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SB1689 - 572R - I Ver
REFERENCE TITLE:
home equity revolving loan; lenders
State of Arizona
Senate
Fifty-seventh Legislature
Second Regular Session
2026
SB 1689
Introduced by
Senator
Kavanagh
AN
ACT
amending sections 6-601, 6-602,
6-606, 6-609, 6-613, 6-631, 6-632, 6-633, 6-635,
6-636, 6-637 and 41-5605, Arizona Revised Statutes; relating
to consumer lenders.
(TEXT OF BILL BEGINS ON NEXT PAGE)
Be it enacted by the Legislature of the State of Arizona:
Section 1. Section 6-601, Arizona Revised
Statutes, is amended to read:
START_STATUTE
6-601.
Definitions
In this chapter, unless the context otherwise requires:
1. "Actuarial method" means the method of
allocating each payment between finance charges and principal pursuant to which
the payment is applied first to finance charges computed on the unpaid balance
of principal for the time the balance is outstanding, and the remainder of the
payment is subtracted from the unpaid principal amount.
2. "Amount financed" means the amount of
credit extended to a consumer on a consumer loan determined in accordance with
the truth in lending act.
3. "Annual percentage rate" means the
measure of the cost of credit, expressed as a yearly rate, that relates the
amount and timing of value received by the consumer to the amount and timing of
payments made, determined in accordance with the truth in lending act.
4. "Consumer" means an individual who
obtains a consumer lender loan for personal, family or household purposes.
5. "Consumer lender" means a person that
advertises to make or procure, solicits or holds itself out to make or procure,
or makes or procures consumer lender loans to consumers in this state.
6. "Consumer lender loans" means consumer
loans
,
and
consumer revolving
loans
and home equity revolving loans
.
7. "Consumer loan" means the direct closed
end loan of money, whether unsecured or secured by personal or real property,
in an amount of
$10,000
$50,000
or
less that is subject to a finance charge in which only the principal amount of
the loan is considered, and not any finance charges or other fees allowed
pursuant to section 6-635,
for the purpose of determining
to determine
whether the consumer loan is
$10,000
$50,000
or less.
8. "Consumer loan rate"
:
(
a
)
Means
the periodic rate of finance charges that applies to the outstanding principal
balance of a consumer loan and that remains unpaid.
Consumer
loan rate
(
b
)
Does
not include any prepaid finance charges pursuant to section 6-632,
subsection E or any fees pursuant to section 6-635.
9. "Consumer revolving loan" means an open
end revolving loan that is established pursuant to an agreement with an agreed
on credit limit that does not exceed
$10,000
$30,000
, that the consumer may pay in full at any time but has
the privilege of paying in installments and that contemplates or provides that
advances may be obtained from time to time by the consumer, through checks,
drafts, items, credit access devices, orders for the payment of money,
evidences of debt or similar means, whether or not negotiable.
10. "Educational loan" means any loan or
other aid or assistance for the purpose of furthering the education of a
consumer or a relative of a consumer at an accredited or approved university,
college, community college, junior college, technical, vocational or
professional school, or similar institution.
11. "Finance charge" means the amount
payable by a consumer incident to or as a condition of the extension of a
consumer lender loan but does not include other fees allowed pursuant to
section 6-635.
12. "Home equity revolving
loan" means an open end revolving loan that is made pursuant to an
agreement with an agreed on credit limit that is not more than $10,000, that is
secured by the consumer's principal residence and that provides that advances
may be obtained from time to time by the consumer through checks, drafts,
items, credit access devices, orders for the payment of money, evidences of
debt or similar means, whether or not negotiable.
13.
12.
"License"
means a license issued under the authority of this chapter to make consumer
lender loans in accordance with this chapter.
14.
13.
"Licensee"
means a person licensed pursuant to this chapter.
15.
14.
"Precomputed
consumer loan" means a consumer loan that is payable in substantially
equal, consecutive monthly installments that are applied to the unpaid balance
of the principal and precomputed finance charges combined, subject to
provisions for refund or credit in the event of prepayment and for deferral or
default charges in the event of deferral or default.
16.
15.
"Regularly
engaged in the business" means either:
(a) Advertising to or any other solicitation of a
resident of this state that offers a consumer loan and that occurs within this
state.
(b) Making three or more consumer loans within a
calendar year to residents of this state.
17.
16.
"Truth
in lending act" means title I of the consumer credit protection act (15
United States Code sections 1601 through 1666j), as amended, and the
regulations promulgated under that act (12 Code of Federal Regulations part
226), as amended.
END_STATUTE
Sec. 2. Section 6-602, Arizona Revised
Statutes, is amended to read:
START_STATUTE
6-602.
