16a-2-404.   Payday loans; finance charges; rights andduties.(1) On consumer loan transactions in which cash is advanced:

      (a)   With a short term,

      (b)   a single payment repayment is anticipated, and

      (c)   such cash advance is equal to or less than $500, alicensed orsupervisedlender may chargean amount not to exceed 15% of the amount of thecashadvance.

      (2)   The minimum term of any loan under this section shall be 7 days andthe maximum term of any loan made under this section shall be 30 days.

      (3)   A lender and related interest shall not have more than two loans madeunder this section outstanding to the same borrower at any one time andshall not make more than three loans to any one borrower within a 30 calendarday period. Each lender shall maintain a journal of loan transactions for eachborrower which shall include at least the following information:

      (a)   Name, address and telephone number of each borrower; and

      (b)   date made and due date of each loan.

      (4)   Each loan agreement made under this section shall contain the followingnotice in at least 10 point bold face type:   NOTICE TO BORROWER:   KANSAS LAWPROHIBITS THIS LENDER AND THEIR RELATED INTEREST FROM HAVING MORE THAN TWOLOANS OUTSTANDING TO YOU AT ANY ONE TIME. A LENDER CANNOT DIVIDE THE AMOUNT YOUWANT TO BORROW INTO MULTIPLE LOANS IN ORDER TO INCREASE THE FEES YOU PAY.

      Prior to consummation of the loan transaction, the lender must:

      (a)   Provide the notice set forth in this subsection in both English andSpanish; and

      (b)   obtain the borrower's signature or initials next to the English versionofthe notice or, if the borrower advises the lender that the borrower is moreproficient in Spanish than in English, then next to the Spanish version of thenotice.

      (5)   The contract rate of any loan made under this sectionshall not be more than 3% per month of the loan proceeds after the maturitydate. No insurance charges or any other charges of any nature whatsoever shallbe permitted, except as stated in subsection (7), includingany charges for cashing the loan proceeds if they are given in check form.

      (6)   Any loan made under this section shall not be repaid byproceeds of another loan made under this section by the same lender or relatedinterest. The proceeds from any loan made under this section shall not beapplied to any other loan from the same lender or related interest.

      (7)   On a consumer loan transaction in which cash isadvanced in exchange for a personal check, one return checkcharge may be chargedif the check is deemed insufficient as defined in paragraph (e) of subsection(1) of K.S.A. 16a-2-501, and amendments thereto.Upon receipt of the check from the consumer, the lender shall immediatelystamp the back of the check with an endorsement that states: "Negotiated aspart of a loan made under K.S.A. 16a-2-404. Holder takes subject to claims anddefenses of maker. No criminal prosecution."

      (8)   In determining whether a consumer loan transaction madeunder the provisions of this section is unconscionable conduct under K.S.A.16a-5-108, and amendments thereto, consideration shall be given, among otherfactors, to:

      (a)   The ability of the borrower to repay within the terms of the loan madeunder this section; or

      (b)   the original request of the borrower for amount and term of the loan arewithin the limitations under this section.

      (9)   A consumer may rescind any consumer loan transaction made under theprovisions of this section without cost not later than the end of the businessday immediately following the day on which the loan transaction was made. Torescind the loan transaction:

      (a)   A consumer shall inform the lender that the consumer wants to rescindthe loan transaction;

      (b)   the consumer shall return the cash amount of the principal of the loantransaction to the lender; and

      (c)   the lender shall return any fees that have been collected in associationwith the loan.

      (10)   A person shall not commit or cause to be committed any of the followingacts or practices in connection with a consumer loan transaction subject to theprovisions of this section:

      (a)   Use any device or agreement that would have the effect of charging orcollecting more fees, charges or interest, or which results in more fees,charges, or interest being paid by the consumer, than allowed by theprovisions ofthis section, including but not limited to:

      (i)   Entering into a different type of transaction with the consumer;

      (ii)   entering into a sales/leaseback or rebate arrangement;

      (iii)   catalog sales; or

      (iv)   entering into any other transaction with the consumer or any otherperson that is designedto evade the applicability of this section;

      (b)   use, or threaten to use the criminal process in any state to collect onthe loan;

      (c)   sell any other product of any kind in connection with the making orcollecting of theloan;

      (d)   include any of the following provisions in a loan document:

      (i)   A hold harmless clause;

      (ii)   a confession of judgment clause;

      (iii)   a provision in which the consumer agrees not to assert a claim ordefense arising out of the contract.

      (11)   As used in this section, "related interest" shall have the same meaningas "person related to" in K.S.A. 16a-1-301, and amendments thereto.

      (12)   Any person who facilitates, enables or acts as a conduit or agent forany third party who enters into a consumer loan transaction with thecharacteristics set out in paragraphs (a) and (b) of subsection (1) shall berequired to obtain a supervised loan license pursuant to K.S.A. 16a-2-301, andamendments thereto, regardless of whether the third party may be exempt fromlicensure provisions of the Kansas uniform consumer credit code.

      (13)   Notwithstanding that a person may be exempted by virtue of federal lawfrom the interest rate, finance charge and licensure provisions of the Kansasuniform consumer credit code, all other provisions of the code shall apply toboth the person and the loan transaction.

      (14)   This section shall be supplemental to and a part oftheuniform consumer credit code.

      History:   L. 1993, ch. 75, § 1;L. 1999, ch. 107, § 20;L. 2001, ch. 50, § 1;L. 2004, ch. 29, § 1;L. 2005, ch. 144, § 12; July 1.