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LEGISLATURE OF NEBRASKA
ONE HUNDRED SIXTH LEGISLATURE
FIRST SESSION
LEGISLATIVE BILL 265
Introduced by La Grone, 49.
Read first time January 15, 2019
Committee: Banking, Commerce and Insurance
1 A BILL FOR AN ACT relating to finance; to amend sections 45-901 and
2 45-1001, Revised Statutes Cumulative Supplement, 2018; to adopt the
3 Unsecured Consumer Loan Licensing Act; to provide penalties; to
4 create a fund; to clarify licensing provisions under the Delayed
5 Deposit Services Licensing Act and the Nebraska Installment Loan
6 Act; to harmonize provisions; and to repeal the original sections.
7 Be it enacted by the people of the State of Nebraska,
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1 Section 1. Sections 1 to 33 shall be known and may be cited as the
2 Unsecured Consumer Loan Licensing Act.
3 Sec. 2. For purposes of the Unsecured Consumer Loan Licensing Act:
4 (1) Annual percentage rate means an annual percentage rate as
5 determined under section 107 of the federal Truth in Lending Act, 15
6 U.S.C. 1606, as such section existed on January 1, 2019, and includes all
7 fees, interest, and charges contained in an unsecured consumer loan
8 contract, except for charges permitted for the presentation of
9 instruments that are not negotiable under subsection (1)(e) of section 19
10 of this act;
11 (2) Check means any check, draft, or other instrument for the
12 payment of money, including an authorization to debit an account
13 electronically;
14 (3) Default means a borrower's failure to repay an unsecured
15 consumer loan transaction in compliance with the terms contained in an
16 unsecured consumer loan agreement;
17 (4) Department means the Department of Banking and Finance;
18 (5) Director means the Director of Banking and Finance or his or her
19 designee;
20 (6) Financial institution has the same meaning as in section
21 8-101.03;
22 (7) Licensee means any person licensed under the Unsecured Consumer
23 Loan Licensing Act;
24 (8) Nationwide Mortgage Licensing System and Registry means a
25 licensing system developed and maintained by the Conference of State Bank
26 Supervisors and the American Association of Residential Mortgage
27 Regulators for the licensing and registration of mortgage loan
28 originators, mortgage bankers, installment loan companies, and other
29 state-regulated financial services entities and industries;
30 (9) Person means an individual, proprietorship, association, joint
31 venture, joint stock company, partnership, limited partnership, limited
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1 liability company, business corporation, nonprofit corporation, or any
2 group of individuals however organized; and
3 (10) Unsecured consumer loan business means any person who offers a
4 loan: (a) With a principal loan amount no greater than one thousand
5 dollars with loan payments that shall not exceed nine percent gross
6 monthly income; (b) in which the lender holds the borrower's check or
7 checks for a specific period, or receives the borrower's written
8 authorization to debit the borrower's account, other than as a result of
9 default under an agreement, either express or implied, for a specific
10 period, before the lender (i) offers the check or checks for deposit or
11 presentment or (ii) exercises the authorization or authorizations to
12 debit the borrower's account; (c) that does not take a security interest
13 in any property of the borrower; and (d) which is payable according to
14 the agreement between the licensee and consumer.
15 Sec. 3. The Unsecured Consumer Loan Licensing Act shall not apply
16 to a financial institution organized under the laws of this state or the
17 laws of the United States.
18 Sec. 4. (1) No person shall operate an unsecured consumer loan
19 business in this state unless the person is licensed by the director as
20 provided in the Unsecured Consumer Loan Licensing Act. Any unsecured
21 consumer loan transaction that is made by a person who is required to be
22 licensed pursuant to the act but who is not licensed is void, and the
23 person making such unsecured consumer loan business transaction has no
24 right to collect, receive, or retain any principal, interest, fees, or
25 any other charges in connection with such unsecured consumer loan
26 transaction.
