2012 -- S 2832

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LC02281

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2012

____________

A N A C T

RELATING TO FINANCIAL INSTITUTIONS - DEFERRED PRESENTMENT

TRANSACTIONS

     Introduced By: Senator Joshua Miller

     Date Introduced: March 28, 2012

     Referred To: Senate Corporations

It is enacted by the General Assembly as follows:

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     SECTION 1. Sections 19-14-1, 19-14-2, 19-14-4 and 19-14-6 of the General Laws in

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Chapter 19-14 entitled "Licensed Activities" are hereby amended to read as follows:

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     19-14-1. Definitions. -- Unless otherwise specified, the following terms shall have the

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following meanings throughout chapters 14, 14.1, 14.2, 14.3, 14.4, 14.6, 14.8, and 14.10 and

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14.11 of this title:

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      (1) "Check" means any check, draft, money order, personal money order, or other

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instrument for the transmission or payment of money. For the purposes of check cashing,

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travelers checks or foreign denomination instruments shall not be considered checks. "Check

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cashing" means providing currency for checks;

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      (2) "Deliver" means to deliver a check to the first person who in payment for the check

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makes or purports to make a remittance of or against the face amount of the check, whether or not

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the deliverer also charges a fee in addition to the face amount, and whether or not the deliverer

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signs the check;

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      (3) "Electronic money transfer" means receiving money for transmission within the

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United States or to locations abroad by any means including, but not limited to, wire, facsimile or

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other electronic transfer system;

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      (4) (i) "Lender" means any person who makes or funds a loan within this state with the

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person's own funds, regardless of whether the person is the nominal mortgagee or creditor on the

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instrument evidencing the loan;

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      (ii) A loan is made or funded within this state if any of the following conditions exist:

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      (A) The loan is secured by real property located in this state;

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      (B) An application for a loan is taken by an employee, agent, or representative of the

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lender within this state;

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      (C) The loan closes within this state;

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      (D) The loan solicitation is done by an individual with a physical presence in this state;

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or

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      (E) The lender maintains an office in this state.

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      (iii) The term "lender" shall also include any person engaged in a transaction whereby

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the person makes or funds a loan within this state using the proceeds of an advance under a line

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of credit over which proceeds the person has dominion and control and for the repayment of

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which the person is unconditionally liable. This transaction is not a table funding transaction. A

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person is deemed to have dominion and control over the proceeds of an advance under a line of

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credit used to fund a loan regardless of whether:

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      (A) The person may, contemporaneously with or shortly following the funding of the

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loan, assign or deliver to the line of credit lender one or more loans funded by the proceeds of an

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advance to the person under the line of credit;

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      (B) The proceeds of an advance are delivered directly to the settlement agent by the line

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of credit lender, unless the settlement agent is the agent of the line of credit lender;

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      (C) One or more loans funded by the proceeds of an advance under the line of credit is

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purchased by the line of credit lender; or

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      (D) Under the circumstances as set forth in regulations adopted by the director or the

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director's designee pursuant to this chapter;

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      (5) "Licensee" means any person licensed under this chapter;

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      (6) "Loan" means any advance of money or credit including, but not limited to:

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      (i) Loans secured by mortgages;

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      (ii) Insurance premium finance agreements;

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      (iii) The purchase or acquisition of retail installment contracts or advances to the holders

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of those contracts;

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      (iv) Educational loans;

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      (v) Any other advance of money; or

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      (vi) Deferred presentment transactions as defined in this section. Any transaction such as

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those commonly known as "pay day loans," "pay day advances," or "deferred presentment loans,"

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in which a cash advance is made to a customer in exchange for the customer's personal check, or

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in exchange for the customer's authorization to debit the customer's deposit account, and where

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the parties agree either that the check will not be cashed or deposited, or that customer's deposit

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account will not be debited, until a designated future date.

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      (7) "Loan broker" means any person who, for compensation or gain, or in the expectation

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of compensation or gain, either directly or indirectly, solicits, processes, negotiates, places or sells

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a loan within this state for others in the primary market, or offers to do so. A loan broker shall

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also mean any person who is the nominal mortgagee or creditor in a table funding transaction. A

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loan is brokered within this state if any of the following conditions exist:

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      (i) The loan is secured by real property located in this state;

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      (ii) An application for a loan is taken or received by an employee, agent or representative

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of the loan broker within this state;

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      (iii) The loan closes within this state;

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      (iv) The loan solicitation is done by an individual with a physical presence in this state;

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or

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      (v) The loan broker maintains an office in this state.

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      (8) "Personal money order" means any instrument for the transmission or payment of

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money in relation to which the purchaser or remitter appoints or purports to appoint the seller as

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his or her agent for the receipt, transmission, or handling of money, whether the instrument is

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signed by the seller or by the purchaser or remitter or some other person;

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      (9) "Primary market" means the market in which loans are made to borrowers by lenders,

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whether or not through a loan broker or other conduit;

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      (10) "Principal owner" means any person who owns, controls, votes or has a beneficial

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interest in, directly or indirectly, ten percent (10%) or more of the outstanding capital stock

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and/or equity interest of a licensee;

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      (11) "Sell" means to sell, to issue, or to deliver a check;

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      (12) "Small loan" means a loan of less than five thousand dollars ($5,000), not secured

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by real estate, made pursuant to the provisions of chapter 14.2 of this title;

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      (13) "Small loan lender" means a lender engaged in the business of making small loans

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within this state;

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      (14) "Table funding transaction" means a transaction in which there is a

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contemporaneous advance of funds by a lender and an assignment by the mortgagee or creditor of

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the loan to the lender;

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      (15) "Check casher" means a person or entity that, for compensation, engages, in whole

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or in part, in the business of cashing checks;

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      (16) "Deferred deposit presentment transaction" means any transaction such as those

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commonly known as "pay-day loans," or "pay-day advances," or "deferred presentment loans" in

