HOUSE BILL NO. 3104 Offered January 18, 2007 A BILL to amend the Code of Virginia by adding in Article 12 of Chapter 7.3 of Title 6.1 a section numbered 6.1-330.91, relating to loans to covered servicemembers and their dependents. ---------- Patron-- Nutter ---------- Committee Referral Pending ----------

Be it enacted by the General Assembly of Virginia:

1. That the Code of Virginia is amended by adding in Article 12 of Chapter 7.3 of Title 6.1 a section numbered 6.1-330.91 as follows:

§ 6.1-330.91. Loans made to covered servicemembers and dependents.

A. As used in this section:

"Consumer credit" has the meaning provided for such term in 15 U.S.C. § 1602(e) and (h).

"Covered servicemember" means a member of the armed forces of the United States who is:

1. On active duty under a call or order that does not specify a period of 30 days or less; or

2. On active National Guard or Reserve duty.

"Creditor" means a person who is (i) engaged in the business of extending consumer credit or (ii) an assignee of a covered servicemember with respect to any consumer credit extended.

"Dependent," with respect to a covered servicemember, means:

1. The covered servicemember's spouse;

2. The covered servicemember's child (as defined in 38 U.S.C. § 101(4); or

3. An individual for whom the covered servicemember provided more than one-half of the individual's support for 180 days immediately preceding an extension of consumer credit covered by this section.

"Interest" includes all cost elements associated with the extension of credit, including fees, service charges, renewal charges, credit insurance premiums, any ancillary product sold with any extension of credit to a covered servicemember or the covered servicemember's dependent, as applicable, and any other charge or premium with respect to the extension of consumer credit covered by this section.

B. Creditors doing business in the Commonwealth:

1. Shall apply the law of the Commonwealth to any contracts and all activities related to the solicitation, origination, servicing, and collection of any contracts with covered servicemembers and their dependents regardless of the legal residency of the covered servicemembers and their dependents;

2. Shall not charge or collect an annual rate of interest on consumer credit loans to covered servicemembers and their dependents that is higher than the legal limit for residents of the Commonwealth; and

3. Shall not obtain or require from covered servicemembers or their dependents a waiver of any state consumer lending protections for the benefit of residents of the Commonwealth.

C. A creditor who extends consumer credit to a covered servicemember or a dependent of a covered servicemember shall not:

1. Require the covered servicemember or dependent of a covered servicemember to pay interest with respect to the extension of such credit, except as (i) agreed to under the terms of the credit agreement or promissory note, (ii) authorized by applicable state or federal law, and (iii) not specifically prohibited by this section.

2. Impose an annual percentage rate of interest greater than 36 percent with respect to the consumer credit extended to a covered servicemember or a dependent of a covered servicemember.

D. Any creditor that makes a loan or extends credit to a covered servicemember or a dependent of a covered servicemember shall not, with respect to such credit:

1. Provide for a repayment schedule other than one that will provide for complete payment of all charges due under the contract, including the amount financed, the finance charge, and any other authorized charges in substantially equal installments;

2. Make such a loan or extend credit without reasonable grounds for believing that the servicemember has the ability to repay the loan, based upon a consideration of the servicemember's current and reasonably expected verified income, current and expected obligations, length of active duty status, and other available financial resources, other than the servicemember's equity in any property or collateral securing the loan or upon which the loan is conditioned and any resulting combined debt-to-income ratio does not exceed 50 percent of the servicemember's documented and verified monthly gross income, provided that the servicemember has sufficient residual income as defined in the guidelines established in 30 C.F.R. 36.4337(e) and VA form 26-639;

3. Require the borrower to waive, or to obtain the borrower's waiver of, any right to legal recourse under any otherwise applicable provision of the Servicemembers Civil Relief Act, P.L. 108-189;

4. Require the borrower to submit to arbitration or impose onerous legal notice provisions in the case of a dispute;

5. Demand unreasonable notice from the borrower as a condition for legal action;

6. Secure or condition the extension of credit upon (i) a personal check held for future deposit or (ii) electronic access to a bank account;

7. Secure or condition the extension of credit upon obtaining a lien on the title to a motor vehicle for nonpurchase money loans;

8. Require as a condition to the extension of credit that the borrower establish an allotment to repay an obligation; or

9. Prohibit the borrower from repaying the loan or charge a penalty or fee for prepaying all or part of the loan.

E. The remedies and rights provided under this section are in addition to and do not preclude any remedy otherwise available under law to the person claiming relief under this section, including any award for consequential and punitive damages.

F. This section shall not apply to any lender authorized to engage in business as a bank, savings institution, or credit union under the laws of the United States, any United States state or territory or the District of Columbia, and subsidiaries and affiliates of such entities which lender, subsidiary, or affiliate is subject to the general supervision or regulation of or subject to audit or examination by a regulatory body or agency of the United States, any state or territory of the United States, or the District of Columbia.