Extends the effectiveness of provisions of law relating to permissible fees in connection with open end loans

• Democratic1

◆ The sponsor's argument

Why James Sanders Jr. says this is needed

In 1996, legislation was enacted to authorize licensed lenders to charge annual fees on open-end loans. The law further provided that any such fee may not exceed the lesser of 1% of the loan amount or $50. This 1996 law contained a sunset date of June 30, 2000. Legislation was enacted in 2000 to extend this authority for another five years, and legislation was enacted in 2005, 2007, 2009, 2011, 2013, 2015, 2017, 2019, 2021 and 2023 to extend this authority for an additional two years. The provisions of 1996 law are currently scheduled to expire on June 30, 2027. The 1996 law recognized that annual fees are a commonly used feature in the pricing of open-end loan products, such as credit cards, home equity loans and personal loans. This type of fee reflects the fact that addi- tional costs are incurred in the administration of revolving loans, such as the preparation and mailing of monthly billing statements, the proc- essing of transactions and increased monitoring costs. For these reasons, banking institutions have long had the ability to charge annual fees in open-end loan products. Licensed lenders have also had the ability to charge annual fees on certain open-end products, such as credit cards and home equity_loans. However, prior to 1996, they did not have authority to charge annual fees on open-end personal loans. Chapter 223 of 1996 gave licensed lenders the same pricing flexibility as banking institutions in regard to charging annual fees on open-end personal loans. Licensed lenders should continue to have this flexibili- ty in pricing their loan products. Therefore, this bill would extend the provisions of the 1996 law for another two years.

This is the sponsor's own case for the bill, quoted from their memorandum. It is not Agora's description of what the bill does.