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which a cash advance is made to a customer in exchange for the customer's personal check or in

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exchange for the customer's authorization to debit the customer's deposit account and where the

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parties agree either that the check will not be cashed or deposited, or that the customer's deposit

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account will not be debited until a designated future date for providing currency or a payment

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instrument in exchange for a drawer’s check and agreeing to hold the check for a deferment

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period;

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      (17) "Insurance premium finance agreement" means an agreement by which an insured,

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or prospective insured, promises to pay to an insurance premium finance company the amount

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advanced or to be advanced, under the agreement to an insurer or to an insurance producer, in

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payment of a premium or premiums on an insurance contract or contracts, together with interest

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and a service charge, as authorized and limited by this title;

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      (18) "Insurance premium finance company" means a person engaged in the business of

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making insurance premium finance agreements or acquiring insurance premium finance

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agreements from other insurance premium finance companies;

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      (19) "Simple interest" means interest computed on the principal balance outstanding

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immediately prior to a payment for the actual number of days between payments made on a loan

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over the life of a loan;

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      (20) "Nonprofit organization" means a corporation qualifying as a 26 U.S.C. section

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501(c)(3) nonprofit organization, in the operation of which no member, director, officer, partner,

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employee, agent, or other affiliated person profits financially other than receiving reasonable

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salaries if applicable;

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      (21) "Mortgage loan originator" has the same meaning set forth in subdivision 19-14.10-

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3(6);

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      (22) "Mortgage loan" means a loan secured in whole or in part by real property located

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in this state;

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      (23) "Loan solicitation" shall mean an effectuation, procurement, delivery and offer, and

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advertisement of a loan. Loan solicitation also includes providing or accepting loan applications

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and assisting persons in completing loan applications and/or advising, conferring, or informing

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anyone regarding the benefits, terms and/or conditions of a loan product or service. Loan

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solicitation does not include loan processing or loan underwriting as defined in this section. Loan

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solicitation does not include telemarketing which is defined for purposes of this section to mean

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contacting a person by telephone with the intention of collecting such person's name, address and

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telephone number for the sole purpose of allowing a mortgage loan originator to fulfill a loan

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inquiry;

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      (24) "Processes" shall mean, with respect to a loan, any of a series of acts or functions

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including the preparation of a loan application and supporting documents performed by a person

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which leads to or results in the acceptance, approval, denial, and/or withdrawal of a loan

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application, including, without limitation, the rendering of services including loan underwriting,

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obtaining verifications, credit reports or appraisals, communicating with the applicant and/or the

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lender or loan broker, and/or other loan processing and origination services for consideration by a

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lender or loan broker. Loan processing does not include the following:

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      (i) Providing loan closing services;

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      (ii) Rendering of credit reports by an authorized credit reporting agency; and

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      (iii) Rendering of appraisal services.

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      (25) "Loan underwriting" shall mean a loan process that involves the analysis of risk

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with respect to the decision whether to make a loan to a loan applicant based on credit,

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employment, assets, and other factors including evaluating a loan applicant against a lender's

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various lending criteria for creditworthiness, making a determination for the lender as to whether

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the applicant meets the lender's pre-established credit standards and/or making a recommendation

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regarding loan approval;

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      (26) "Negotiates" shall mean, with respect to a loan, to confer directly with or offer

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advice directly to a loan applicant or prospective loan applicant for a loan product or service

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concerning any of the substantive benefits, terms, or conditions of the loan product or service;

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      (27) "Natural person employee" shall mean any natural person performing services as a

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bona-fide employee for a person licensed under the provisions of Rhode Island general laws

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section 19-14-1, et. seq., in return for a salary, wage, or other consideration, where such salary,

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wage, or consideration is reported by the licensee on a federal form W-2 payroll record. The term

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does not include any natural person or business entity performing services for a person licensed

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under the provisions of Rhode Island general laws in return for a salary, wage, or other

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consideration, where such salary, wage, or consideration is reported by the licensee on a federal

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form 1099;

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      (28) "Bona-fide employee" shall mean an employee of a licensee who works under the

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oversight and supervision of the licensee;

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      (29) "Oversight and supervision of the licensee" shall mean that the licensee provides

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training to the employee, sets the employee's hours of work, and provides the employee with the

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equipment and physical premises required to perform the employee's duties;

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      (30) "Operating subsidiary" shall mean a majority-owned subsidiary of a financial

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institution or banking institution that engages only in activities permitted by the parent financial

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institution or banking institution;

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      (31) "Provisional employee" means a natural person who, pursuant to a written

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agreement between the natural person and a wholly owned subsidiary of a financial holding

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company, as defined in The Bank Holding Company Act of 1956, as amended, a bank holding

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company, savings bank holding company, or thrift holding company, is an exclusive agent for the

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subsidiary with respect to mortgage loan originations, and the subsidiary: (a) holds a valid loan

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broker's license and (b) enters into a written agreement with the director or the director's designee

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to include:

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      (i) An "undertaking of accountability" in a form prescribed by the director or the

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director's designee, for all of the subsidiary's exclusive agents to include full and direct financial

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and regulatory responsibility for the mortgage loan originator activities of each exclusive agent as

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if said exclusive agent was an employee of the subsidiary;

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      (ii) A business plan to be approved by the director or the director's designee, for the

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education of the exclusive agents, the handling of consumer complaints related to the exclusive

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agents, and the supervision of the mortgage loan origination activities of the exclusive agents;

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      (iii) A restriction of the exclusive agents' mortgage loan originators' activities to loans to

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be made only by the subsidiary's affiliated bank; and

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      (32) "Multi-state licensing system" means a system involving one or more states, the

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District of Columbia, or the Commonwealth of Puerto Rico established to facilitate the sharing of

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regulatory information and the licensing, application, reporting and payment processes, by

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electronic or other means, for mortgage lenders and loan brokers, and other licensees required to

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be licensed under this chapter.