Exemptions
A. This chapter does not apply to:
1. A person who does business under any other law of
this state, or any other state while regulated by a state agency of that other
state, or of the United States, relating to banks, savings banks, trust
companies, savings and loan associations, profit sharing and pension trusts,
credit unions, insurance companies or receiverships if the consumer lender loan
transactions are regulated by the other law or are under the jurisdiction of a
court.
2. A person who is licensed as a pawnbroker pursuant
to title 44, chapter 11, article 3 to the extent that the person's activities
are governed by that article.
3. A person who is not regularly engaged in the
business of making consumer lender loans.
4. A person who is licensed pursuant to chapter 9 of
this title to the extent that the person's activities are governed by that
chapter.
B. The requirements of this chapter do not apply to:
1. Closed end loans of more than
$10,000
$50,000
.
2. Advances on open end revolving loans that are not
secured by the consumer's principal residence with an agreed on credit limit of
more than
$10,000
$30,000
,
regardless of the amount of any advances on these revolving loans.
3. Advances on open end revolving loans that are
secured by the consumer's principal residence with an agreed on credit limit of
more than
$10,000
$30,000
,
regardless of the amount of any advances on these revolving loans.
4. Consumer lender loans that are lawfully made to
nonresidents of the state in any other state under and in accordance with a
regulatory consumer lender law similar in principle to this chapter.
5. Educational loans that are either:
(a) Made, insured or guaranteed pursuant to a
program authorized by the United States, this state or any other state.
(b) Made by a nonprofit organization that is exempt
from taxation under section 501(c)(3) of the internal revenue code to students
who attend postsecondary educational institutions in this state.
C. A consumer loan made pursuant to a consumer
lender license is not a secondary motor vehicle finance transaction as defined
in section 44-281.
END_STATUTE
Sec. 3. Section 6-606, Arizona Revised
Statutes, is amended to read:
START_STATUTE
6-606.
Business limited to licensed locations; restrictions
A. Except as provided in subsection B of this
section, a licensee may not conduct the business of making consumer lender
loans pursuant to this chapter under any name or at any place of business in
this state other than the name and place stated in the licensee's consumer
lender license or branch office license.
B. Subsection A of this section does not prohibit a
licensee from:
1. Making consumer lender loans by mail or
electronic means.
2. On request, making accommodations to consumers at
any location requested by the consumer.
3. Conducting any administrative, loan servicing or
recordkeeping activity at any other location not open to the public, if the
deputy director is notified in advance of that activity.
4. Closing a consumer lender loan secured by real
property at an office of a financial institution, title company, licensed
escrow agent, licensed mortgage broker or licensed mortgage banker.
5. Giving a consumer an advance on a consumer
revolving loan
or home equity revolving loan
from any
location.
6. Conducting business pursuant to this chapter
under an assumed name or a trade name that is submitted to the department
pursuant to section 6-117.
C. On approval by the deputy director, the licensee
may conduct any of the activities listed in subsection B of this section
outside of this state.
D. A licensee may change the location of its
licensed office or licensed branch office by giving written notice to the
deputy director, who shall amend the license accordingly.
E. All consumer lender loans that are made at the
location of a licensed office or branch office are subject to the requirements
of article 2 of this chapter, whether made by a licensee, any person otherwise
exempt from this chapter pursuant to section 6-602 or any other person.
F. A licensee may not conduct the business of making
consumer lender loans pursuant to this chapter from within any licensed office
or branch office in which any other business not licensed pursuant to this
title is solicited or engaged in, or in association or conjunction with any
other business not licensed pursuant to this title, without giving prior notice
to the deputy director. If it appears to the deputy director that
the other business is of such a nature or is being conducted in such a manner
as to conceal an evasion of this chapter or is contrary to the public interest
or otherwise being conducted in an unlawful manner, the deputy director may act
pursuant to section 6-137 to restrict the licensee from conducting its
business in conjunction with that other business. For the purposes
of this subsection, "public interest" means the laws of this state or
of the United States or rules adopted by the deputy director.
END_STATUTE
Sec. 4. Section 6-609, Arizona Revised
Statutes, is amended to read:
START_STATUTE
6-609.
Reporting rates; change in rates; quarterly report of deputy
director
A. At the time of making its annual report to the
deputy director, each licensee shall report the licensee's standard annual
percentage rate or range of annual percentage rates in effect at that time on
the following types of loans:
1. A $500 unsecured consumer loan, payable in twelve
equal monthly installments.
2. A $2,500 consumer loan secured by a motor
vehicle, payable in thirty-six equal monthly installments.
3. A $9,000 consumer loan secured in full by real
property, payable in one hundred twenty equal monthly installments.
