Notice of cancellation

5-3-503. Notice of cancellation. If a default exists on a consumer insurance premium loan and any right to cure that exists has expired without cure being effected, the lender may give notice of cancellation of each insurance policy or contract to be canceled. If given, the notice of cancellation shall be in writing and given to the insurer who issued the policy or contract and to the insured. The insurer, within two business days after receipt of the notice of cancellation together with a copy of the insurance premium loan agreement if not previously given to the insurer, shall give any notice of cancellation required by the policy, contract, or law and, within ten business days after the effective date of the cancellation, pay to the lender any premium unearned on the policy or contract as of that effective date. Within ten business days after receipt of the unearned premium, the lender shall pay to the consumer indebted upon the insurance premium loan any excess of the unearned premium received over the amount owing by the consumer upon the insurance premium loan. Source: L. 2000: Entire article R&RE, p. 1224, � 1, effective July 1. Editor's note: This section is similar to former � 5-7-103, as it existed prior to 2000. ARTICLE 3.1 Deferred Deposit Loan Act Law reviews: For article, Borrowing from Peter to Pay Paul: A Statistical Analysis of Colorado's Deferred Deposit Loan Act, see 83 Den. U.L. Rev. 387 (2005). 5-3.1-101. Short title. This article shall be known and may be cited as the Deferred Deposit Loan Act. Source: L. 2000: Entire article added, p. 439, � 1, effective July 1. 5-3.1-101.5. Legislative declaration. The people of this state find and declare that payday lenders are charging up to two hundred percent annually for payday loans and that excess charges on such loans can lead Colorado families into a debt trap of repeat borrowing. It is the intent of the people to lower the maximum authorized finance charge for payday loans to an annual percentage rate of thirty-six percent. Source: Initiated 2018: Entire section added, Proposition 111, L. 2019, p. 4539, � 1, effective February 1, 2019, proclamation of the Governor issued December 19, 2018. Editor's note: This section was added by Proposition 111, with the proclamation of the governor on December 19, 2018. The vote count for the measure at the general election held November 6, 2018, was as follows: FOR: 1,865,200 AGAINST: 549,357 5-3.1-102. Definitions. As used in this article, unless the context otherwise requires: (1) Administrator means the administrator of the Uniform Consumer Credit Code. (1.5) Annual percentage rate means an annual percentage rate as determined pursuant to section 107 of the federal Truth in Lending Act, 15 U.S.C. sec. 1601 et seq. All finance charges shall be included in the calculation of the annual percentage rate. (2) Consumer means a person other than an organization who is the buyer, lessee, or debtor to whom credit is granted in a consumer credit transaction. (2.5) Default means a consumer's failure to repay a deferred deposit loan in compliance with the terms contained in a deferred deposit loan agreement. (3) Deferred deposit loan or payday loan means a consumer loan whereby the lender, for a fee, finance charge, or other consideration, does the following: (a) Accepts a dated instrument from the consumer as sole security for the loan and no other collateral; (b) Agrees to hold the instrument for a period of time prior to negotiation or deposit of the instrument; and (c) Pays to the consumer, credits to the consumer's account, or pays to another person on the consumer's behalf the amount of the instrument, less finance charges permitted by section 5-3.1-105. (4) Instrument means a personal check or authorization to transfer or withdraw funds from an account signed by the consumer and made payable to a person subject to this article. (5) (a) Lender means any person who offers or makes a deferred deposit loan, who arranges a deferred deposit loan for a third party, or who acts as an agent for a third party, regardless of whether the third party is exempt from licensing under this article or whether approval, acceptance, or ratification by the third party is necessary to create a legal obligation for the third party, through any method including mail, telephone, internet, or any electronic means. (b) Lender includes, but is not limited to, a supervised financial organization as defined in section 5-1-301 (45). (c) Notwithstanding that a bank, saving and loan association, credit union, or supervised lender may be exempted by federal law from this code's interest rate, finance charges, and licensure provisions, all other applicable provisions of this code apply to both a deferred deposit loan and a deferred deposit lender. (6) Loan amount means the amount financed as defined in regulation z of the federal Truth in Lending Act, 12 CFR 226.18 (b), as amended, or as supplemented by this code, articles 1 to 9 of this title. Source: L. 2000: Entire article added, p. 439, � 1, effective July 1. L. 2001: (5)(b) amended, p. 29, � 6, effective March 9. L. 2004: (2.5) added and (3) (a) amended, p. 317, � 1, effective July 1. L. 2010: (1.5) added and IP(3) and (5)(a) amended, (HB 10-1351), ch. 267, p. 1221, � 2, effective August 11. Cross references: For the legislative declaration in the 2010 act adding subsection (1.5) and amending the introductory portion to subsection (3) and subsection (5)(a), see section 1 of chapter 267, Session Laws of Colorado 2010. 