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      (33) "Negative equity" means the difference between the value of an asset and the

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outstanding portion of the loan taken out to pay for the asset, when the latter exceeds the former

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amount.

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      (34) "Loan closing services" means providing title services, including title searches, title

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examinations, abstract preparation, insurability determinations, and the issuance of title

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commitments and title insurance policies, conducting loan closings, and preparation of loan

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closing documents when performed by or under the supervision of a licensed attorney, licensed

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title agency, or licensed title insurance company.

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     (35) “Deferred presentment provider” means a person engaged in providing deferred

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presentment transactions.

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     19-14-2. Licenses required. -- (a) No person shall engage within this state in the

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business of: (1) making or funding loans or acting as a lender or small loan lender; (2) brokering

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loans or acting as a loan broker; (3) selling checks for a fee or other consideration; (4) cashing

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checks for a fee or other consideration which includes any premium charged for the sale of goods

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in excess of the cash price of the goods; (5) providing electronic money transfers for a fee or

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other consideration; (6) providing debt-management services; or (7) performing the duties of a

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mortgage loan originator without first obtaining a license or registration from the director or the

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director's designee; or (8) making deferred presentment transactions. The licensing requirement

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for any person providing debt management plans shall apply to all persons, without regard for

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state of incorporation or a physical presence in this state, who initiate or service debt management

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plans for residents of this state. Special exemptions from licensing for each activity are contained

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in other chapters in this title.

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      (b) No lender or loan broker licensee shall permit an employee to act as a mortgage loan

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originator without first verifying that such originator is licensed under this chapter. No individual

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may act as a mortgage loan originator without being licensed, or act as a mortgage loan originator

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for more than one person. The license of a mortgage loan originator is not effective during any

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period when such mortgage loan originator is not associated with a lender or loan broker licensee.

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      (c) Each loan negotiated, solicited, placed, found or made without a license as required

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in subsection (a) of this section shall constitute a separate violation for purposes of this chapter.

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      (d) No person engaged in the business of making or brokering loans in this state, whether

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licensed in accordance with the provisions of this chapter, or exempt from licensing, shall accept

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applications or referral of applicants from, or pay a fee to, any lender, loan broker or mortgage

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loan originator who is required to be licensed or registered under said sections but is not licensed

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to act as such by the director or the director's designee.

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     19-14-4. Annual fee. -- (a) Each licensee shall pay an annual license fee as follows:

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      (1) Each small loan lender license and each branch certificate, the sum of five hundred

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fifty dollars ($550);

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      (2) Each loan broker license and each branch certificate, the sum of five hundred fifty

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dollars ($550);

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      (3) Each lender license and each branch certificate, the sum of one thousand one hundred

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dollars ($1,100);

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      (4) Each sale of checks license, the sum of three hundred sixty dollars ($360);

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      (5) Each check cashing license, the sum of three hundred sixty dollars ($360);

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      (6) Each electronic money transfer license, the sum of three hundred sixty dollars

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($360);

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      (7) Each registration to provide debt-management services, the sum of two hundred

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dollars ($200); and

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      (8) Each mortgage loan originator license, the sum of one hundred dollars ($100).

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      (9) Each deferred presentment transaction license, the sum of three hundred sixty dollars

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($360).

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      (b) Any licensee who shall not pay the annual fee by December 31 of each year shall be

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subject to a daily penalty of twenty-five dollars ($25) per day, subject to a maximum of seven

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hundred fifty dollars ($750). The penalty shall be paid to the director to and for the use of the

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state. The penalty may be waived for good cause by the director or the director's designee, upon

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written request.

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     19-14-6. Bond of applicant. -- (a) An applicant for any license shall file with the director

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or the director's designee a bond to be approved by him or her in which the applicant shall be the

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obligor.

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      (b) The amount of the bond shall be as follows:

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      (1) Small loan lenders, the sum of ten thousand dollars ($10,000);

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      (2) Loan brokers, the sum of twenty thousand dollars ($20,000);

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      (3) Lenders, the sum of fifty thousand dollars ($50,000);

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      (4) Sale of checks and electronic money transfer licensees, the sum of fifty thousand

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dollars ($50,000) subject to a maximum of one hundred and fifty thousand dollars ($150,000)

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when aggregated with agent locations;

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      (5) Check cashing licensees who accept checks for collection with deferred payment, the

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sum of fifty thousand dollars ($50,000) subject to a maximum of one hundred and fifty thousand

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dollars ($150,000) when aggregated with agent locations Deferred presentment transaction

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licensees, the sum of fifty thousand dollars ($50,000) subject to a maximum of one hundred and

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fifty thousand dollars ($150,000) when aggregated with agent locations;

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      (6) Foreign exchange licensees, the sum of ten thousand dollars ($10,000);

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      (7) Each branch or agent location of a licensee, the sum of five thousand dollars

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($5,000); or

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      (8) Each debt-management services registrant, the amount provided in section 19-14.8-

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13.; or

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      (c) The bond shall run to the state for the use of the state and of any person who may

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have cause of action against the obligor of the bond under the provisions of this title. The bond

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shall be conditioned upon the obligor faithfully conforming to and abiding by the provisions of

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this title and of all rules and regulations lawfully made, and the obligor will pay to the state and to

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any person any and all money that may become due or owing to the state or to the person from

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the obligor under and by virtue of the provisions of this title.

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      (d) The provisions of subsection (b)(6) of this section shall not apply to any foreign

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exchange business holding a valid electronic money transfer license issued pursuant to section

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19-14-1 et seq., that has filed with the division of banking the bond required by subsections (b)(4)

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and (b)(7) of this section.

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      (e) The bond shall remain in force and effect until the surety is released from liability by

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the director or the director's designee or until the bond is cancelled by the surety. The surety may

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cancel the bond and be released from further liability under the bond upon receipt by the director

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or the director's designee of written notice of the cancellation of the bond at least thirty (30) days

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in advance of the cancellation of the bond. The cancellation shall not affect any liability incurred

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or accrued under the bond before the termination of the thirty (30) day period. Upon receipt of

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any notice of cancellation, the director shall provide written notice to the licensee.

