§ 16a-2-404 — Payday loans; finance charges; rights and duties

(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, a licensed or supervised lender may charge an amount not to exceed 15% of the amount of the cash advance.
(2) The minimum term of any loan under this section shall be 7 days and the 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 made under this section outstanding to the same borrower at any one time and shall not make more than three loans to any one borrower within a 30 calendar day period. Each lender shall maintain a journal of loan transactions for each borrower 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 following notice in at least 10 point bold face type: NOTICE TO BORROWER: KANSAS LAW PROHIBITS THIS LENDER AND THEIR RELATED INTEREST FROM HAVING MORE THAN TWO LOANS OUTSTANDING TO YOU AT ANY ONE TIME. A LENDER CANNOT DIVIDE THE AMOUNT YOU WANT 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 and Spanish; and
(b) obtain the borrower's signature or initials next to the English version of the notice or, if the borrower advises the lender that the borrower is more proficient in Spanish than in English, then next to the Spanish version of the notice.
(5) The contract rate of any loan made under this section shall not be more than 3% per month of the loan proceeds after the maturity date. No insurance charges or any other charges of any nature whatsoever shall be permitted, except as stated in subsection (7), including any charges for cashing the loan proceeds if they are given in check form.
(6) Any loan made under this section shall not be repaid by proceeds of another loan made under this section by the same lender or related interest. The proceeds from any loan made under this section shall not be applied to any other loan from the same lender or related interest.
(7) A consumer who is unable to repay a payday loan as contemplated under this section when due may elect once every 12 months to repay the payday loan by means of an extended payment plan. The 12-month period shall be measured from the date that the consumer pays in full an extended payment plan with the lender until the date that the consumer enters another extended payment plan with the lender.
(a) To request an extended payment plan, the consumer shall request the plan before close of business on the last business day before the due date of the outstanding payday loan and sign an amendment to the original agreement which memorializes the plan terms.
(b) The extended payment plan terms shall allow the consumer to repay the outstanding payday loan including any fee due in at least four substantially equal installments. Each plan installment shall be due on or after a date on which the consumer receives regular income, or, if the consumer has no regular income, due dates shall be a minimum of two weeks between installments. The consumer may prepay an extended payment plan in full at any time without penalty. As long as the consumer complies with the terms of the extended payment plan, the plan shall be at no additional cost to the consumer and the lender shall not charge the consumer any interest or additional fees during the term of the extended payment plan. The lender may, with each payment under the plan by the consumer, provide for the return of the consumer's prior held check and require a new check for the remaining balance under the plan.
(c) If the consumer fails to pay any extended payment plan installment when due, the consumer shall be in default of the payment plan and the lender may immediately accelerate payment on the remaining balance and take action to collect all amounts due.
(d) No additional payday loan shall be made to the consumer under this section during an extended payment plan.
(e) Lenders shall prominently display the availability of extended payment plans where loans are made and shall disclose the availability of extended payment plans in payday loan agreements.
(8) On a consumer loan transaction in which cash is advanced in exchange for a personal check, one return check charge may be charged if the check is deemed insufficient as defined in K.S.A. 16a-2-501(1)(e), and amendments thereto. Upon receipt of the check from the consumer, the lender shall immediately stamp the back of the check with an endorsement that states: "Negotiated as part of a loan made under K.S.A. 16a-2-404. Holder takes subject to claims and defenses of maker. No criminal prosecution."
(9) In determining whether a consumer loan transaction made under the provisions of this section is unconscionable conduct under K.S.A. 16a-5-108, and amendments thereto, consideration shall be given, among other factors, to:
(a) The ability of the borrower to repay within the terms of the loan made under this section; or
(b) the original request of the borrower for amount and term of the loan are within the limitations under this section.
(10) A consumer may rescind any consumer loan transaction made under the provisions of this section without cost not later than the end of the business day immediately following the day on which the loan transaction was made. To rescind the loan transaction:
(a) A consumer shall inform the lender that the consumer wants to rescind the loan transaction;
(b) the consumer shall return the cash amount of the principal of the loan transaction to the lender; and
(c) the lender shall return any fees that have been collected in association with the loan.
(11) A person shall not commit or cause to be committed any of the following acts or practices in connection with a consumer loan transaction subject to the provisions of this section:
(a) Use any device or agreement that would have the effect of charging or collecting more fees, charges or interest or that results in more fees, charges or interest being paid by the consumer, than allowed by the provisions of this 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 other person that is designed to evade the applicability of this section;
(b) use, or threaten to use the criminal process in any state to collect on the loan;
(c) sell any other product of any kind in connection with the making or collecting of the loan;
(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 or defense arising out of the contract.
(12) As used in this section, "related interest" shall have the same meaning as "person related to" in K.S.A. 16a-1-301, and amendments thereto.
(13) Any person who facilitates, enables or acts as a conduit or agent for any third party who enters into a consumer loan transaction with the characteristics set out in subsections (1)(a) and (1)(b) shall be required to obtain a supervised loan license pursuant to K.S.A. 16a-2-301, and amendments thereto, regardless of whether the third party may be exempt from licensure provisions of the uniform consumer credit code.
(14) Notwithstanding that a person may be exempted by virtue of federal law from the interest rate, finance charge and licensure provisions of the uniform consumer credit code, all other provisions of the code shall apply to both the person and the loan transaction.
(15) This section shall be supplemental to and a part of the uniform consumer credit code.

Legislative 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; L. 2024, ch. 6, § 52; January 1, 2025.