STAND

STAND. COM. REP. NO.3163

Honolulu, Hawaii

, 2002

RE: H.B. No. 1778

H.D. 1

S.D. 1

Honorable Robert Bunda

President of the Senate

Twenty-First State Legislature

Regular Session of 2002

State of Hawaii

Sir:

Your Committee on Judiciary, to which was referred H.B. No. 1778, H.D. 1, S.D. 1, entitled:

"A BILL FOR AN ACT RELATING TO FINANCIAL SERVICES LOAN COMPANIES,"

begs leave to report as follows:

The purpose of this measure is to recodify the laws relating to financial services loan companies.

Testimony in support of this measure was received from the Hawaii Financial Services Association. The Division of Financial Institutions submitted comments.

This measure repeals article 9 of the code of financial institutions relating to financial services loan companies (FSLCs) and replaces it with two new articles relating to depository FSLCs and nondepository FSLCs, respectively. The proposed new laws, among other things:

(1) Provide depository FSLCs with greater flexibility in their operations, similar to that enjoyed by banks, savings banks, and savings and loan associations;

(2) Establish a 24% usury ceiling on simple interest loans made by depository and nondepository FSLCs, the same as that applicable to banks, savings banks, and savings and loan associations, and a 31.66% annual percentage rate ceiling on certain simple interest loans made by nondepository FSLCs;

(3) Repeal the authority of FSLCs to make precomputed loans, but grandfather in existing precomputed loans;

(4) Limit or prohibit certain fees and charges that may be assessed against consumers; and

(5) Establish recordkeeping and reporting requirements for nondepository FSLCs.

Your Committee finds that this recodification of the law governing FSLCs will provide greater certainty and clarity regarding the rights and responsibilities of FSLCs and that this measure maintains a balance between the needs of the industry and consumer protection.

As affirmed by the record of votes of the members of your Committee on Judiciary that is attached to this report, your Committee is in accord with the intent and purpose of H.B. No. 1778, H.D. 1, S.D. 1, and recommends that it pass Third Reading.

Respectfully submitted on behalf of the members of the Committee on Judiciary,

		____________________________ BRIAN KANNO, Chair