An act relating to credit enhancement loans; providing for
the licensure of lenders by the Department of Financial
Services; providing penalties for violations; providing
for licensure fees, payable to the department; providing
licensure requirements; providing the form and contents of
a licensure application; requiring that the licensee
maintain a minimum net worth; providing for the revocation
or suspension of a license; providing loan and interest
rate limits; authorizing a licensee to charge certain fees
in addition to interest charges; prohibiting multiple
loans in certain situations; providing for enforcement of
loan agreements; providing for disclosure forms for the
customer; providing for reports to credit bureaus;
requiring the maintenance of financial records by
licensees; prohibiting a licensee from accepting an
assignment of earnings from a customer or requiring a
customer to execute a confession of judgment; requiring
that a licensee maintain records for a specified period
and allow the department to examine its records; requiring
that certain reports be filed with the department;
authorizing the department to adopt rules; authorizing the
department to issue subpoenas and compel testimony;
providing for desist orders and injunctions; providing for
appeals from actions of the department; providing that
certain credit enhancement loans are not enforceable;
providing an effective date.
Be It Enacted by the Legislature of the State of Florida:
Section 1. Credit enhancement loans; license required.--
(1)(a) A person may not engage in the business of offering
credit enhancement loans in amounts of $3,000 or less or contract
for or receive in connection with any credit enhancement loan any
fees that, in the aggregate, are greater than authorized by this
section. A person may not engage in the business of offering
credit enhancement loans without being licensed. The Department
of Financial Services shall regulate the credit enhancement loan
business and is responsible for the licensure and regulation of
persons who offer credit enhancement loans.
(b) A person who violates this section commits a
misdemeanor of the second degree for a first offense, punishable
commits a misdemeanor of the first degree for a second or
subsequent offense, punishable as provided in s. 775.082 or s.
775.083, Florida Statutes. Each violation of this section is a
(c) Any contract for the extension of credit, the making or
collecting of which violates this section, except as a result of
an accidental error or error of computation, is void. The
licensee or any other party in violation has no right to receive
or retain any principal or charges pursuant to the transaction.
(2) The Department of Financial Services shall issue a
license to engage in the credit enhancement loan business to any
(a) Has, on a consolidated basis and computed in accordance
with generally accepted accounting principles, a minimum net
worth of not less than $1 million;
(b) Submits a complete application; and
(c) Submits a nonrefundable application fee of $2,500.
(3) The application for licensure shall be made on a
departmental form, sworn to, and shall state:
(a) That the applicant desires to engage in the credit
enhancement loan business;
(b) Whether the applicant is an individual, partnership,
association, corporation, or other legal entity;
(c) The name and address of the person who will manage and
be in immediate control of the business;
(d) Except for publicly held corporations and their
operating subsidiaries, the names and addresses of the owners of
the business and their percentage of equity in the business; and
(e) The date upon which the applicant proposes to commence
(4)(a) The department shall act on a completed license
application within 90 days after the application is submitted.
The department shall notify the applicant when the application is
complete and may extend the 90-day period with the written
consent of the applicant. If the department does not approve,
deny, or grant an extension within 90 days, the application is
deemed approved and the department shall issue the license
(b) If the applicant does not satisfy the conditions for
licensure, the department shall notify the applicant in writing
of the denial, specifying the findings of fact and reasons for
the denial. The applicant may request an informal hearing on the
decision, in writing, within 30 days after receipt of the
notification. The department shall reconsider the application
and, after the hearing, shall issue a written order granting or
denying the application.
(5) A licensee shall maintain, on a consolidated basis, a
minimum net worth of $1 million at all times. The failure to
maintain this minimum net worth is grounds for revocation of a
(6) A licensee may operate only at locations that are
approved by the department. A change of location may not be made
without prior written notice to and approval by the department.
The department may issue more than one license to the same
licensee for multiple business locations.
(7) If a change occurs in the name or address of the
licensee, the legal agent of a licensed corporation, or the
ownership of more than 5 percent of a licensee that is not a
natural person, the licensee shall file a sworn statement of the
change with the department within 30 days after such change.
(8)(a) The department may revoke or suspend a license if it
finds, after due notice and a hearing, that the licensee or an
officer, director, agent, or employee of the licensee:
1. Materially failed to comply with any rule or order of
2. Materially failed or refused to make any required
3. Failed to pay any required fee; or
4. Knowingly furnished false or misleading information to
(b) Within 5 days after the entry of an order revoking or
suspending a license, the department shall file the findings of
fact and mail a copy to the licensee. Upon receipt of the order,
the licensee shall immediately surrender the license certificate
(9)(a) The license of a licensee who does not make any
extensions of credit for 1 year after being licensed is
automatically void and must be surrendered to the department.