27 (2) Nothing in this section shall prevent a person licensed under
28 the Unsecured Consumer Loan Licensing Act from acquiring a license under
29 the Delayed Deposit Services Licensing Act or the Nebraska Installment
30 Loan Act.
31 Sec. 5. (1) An applicant for a license shall submit an application,
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1 under oath, to the director on forms prescribed by the director. The
2 forms shall contain such information as the director may prescribe,
3 including, but not limited to:
4 (a) The applicant's financial condition;
5 (b) The qualifications and business history of the applicant and any
6 of the applicant's officers, directors, shareholders, partners, or
7 members;
8 (c) Whether the applicant or any of the applicant's officers,
9 directors, shareholders, partners, or members have ever been convicted of
10 any (i) misdemeanor involving any aspect of an unsecured consumer loan
11 business, or any business of a similar nature or (ii) felony;
12 (d) Whether the applicant or any of the applicant's officers,
13 directors, shareholders, partners, or members have ever been permanently
14 or temporarily enjoined by a court of competent jurisdiction from
15 engaging in or continuing any conduct or practice involving any aspect of
16 an unsecured consumer loan business, or any business of a similar nature;
17 (e) A description of the applicant's proposed method of doing
18 business; and
19 (f) If the applicant is an individual, the applicant's social
20 security number.
21 (2) The director shall cause a criminal history record information
22 check to be conducted of the applicant and any of the applicant's
23 officers, directors, shareholders, partners, or members. The direct cost
24 of the criminal history record information check shall be paid by the
25 applicant.
26 Sec. 6. (1) Licensees under the Unsecured Consumer Loan Licensing
27 Act are required to be licensed and registered through the Nationwide
28 Mortgage Licensing System and Registry. In order to carry out this
29 requirement, the department is authorized to participate in the
30 Nationwide Mortgage Licensing System and Registry. For this purpose, the
31 department may establish requirements as necessary by adopting and
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1 promulgating rules and regulations or by order. The requirements may
2 include, but are not limited to:
3 (a) Background checks of applicants and licensees, including, but
4 not limited to:
5 (i) Checks of an applicant's or a licensee's criminal history
6 through fingerprint or other data bases, except that the department shall
7 not require the submission of fingerprints by (A) an executive officer or
8 director of an applicant or licensee which is either a publicly traded
9 company or a wholly owned subsidiary of a publicly traded company or (B)
10 an applicant or licensee who has previously submitted the fingerprints of
11 an executive officer or director directly to the Nationwide Mortgage
12 Licensing System and Registry and the Federal Bureau of Investigation;
13 (ii) Checks of civil or administrative records;
14 (iii) Checks of an applicant's or a licensee's credit history; or
15 (iv) Any other information as deemed necessary by the Nationwide
16 Mortgage Licensing System and Registry;
17 (b) The payment of fees to apply for or renew a license through the
18 Nationwide Mortgage Licensing System and Registry;
19 (c) The setting or resetting, as necessary, of renewal processing or
20 reporting dates;
21 (d) Information and reports pertaining to authorized delegates; and
22 (e) Amending or surrendering a license or any other such activities
23 as the director deems necessary for participation in the Nationwide
24 Mortgage Licensing System and Registry.
25 (2) In order to fulfill the purposes of the act, the department is
26 authorized to contract with the Nationwide Mortgage Licensing System and
27 Registry or any other entity designated by the Nationwide Mortgage
28 Licensing System and Registry to collect and maintain records and process
29 transaction fees or other fees related to licensees or other persons
30 subject to the Unsecured Consumer Loan Licensing Act. The department may
31 allow such system to collect licensing fees on behalf of the department
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1 and allow such system to collect a processing fee for the services of the
2 system directly from each licensee or applicant for a license.
3 (3) The director is required to regularly report enforcement actions
4 and other relevant information to the Nationwide Mortgage Licensing
5 System and Registry.
6 (4) The director shall establish a process whereby applicants and
7 licensees may challenge information entered by the director into the
8 Nationwide Mortgage Licensing System and Registry.
9 (5) The department shall ensure that the Nationwide Mortgage
10 Licensing System and Registry adopts a privacy, data security, and breach
11 of security of the system notification policy. The director shall make
12 available upon written request a copy of the contract between the
13 department and the Nationwide Mortgage Licensing System and Registry
14 pertaining to the provisions of the breach of security system.