4. A consumer revolving loan with an agreed on
credit limit of $3,000.
5. A home equity revolving loan with
an agreed on credit limit of $15,000.
B. The amount of each of the consumer loans
described in subsection A of this section refers to the amount financed as
computed in accordance with the truth in lending act.
The
licensee shall also report the range of the percentage amount of any prepaid
finance charges charged in connection with a home equity revolving loan
described in subsection A, paragraph 5 of this section.
C. Within thirty days after effectuating a change in
the standard rate of charge for any of the types of loans described in
subsection A of this section, the licensee shall report that change to the
deputy director.
D. On at least a quarterly basis the deputy director
shall compile a report of the standard annual percentage rate or range of
annual percentage rates of each licensee for the types of loans described in
subsection A of this section. The deputy director shall disseminate
this report in a manner deemed appropriate by the deputy director, and the
deputy director shall make the report available to the public for inspection
and copying.
END_STATUTE
Sec. 5. Section 6-613, Arizona Revised
Statutes, is amended to read:
START_STATUTE
6-613.
Restrictions; voidable loans
A. Except as the result of an accidental or bona
fide error, if the licensee charges, contracts for or receives any amount in
excess of the finance charges and other fees permitted by this chapter
,
the following restrictions apply:
1. If the original principal amount of a consumer
loan is
five thousand dollars or less
not
more than $5,000
, that consumer loan is voidable and the licensee has no
right to collect or receive any principal, finance charges or other fees in
connection with that consumer loan.
2. If the original principal amount of a consumer
loan is more than
five thousand dollars
$5,000
, the licensee has no right to collect or receive any finance
charges in connection with that consumer loan.
3. If the aggregate amount of advances borrowed on a
consumer revolving loan
or home equity revolving loan
is
five thousand dollars or less
not more than
$5,000
, that consumer revolving loan
or home equity
revolving loan
is voidable and the licensee has no right to collect or
receive any principal, finance charges or other fees in connection with that
consumer revolving loan
or home equity revolving loan
.
4. If the aggregate amount of advances borrowed on a
consumer revolving loan
or home equity revolving loan
is
more than
five thousand dollars
$5,000
,
the licensee has no right to collect or receive any finance charges in
connection with that consumer revolving loan
or home equity
revolving loan
.
B. Any consumer lender loan that is made by a person
who is required to be licensed pursuant to this chapter but who is not licensed
is void, and the person making that consumer lender loan has no right to
collect, receive or retain any principal, finance charges or other fees in
connection with that consumer lender loan.
END_STATUTE
Sec. 6. Section 6-631, Arizona Revised Statutes,
is amended to read:
START_STATUTE
6-631.
Disclosures; civil penalty
A. To the extent applicable, a licensee shall comply
with the disclosure requirements of the truth in lending act.
B. Each note or agreement evidencing a consumer
lender loan shall contain the following disclosure statement in at least
ten-point type that is in English and in Spanish and in close proximity to the
consumer's signature line:
Notice: You may request that the initial
disclosures prescribed in the truth in lending act (15 United States Code
sections 1601 through 1666j) be provided in Spanish before signing any loan
documents.
C. A licensee shall continuously and conspicuously
display a sign printed in at least twelve-point
bold type
bold face
containing the notice prescribed by subsection B of
this section and the following notice at each desk in each licensed office or
branch office at which consumer lender loans are usually and normally closed:
Notice
Before signing any loan documents or otherwise committing to
a loan, you may take copies of those documents away from the consumer lender's
place of business for review.
D. A licensee shall give to the consumer a receipt
or another written record of the amount of any payment made in currency on any
consumer lender loan, either at the time the payment is made or within ten days
after the payment is made, or the licensee may reflect the payment on the
periodic statement sent to the consumer for the billing period that includes
the date of that payment.
E. A licensee shall
mail
provide
periodic statements for consumer revolving loans
and home equity revolving loans
to the consumer within fourteen
days after the end of each monthly billing cycle period. A billing
cycle period is considered monthly if the closing date of the billing cycle
period is the same day each month or does not vary by more than four days from
that day.
F. If the licensee fails to make the disclosure
statement prescribed in subsection B of this section, the deputy director shall
assess the licensee a one-time
civil
penalty of
up to
not more than
$300 for
every
each
violation.
END_STATUTE
Sec. 7. Section 6-632, Arizona Revised Statutes,
is amended to read:
START_STATUTE
6-632.
Finance charges
A. A licensee may contract for and receive finance
charges on consumer loans that are not more than the following amounts:
1. On a consumer loan in an original principal
amount of
three thousand dollars or less
not more than $10,000
, a consumer loan rate of thirty-six
per cent
percent
.