(b) A licensee may voluntarily surrender a license by
delivering it to the department with written notice of the
(c) The revocation, suspension, or surrender of a license
does not affect the obligation of any preexisting contract
between the licensee and an obligor or the licensee's liability
for acts committed prior to the revocation, suspension, or
(d) The department may reinstate a suspended license or
reissue a license to a person whose license has been revoked if
it determines that no fact or condition exists which justifies a
refusal to reissue or reinstate the license.
(10) A credit enhancement loan may not exceed $3,000 or
have an interest rate greater than 19.9 percent per annum and
must meet the following criteria:
(a) Loan interest shall be at the single simple interest
rate applied to the outstanding balance that would earn the same
amount of interest as the initial rate for payment, according to
(b) Interest may not be paid or deducted in advance or
(c) Interest on extensions of credit shall be computed:
1. Only as a percentage of the unpaid principal balance or
portion of the unpaid principal balance; and
2. On the basis of the number of days actually elapsed.
(d) If any consideration for the loan is the unpaid
principal balance of a prior credit enhancement loan, the
principal amount payable under a new loan may include the unpaid
interest on the prior loan which accrued within 90 days before
the new loan was made.
(e) For the purpose of computing interest, a day is 1/365
(f) Payments shall be applied in order, first to any
accrued fees, then interest, and then principal. Any part of the
principal balance of a loan may be prepaid at any time without
(g) Minimum principal payment requirements are 4 percent of
the loan amount or $25, whichever is greater. Customers shall be
billed monthly, at a minimum.
(h) In addition to the interest authorized by this section,
a credit enhancement loan may have:
1. A maximum annual processing fee of $180, amortized in 12
2. A maximum one-time underwriting fee of $10;
3. A maximum monthly maintenance fee of $15;
4. A maximum late payment fee of $25;
5. A maximum returned-check fee of $30; and
6. A minimum term of 3 months.
(i) A licensee shall report, on a periodic basis and based
on accepted industry standards, credit-related data as incurred
and without discrimination to major credit bureaus in order to
assist customers who pay in a timely manner rebuild their credit
(j) A licensee shall endeavor to graduate customers to more
favorable interest rates or terms, based on positive payment
histories, in a manner submitted by the licensee and approved by
(k) When a customer applies for a loan, the licensee shall
provide information about consumer credit enhancement products to
inform the consumer of the importance of improving his or her
credit score. The information shall include:
1. Information about how making timely payments will help
raise the consumer's overall credit score and could lead to
better rates or terms.
2. Information about how making payments late will lower
the consumer's credit score.
3. Locations where the consumer can get free financial
(l) A licensee shall offer and encourage its customers to
participate in programs designed to enhance their financial
(m) If a monetary judgment is obtained against any person
on a credit enhancement loan, neither the judgment nor the loan
balance may carry, from the date of the judgment, interest in
excess of 8 percent per annum.
(n) A licensee shall determine the credit worthiness of
each customer applying for a loan according to industry-accepted
or proprietary credit models.
(o) A licensee may not make credit enhancement loans in one
office to a customer who has an outstanding credit enhancement
loan from another office operated by the licensee or by another
licensee that is an affiliate, parent, or subsidiary of the
licensee, or that is under the same ownership, management, or
control as the licensee.
(p) A licensee may service loans and modify the terms of
the loans at any office operated by that licensee regardless of
where the loan was originated.
(11)(a) A licensee may not accept an assignment of earnings
of a customer for payment or as security for payment of a credit
enhancement loan. Any assignment of earnings is void and
unenforceable by the assignee and is revocable by the customer.
However, a customer may agree to repay the loan through automatic
payroll deduction, direct withdrawal from a checking account, or
other automatic repayment plan.
(b) An agreement between a licensee and a customer pursuant
to a credit enhancement loan pertaining to default by the
customer is enforceable only to the extent that the customer
fails to make a payment as required by the agreement.
(c) A licensee may not deny a credit enhancement loan or
discriminate in the amount, duration, application procedure, or
other terms or conditions of the loan or services based on the
race, color, religion, national origin, gender, or marital status
of the applicant or any other person connected with the
(d) A credit enhancement loan or service made pursuant to
this section may not provide for payment of attorney's fees by
(e) A credit enhancement loan may not be secured by real
(f) A licensee may not engage in any unfair method of
competition or unfair or deceptive trade practice in providing
credit enhancement loans or services or in collecting money
allegedly owed by a customer.