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     SECTION 2. Sections 19-14.4-4 and 19-14.4-5 of the General Laws in Chapter 19-14.4

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entitled "Check Cashing" are hereby amended to read as follows:

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     19-14.4-4. Fees for services. -- No licensee shall:

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      (1) Charge check-cashing fees in excess of three percent (3%) of the face amount of the

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check, or five dollars ($5.00), whichever is greater, if the check is the payment of any kind of

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state public assistance or federal social security benefit;

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      (2) Charge check-cashing fees for personal checks in excess of ten percent (10%) eight

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percent (8%) of the face amount of the personal check or five dollars ($5.00), whichever is

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greater; or

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      (3) Charge check-cashing fees in excess of five percent (5%) of the face amount of the

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check or five dollars ($5.00), whichever is greater, for all other checks.

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      (4) Charge deferred deposit transaction fees in excess of ten percent (10%) of the amount

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of funds advanced.

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     19-14.4-5. Posting of charges -- Endorsement -- Receipt. -- (a) In every location

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licensed pursuant to this chapter, there shall be at all times posted in a conspicuous place within

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the licensed premises a complete and unambiguous schedule of all fees for cashing checks,

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deferred deposit transactions expressed as both a dollar amount and an annual percentage rate,

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and the initial issuance of any identification card.

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      (b) Before a licensee shall deposit, with any regulated institution or other insured-

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deposit-taking institution organized under the laws of the United States, a check cashed by the

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licensee, the check must be endorsed with the name under which the licensee is doing business

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and must include the words "licensed check cashing services".

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      (c) The licensee shall provide a receipt for each transaction for the benefit of a customer.

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      (d) Each check casher shall also post a list of valid identification which is acceptable in

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lieu of identification provided by the check casher. The information required by this section shall

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be clear, legible, and in letters not less than one-half (1/2) inch in height. The information shall be

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posted in a conspicuous location in the unobstructed view of the public within the check cashers'

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premises. Failure to post information as required by this section, or the imposition of fees or

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identification requirements contrary to the information posted, shall constitute a deceptive trade

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practice under chapter 13.1 of title 6.

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     SECTION 3. Section 19-14.4-5.1 of the General Laws in Chapter 19-14.4 entitled

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"Check Cashing" is hereby repealed.

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     19-14.4-5.1. Customer checks -- Deferred deposits. -- (a) A check casher may defer the

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deposit of a personal check written by a customer for a term of no less than thirteen (13) days,

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pursuant to the provisions of this section. The face amount of the check shall not exceed five

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hundred dollars ($500).

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      (b) Each deferred deposit shall be made pursuant to a written agreement that has been

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signed by the customer and by the check casher or an authorized representative of the check

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casher. The written agreement shall contain a statement of the total amount of any fees charged

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for the deferred deposit, expressed both in United States currency and as an annual percentage

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rate (APR), as required by federal regulations. The written agreement shall authorize the check

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casher to defer deposit of the personal check until a specific date no less than thirteen (13) days

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from the date the written agreement was signed and executed. The written agreement shall not

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permit the check casher to accept collateral.

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      (c) A roll-over is an extension or deferral of the payment due date of a deferred deposit

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transaction for the payment of only an additional fee.

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      (d) The maximum amount of a single customer's check is five hundred dollars ($500).

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      (e) The maximum aggregate amount of concurrently outstanding checks held by the

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licensee or its affiliate from the same customer is five hundred dollars ($500).

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      (f) The maximum number of concurrently outstanding checks held by the licensee or its

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affiliates from the same customer is three (3).

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      (g) The maximum number of rollovers permitted is one.

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      (h) The check casher shall give a duplicate original of the agreement to the customer at

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the time of the transaction.

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     SECTION 4. Title 19 of the General Laws entitled "FINANCIAL INSTITUTIONS" is

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hereby amended by adding thereto the following chapter:

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     CHAPTER 14.11

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DEFERRED PRESENTMENT TRANSACTIONS

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     19-14.11-1. Short title. -- This chapter may also be referred to as the “Pay Day Lending

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Law”.

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     19-14.11-2. Purpose. -- The purpose of this chapter is to provide enhanced regulation of

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deferred presentment transactions and prevent fraud, abuse, and other unlawful activity associated

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with deferred presentment transactions in part by:

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     (1) Providing for sufficient regulatory authority and resources to monitor deferred

11-11

presentment transactions;

11-12

     (2) Preventing rollovers; and

11-13

     (3) Regulating the allowable fees charged in connection with a deferred presentment

11-14

transaction.

11-15

     19-14.11-3. Definitions. -- For the purposes of this chapter:

11-16

     (1) “Affiliate” means a person who, directly or indirectly, through one or more

11-17

intermediaries controls, is controlled by, or is under common control with, a deferred presentment

11-18

provider.

11-19

     (2) “Deferment period” means the number of days a deferred presentment provider agrees

11-20

to defer depositing, presenting, or redeeming a payment instrument.

11-21

     (3) “Deferred presentment transaction” means a deferred presentment transaction as

11-22

defined in subdivision 19-14-1(16).

11-23

     (4) “Department” means the department of business regulation.

11-24

     (5) “Director” means the director of the department of business regulation.

11-25

     (6) “Drawer” means a customer who writes a personal check and upon whose account the

11-26

check is drawn.

11-27

     (7) “Extension of a deferred presentment agreement” means continuing a deferred

11-28

presentment transaction past the deferment period by having the drawer pay additional fees and

11-29

the deferred presentment provider continuing to hold the check for another deferment period.

11-30

     (8) “Rollover” means the termination or extension of a deferred presentment agreement

11-31

by the payment of an additional fee and the continued holding of the check, or the substitution of

11-32

a new check by the drawer pursuant to a new deferred presentment agreement.