5-3.1-103. Written agreement requirements. Each deferred deposit loan transaction and renewal shall be documented by a written agreement signed by both the lender and consumer. The written agreement shall contain the name of the consumer; the transaction date; the amount of the instrument; the annual percentage rate charged; a statement of the total amount of finance charges charged, expressed both as a dollar amount and an annual percentage rate; and the name, address, and telephone number of any agent or arranger involved in the transaction. In addition, the written agreement shall include all disclosures required by section 5-3-101 (2). The written agreement shall set a date upon which the instrument may be deposited or negotiated. There shall be no maximum loan term or minimum finance charge. The minimum loan term shall be six months from the loan transaction date. The lender shall accept prepayment from a consumer prior to the loan due date and shall not charge the consumer a penalty if the consumer opts to prepay the loan. A lender may hold an instrument and delay completion of the transaction beyond the loan due date without any additional written agreement or new disclosure, but the lender may not charge any additional fees for holding the instrument or delaying the completion of the transaction. Source: L. 2000: Entire article added, p. 440, � 1, effective July 1. L. 2001: Entire section amended, p. 29, � 7, effective March 9. L. 2003: Entire section amended, p. 1893, � 6, effective July 1. L. 2004: Entire section amended, p. 317, � 2, effective July 1. L. 2010: Entire section amended, (HB 10-1351), ch. 267, p. 1222, � 3, effective August 11. Cross references: For the legislative declaration in the 2010 act amending this section, see section 1 of chapter 267, Session Laws of Colorado 2010. 5-3.1-104. Notice to consumers. A lender shall provide the following notice in a prominent place on each loan agreement in at least ten-point type: A DEFERRED DEPOSIT LOAN IS NOT INTENDED TO MEET LONG-TERM FINANCIAL NEEDS. A DEFERRED DEPOSIT LOAN SHOULD BE USED ONLY TO MEET SHORT-TERM CASH NEEDS. RENEWING THE DEFERRED DEPOSIT LOAN RATHER THAN PAYING THE DEBT IN FULL WILL REQUIRE ADDITIONAL FINANCE CHARGES. Source: L. 2000: Entire article added, p. 440, � 1, effective July 1. 5-3.1-105. Authorized charges. A lender may charge a finance charge for each deferred deposit loan or payday loan that must not exceed an annual percentage rate of thirty-six percent. If the loan is prepaid prior to the maturity of the loan term, the lender shall refund to the consumer a prorated portion of the finance charge based upon the ratio of time left before maturity to the loan term. A lender may charge only those charges expressly authorized in this article in connection with a deferred deposit loan or payday loan. Source: L. 2000: Entire article added, p. 441, � 1, effective July 1. L. 2010: Entire section amended, (HB 10-1351), ch. 267, p. 1222, � 4, effective August 11. Initiated 2018: Entire section amended, Proposition 111, L. 2019, p. 4539, � 2, effective February 1, 2019, proclamation of the Governor issued December 19, 2018. Cross references: For the legislative declaration in the 2010 act amending this section, see section 1 of chapter 267, Session Laws of Colorado 2010. 5-3.1-106. Maximum loan amount - right to rescind. (1) A lender shall not lend an amount greater than five hundred dollars nor shall the amount financed exceed five hundred dollars by any one lender at any time to a consumer. Nothing in this subsection (1) shall preclude a lender from making more than one loan to a consumer so long as the total amount financed does not exceed five hundred dollars at any one time and there is at least a thirty-day waiting period between loans. (2) A consumer shall have the right to rescind the deferred deposit loan on or before 5 p.m. the next business day following the loan transaction. Source: L. 2000: Entire article added, p. 441, � 1, effective July 1. L. 2004: (1) amended, p. 318, � 3, effective July 1. L. 2010: (1) amended, (HB 10-1351), ch. 267, p. 1223, � 5, effective August 11. Cross references: For the legislative declaration in the 2010 act amending subsection (1), see section 1 of chapter 267, Session Laws of Colorado 2010. 5-3.1-107. Multiple outstanding transactions notice. A lender shall provide the following notice in a prominent place on each deferred deposit loan agreement in at least ten-point type: STATE LAW PROHIBITS DEFERRED DEPOSIT LOANS EXCEEDING FIVE HUNDRED DOLLARS ($500) TOTAL DEBT PLUS APPLICABLE FINANCE CHARGES PERMITTED BY LAW FROM A DEFERRED DEPOSIT LENDER. EXCEEDING THIS AMOUNT MAY CREATE FINANCIAL HARDSHIPS FOR YOU AND YOUR FAMILY. YOU HAVE THE RIGHT TO RESCIND THIS TRANSACTION BY 5 P.M. THE NEXT BUSINESS DAY FOLLOWING THIS TRANSACTION. Source: L. 2000: Entire article added, p. 441, � 1, effective July 1. L. 2001: Entire section amended, p. 29, � 8, effective March 9. 5-3.1-108. Renewal - new loan - consecutive loans - payment plan - definitions. (1) A deferred deposit loan shall not be renewed more than once. After such renewal, the consumer shall pay the debt in cash or its equivalent. If the consumer does not pay the debt, then the lender may deposit the consumer's instrument. (2) Upon renewal of a deferred deposit loan or payday loan, the lender may assess a finance charge that must not exceed an annual percentage rate of thirty-six percent. If the deferred deposit loan or payday loan is renewed prior to the maturity date, the lender shall refund to the consumer a prorated portion of the finance charge based upon the ratio of time left before maturity to the loan term. (3) A transaction is completed when the lender presents the instrument for payment or the consumer redeems the instrument by paying the full amount of the instrument to the holder. Once the consumer has completed the deferred deposit transaction, the consumer may enter into a new deferred deposit agreement with the lender. If the consumer's instrument is dishonored by the payor financial institution after the