(12) At the time a credit enhancement loan is offered to a
customer, the licensee shall deliver to the customer a written
statement, showing in clear and distinct terms:
(a) The name and address of the licensee and one of the
primary obligors on the loan;
(b) The date of the contract;
(c) A schedule of required payments;
(d) All applicable interest rates; and
(e) Any available financial literacy materials.
(13) At each business location a licensee shall have
available to the customer, on a departmental form, a complete and
accurate schedule of charges on all credit enhancement loans it
offers. A copy of the schedule shall be filed with the
(14) A licensee may not require a customer to agree to or
execute any confession of judgment or power of attorney in favor
of the licensee or any other person. Any document executed in
violation of this subsection is void.
(15)(a) A licensee may not advertise, display, distribute,
telecast, or broadcast false, misleading, or deceptive statements
or representations regarding rates, terms, or conditions of
credit enhancement loans. Charges or rates, if stated by a
licensee, shall be stated completely and clearly in a manner that
the department deems necessary to prevent any misunderstanding by
a prospective customer.
(b) The department may permit or require licensees to refer
in their advertising to the fact that the credit enhancement loan
business is under state supervision and subject to conditions
required by the department in order to prevent an erroneous
impression as to the scope or degree of protection provided by
the department or pursuant to this section.
(16)(a) A licensee shall maintain for 2 years all financial
books and records directly relating to credit enhancement loans
made as reasonably required by the department. The department may
examine the records at any reasonable time in order to determine
whether the licensee is complying with this section and the rules
adopted to administer this section.
(b) The required financial books and records may be
maintained in any form authorized by the department, but the
books and records of each office shall be clearly segregated. If
a licensee maintains its financial books and records outside this
state, the licensee shall make them available for examination at
the place where they are maintained and shall pay for all
reasonable and necessary expenses incurred by the department in
conducting an examination.
(c) If the data processing for a licensee is performed by a
person other than the licensee, the licensee shall execute and
provide to the department a copy of an agreement between the
licensee and the data processor which allows the department to
examine that data processor's activities and records pertaining
to the licensee to the same extent as if the data processing
services were performed by the licensee on its premises.
(d) A licensee shall reimburse the department for all costs
and expenses incurred by the department in conducting an
(e) A licensee shall file an annual report with the
department on or before March 31 for the 12-month period ending
the preceding December 31 on departmental forms. The report shall
disclose in detail and under appropriate headings any changes in
the information contained in the original license application and
other information necessary to show that the licensee is in
compliance with this section. Reports shall be verified by oath
or affirmation of the owner, manager, president, vice president,
cashier, secretary, or treasurer of the licensee.
(f) If a licensee conducts another business or is
affiliated with other licensees or if any other situation exists
under which expense allocations are necessary, the licensee shall
make that allocation according to appropriate and generally
accepted accounting principles.
(17) The department may adopt rules to administer this
(18) The department may issue subpoenas and compel the
attendance of witnesses, administer oaths, conduct hearings, and
transcribe testimony necessary to discharge its duties under this
(19)(a) If the department has reasonable cause, supported
by credible evidence, to believe that a person is violating this
section, it may, in addition to all actions authorized in this
section and without prejudice to those actions, enter an order
requiring the person to desist or refrain from such violation. An
action may also be brought to enjoin the person from engaging in
or continuing the violation. In such action, an order or judgment
may be entered awarding a preliminary or final injunction.
(b) In addition to other means provided by law for the
enforcement of a restraining order or injunction, the court in
which the action is brought may impound property and appoint a
receiver for the property and business of the defendant,
including any records that the court deems reasonably necessary
to prevent violations of this section. The receiver shall have
those powers and duties pertaining to custody, collection,
administration, winding up, and liquidation of the property and
business as conferred upon him or her by the court.
(20) Any person aggrieved by a rule or order of the
department may appeal to the department for review upon giving
notice in writing within 60 days after such rule or order is
adopted. The appeal shall be conducted pursuant to chapter 120,
(21) A credit enhancement loan made outside this state
after July 1, 2008, in the amount of or value of $3,000 or less
which carries greater consideration or charges than authorized by
this section is not enforceable in this state.
Section 2. This act shall take effect July 1, 2008.