Kansas Changes Consumer Credit Code Impacting Finance Companies January 1, 2025

Kansas has made significant changes to its Consumer Credit Code (Code) (K.S.A. Chapter 16A) which will take effect January 1, 2025. Finance companies need to understand the impact of these changes prior to the effective date. Many of the changes relate to the removal and relocation of mortgage-related provisions from the Code to the Mortgage Business Act. Mortgage lenders should review these changes in detail. There are several changes that may have a substantial impact on non-mortgage creditors and lenders. The following summarizes some key operational impacts of these changes for finance companies taking assignments of closed-end credit sales or making or purchasing loans not secured by real estate.

I. Code changes that will impact both credit sales and loans include the following:

• Code Applicability Raised to Threshold Amount – The Code will now apply to larger credit sales and loans up to a new threshold amount that will be calculated and adjusted the same as the threshold amount under the Truth in Lending Act. Currently, the Code only applies to transactions of $25,000 or less. The new threshold amount is $69,500 and will increase to $71,900 on January 1, 2025, and continue to adjust annually on January 1 based on changes to the consumer price index. Finance companies will now be subject to the Code’s provisions for transactions up to the threshold amount. The Code continues to include a provision allowing finance companies to opt in to the Code’s applicability, meaning that transactions that are above the threshold amount may be subject to the Code at the option of the finance company.
• Prepaid Finance Charges – The allowable prepaid finance charges will increase to the lesser of 2 percent or $300 (currently $200) for both closed-end credit sales and loans.
• Minimum Finance Charges – The minimum finance charge allowed upon prepayment in full will increase to $10 for all credit sales and loans, up from $7.50 for transactions more than $75 and $5 for transactions of $75 or less.
• Insufficient Funds Fees – The maximum insufficient funds fee for checks will remain at $30 with notice either by mail or provided in a regular monthly statement required prior to charging the fee. The option to charge $10 without any notice to the customer is no longer allowed.
• Cash Payment Receipts – A receipt for a cash payment may be sent electronically instead of just via mail.
• Right to Cure – The right to cure statutory form has been removed from the Code, but the Code still requires all the items contained in the current statutory form be provided to the borrower. Using the current statutory form still appears to comply with the Code requirements, but finance companies now have the option to provide the required provisions in a format they choose. Finance companies can continue using their current right to cure forms or reformat them if desired.
• Advertising – There will be a new requirement to include the creditor’s name and license number on all solicitations and advertisements to Kansas residents. Records of all solicitations and advertisements must be maintained for 36 months.
• Electronic Signatures and Records – If a consumer agrees in writing, electronic means can be used for signatures and records required by the Code.

II. Code changes that will be applicable only to direct loans to consumers include the following:

• Increase in Allowed Finance Charges for Loans – The allowable loan finance charge is being raised to 36 percent for all loans up to the abovementioned threshold amount and raised to $71,900 on January 1, 2025. Previously, the finance charge was limited to 36 percent for loans of $860 or less and 21 percent for loans of $860 or more. Finance companies will now be allowed to charge up to 36 percent for all loans up to the threshold amount. [Note: for credit sales, the Code allows any finance charge agreed to by the consumer in the credit sale.]
• Supervised Loans Term Limit – The maximum term for any supervised loan of $1,000 or less will be 25 months no matter the amount of the loan. Currently, a 37-month term is allowed if the loan amount is $300 or more and 25 months if the loan amount is less than $300.
• Loan Advertising – The Code expands the prohibition from making false, misleading or deceptive advertisements regarding loans or the availability of loans to all persons and not just to licensed, supervised lenders.

The following chart summarizes the changes to Code discussed in this article that are effective January 1, 2025. To review all changes to the Code, see KS HB 2247.

Finance companies taking assignment of credit sales or making or purchasing loans under the Kansas Code should prepare for these changes. Reinhart’s Consumer Finance Practice assists finance companies with their regulatory compliance needs. If you have questions regarding these Code changes or need assistance in complying, please contact Wendy Collins or another member of Reinhart’s Consumer Finance Practice.