§ 537.5110 — Cure of default

Iowa § 537.5110

• Jurisdiction: Iowa
• Title XIII: COMMERCE
• Ch. 537: CONSUMER CREDIT CODE

Text

1. Notwithstanding any term or agreement to the contrary, the obligation of a consumer
in a consumer credit transaction is enforceable by a creditor only after compliance with this
section, except that in a consumer rental purchase agreement, default is governed by section
537.3618.
2. a. A creditor who believes in good faith that a consumer is in default may give the
consumer written notice of the alleged default, and, if the consumer has a right to cure the
default, shall give the consumer the notice of right to cure provided in section 537.5111
before commencing any legal action in any court on an obligation of the consumer and
before repossessing collateral. However, this subsection and subsection 4 do not require a
creditor to give notice of right to cure prior to the filing of a petition by a creditor seeking to
enforce the consumer’s obligation in which attachment under chapter 639 is sought upon
any of the grounds specified in section 639.3, subsections 3 through 12.
b. When property is attached without the giving of notice of right to cure as permitted by
this subsection, the creditor immediately shall give notice of the attachment to the consumer
in the same manner as prescribed by the rules of civil procedure for service of an original
notice. The notice shall advise the consumer that the attachment may be discharged by the
filing of a bond as provided in sections 639.42 and 639.45, or by the filing of a motion with
the court to discharge the attachment pursuant to section 639.63. The notice required by this
paragraph is in lieu of the notice requirements of sections 639.31 and 639.33.
c. When a motion is filed to discharge an attachment made without the giving of a prior
notice of right to cure, the court shall hear the motion within three days of the filing of the
motion to discharge. If the court finds that the attachment should not have been issued or
should not have been levied on all or any part of the property held, the attachment shall
be discharged in whole or in part and property wrongfully attached shall be returned to the
consumer.
d. If the court finds that there was no probable cause to believe the grounds upon
which the attachment was issued, the consumer may be awarded damages plus reasonable
attorney’s fees to be determined by the court.
3. A consumer has a right to cure the default unless, in other than an insurance premium
loan transaction, the creditor has given the consumer a proper notice of right to cure with
respect to a prior default which occurred within three hundred sixty-five days of the present
default, or the consumer has voluntarily surrendered possession of goods that are collateral
and the creditor has accepted them in full satisfaction of any debt owing on the transaction
in default.
4. If the consumer has a right to cure a default:
a. A creditor shall not accelerate the maturity of the unpaid balance of the obligation,
demand or take possession of collateral, otherwise than by accepting a voluntary surrender
of it, or otherwise attempt to enforce the obligation until twenty days after a proper notice of
right to cure is given.
b. With respect to an insurance premium loan, a creditor shall not give notice of
cancellation as provided in subsection 6 until thirteen days after a proper notice of right to
cure is given.
c. Until the expiration of the minimum applicable period after the notice is given, the
consumer may cure the default by tendering either the amount of all unpaid installments
due at the time of the tender, without acceleration, plus any unpaid delinquency or deferral
charges, or the amount stated in the notice of right to cure, whichever is less, or by tendering
any performance necessary to cure any default other than nonpayment of amounts due,
which is described in the notice of right to cure. The act of curing a default restores to the
consumer the consumer’s rights under the agreement as though no default had occurred,
except as provided in subsection 3. However, where the obligation in default is a credit card
account that has been closed, the act of curing a default does not restore to the consumer
the consumer’s rights under the agreement as though no default had occurred.
5. This section and the provisions on waiver, agreements to forego rights, and settlement
of claims under section 537.1107 do not prohibit a consumer from voluntarily surrendering

possession of goods which are collateral and do not prohibit the creditor from thereafter
enforcing the creditor’s security interest in the goods at any time after default.
6. If a default on an insurance premium loan is not cured, 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 that issued the policy or contract and
totheinsured. Theinsurer, withintwobusinessdaysafterreceiptofthenoticeofcancellation
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 or contract or by law and,
within ten business days after the effective date of the cancellation, pay to the lender any
premium unearned on the policy or contracts 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.
7. If a creditor in a consumer credit transaction commences an action for money
judgment prior to giving the customer notice of right to cure as required by this section and
fails to follow the procedures set out in this section, the court shall dismiss the action without
prejudice. If the action was commenced as a small claim under chapter 631, the creditor
shall not be found to be in violation of this section for purposes of section 537.5201 and the
penalties provided in that section shall not apply if the creditor proves by a preponderance
of the evidence that the creditor did not at the time of the violation have either knowledge
or reason to know of the requirements of this section, and for this purpose the court shall
consider all relevant evidence, including but not limited to the education or experience of
the creditor with respect to the collection of debts arising from consumer credit transactions
and any representation of the creditor by legal counsel and any legal advice rendered to the
creditor with respect to the collection of debts arising from consumer credit transactions.

Legislative History

[C75, 77, 79, 81, §537.5110; 82 Acts, ch 1025, §1, 2]