11-33

     (9) “Termination of a deferred presentment agreement” means that the check that is the

11-34

basis for the agreement is redeemed by the drawer by payment in full in cash, or is deposited and

12-1

the deferred presentment provider has evidence that such check has cleared. Verification of

12-2

sufficient funds in the drawer’s account by the deferred presentment provider is not sufficient

12-3

evidence to deem that the deferred deposit transaction is terminated.

12-4

     19-14.11-4. License and Exemption. -- A person may not provide deferred presentment

12-5

transaction services unless the person is licensed pursuant to the provisions of chapter 19-14

12-6

except that no license to provide deferred presentment transaction services shall be required of

12-7

any:

12-8

     (1) Regulated institution, bank or credit union organized under the laws of the United

12-9

States, or subject to written notice with a designated Rhode Island agent for service of process in

12-10

the form prescribed by the director or the director's designee, of any other state within the United

12-11

States if the laws of the other state in which such bank or credit union is organized authorizes

12-12

under conditions not substantially more restrictive than those imposed by the laws of this state, as

12-13

determined by the director or the director's designee, a financial institution or credit union to

12-14

engage in the business of deferred presentment transaction services checks in the other state; no

12-15

bank or credit union duly organized under the laws of another state within the United States may

12-16

receive deposits, pay checks or lend money from any location within this state unless such bank

12-17

or credit union has received approval from the director or the director's designee for the

12-18

establishment of an interstate branch office pursuant to chapter 19-7; or

12-19

     (2) Natural person employee, as defined in subdivision 19-14-1(27), who is employed by

12-20

a licensee when acting on the licensee's behalf.

12-21

     19-14.11-5. Requirements for deferred presentment transactions.-- (1) Each deferred

12-22

presentment transaction must be documented in a written agreement signed by the deferred

12-23

presentment provider and the drawer.

12-24

     (2) The deferred presentment transaction agreement must be executed on the day the

12-25

deferred presentment provider furnishes currency or a payment instrument to the drawer.

12-26

     (3) Each written agreement must, in addition to any information required by rule, contain

12-27

the following information:

12-28

     (i) The name or trade name, address, and telephone number of the deferred presentment

12-29

provider and the name and title of the person who signs the agreement on behalf of the provider;

12-30

     (ii) The date the deferred presentment transaction is made;

12-31

     (iii) The amount of the drawer’s check;

12-32

     (iv) The length of the deferment period;

12-33

     (v) The last day of the deferment period;

13-34

     (vi) The address and telephone number of the licensed location;

13-35

     (vii) A clear description of the drawer’s payment obligations under the deferred

13-36

presentment transaction; and

13-37

     (viii) The transaction number assigned by the licensed location’s database.

13-38

     (4) The deferred presentment provider must furnish a copy of the deferred presentment

13-39

transaction agreement to the drawer.

13-40

     (5) The face amount of a check taken for deferred presentment may not exceed five

13-41

hundred dollars ($500) exclusive of the fees allowed under this section.

13-42

     (6) A deferred presentment provider or its affiliate may not charge fees that exceed ten

13-43

percent (10%) of the currency or payment instrument provided. However, a verification fee may

13-44

be charged as provided for in this chapter. The ten percent (10%) fee may not be applied to the

13-45

verification fee. A deferred presentment provider may charge only those fees specifically

13-46

authorized in this chapter.

13-47

     (7) The fees authorized by this section may not be collected before the drawer’s check is

13-48

presented or redeemed.

13-49

     (8) A deferred presentment agreement may not be for a term longer than thirty-one (31)

13-50

days nor less than seven (7) days.

13-51

     (9) A deferred presentment provider may not require a drawer to provide any additional

13-52

security for the deferred presentment transaction or any extension or require the drawer to provide

13-53

any additional guaranty from another person.

13-54

     (10) A deferred presentment provider may not include any of the following provisions in

13-55

a deferred provider agreement:

13-56

     (i) A hold harmless clause;

13-57

     (ii) A confession of judgment clause;

13-58

     (iii) Any assignment of or order for payment of wages or other compensation for

13-59

services;

13-60

     (iv) A provision in which the drawer agrees not to assert any claim or defense arising out

13-61

of the agreement; or

13-62

     (v) A waiver of any provision of this section.

13-63

     (11) A deferred presentment provider shall immediately provide the drawer with the full

13-64

amount of any check to be held, less only the fees allowed under this section.

13-65

     (12) The deferred presentment agreement and the drawer’s check must bear the same

13-66

date, and the number of days of the deferment period shall be calculated from that date. The

13-67

deferred presentment provider and the drawer may not alter or delete the date on any written

13-68

agreement or check held by the deferred presentment provider.

14-1

     (13) For each deferred presentment transaction, the deferred presentment provider must

14-2

comply with the disclosure requirements of 12 C.F.R., part 226, relating to the Federal Truth-in-

14-3

Lending Act, and Regulation Z of the Board of Governors of the Federal Reserve Board as may

14-4

be amended from time to time. A copy of the disclosure must be provided to the drawer at the

14-5

time the deferred presentment transaction is initiated.

14-6

     (14) A deferred presentment provider or its affiliate may not accept or hold an undated

14-7

check or a check dated on a date other than the date on which the deferred presentment provider

14-8

agreed to hold the check and signed the deferred presentment transaction agreement.

14-9

     (15) A deferred presentment provider must hold the drawer’s check for the agreed

14-10

number of days, unless the drawer chooses to redeem the check before the presentment date.

14-11

     (16) Proceeds in a deferred presentment transaction may be made to the drawer in the

14-12

form of the deferred presentment provider’s payment instrument if the deferred presentment

14-13

provider is registered under part II; however, an additional fee may not be charged by a deferred

14-14

presentment provider or its affiliate for issuing or cashing the deferred presentment provider’s

14-15

payment instrument.