transaction is complete and, before the lender receives a notice of dishonor, the lender makes a new loan that does not exceed the maximum allowable loan, the lender shall not be in violation of the maximum loan amount provisions in section 5-3.1-106. (4) Nothing in this section prohibits a lender from refinancing a deferred deposit loan as a supervised loan subject to the provision of this code, articles 1 to 9 of this title; except that the lender may not contract for or receive the minimum finance charge contained in section 5-2-201 (7). (5) (Deleted by amendment, L. 2010, (HB 10-1351), ch. 267, p. 1223, � 6, effective August 11, 2010.) Source: L. 2000: Entire article added, p. 441, � 1, effective July 1. L. 2001: (4) amended, p. 29, � 9, effective March 9. L. 2004: (3) amended, p. 318, � 4, effective July 1. L. 2007: (5) added, p. 384, � 1, effective July 1. L. 2010: (2) and (5) amended, (HB 10-1351), ch. 267, p. 1223, � 6, effective August 11. Initiated 2018: (2) amended, Proposition 111, L. 2019, p. 4539, � 3, effective February 1, 2019, proclamation of the Governor issued December 19, 2018. Cross references: For the legislative declaration in the 2010 act amending subsections (2) and (5), see section 1 of chapter 267, Session Laws of Colorado 2010. 5-3.1-109. Form of loan proceeds. A lender may pay the proceeds from a deferred deposit loan to the consumer in the form of a business instrument, money order, cash, stored value card, internet transfer, or authorized automated clearinghouse transaction. The consumer shall not be charged an additional finance charge or fee for cashing the lender's business instrument or for negotiating forms of loan proceeds other than cash. Source: L. 2000: Entire article added, p. 442, � 1, effective July 1. L. 2004: Entire section amended, p. 318, � 5, effective July 1. 5-3.1-110. Endorsement of instrument. A lender shall not negotiate or present an instrument for payment unless the instrument is endorsed with the actual business name of the lender. Source: L. 2000: Entire article added, p. 442, � 1, effective July 1. 5-3.1-111. Redemption of instrument. Prior to the lender negotiating or presenting the instrument, the consumer shall have the right to redeem any instrument held by a lender as a result of a deferred deposit loan if the consumer pays the full amount of the instrument to the lender. Source: L. 2000: Entire article added, p. 442, � 1, effective July 1. 5-3.1-112. Authorized dishonored instrument charge. If an instrument held by a lender as a result of a deferred deposit loan is returned unpaid to the lender from a payor financial institution due to insufficient funds, a closed account, a stop-payment order, or any other reason, not including a bank error, the lender shall have the right to exercise all civil means authorized by law to collect the face value of the instrument; except that the provisions and remedies of section 13-21-109, C.R.S., are not applicable to any deferred deposit loan. In addition, the lender may contract for and collect one returned instrument charge for each deferred deposit loan, not to exceed twenty-five dollars, plus court costs and reasonable attorney fees as awarded by a court and incurred as a result of the default. However, such attorney fees shall not exceed the loan amount. The lender shall not collect any other fees as a result of default. A returned instrument charge shall not be allowed if the loan proceeds instrument is dishonored by the financial institution or the consumer places a stop-payment order due to forgery or theft. Source: L. 2000: Entire article added, p. 442, � 1, effective July 1. L. 2004: Entire section amended, p. 318, � 6, effective July 1. 5-3.1-113. Posting of charges. Any lender offering a deferred deposit loan shall post at any place of business where deferred deposit loans are made a notice of the finance charges imposed for such deferred deposit loans. Source: L. 2000: Entire article added, p. 442, � 1, effective July 1. L. 2003: Entire section amended, p. 1894, � 7, effective July 1. 5-3.1-114. Notice on assignment or sale of instruments. Prior to sale or assignment of instruments held by the lender as a result of a deferred deposit loan, the lender shall place a notice on the instrument in at least ten-point type to read: THIS IS A DEFERRED DEPOSIT LOAN INSTRUMENT. Source: L. 2000: Entire article added, p. 442, � 1, effective July 1. 5-3.1-115. Records and annual reports. A lender shall maintain records and file an annual report in accordance with section 5-2-304. Source: L. 2000: Entire article added, p. 442, � 1, effective July 1. L. 2001: Entire section amended, p. 30, � 10, effective March 9. 5-3.1-116. License requirement. In accordance with section 5-2-301, no person shall engage in the business of deferred deposit loans without having first obtained a supervised lender's license pursuant to section 5-2-302. A separate license shall be required for each location where such business is conducted. Source: L. 2000: Entire article added, p. 442, � 1, effective July 1. L. 2001: Entire section amended, p. 30, � 11, effective March 9. 5-3.1-117. Examination and investigation. A lender may be examined and investigated in accordance with section 5-2-305. Source: L. 2000: Entire article added, p. 443, � 1, effective July 1. L. 2001: Entire section amended, p. 30, � 12, effective March 9. 