2. On a consumer loan in an original principal
amount of more than
three thousand dollars
$10,000
, either:
(a) A consumer loan rate of thirty-six
per cent
percent
on the initial
three thousand dollars
$10,000
of the
original principal amount, and a consumer loan rate of twenty-four
per cent
percent
on that part of the
principal amount
greater
that is more
than
three thousand dollars
$10,000 but less
than $20,000, and a consumer loan rate of eighteen percent on a consumer loan
rate of more than $20,000 but less than $50,000
.
(b) The single blended consumer loan rate that
results from the total amount of finance charges that the licensee would
receive through the scheduled maturity of the consumer loan at the consumer
loan rates that otherwise would be applicable pursuant to subdivision (a) of
this paragraph to the different portions of the unpaid principal balance,
assuming that the consumer loan will be paid according to its agreed terms.
B. A licensee may contract for and receive periodic
finance charges on consumer revolving loans
and home equity
revolving loans
that are not more than the following amounts:
1. On consumer revolving loans with credit limits of
three thousand dollars or less
not more
than $10,000
, a periodic rate corresponding to an annual percentage rate
of thirty-six
per cent
percent
on the outstanding balance each monthly billing cycle.
2. On consumer revolving loans with credit limits of
more than
three thousand dollars and home equity revolving loans
$10,000
, either:
(a) A periodic rate corresponding to an annual
percentage rate of thirty-six
per cent
percent
on that portion of the outstanding balance each
monthly billing cycle that is not more than
three thousand
dollars
$10,000
and a periodic rate corresponding
to an annual percentage rate of twenty-four
per cent
percent
on that portion of the outstanding balance each
monthly billing cycle that is more than
three thousand dollars
$10,000
.
(b) A periodic rate corresponding to the single
blended annual percentage rate that would result in a periodic finance charge
during a monthly billing cycle that is not more than the finance charges that
result from the application of the multiple periodic rates authorized by
subdivision (a) of this paragraph.
C. A licensee may charge a fixed or variable rate of
periodic finance charges on a consumer revolving loan
or a home
equity revolving loan
, as provided by the agreement that establishes the
consumer revolving loan
or home equity revolving loan
. The
licensee shall not base a variable rate of periodic finance charges on an index
that is under the control of the licensee. Unless the consumer can
readily verify the index on which an adjustment in the rate of periodic finance
charges is based, the licensee shall provide conspicuous notice of the rate
adjustment at least one monthly billing cycle before the effective date of the
rate adjustment. The licensee may include a rate adjustment notice
on or with a periodic statement to the consumer. The corresponding
annual percentage rate of periodic finance charges may not increase or decrease
more than three percentage points in any period of twelve consecutive months,
and the corresponding annual percentage rate of periodic finance charges may
not increase or decrease more than seven percentage points above or below the
initial annual percentage rate of periodic finance charges at the time the
consumer revolving loan
or home equity revolving loan
is
established.
D. Except as
permitted
allowed
by subsection E of this section, prepaid finance
charges commonly referred to as points are prohibited.
E. In addition to the finance charges authorized in
subsections A, B and C of this section, a licensee may contract for and
receive, and collect finance charges on, nonrefundable prepaid finance charges
or fees commonly referred to as points in an amount of not more than
:
1.
four
per cent
percent
of the original principal amount of a consumer loan of
at least
five thousand dollars
$5,000
secured by the consumer's principal residence.
2. Four per cent of the agreed on
credit limit of a home equity revolving loan.
F. If a consumer loan
,
or
consumer revolving loan
or home equity
revolving loan
is in existence before
the effective date
of this amendment to this section
july 24, 2014
and
is modified or restructured after
the effective date of this
amendment to this section
july 24, 2014
and the
total new cash advances do not exceed
one hundred dollars
$100
, a licensee may not contract for and receive periodic
finance charges at an annual percentage rate that is higher than the annual
percentage rate that existed before
the effective date of this
amendment to this section
july 24, 2014
.
END_STATUTE
Sec. 8. Section 6-633, Arizona Revised
Statutes, is amended to read:
START_STATUTE
6-633.
Computation of finance charges
A. A licensee shall compute and measure finance
charges on consumer loans on unpaid balances outstanding from time to
time. A licensee may also precompute finance charges on consumer
loans on scheduled unpaid principal balances as provided in section 6-634.
For the purposes of computing
To compute
finance charges on consumer loans that are not precomputed, a licensee may
calculate the finance charges on an annual basis of twelve months of thirty
days each month or on a daily basis if a day is counted either as 1/360th,
1/365th or 1/366th of a year, as the licensee and consumer may agree in
writing.