14-16

     (17) A deferred presentment provider may not require the drawer to accept its payment

14-17

instrument in lieu of currency.

14-18

     (18) A deferred presentment provider or its affiliate may not engage in the rollover of a

14-19

deferred presentment agreement. A deferred presentment provider may not redeem, extend, or

14-20

otherwise consolidate a deferred presentment agreement with the proceeds of another deferred

14-21

presentment transaction made by the same or an affiliate.

14-22

     (19) A deferred presentment provider may not enter into a deferred presentment

14-23

transaction with a drawer who has an outstanding deferred presentment transaction with that

14-24

provider or with any other deferred presentment provider, or with a person whose previous

14-25

deferred presentment transaction with that provider or with any other provider has been

14-26

terminated for less than twenty-four (24) hours. The deferred presentment provider must verify

14-27

such information as follows:

14-28

     (i) The deferred presentment provider shall maintain a common database and shall verify

14-29

whether the provider or an affiliate has an outstanding deferred presentment transaction with a

14-30

particular person or has terminated a transaction with that person within the previous twenty-four

14-31

(24) hours.

14-32

     (ii) The deferred presentment provider shall access the database established pursuant to

14-33

subdivision (23) and shall verify whether any other deferred presentment provider has an

14-34

outstanding deferred presentment transaction with a particular person or has terminated a

15-1

transaction with that person within the previous twenty-four (24) hours. If a provider has not

15-2

established a database, the deferred presentment provider may rely upon the written verification

15-3

of the drawer as provided in subdivision (20).

15-4

     (20) A deferred presentment provider shall provide the following notice in a prominent

15-5

place on each deferred presentment agreement in at least fourteen (14) point type in substantially

15-6

the following form and must obtain the signature of the drawer where indicated:

15-7

     NOTICE

15-8

     STATE LAW PROHIBITS YOU FROM HAVING MORE THAN ONE DEFERRED

15-9

PRESENTMENT AGREEMENT AT ANY ONE TIME. STATE LAW ALSO PROHIBITS

15-10

YOU FROM ENTERING INTO A DEFERRED PRESENTMENT AGREEMENT WITHIN

15-11

TWENTY-FOUR (24) HOURS AFTER TERMINATING ANY PREVIOUS DEFERRED

15-12

PRESENTMENT AGREEMENT. FAILURE TO OBEY THIS LAW COULD CREATE

15-13

SEVERE FINANCIAL HARDSHIP FOR YOU AND YOUR FAMILY.

15-14

     YOU MUST SIGN THE FOLLOWING STATEMENT:

15-15

      I DO NOT HAVE AN OUTSTANDING DEFERRED PRESENTMENT AGREEMENT

15-16

WITH ANY DEFERRED PRESENTMENT PROVIDER AT THIS TIME. I HAVE NOT

15-17

TERMINATED A DEFERRED PRESENTMENT AGREEMENT WITHIN THE PAST

15-18

TWENTY-FOUR (24) HOURS.

15-19

     (Signature of Drawer)

15-20

      YOU CANNOT BE PROSECUTED IN CRIMINAL COURT FOR A CHECK

15-21

WRITTEN UNDER THIS AGREEMENT, BUT ALL LEGALLY AVAILABLE CIVIL MEANS

15-22

TO ENFORCE THE DEBT MAY BE PURSUED AGAINST YOU.

15-23

     STATE LAW PROHIBITS A DEFERRED PRESENTMENT PROVIDER (THIS

15-24

BUSINESS) FROM ALLOWING YOU TO “ROLL OVER” YOUR DEFERRED

15-25

PRESENTMENT TRANSACTION. THIS MEANS THAT YOU CANNOT BE ASKED OR

15-26

REQUIRED TO PAY AN ADDITIONAL FEE IN ORDER TO FURTHER DELAY THE

15-27

DEPOSIT OR PRESENTMENT OF YOUR CHECK FOR PAYMENT. IF YOU INFORM THE

15-28

PROVIDER IN PERSON THAT YOU CANNOT COVER THE CHECK OR PAY IN FULL

15-29

THE AMOUNT OWING AT THE END OF THE TERM OF THIS AGREEMENT, YOU WILL

15-30

RECEIVE A GRACE PERIOD EXTENDING THE TERM OF THE AGREEMENT FOR AN

15-31

ADDITIONAL SIXTY (60) DAYS AFTER THE ORIGINAL TERMINATION DATE,

15-32

WITHOUT ANY ADDITIONAL CHARGE. THE DEFERRED PRESENTMENT PROVIDER

15-33

SHALL REQUIRE THAT YOU, AS A CONDITION OF OBTAINING THE GRACE PERIOD,

15-34

COMPLETE CONSUMER CREDIT COUNSELING PROVIDED BY AN AGENCY

16-1

INCLUDED ON THE LIST THAT WILL BE PROVIDED TO YOU BY THIS PROVIDER.

16-2

YOU MAY ALSO AGREE TO COMPLY WITH AND ADHERE TO A REPAYMENT PLAN

16-3

APPROVED BY THAT AGENCY. IF YOU DO NOT COMPLY WITH AND ADHERE TO A

16-4

REPAYMENT PLAN APPROVED BY THAT AGENCY, WE MAY DEPOSIT OR PRESENT

16-5

YOUR CHECK FOR PAYMENT AND PURSUE ALL LEGALLY AVAILABLE CIVIL

16-6

MEANS TO ENFORCE THE DEBT AT THE END OF THE SIXTY (60) DAY GRACE

16-7

PERIOD.

16-8

     (21) The deferred presentment provider may not deposit or present the drawer’s check if

16-9

the drawer informs the provider in person that the drawer cannot redeem or pay in full in cash the

16-10

amount due and owing the deferred presentment provider. No additional fees or penalties may be

16-11

imposed on the drawer by virtue of any misrepresentation made by the drawer as to the

16-12

sufficiency of funds in the drawer’s account. Additional fees may not be added to the amounts

16-13

due and owing to the deferred presentment provider.

