Please excuse the delay in responding to your letter which inquired whether the NSF charge allowed by S.F. 420 would be a permissible charge under the Iowa Consumer Credit Code (ICCC) .
As you know, any charge assessed by the creditor in a consumer credit transaction must either be included and disclosed as part of the finance charge or fall under the classification of additional charges. A charge for a NSF returned check clearly does not fall under the ICCC definition of finance charge § 537.1301 (19). The Truth-In-Lending Act. also considers such a charge to be one which is excluded from the finance charge. (See: 12 CFR; Reg. Z § 226.4, para. 4 [c] [21 .)
As you note in your letter, the question is whether an NSF check charge is permitted by § 537.2501 of the ICCC. In my review of the question, I cannot find any basis to support the argument that such charges are included under § 537.2501. This is true even when it is considered that8S.F. 420 is found in the U.C.C. The ICCC does incorporate the UCC where applicable (See:537.1103); however, this is, of course, true only if the U.C.C. is not displaced by particular provisions of the ICCC.
I recognize that such a conclusion may be contrary to the legislative intent of S.F. 420. If, indeed, this is true, it would appear that the Legislature will have to explicitly include NSF charges under § 537.2501.
I should note that I have not surveyed the other U.C.C.C. jurisdictions, and I am unable to tell you if they have taken a position on this question.
Please note, this letter is neither an opinion of the Attorney General nor a ruling of the ICCC Administrator and should not be construed or relied upon as such.
If you would like to discuss the matter further, please feel free to give me a call.
Linda Thomas Lowe
Assistant Attorney General
S.F. 420 - Charges for Nonsufficient Funds Checks & the ICCC (PDF)