B. A licensee shall compute periodic finance charges
on consumer revolving loans
or home equity revolving loans
on the unpaid balance of the consumer revolving loan
or home
equity revolving loan
by either of the following methods:
1. By multiplying the daily periodic rate by the
actual unpaid balance of the consumer revolving loan
or home
equity revolving loan
each day during the billing cycle
period. The daily periodic rate
shall be
is
determined by dividing the annual percentage rate by three
hundred sixty-five.
2. By multiplying the monthly periodic rate by the
average daily balance of the consumer revolving loan
or home
equity revolving loan
during the billing cycle. The average
daily balance is the sum of the unpaid balances of the consumer revolving loan
or home equity revolving loan
each day during the billing cycle
period divided by the number of days in the billing cycle
period. The monthly periodic rate is determined by dividing the
annual percentage rate by twelve. The unpaid balance on any day is
determined by adding to any balance unpaid as of the beginning of that day all
advances and allowed additional fees and deducting all payments and other
credits to the consumer revolving loan
or home equity revolving
loan
that day.
C. A licensee may compute finance charges only on
the unpaid principal balance, allowed additional fees and prepaid finance
charges. A licensee shall not compound finance
charges. Precomputation of the finance charges on a consumer loan
does not constitute compounding of finance charges.
D. If part or all of the principal of a consumer
loan is the unpaid principal balance of a prior precomputed consumer loan, the
principal amount payable under such consumer loan may include any unpaid
finance charges on the prior loan that have accrued within sixty days before
the making of that consumer loan.
END_STATUTE
Sec. 9. Section 6-635, Arizona Revised Statutes, is amended to read:
START_STATUTE
6-635.
Other allowable fees; annual reporting
A. In addition to the
finance charges authorized by section 6-632, a licensee may contract for
and receive, and collect finance charges on, the following fees:
1. A delinquency charge in an amount equal to five
percent of the amount of any installment not paid in full within seven days
after its due date.
2. The actual costs of charges that are paid to a
third party who is not an employee of the licensee and that are incurred in
making consumer lender loans secured in whole or in part by real property,
including the charges for a preliminary title search, title examination and
report, title insurance premiums, property survey and appraisal fees.
3. Lawful fees for the acknowledging, filing and
recording, continuing or releasing in any public office of any instrument or
financing statement evidencing or perfecting a lien or security interest in
real or personal property securing a consumer lender loan or the premiums paid
for insurance in lieu of filing or recording that shall not exceed the filing
or recording fee.
4. A loan origination fee of not more than five
percent of a closed end consumer loan or the agreed credit limit of a consumer
revolving loan but in no event in an amount that is more than
$150
$300
. A licensee shall not charge a loan
origination fee:
(a) For the refinancing of a closed end consumer
loan or the renegotiating of an agreed credit limit of a consumer revolving
loan if the refinancing or renegotiating occurs within one year of the
collection of a prior loan origination fee.
(b) If the licensee charges prepaid finance charges
pursuant to section 6-632, subsection E
, paragraph 1
.
5. Deferral fees authorized in section 6-634
for precomputed consumer loans.
6. Insurance premiums as provided in section 6-636.
7. Court costs.
8. Reasonable attorney fees if the consumer lender
loan is referred for collection to an attorney other than a salaried employee
of the licensee.
9. Costs, expenses and fees authorized in section 33-813,
subsection B for reinstatement of a deed of trust encumbering real property
that secures a consumer lender loan.
10. Costs and expenses of exercising the power of
sale in a deed of trust encumbering real property that secures a consumer
lender loan and costs and expenses of a sale that are included in a credit bid
or that are applied from the proceeds of a trustee's sale pursuant to section
33-812, including the payment of trustee fees and reasonable attorney
fees actually incurred.
11. Costs and expenses of retaking, holding,
preparing for sale and selling any personal property in accordance with title
47, chapter 9, article 6.
12. the cost of the guaranteed asset
protection waiver as defined in section 20-103.
B. If a licensee receives a check, draft, negotiable
order of withdrawal or similar instrument drawn on a depository institution
that is offered by a consumer in full or partial payment on a consumer lender
loan and the instrument is not paid or is dishonored by the depository
institution, the licensee may charge and collect from the consumer a dishonored
check service fee pursuant to section 44-6852.
C. In addition to the finance charges and fees
provided in this article, the licensee shall not directly or indirectly charge,
contract for or receive any further or other amount in connection with a
consumer lender loan.
D. In conjunction with the reporting requirements
prescribed in section 6-609, on or before October 1 each year, a licensee
shall report to the deputy director the number of closed end consumer loans and
consumer revolving loans under $1,000 made in the prior two years.
END_STATUTE
Sec. 10. Section 6-636, Arizona Revised
Statutes, is amended to read:
START_STATUTE
6-636.