16-14

     (22) If, by the end of the deferment period, the drawer informs the deferred presentment

16-15

provider in person that the drawer cannot redeem or pay in full in cash the amount due and owing

16-16

the deferred presentment provider, the deferred presentment provider shall provide a grace period

16-17

extending the term of the agreement for an additional sixty (60) days after the original

16-18

termination date, without any additional charge.

16-19

     (i) The provider shall require that as a condition of providing a grace period, that the

16-20

drawer make an appointment with a consumer credit counseling agency within seven (7) days

16-21

after the end of the deferment period and complete the counseling by the end of the grace period.

16-22

The drawer may agree to, comply with, and adhere to a repayment plan approved by the

16-23

counseling agency. If the drawer agrees to comply with and adhere to a repayment plan approved

16-24

by the counseling agency, the provider must also comply with and adhere to that repayment plan.

16-25

The deferred presentment provider may not deposit or present the drawer’s check for payment

16-26

before the end of the sixty (60) day grace period unless the drawer fails to comply with such

16-27

conditions or the drawer fails to notify the provider of such compliance. Before each deferred

16-28

presentment transaction, the provider may verbally advise the drawer of the availability of the

16-29

grace period consistent with the written notice in subdivision (20), and may not discourage the

16-30

drawer from using the grace period.

16-31

     (ii) At the commencement of the grace period, the deferred presentment provider shall

16-32

provide the drawer:

16-33

     (A) Verbal notice of the availability of the grace period consistent with the written notice

16-34

in subdivision (20).

17-1

     (B) A list of approved consumer credit counseling agencies prepared by the department.

17-2

The department list shall include nonprofit consumer credit counseling agencies affiliated with

17-3

the National Foundation for Credit Counseling which provide credit counseling services to state

17-4

residents in person, by telephone, or through the Internet. The department list must include phone

17-5

numbers for the agencies, the counties served by the agencies, and indicate the agencies that

17-6

provide telephone counseling and those that provide Internet counseling. The department shall

17-7

update the list at least once each year.

17-8

     (C) The following notice in at least fourteen (14) point type in substantially the following

17-9

form:

17-10

     AS A CONDITION OF OBTAINING A GRACE PERIOD EXTENDING THE TERM

17-11

OF YOUR DEFERRED PRESENTMENT AGREEMENT FOR AN ADDITIONAL SIXTY

17-12

(60) DAYS, UNTIL [DATE], WITHOUT ANY ADDITIONAL FEES, YOU MUST

17-13

COMPLETE CONSUMER CREDIT COUNSELING PROVIDED BY AN AGENCY

17-14

INCLUDED ON THE LIST THAT WILL BE PROVIDED TO YOU BY THIS PROVIDER.

17-15

YOU MAY ALSO AGREE TO COMPLY WITH AND ADHERE TO A REPAYMENT PLAN

17-16

APPROVED BY THE AGENCY. THE COUNSELING MAY BE IN PERSON, BY

17-17

TELEPHONE, OR THROUGH THE INTERNET. YOU MUST NOTIFY US WITHIN SEVEN

17-18

(7) DAYS, BY [DATE], THAT YOU HAVE MADE AN APPOINTMENT WITH A

17-19

CONSUMER CREDIT COUNSELING AGENCY. YOU MUST ALSO NOTIFY US WITHIN

17-20

SIXTY (60) DAYS, BY [DATE], THAT YOU HAVE COMPLETED THE CONSUMER

17-21

CREDIT COUNSELING. WE MAY VERIFY THIS INFORMATION WITH THE AGENCY.

17-22

IF YOU FAIL TO PROVIDE THE SEVEN (7) DAY OR SIXTY (60) DAY NOTICE, OR IF

17-23

YOU HAVE NOT MADE THE APPOINTMENT OR COMPLETED THE COUNSELING

17-24

WITHIN THE TIME REQUIRED, WE MAY DEPOSIT OR PRESENT YOUR CHECK FOR

17-25

PAYMENT AND PURSUE ALL LEGALLY AVAILABLE CIVIL MEANS TO ENFORCE

17-26

THE DEBT.

17-27

     (iii) If a drawer completes an approved payment plan, the deferred presentment provider

17-28

shall pay one-half (1/2) of the drawer’s fee for the deferred presentment agreement to the

17-29

consumer credit counseling agency.

17-30

     (23) The department shall implement a common database with real-time access through

17-31

an Internet connection for deferred presentment providers, as provided in this chapter. The

17-32

database must be accessible to the department and the deferred presentment providers in order to

17-33

verify whether any deferred presentment transactions are outstanding for a particular person.

17-34

Deferred presentment providers shall submit such data before entering into each deferred

18-1

presentment transaction in such format as required by rule, including the drawer’s name, social

18-2

security number or employment authorization alien number, address, driver’s license number,

18-3

amount of the transaction, date of transaction, the date that the transaction is closed, and such

18-4

additional information as is required by rule. The department may promulgate regulations to

18-5

impose a reasonable fee per transaction for data that must be submitted by a deferred presentment

18-6

provider. A deferred presentment provider may rely on the information contained in the database

18-7

as accurate and is not subject to any administrative penalty or civil liability due to relying on

18-8

inaccurate information contained in the database. A deferred presentment provider must notify

18-9

the department, in a manner as prescribed by rule, within fifteen (15) business days after ceasing

18-10

operations or no longer holding a license under this chapter. Such notification must include a

18-11

reconciliation of all open transactions. If the provider fails to provide notice, the department shall

18-12

take action to administratively release all open and pending transactions in the database after the

18-13

office becomes aware of the closure. This section does not affect the rights of the provider to

18-14

enforce the contractual provisions of the deferred presentment agreements through any civil

18-15

action allowed by law. The department may adopt regulations to administer this subsection and to

18-16

ensure that the database is used by deferred presentment providers in accordance with this

18-17

chapter.