5-3.1-118. Denial of license - discipline. (1) The administrator may deny a license or discipline a lender in accordance with sections 5-2-302, 5-2-303, and 5-2-306. (2) (a) If the administrator finds that a lender has violated the code, articles 1 to 9 of this title, the administrator shall notify the lender in writing of such violations and the actions the lender must take to cure the violations. The administrator shall allow the lender thirty days after the postmark date of the notice, or the date of delivery if not mailed, to cure the violations before taking disciplinary action in accordance with subsection (1) of this section. If the administrator determines that such lender has performed such actions contained in such notice, the lender shall not be liable for the violations that have been cured. (b) This subsection (2) shall not apply if the lender violated the code, articles 1 to 9 of this title, in a repeated or willful manner. (c) If an alleged violation of the code, articles 1 to 9 of this title, is the result of a bona fide clerical oversight or computer-based error and not the product of the lender's established lending practices, and the alleged violation can be corrected without material change to the terms and conditions of a consumer's loan, the lender shall have thirty days after the postmark date of the notice, or the date of delivery if not mailed, to cure the alleged violation without incurring any fine or penalty or any required refund of any finance charges associated with the alleged violation. Nothing in this subsection (2) shall exempt a lender from making required refunds if the violation resulted in an overcharge or excess charge to the consumer. (3) A lender shall have ninety days to comply with any rule, interpretation, or opinion of the administrator that requires a lender to implement new policies or procedures that involve the reprinting of the lender's forms to include new disclosures, or that requires the lender to revise existing computer programs or add new computer programs to comply with the rule, interpretation, or opinion. During the ninety-day period, the administrator shall not deem the lender to be in violation of articles 1 to 9 of this title for noncompliance with the new rule, interpretation, or opinion. Source: L. 2000: Entire article added, p. 443, � 1, effective July 1. L. 2001: (1) amended, p. 30, � 13, effective March 9. L. 2004: (2) amended and (3) added, p. 319, � 7, effective July 1. 5-3.1-119. Applicability of other provisions of this title. The provisions of the code, articles 1 to 9 of this title, apply to a lender unless such provisions are inconsistent with this article. Source: L. 2000: Entire article added, p. 443, � 1, effective July 1. 5-3.1-120. Criminal culpability. A consumer shall not be subject to any criminal penalty for entering into a deferred deposit loan agreement. A consumer shall not be subject to any criminal penalty in the event the instrument is dishonored, unless the consumer's account on which the instrument was written was closed before the agreed upon date of negotiation, subject to the provisions of section 18-5-205, C.R.S. Source: L. 2000: Entire article added, p. 443, � 1, effective July 1. 5-3.1-121. Unfair or deceptive practices. (1) No person shall engage in unfair or deceptive acts, practices, or advertising in connection with a deferred deposit loan. (2) No person may engage in any device, subterfuge, or pretense to evade the requirements of this article, including making loans disguised as a personal property sale, and leaseback transaction; disguising loan proceeds as a cash rebate for the pretextual installment sale of goods or services; or making, offering, guaranteeing, assisting, or arranging a consumer to obtain a loan with a greater rate of interest, consideration, or charge than is permitted by this article through any method including mail, telephone, internet, or any electronic means regardless of whether the person has a physical location in the state. Source: L. 2000: Entire article added, p. 443, � 1, effective July 1. L. 2010: Entire section amended, (HB 10-1351), ch. 267, p. 1224, � 7, effective August 11. Initiated 2018: (2) amended, Proposition 111, L. 2019, p. 4540, � 4, effective February 1, 2019, proclamation of the Governor issued December 19, 2018. Cross references: For the legislative declaration in the 2010 act amending this section, see section 1 of chapter 267, Session Laws of Colorado 2010. 5-3.1-122. Unconscionability. (1) In applying the provisions of sections 5-5-109 and 5-6-112 to the actions of a lender, consideration shall be given to the following, among other factors: (a) The financial benefits of the loan to the consumer and the level of risk incurred by the lender in extending credit; (b) The absence of collateral other than the instrument executed by the consumer payable to the lender; (c) The relation between the amount and terms of credit granted and the cost of making the loan. (2) A lender shall require a consumer to fill out a loan application at least once in each twelve-month period of time and shall maintain this application on file. The application shall be signed and dated by the consumer. (3) (a) A lender shall require the consumer to provide a pay stub or other evidence of income at least once each twelve-month period. Such evidence shall not be over forty-five days old when presented. If a lender requires a consumer to present a bank statement to secure a loan, the lender shall allow the consumer to delete from the statement the information regarding to whom the debits listed on the statement were payable. (b) If the amount borrowed is not more than twenty-five percent of the consumer's monthly gross income and benefits, as evidenced by a paycheck stub or otherwise substantiated, a lender shall not be obligated to investigate the consumer's continued debt position, and the consumer's ability to repay the loan need not be further demonstrated. (4) If a lender complies with the requirements of subsections (2) and (3) of this section, and the deferred deposit loan otherwise complies with this article and other applicable law, neither the consumer's inability to repay the loan nor the lender's decision to obtain or not obtain additional information concerning the consumer's creditworthiness shall be cause to determine that a loan is unconscionable. Source: L. 2004: Entire section added, p. 320, � 8, effective July 1. 