Insurance securing loan; cancellation; notice
A. The following types of insurance may be sold to
the consumer in connection with a consumer lender loan and the consumer may
contract for:
1. Property insurance
,
covering
any property securing a consumer lender loan.
2. Life insurance insuring the life of one or more
consumers obligated on a consumer lender loan.
3. Credit disability insurance that provides
indemnity for payments due on a consumer lender loan while any covered consumer
has a disability.
4. Credit involuntary unemployment insurance that
provides indemnity for payments due on a consumer lender loan while one or more
consumers are involuntarily unemployed.
5. Accidental death and dismemberment insurance
providing a benefit if death occurs as a result of an accident or if dismemberment
occurs.
6. Disability income protection insurance providing
a benefit if a total disability occurs during the term of insurance.
B. Any insurance purchased by a consumer from or
through a licensee, except insurance on property securing a consumer lender
loan, is optional, and a licensee shall not refuse to make a consumer lender
loan based on the consumer's refusal to purchase the insurance. The
consumer may cancel any insurance purchased in connection with a consumer
lender loan for any reason at any time within thirty days after the consumer
lender loan is made and shall mail or deliver a written notice of the
cancellation to the licensee's place of business. If the consumer
cancels the insurance pursuant to this subsection, the consumer is entitled to
a full refund of any premiums paid for the insurance. Before
executing the note or agreement evidencing a consumer lender loan that includes
a premium for insurance, the licensee shall give the consumer the disclosures
required to exclude those insurance premiums from the finance charge in
accordance with the truth in lending act.
C. At the time the insurance is sold the licensee
shall mail or deliver
provide
a written
receipt or binder to the consumer. Within thirty days after
mailing or delivering
provide
the written
receipt or binder, the licensee shall deliver to the consumer, or if more than
one, to any one of them, a policy or certificate of insurance covering any
insurance purchased by or through the licensee or any employee or affiliate of
the licensee in connection with the consumer lender loan that sets forth the
amount of any premium that the consumer has paid or is obligated to pay, the
amount of insurance, the term of insurance and a description of the
coverage. The policy or certificate may contain a mortgagee clause
or other appropriate provisions to protect the insurable interest of the
licensee.
D. All property insurance sold pursuant to this
section shall bear a reasonable bona fide relation to the existing hazard or
risk of loss and shall be written by an agent licensed in this state and by an
insurance company authorized to conduct property insurance business in this
state.� A licensee shall not require the purchase of property insurance from
the licensee or any employee, affiliate or associate of the licensee as a
condition precedent to the making of a consumer lender loan. The
licensee may otherwise designate the company in which the insurance shall be
placed as long as the insurance company is authorized to conduct business in
this state.
E. Property insurance, if sold by a licensee in
connection with a consumer loan, is at the option of the consumer in an amount
not
exceeding
more than
the greater
of the reasonable value of the property insured as designated in writing by the
consumer or the approximate amount of the consumer loan and shall be for a term
not exceeding the approximate term of the consumer loan.� However, the amount
of this property insurance may not exceed the designated value of the property
insured.
F. If a licensee sells property insurance in
connection with a consumer revolving loan
or a home equity
revolving loan
, the amount of the property insurance shall not exceed
the greater of the reasonable value of the property insured as designated in
writing by the consumer or the agreed on credit limit. However, the
amount of property insurance shall not exceed the designated value of the
insured property. The licensee may sell property insurance for
renewable terms of not more than two years.� Alternatively, the amount of
property insurance may be equal to the balance outstanding on a consumer
revolving loan
or a home equity revolving loan
from time
to time with the premiums calculated on the basis of the actual daily unpaid
balance or the average daily balance of the account during each billing cycle
period. Premiums for property insurance may be charged as an advance
on a consumer revolving loan
or a home equity revolving loan
.
G. If the licensee sells the consumer property
insurance for a renewable term, the licensee shall mail a notice to the
consumer at least thirty days before the renewal date that states all of the
following:
1. The consumer's property insurance is about to
expire.
2. The consumer may obtain property insurance from
any source chosen by the consumer subject to the licensee's right to reasonably
reject the insurer chosen by the consumer by providing written notice to the
consumer of those reasons for rejection.
3. The term, coverage and premium for the renewal of
property insurance.
4. The property insurance will be renewed on
expiration unless the consumer provides the licensee before the expiration date
with evidence that the consumer has obtained other property insurance.