18-18

     (24) A deferred presentment provider may not accept more than one check or

18-19

authorization to initiate more than one automated clearinghouse transaction to collect on a

18-20

deferred presentment transaction for a single deferred presentment transaction.

18-21

     19-14.11-6. Database for deferred presentment providers - Not a public record. --

18-22

Information that identifies a drawer or a deferred presentment provider contained in the database

18-23

authorized under this chapter is confidential and not a public record. A deferred presentment

18-24

provider may access information that it has entered into the database and may obtain an eligibility

18-25

determination for a particular drawer based on information in the database.

18-26

     19-14.11-7. Deposit and redemption. -- (a) The deferred presentment provider or its

18-27

affiliate may not present the drawer’s check before the end of the deferment period, as reflected

18-28

in the deferred presentment transaction agreement.

18-29

     (b) Before a deferred presentment provider presents the drawer’s check, the check must

18-30

be endorsed with the name under which the deferred presentment provider is doing business.

18-31

     (c) Notwithstanding subsection (a), in lieu of presentment, a deferred presentment

18-32

provider may allow the check to be redeemed at any time upon payment of the face amount of the

18-33

drawer’s check. However, payment may not be made in the form of a personal check. Upon

18-34

redemption, the deferred presentment provider shall return the drawer’s check and provide a

19-1

signed, dated receipt showing that the drawer’s check has been redeemed.

19-2

     (d) A drawer may not be required to redeem his or her check before the agreed-upon date;

19-3

however, the drawer may choose to redeem the check before the agreed-upon presentment date.

19-4

     19-14.11-8. Worthless checks. -- (a) If a check is returned to a deferred presentment

19-5

provider from a payor financial institution due to lack of funds, a closed account, or a stop-

19-6

payment order, the deferred presentment provider may seek collection in the normal course of

19-7

business. Except as otherwise provided in this chapter, an individual who issues a personal check

19-8

to a deferred presentment provider under a deferred presentment agreement is not subject to

19-9

criminal penalty.

19-10

     (b) If a check is returned to a deferred presentment provider from a payor financial

19-11

institution due to insufficient funds, a closed account, or a stop-payment order, the deferred

19-12

presentment provider may pursue all legally available civil remedies to collect the check,

19-13

including, but not limited to, the imposition of all charges imposed on the deferred presentment

19-14

provider by the financial institution. In its collection practices, a deferred presentment provider

19-15

must comply with the prohibitions against harassment or abuse, false or misleading

19-16

representations, and unfair practices that are contained in the Fair Debt Collections Practices Act,

19-17

15 U.S.C. ss. 1692d, 1692e, and 1692f as may be amended from time to time.

19-18

     (c) A deferred presentment provider may not assess the cost of collection, other than

19-19

charges for insufficient funds as allowed by law, without a judgment from a court of competent

19-20

jurisdiction.

19-21

     19-14.11-9. Rules and regulations. -- The director or the director's designee is

19-22

authorized, directed and empowered to promulgate rules and regulations, in addition to any other

19-23

rule making powers conferred on the director under this title, as may be required to implement the

19-24

provisions of this law, however, such rules and regulations must provide that licensees maintain:

19-25

     (1) Continuously, for each licensed premises, liquid assets of at least ten thousand dollars

19-26

($10,000);

19-27

      (2) Insurance issued by an insurance company or indemnity company, authorized to do

19-28

business under the laws of this state, which shall insure the applicant against loss by theft,

19-29

burglary, robbery or forgery in principal sum, as determined by the director or the director's

19-30

designee, which shall in no event be less than ten thousand dollars ($10,000) nor more than one

19-31

hundred thousand dollars ($100,000). The required amounts shall bear a relationship to the liquid

19-32

assets on hand at the licensed location; and

19-33

     (3) An adequate written policy and affirmative program to insure compliance with state

19-34

and federal money laundering statutes.

20-1

     19-14.11-10. Penalties for unlicensed activity - Internet providers. -- Any person and

20-2

the several members, officers, directors, agents and employees of any person who are involved in

20-3

the operation of any unlicensed deferred presentment transaction services businesses, including,

20-4

but not limited to businesses conducting unlicensed deferred presentment transaction services

20-5

through the Internet shall have violated this chapter and be subject to any and all criminal and

20-6

administrative penalties levied by this title.

20-7

     19-14.4-11. Severability. -- If any provision of this chapter or the application of this

20-8

chapter to any person or circumstances is held invalid or unconstitutional, the invalidity or

20-9

unconstitutionality shall not affect the other provisions or applications of this chapter that can be

20-10

given effect without the invalid or unconstitutional provisions or application, and to this end the

20-11

provisions of this chapter are declared to be severable.

20-12

     19-14.4-12. Transition for Check Cashing Licensees. -- Persons with a license to cash

20-13

checks that was issued on or before July 1, 2012 pursuant to chapter 19-14.4 shall, without the

20-14

requirement for an initial application, receive a license under this chapter to provide deferred

20-15

presentment transaction services as long as such person has a bond on file with the department in

20-16

compliance with section 19-14-6 as of July 1, 2012. The department shall issue such new licenses

20-17

as required herein by August 15, 2012. On July 1, 2012 and thereafter, all such persons affected

20-18

herein shall be subject to all the requirements for a deferred presentment license under this

20-19

chapter, including, but not limited to, all applicable fees, bonds and renewal applications.

20-20

     SECTION 5. This act shall take effect upon passage.

=======

LC02281

=======

EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO FINANCIAL INSTITUTIONS - DEFERRED PRESENTMENT

TRANSACTIONS

***

21-1

     This act would provide for separate licensing requirements for check cashers and pay day

21-2

lenders. This act would also create the pay day lending law in order to subject pay day lenders to

21-3

various consumer protecting provisions.

21-4

     This act would take effect upon passage.

=======

LC02281

=======