity that is permitted to make such loans, but it is the purported agent, instead of the entity, that holds, acquires or maintains the predominant economic interest in the revenues generated by the loan.
(3) If the loan is a tax refund anticipation loan, it must be issued using a borrower's filed tax return and the loan cannot be for more than the amount of the borrower's anticipated tax refund. Tax returns that are prepared but not filed with the proper government agency will not qualify for a loan exemption under this paragraph.
(4) No loan transaction may include the deferred presentment of a check or other negotiable instrument; the selling or providing of an item, service or commodity incidental to the advance of funds; or any other element introduced to disguise the true nature of the transaction as an extension of credit.
(5) This section does not apply to persons who do not hold themselves out to the public as being in the business of making loans.
(b) Enforcement. -
(1) Any person who violates this section is guilty of a misdemeanor and, upon conviction thereof, shall be fined not more than ten thousand dollars or confined in jail not more than one year, or both fined and confined. Each loan transaction is considered a separate violation of this section.
(2) If a person has been convicted of violating this section on two prior occasions, then all subsequent convictions shall be considered felonies punishable by imprisonment in a state correctional facility for up to five years or a fine not to exceed one hundred thousand dollars, or both fined and imprisoned.
(3) A civil action may be brought on behalf of an individual borrower or on behalf of an ascertainable class of borrowers. In a successful action to enforce the provisions of this article, a court shall award a borrower, or class of borrowers, costs including reasonable attorney's fees.

NOTE: The purpose of this bill is to establish the payday lending act to protect consumers from predatory terms and tactics employed in the lending and collection of payday loans.

This article is new; therefore, strike-throughs and underscoring have been omitted.

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