H. Notwithstanding any other provision of this
chapter, any advantage, commission, dividend, gain or identifiable charge for
insurance authorized by this section, or otherwise, to the licensee or any
employee or affiliate of the licensee from that insurance or its sale is not an
additional finance charge or other allowed fee in connection with the consumer
lender loan. If the licensee provides a new consumer lender loan or
renews a contract of a consumer lender loan and the licensee sells the consumer
new insurance, the licensee shall apply the insurance provided for in this
section to the new loan or renewal, or the licensee shall cancel the prior
insurance and provide the consumer with a refund or credit of the unearned
premium or identifiable charge before selling the new insurance to the
consumer.
I. The licensee shall determine the refund of
unearned premiums for credit life insurance and credit disability insurance on
prepayment in full according to title 20, chapter 6, article 10.
J. Except as otherwise specifically provided in this
chapter, insurance transactions pursuant to this chapter are subject in all
respects to the applicable laws pertaining to that insurance pursuant to title
20 and to the applicable rules adopted pursuant to title 20.
END_STATUTE
Sec. 11. Section 6-637, Arizona Revised
Statutes, is amended to read:
START_STATUTE
6-637.
Term; payments
A. The scheduled term of a consumer loan shall not
be longer than the following:
1. Twenty-four months and fifteen days from
the date of making a consumer loan of
one thousand dollars or
less
not more than $1,000
.
2. Thirty-six months and fifteen days from the
date of making a consumer loan of more than
one thousand dollars
$1,000
but not more than
two thousand five
hundred dollars
$2,500
.
3. Forty-eight months and fifteen days from
the date of making a consumer loan of more than
two thousand five
hundred dollars
$2,500
but not more than
four thousand dollars
$4,000
.
4. Sixty months and fifteen days from the date of
making a consumer loan of more than
four thousand dollars
$4,000
but not more than
six thousand
dollars
$6,000
.
5. Any agreed on time period for a consumer loan of
more than
six thousand dollars
$6,000
.
B. The note evidencing a consumer loan shall provide
for the scheduled repayment of principal and finance charges in approximately
equal periodic installments.
C. Pursuant to the provisions of 12 United States
Code section 3804, subsections A and B of this section shall not be superseded
by the provisions of 12 United States Code section 3803.
D. Balloon payments, prepayment penalties, call
options and other contract provisions that permit a consumer lender to
accelerate payment of a consumer revolving loan
or home equity
revolving loan
for any reason other than the consumer's default as
provided in the agreement evidencing the consumer revolving loan
or
home equity revolving loan
are prohibited, except that a licensee may
include a call option to be exercised at least fifteen years after the date of
the agreement. If the licensee exercises this call option and the
consumer revolving loan
or home equity revolving loan
is
not in default, the licensee shall amortize the amount due on the account over
at least sixty monthly installments.
E. Except as provided in subsection D of this
section, an agreement evidencing a consumer revolving loan
or
home equity revolving loan
shall provide that on termination of the
right to obtain advances the outstanding principal balance and finance charges
at the time of termination of the right to obtain advances are repayable in
installments if a consumer is not in default as provided in the
agreement. These installments shall provide for the scheduled
repayment of principal and finance charges in approximately equal periodic
installments except as a result of an adjustment in the index on which a
variable rate of periodic finance charges is based. These
installments are payable within the following time limits:
1. Twenty-four months and fifteen days from
the date of termination of the right to obtain advances for an outstanding
principal balance on that date of
one thousand dollars or less
not more than $1,000
.
2. Thirty-six months and fifteen days from the
date of termination of the right to obtain advances for an outstanding
principal balance on that date that is more than
one thousand
dollars
$1,000
but not more than
two
thousand five hundred dollars
$2,500
.
3. Forty-eight months and fifteen days from
the date of termination of the right to obtain advances for an outstanding
principal balance on that date that is more than
two thousand
five hundred dollars
$2,500
but not more than
four thousand dollars
$4,000
.
4. Sixty months and fifteen days from the date of
termination of the right to obtain advances for an outstanding principal
balance on that date that is more than
four thousand dollars
$4,000
but not more than
six thousand
dollars
$6,000
.
5. Any agreed on time period for an outstanding
principal balance that is more than
six thousand dollars
$6,000
on the date of termination of the right to obtain
advances.
F. A licensee shall permit a consumer to prepay any
scheduled installment or additional amount due on any consumer lender loan in
advance at any time during the licensee's regular business hours, but the
licensee may apply that prepayment first to all finance charges accrued through
the date of that prepayment.