5-3.1-123. Use of multiple agreements for deferred deposit loans. If a consumer obtains a deferred deposit loan voluntarily and separately from his or her spouse and the consumer's action is documented in writing, signed by the consumer, and retained by the lender, the transaction shall not be considered a violation of section 5-3-205. Source: L. 2004: Entire section added, p. 320, � 9, effective July 1. ARTICLE 3.5 Consumer Equity Protection Law reviews: For article, The Colorado Equity Protection Act: A Response to Predatory Lending Practices, see 32 Colo. Law. 79 (April 2003). PART 1 OBLIGOR PROTECTION 5-3.5-101. Definitions. As used in this article, unless the context otherwise requires: (1) Bridge loan means temporary or short-term financing with a maturity of less than eighteen months that requires payments of only interest until the entire unpaid balance is due and payable. (2) Covered loan means a consumer credit transaction secured by property located within this state that is considered a mortgage under section 152 of the federal Home Ownership and Equity Protection Act of 1994, 15 U.S.C. sec. 1602 (aa), as amended, and regulations adopted pursuant thereto by the federal reserve board, including, without limitation, 12 CFR 226.32, as amended; except that, if the total points and fees paid by the obligor at or before closing exceed six percent of the total loan amount, such loan shall be deemed to be a covered loan if the transaction otherwise meets the requirements of this subsection (2). (3) Lender means any individual or entity that originates one or more covered loans. The individual or entity to whom a covered loan is initially payable, either on the face of the note or contract or by agreement when there is no note or contract, shall be deemed to be the lender. (4) Mortgage broker means a person other than an employee or exclusive agent of a lender who, for compensation, brings an obligor and lender together to obtain a covered loan. (5) Obligor means each obligor, co-obligor, co-signer, or grantor obligated to repay a covered loan. (6) Political subdivision means a county, city and county, city, town, service authority, school district, local improvement district, law enforcement authority, city or county housing authority, or water, sanitation, fire protection, metropolitan, irrigation, drainage, or other special district or any other kind of municipal, quasi-municipal, or public corporation organized pursuant to law. (7) Principal balance means the amount financed plus prepaid finance charges as defined in the federal Truth in Lending Act, 15 U.S.C. sec. 1601 et seq., as amended. (8) Servicer has the same meaning as set forth in section 2605 (i)(2) of the federal Real Estate Settlement Procedures Act of 1974, 12 U.S.C. sec. 2601 et seq., as amended. Source: L. 2002: Entire article added, p. 1594, � 1, effective June 7. L. 2003: (2) amended, p. 1894, � 8, effective July 1. 5-3.5-102. Protection of obligors. (1) A covered loan is subject to the following limitations: (a) Limitation on balloon payment. No covered loan may contain a provision for a scheduled payment that is more than twice as large as the average of earlier regularly scheduled payments, unless such balloon payment becomes due and payable not less than one hundred twenty months after the date of execution of the loan. This prohibition does not apply when the payment schedule is adjusted to account for the seasonal or irregular income of the obligor or if the purpose of the loan is a bridge loan connected with, or related to, the acquisition or construction of a dwelling intended to become the obligor's principal dwelling. (b) No call provision. No covered loan may contain a call provision that permits the lender, in its sole discretion, to accelerate the indebtedness. This prohibition shall not apply when: (I) Acceleration of repayment of the loan is justified: (A) By default in which the obligor fails to meet the repayment terms of the agreement for any outstanding balance; or (B) Pursuant to a due-on-sale provision; (II) There is fraud or material misrepresentation by an obligor in connection with the loan; (III) There is a provision permitting acceleration if the lender, in good faith, believes itself to be materially insecure or believes that the prospect of future payment has become materially impaired; or (IV) There is any action or inaction by the obligor that adversely affects the lender's security for the loan or any rights of the lender in such security. (c) No negative amortization. No covered loan may contract for a payment schedule with regular periodic payments that cause the principal balance to increase; except that this paragraph (c) shall not prohibit negative amortization as a consequence of a temporary forbearance or restructure sought by the obligor. (d) No increased interest rate upon default. No covered loan may contract for any increase in the interest rate as a result of a default; except that this paragraph (d) shall not apply to periodic interest rate changes in a variable rate loan that is otherwise consistent with the provisions of the loan agreement if the change in the interest rate is not occasioned by the event of default or a permissible acceleration of the indebtedness. (e) Limitations on mandatory arbitration clauses. No covered loan may be subject to a mandatory arbitration clause that: (I) Does not comply with rules set forth by a nationally recognized arbitration organization such as the American arbitration association; (II) Does not require the arbitration proceeding to be conducted: (A) Within the federal