15 (6) The department shall upon written request provide the most
16 recently available audited financial report of the Nationwide Mortgage
17 Licensing System and Registry.
18 Sec. 7. The application required by section 5 of this act shall be
19 accompanied by:
20 (1) A nonrefundable application fee of five hundred dollars; and
21 (2) A surety bond in the amount of fifty thousand dollars to be
22 executed by the licensee and a surety company authorized to do business
23 in Nebraska and approved by the director conditioned for the faithful
24 performance by the licensee of the duties and obligations pertaining to
25 the unsecured consumer loan business so licensed and the prompt payment
26 of any judgment recovered against the licensee. The bond or a substitute
27 bond shall remain in effect during all periods of licensing or the
28 licensee shall immediately cease doing business and its license shall be
29 surrendered to or canceled by the department. A surety may cancel a bond
30 only upon thirty days' written notice to the director.
31 (3) The director may at any time require the filing of a new or
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1 supplemental bond in the form as provided in subdivision (2) of this
2 section if he or she determines that the bond filed under this section is
3 exhausted or is inadequate for any reason, including, but not limited to,
4 the financial condition of the licensee or the applicant for a license,
5 or violations of the Unsecured Consumer Loan Licensing Act or any rule,
6 regulation, or order thereunder, or any state or federal law applicable
7 to the licensee or applicant for a license. The new or supplemental bond
8 shall not exceed one hundred thousand dollars.
9 Sec. 8. (1) When an application for an unsecured consumer loan
10 license has been accepted by the director as substantially complete,
11 notice of the filing of the application shall be published by the
12 director for three successive weeks in a legal newspaper published in or
13 of general circulation in the county where the applicant proposes to
14 operate the unsecured consumer loan business. A public hearing shall be
15 held on each application except as provided in subsection (2) of this
16 section. The date for hearing shall not be less than thirty days after
17 the last publication. Written protest against the issuance of the license
18 may be filed with the department by any person not less than five days
19 before the date set for hearing. The director, in his or her discretion,
20 may grant a continuance. The costs of the hearing shall be paid by the
21 applicant. The director may investigate the propriety of the issuance of
22 a license to the applicant. The costs of such investigation shall be paid
23 by the applicant.
24 (2) The director may waive the hearing requirements of subsection
25 (1) of this section if (a) the applicant has held and operated under a
26 license to engage in the unsecured consumer loan business in Nebraska
27 pursuant to the Unsecured Consumer Loan Licensing Act for at least three
28 calendar years immediately prior to the filing of the application, (b) no
29 written protest against the issuance of the license has been filed with
30 the department within fifteen days after publication of a notice of the
31 filing of the application one time in a newspaper of general circulation
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1 in the county where the applicant proposes to operate the unsecured
2 consumer loan business, and (c) in the judgment of the director, the
3 experience, character, and general fitness of the applicant warrant the
4 belief that the applicant will comply with the act.
5 (3) The expense of any publication made pursuant to this section
6 shall be paid by the applicant.
7 Sec. 9. The director shall issue a license to an applicant, if,
8 after public hearing and any investigation of the applicant, the director
9 determines that:
10 (1) The experience, character, and general fitness of the applicant
11 and any of the applicant's officers, directors, shareholders, partners,
12 or members are such as to warrant the belief that the applicant will
13 conduct the unsecured consumer loan business honestly, fairly, and
14 efficiently;
15 (2) The applicant and any of the applicant's officers, directors,
16 shareholders, partners, or members have not been convicted of a felony in
17 this state or any other jurisdiction which would indicate moral turpitude
18 on the part of the applicant;
19 (3) The applicant is financially responsible and will conduct the
20 unsecured consumer loan business pursuant to the Unsecured Consumer Loan
21 Licensing Act; and
22 (4) The applicant has assets of at least twenty-five thousand
23 dollars available for operating the unsecured consumer loan business.
24 Sec. 10. The director shall approve or deny an application for a
25 license by written order not more than ninety days after the filing of a
26 substantially complete application. Failure of the director to act on a
27 substantially complete application within ninety days shall constitute
28 approval of the application. An order of the director issued pursuant to
29 this sec