G. On payment in full or renewal of a consumer
lender loan, the licensee shall provide written notice of payment and release
to the consumer, or if more than one consumer is obligated on the consumer
lender loan, to any one of the consumers. The notice of payment and
release shall include the date of the original note or agreement evidencing the
consumer lender loan and the date of payment in full. In lieu of the
notice of payment and release, the licensee may return the original note or
agreement evidencing the consumer lender loan marked paid or renewed, as
applicable. The licensee shall release any lien or security interest
on property securing a consumer lender loan that is paid in full as provided in
section 33-707 for real property and section 47-9513 for personal
property. This subsection does not apply to a consumer revolving
loan
or home equity revolving loan
on which there is no
unpaid balance if the consumer's right to receive advances on the account
continues in effect.
END_STATUTE
Sec. 12. Section 41-5605, Arizona Revised
Statutes, is amended to read:
START_STATUTE
41-5605.
Scope
A. If the attorney general approves an application
for entry into the regulatory sandbox, the applicant is deemed a sandbox
participant and both of the following apply:
1. The sandbox participant has twenty-four
months after the date of approval to test the innovation described in the
sandbox participant's application.
2. The attorney general must issue the sandbox
participant a registration number.
B. Innovations tested within the regulatory sandbox
are subject to the following restrictions:
1. Consumers must be residents of this state, except
for transactions that involve an innovation provided by a sandbox participant
testing financial products or services as a money transmitter as defined in
section 6-1241 or a related innovation, in which case only physical
presence of the consumer in this state at the time of the transaction may be
required.
2. Except as provided in subsection C of this
section or section 41-5608, an innovation may not be tested with more
than ten thousand consumers.
3. For a sandbox participant testing consumer lender
loans as defined in section 6-601, an individual consumer lender loan may
be issued for up to $15,000, except that aggregate loans per consumer may not
exceed $50,000.� All consumer lender loans issued in the regulatory sandbox,
including loans in excess of
$10,000
$50,000
, are subject to all of the following:
(a) Section 6-114.
(b) Section 6-632.
(c) Section 6-635, subsections A, B and C.
(d) Section 6-637.
4. Except as provided in subsection C of this
section, for a sandbox participant testing financial products or services as a
money transmitter as defined in section 6-1241, individual transactions
per consumer may not exceed $2,500 and aggregate transactions per consumer may
not exceed $25,000.
5. For sandbox participants testing financial
products or services as a sales finance company as defined in section 44-281,
all of the following apply:
(a) Section 44-286.
(b) Section 44-287, except subsection B,
paragraph 8.
(c) Section 44-288.
(d) Section 44-289.
(e) Section 44-290.
(f) Section 44-291.
(g) Section 44-293.
(h) Section 47-9601.
6. For sandbox participants testing financial products
or services that provide investment management that is regulated pursuant to
title 44, chapter 13:
(a) Section 44-3241 applies.
(b) The corporation commission rules adopted
pursuant to title 44, chapter 13 apply as they relate to dishonest and
unethical practices.
C. If a sandbox participant demonstrates adequate
financial capitalization, risk management process and management oversight, the
attorney general may allow either or both of the following:
1. Except as provided in section 41-5608, an
innovation to not be tested with more than seventeen thousand five hundred
consumers.
2. For a sandbox participant testing products or
services as a money transmitter as defined in section 6-1241, individual
transactions per consumer that do not exceed $15,000 and aggregate transactions
per consumer that do not exceed $50,000.
D. This section does not restrict a sandbox
participant who holds a license or other authorization in another jurisdiction
from acting pursuant to and in accordance with that license or other
authorization.
E. A sandbox participant is deemed to possess an
appropriate license under the laws of this state for purposes of any provision
of federal law requiring state licensure or authorization.
F. Except as otherwise provided in this chapter, a
sandbox participant is not subject to state laws that establish requirements
pursuant to a license or authorization issued by an applicable agency that
otherwise would or may regulate an innovative financial product or service.
G. The attorney general may determine that certain
state laws that regulate a financial product or service or innovation apply to
a sandbox participant. If the attorney general makes this
determination and approves an application for entry into the regulatory
sandbox, the attorney general must notify the sandbox participant of the
specific state regulatory laws that will apply to the sandbox participant.�
Pursuant to section 41-5611, the attorney general alone shall enforce the state
regulatory laws applicable to sandbox participants, including the restrictions
established by this section.
H. To the extent that a sandbox participant is
required by this chapter to obtain, record, provide or maintain any
information, writing, signature, record or disclosure, the sandbox participant
may do so in electronic form, including as provided in section 44-7601,
or may substitute any substantially similar equivalent information, writing,
signature, record or disclosure that is approved by the attorney general.
END_STATUTE
Sec. 13.
Applicability
This act applies to any contract or
addendum entered into from and after December 31, 2026.
Sec. 14.
Effective date
Sections 6-601, 6-609, 6-613,
6-631, 6-633, 6-636 and 6-637, Arizona Revised
Statutes, as amended by this act, are effective from and after December 31,
2026.