judicial district in which the subject property is located; (B) In the city nearest the obligor's residence where a federal district court is located; or (C) At such other location as may be mutually agreed upon by the parties; (III) Does not require the lender to contribute at least fifty percent of the amount of any filing fee; and (IV) Does not require the lender to pay standard daily arbitration fees, both its own and those of the obligor, for at least the first day of arbitration. (f) No advance payments. No covered loan may include terms under which any periodic payments required under the loan are paid in advance from the loan proceeds provided to the obligor. (g) Limitations on prepayment fees. (I) First thirty-six months only. A prepayment fee or penalty shall be permitted only on a refinance to a different lender other than pursuant to a sale and only during the first thirty-six months after the date of execution of a covered loan. Prepayment fees and penalties shall not exceed six months' interest for prepayment within the first three years of the loan. The prepayment fees or penalties permitted by this paragraph (g) shall apply only to covered loans that are secured by a first mortgage, deed of trust, or security interest to refinance, by amendment, payoff, or otherwise, an existing loan made to finance the acquisition or construction of a dwelling, including a refinance loan providing additional sums of money for any purpose, regardless of whether related to acquisition or construction. No prepayment fees or penalties shall be included in the loan documents or charged to the obligor for prepayment: (A) After the third year of the loan; (B) Pursuant to a refinance with the same lender; or (C) That is partial. (II) No prepayment fees for certain refinancing. No prepayment fee or penalty may be charged on a refinancing of a covered loan if the covered loan being refinanced is owned by the refinancing lender at the time of such refinancing. (III) Lender must offer choice. A lender shall not include a prepayment penalty fee in a covered loan unless the lender offers the obligor the option of choosing a loan product without a prepayment penalty fee. A lender shall be deemed to have complied with this requirement if the obligor receives and executes the following disclosure, which may be incorporated with any other required disclosure: LOAN PRODUCT CHOICE I was provided with an offer to accept a product both with and without a prepayment penalty provision. I have chosen to accept the product with / without a prepayment penalty. Source: L. 2002: Entire article added, p. 1595, � 1, effective June 7. L. 2003: (1)(a) amended, p. 1894, � 9, effective July 1. 5-3.5-103. Restricted acts and practices. (1) The following acts and practices are prohibited in the making of a covered loan: (a) No lending without cautionary notice. (I) A lender may not make a covered loan unless the lender or a mortgage broker has given the following notice, or a substantially similar notice, in writing to the obligor within a reasonable period of time after determining that the loan would result in a covered loan, but no later than the time by which the notice is required under the notice provision contained in 12 CFR 226.31 (c), as amended: CONSUMER CAUTION If you obtain this loan, the lender will have a mortgage in Colorado; this is a deed of trust on your home. You could lose your home, and any money you have put into it, if you do not meet your obligations under the loan. Mortgage loan rates and closing costs and fees vary based on many factors, including your particular credit and financial circumstances, your earnings history, the loan-to-value requested, and the type of property that will secure your loan. The loan rate and fees could vary based on which lender or broker you select. You are not required to complete any loan agreement merely because you have received these disclosures or have signed a loan application. If you proceed with this mortgage loan, you should also remember that you may face serious financial risks if you use this loan to pay off credit card debts and other debts in connection with this transaction and then later incur significant new credit card charges or other debts. If you continue to accumulate debt after this loan is closed and then experience financial difficulties, you could lose your home and any equity you have in it if you do not meet your mortgage loan obligations. Property taxes and homeowner's insurance are your responsibility. Not all lenders provide escrow services for these payments. You should ask your lender about these services. Your payments on existing debts contribute to your credit ratings. You should not accept any advice to ignore your regular payments to your existing creditors. (II) It shall be a rebuttable presumption that a lender or broker has met its obligation to provide this disclosure if the consumer provides the lender or broker with a signed acknowledgment of receipt of a copy of the notice set forth in subparagraph (I) of this paragraph (a). (b) No lending without due regard to repayment ability. (I) A lender may not make a covered loan to a consumer based on the consumer's collateral without regard to the consumer's repayment ability, including the consumer's current and expected income, current obligations, and employment. (II) There is a presumption that a creditor has violated this paragraph (b) if the creditor engages in a pattern or practice of making loans subject to 12 CFR 226.32 without verifying and documenting consumers' repayment abilities. (III) (A) In the case of a stated income loan, the reasonable basis for believing that there are sufficient funds to support the covered loan may not be based solely on the income stated by the obligor, but may include other information in the possession of the lender after the solicitation of all information that the lender customarily solicits in connection with stated income loans. A lender shall not knowingly or willfully originate a covered loan as a stated income loan with the intent of evading this subparagraph (III). (B) A person who willfully and knowingly gives false or inaccurate information or fails to provide information that the person is required to disclose pursuant to applicable law may have violated and may be subject to penalties established in 15 U.S.C. sec. 1611. (c) Refinancing within a one-year period. Within one year after having extended credit subject to this article, no lender shall refinance any covered loan to the same obligor into another covered loan unless the refinancing is in the obligor's interest. An assignee holding or servicing an extension of mortgage credit subject to this article shall not, for the remainder of the one-year period following the date of origination of the credit, refinance any covered loan to the same obligor into another covered loan unless the refinancing is in the obligor's interest. A creditor or assignee shall not engage in acts or practices to evade this paragraph (c), including a pattern or practice of arranging for the refinancing of its own loans by affiliated or unaffiliated creditors, or modifying a loan agreement, regardless of whether the existing loan is satisfied and replaced by the new loan, and charging a fee. (d) No refinancing certain low-rate loans. A lender shall not replace or consolidate a zero interest rate, or other low-rate, loan made by a governmental or nonprofit lender with a covered loan within the first ten years after the low-rate loan was made unless the current holder of the loan consents in writing to the refinancing. For purposes of this paragraph (d), a low-rate loan is a loan that carries a current interest rate two percentage points or more below the current yield on United States department of the treasury securities with a comparable maturity. If the loan's current interest rate is either a discounted introductory rate or a rate that automatically steps up over time, then the fully-indexed rate or the fully stepped-up rate, as appropriate, should be used in lieu of the current rate to determine whether a loan is a low-rate loan. (e) Restrictions on covered loan proceeds to pay home improvement contracts. A lender shall not pay a contractor under a home-improvement contract from the proceeds of a covered loan other than by an instrument payable to the obligor or jointly to the obligor and the contractor or, at the election of the obligor, through a third-party escrow agent in accordance with terms established in a written agreement signed by the obligor, the lender, and the contractor prior to the disbursement of funds to the contractor. (f) No financing of credit insurance. No covered loan may include, directly or indirectly, financing of any premiums for any credit life, credit disability, credit property, or credit unemployment insurance, any other life or health insurance products, or any payments for any debt cancellation or suspension agreement or contracts; except that calculated insurance premiums or debt cancellation or suspension fees paid on a monthly basis shall not be considered to have been financed by the lender for purposes of this paragraph (f). (g) No recommending default. No lender shall recommend or encourage default on an existing loan or other debt prior to and in connection with the closing or planned closing of a covered loan that refinances all or any portion of such existing loan or debt. (h) No fee for payoff quote. No creditor may charge a fee for informing or transmitting to any person the balance due to pay off a covered loan or to provide a release upon prepayment. A creditor shall provide a payoff balance within a reasonable time after a request, but in any event not more than five business days after a written request. Source: L. 2002: Entire article added, p. 1597, � 1, effective June 7. L. 2003: (1)(c) amended, p. 1894, � 10, effective July 1. 5-3.5-104. Reporting to credit bureaus. A lender or its servicer shall report at least quarterly both the favorable and unfavorable payment history information of the obligor on payments due to the lender on a covered loan to a nationally recognized consumer credit reporting agency. This section shall not prevent a lender or its servicer from agreeing with the obligor not to report specified payment history information in the event of a resolved or unresolved dispute with an obligor, and shall not apply to covered loans held or serviced by a lender for less than ninety days. Source: L. 2002: Entire article added, p. 1600, � 1, effective June 7. PART 2 ENFORCEMENT AND LIABILITY 5-3.5-201. Enforcement - liability. The attorney general and any obligor of a covered loan may enforce this article with respect to such covered loan in the manner provided for violations of the federal Home Ownership and Equity Protection Act of 1994, 15 U.S.C. sec. 1639, and regulations adopted pursuant thereto by the federal reserve board, including, without limitation, 12 CFR 226.32, as set forth in the federal Truth in Lending Act, 15 U.S.C. sec. 1640, and regulations adopted pursuant thereto by the federal reserve board, including the provisions on civil liability, class actions, rescission, correction, and bona fide error. Persons engaged in the purchase, sale, assignment, securitization, or servicing of covered loans shall be liable under this article for the action or inaction of persons originating such loans only in the manner and to the extent provided for violation of the federal Home Ownership and Equity Protection Act of 1994 and the federal Truth in Lending Act, 15 U.S.C. sec. 1641, and regulations adopted pursuant thereto by the federal reserve board. Source: L. 2002: Entire article added, p. 1600, � 1, effective June 7. PART 3 MISCELLANEOUS PROVISIONS 5-3.5-301. Effective date - applicability. Section 5-3.5-303 is intended to restate and confirm the existing law of this state, namely that the laws of this state relating to the financial and lending activities are to be applied on a uniform, statewide basis. Parts 1 and 2 of this article shall take effect January 1, 2003. This part 3 shall take effect upon passage. This article shall apply to covered loans offered or entered into on or after January 1, 2003. Source: L. 2002: Entire article added, p. 1601, � 1, effective June 7. 5-3.5-302. Severability. The provisions of this article are severable and if any of its provisions are held unconstitutional, the decision of the court shall not affect or impair any of the remaining provisions of this article. It is hereby declared to be the legislative intent that this article would have been adopted if the unconstitutional provisions had not been included. Source: L. 2002: Entire article added, p. 1601, � 1, effective June 7. 5-3.5-303. Relationship to other laws. (1) General rule. All political subdivisions of this state, including municipalities, shall be prohibited from enacting and enforcing ordinances, resolutions, and regulations pertaining to lending activities. (2) Preemption. Any provision of this article 3.5 preempted by federal law with respect to a national bank or federal savings association shall also, to the same extent, not apply to an operating subsidiary of a national bank or federal savings association that satisfies the requirements for operating subsidiaries established in 12 CFR 5.34, relating to operating subsidiaries, nor to a bank chartered under the laws of Colorado or any operating subsidiary of such a state chartered bank. (3) Interpretation. The provisions of this article 3.5 shall be interpreted and applied to the fullest extent practical in a manner consistent with applicable federal laws and regulations and shall not be deemed to constitute an attempt to override federal law. Source: L. 2002: Entire article added, p. 1601, � 1, effective June 7. L. 2023: (2) amended, (HB 23-1301), ch. 303, p. 1815, � 2, effective August 7. ARTICLE 3.7 Consumer Credit Solicitation Protection 5-3.7-101. Consumer credit solicitation protection - definitions. (1) A solicitor that makes a firm offer of credit for a lender credit card or a seller credit card to a consumer by mail solicitation and receives an acceptance of that offer that lists the address of the consumer accepting the offer as different from the address to which the offer was sent shall, prior to issuing or directing issuances of the lender credit card or seller credit card, verify that the consumer accepting the offer is the same consumer to whom the offer was sent. (2) As used in this section, unless the context otherwise requires: (a) Firm offer of credit shall have the same meaning as set forth in 15 U.S.C. sec. 1681a (l). (b) Solicitor means the person making the offer by mail solicitation and does not include a card issuer or other creditor when that creditor or card issuer relies on an independent third party to provide the services. (c) Verify means the use of commercially reasonable efforts to ascertain that the consumer responding to a mail solicitation is the same consumer to whom the solicitation was directed. For the purposes of this article, a solicitor shall be deemed to verify that the consumer accepting a mail solicitation is the same consumer to whom the solicitation was directed if: (I) A consumer responding at a telephone number appearing in a publicly available directory or database as the telephone number of the consumer to whom the solicitation was mailed identifies himself or herself as the consumer to whom the solicitation was mailed and acknowledges the consumer's acceptance of the solicitation; or (II) A consumer presents the solicitor, including presentation by facsimile transmission or mail, the original or a copy of one or more documents, including a driver's license, social security card, passport, or any other identification document issued by a state or federal governmental agency, that, on the face of the document or documents, appears to confirm such consumer's identity as the consumer to whom a solicitation was mailed and the consumer acknowledges acceptance of the solicitation; or (III) The solicitor verified, by any means adopted in federal regulations, that the consumer accepting the solicitation is the consumer to whom the solicitation was directed; or (IV) The solicitor verified by any other means, that under the standards and practices of the industry in which the solicitor is engaged would be deemed sufficient, that the consumer accepting the solicitation is the same consumer to whom the solicitation was sent. Source: L. 2004: Entire article added, p. 657, � 1, effective July 1. ARTICLE 4 Insurance Editor's note: This article was numbered as article 4 of chapter 73, C.R.S. 1963. This title was repealed and reenacted in 1971, and this article was subsequently repealed and reenacted in 2000, resulting in the addition, relocation, and elimination of sections as well as subject matter. For amendments to this article prior to 2000, consult the Colorado statutory research explanatory note and the table itemizing the replacement volumes and supplements to the original volume of C.R.S. 1973 beginning on page vii in the front of this volume and the editor's note following the title heading. Former C.R.S. section numbers are shown in editor's notes following those sections that were relocated. For a detailed comparison of this article, see the comparative tables located in the back of the index. PART 1 INSURANCE IN GENERAL