Bill Text: CA SB515 | 2013-2014 | Regular Session | Amended
Bill Title: Deferred deposit transactions.
Sponsorship: Partisan Bill (Democrat 2)
Status: (Introduced - Dead) 2014-02-03 - Returned to Secretary of Senate pursuant to Joint Rule 56. [SB515 Detail]
Download: California-2013-SB515-Amended.html
BILL NUMBER: SB 515 AMENDED
BILL TEXT
AMENDED IN SENATE APRIL 1, 2013
INTRODUCED BY Senator Jackson
( Coauthor: Senator Beall
)
FEBRUARY 21, 2013
An act to amend Sections 23001 and 23026 of
23026, 23035, and 23036 of, and to add Section 23036.5 to,
the Financial Code, relating to deferred deposit transactions.
LEGISLATIVE COUNSEL'S DIGEST
SB 515, as amended, Jackson. Deferred deposit transactions.
Existing law, the California Deferred Deposit Transaction Law,
provides for the licensure and regulation by the Commissioner of
Corporations until July 1, 2013, and thereafter by the Senior
Deputy Commissioner of Business Oversight for the Division of
Corporations, of persons engaged in the business of originating
or making deferred deposit transactions, as defined. Existing law
requires a licensee to file an annual report with the commissioner,
on or before March 15 of each year. Under existing law, the
licensee's annual report is confidential and not open to public
inspection. Existing law requires the commissioner to prepare
an annual consolidated report based upon specified information
received from licensees. Existing law authorizes the commissioner to
suspend or revoke the license of a license that fails to file the
annual report. Existing law makes a willful violation of the
California Deferred Deposit Transaction Law a crime.
Under existing law, a licensee may defer the deposit of a customer'
s check for up to 31 days, regardless of the check amount. Existing
law requires a licensee to provide a notice to the customer regarding
the deferred deposit transaction, containing specified information,
including an example of all charges and fees that would be charged on
at least a $100 and a $200 deferred deposit transaction, payable in
14 and 30 days, respectively. Existing law also authorizes a licensee
to offer an extension of time, or a payment plan, for the repayment
of a deferred deposit transaction under specified circumstances.
This bill would revise the period for which a licensee could defer
a customer's check, depending on the amount of the check. The bill
would require the notification provided to the customer to set forth
an example of charges and fees charged on a $100, $200, and $300
deferred deposit payable in 30, 60, or 90 days, respectively. The
bill would impose specified underwriting duties on licensees, to
determine a customer's likely ability to repay a deferred deposit
transaction when due. The bill would also prohibit a licensee from
entering into a deferred deposit transaction with a customer if it
would result in the customer entering into more than 4 deferred
deposit transactions in a 12-month period.
This bill would delete existing repayment extension procedures,
and instead require a licensee to offer an installment payment
option, as specified, to a customer who notifies the licensee that he
or she is unable to repay a deferred deposit transaction amount when
due. The bill would delete the provisions that make a licensee's
annual report to the commissioner confidential and exempt from public
inspection. The bill would revise the required contents of the
licensees' and commissioner's annual reports described above to
include, among other things, prescribed information relating to
installment plans entered into by a licensee.
Existing law prohibits a licensee from entering into an agreement
for a deferred deposit transaction with a customer during the period
of time that an earlier written agreement for a deferred deposit
transaction for the same customer is in effect.
This bill instead would prohibit a licensee from entering into an
agreement for a deferred deposit transaction with a customer during
the period of time that an earlier written agreement for a deferred
deposit transaction for the same customer is in effect with any
licensee, as specified.
This bill would require the commissioner to develop and implement
a common database to provide licensees with real-time access, via an
Internet connection, to specified information relating to deferred
deposit transaction customers. Records in the database would not be
open to public inspection. The bill would prescribe the duties of
licensees, the database provider, and the commissioner in connection
with the creation and operation of the database, and additionally
would make various conforming changes. The bill would authorize the
database provider, pursuant to rules adopted by the commissioner, to
charge a fee for entering data into the database.
Existing constitutional provisions require that a statute that
limits the right of access to public bodies or the writings of public
officials and agencies be adopted with findings demonstrating the
interest protected by the limitation and the need for protecting that
interest.
This bill would make legislative findings to that effect.
Because a willful violation of the bill's requirements would be a
crime, the bill would impose a state-mandated local program.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
The Governor's Reorganization Plan No. 2 of the 2011-12 Regular
Session provides that, on and after July 1, 2013, the
responsibilities of the Department of Corporations and the
Commissioner of Corporations shall be transferred to the Department
of Business Oversight and the Deputy Commissioner of Business
Oversight for the Division of Corporations.
This bill instead would require a licensee to file the annual
report described above by March 20 of each year. The bill would make
additional changes to conform with the Governor's Reorganization Plan
No. 2.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no yes .
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 23001 of the Financial Code
is amended to read:
23001. As used in this division, the following terms have the
following meanings:
(a) "Deferred deposit transaction" means a transaction whereby a
person defers depositing a customer's personal check until a specific
date, pursuant to a written agreement for a fee or other charge, as
provided in Section 23035.
(b) "Commissioner" means the Deputy Commissioner of Business
Oversight for the Division of Corporations.
(c) "Department" means the Department of Business Oversight.
(d) "Licensee" means any person who offers, originates, or makes a
deferred deposit transaction, who arranges a deferred deposit
transaction for a deferred deposit originator, who acts as an agent
for a deferred deposit originator, or who assists a deferred deposit
originator in the origination of a deferred deposit transaction.
However, "licensee" does not include a state or federally chartered
bank, thrift, savings association, industrial loan company, or credit
union. "Licensee" also does not include a retail seller engaged
primarily in the business of selling consumer goods, including
consumables, to retail buyers that cashes checks or issues money
orders for a minimum fee not exceeding two dollars ($2) as a service
to its customers that is incidental to its main purpose or business.
"Licensee" also does not include an employee regularly employed by a
licensee at the licensee's place of business. An employee, when
acting under the scope of the employee's employment, shall be exempt
from any other law from which the employee's employer is exempt.
(e) "Person" means an individual, a corporation, a partnership, a
limited liability company, a joint venture, an association, a joint
stock company, a trust, an unincorporated organization, a government
entity, or a political subdivision of a government entity.
(f) "Deferred deposit originator" means a person who offers,
originates, or makes a deferred deposit transaction.
SEC. 2. SECTION 1. Section 23026 of
the Financial Code is amended to read:
23026. On or before March 20 15 of
each year, beginning March 2006, each licensee shall file an annual
report with the commissioner pursuant to procedures that the
deputy commissioner shall establish. The licensee'
s annual report shall be kept confidential pursuant to Chapter 3.5
(commencing with Section 6250) of Division 7 of Title 1 of the
Government Code and any regulations adopted thereunder. The
annual consolidated report shall be prepared by the deputy
commissioner and made available to the public. For the
previous calendar year, these reports shall include the following:
(a) The total number and dollar amount of deferred deposit
transactions made by the licensee.
(b) The total dollar amount of fees paid by customers who entered
into deferred deposit transactions.
(b)
(c) The total number of individual customers who
entered into deferred deposit transactions.
(d) The total number of individual borrowers who entered into
short-term consumer loan transactions, by gross monthly income, in
categories to be established by the commissioner.
(c)
(e) The minimum, maximum, and average amount of
deferred deposit transactions.
(d)
(f) The minimum, maximum, and average annual
percentage rate of deferred deposits.
(e)
(g) The average distribution of
the number of days of the terms of deferred deposit
transactions , in a format to be established by the
commissioner .
(f)
(h) The total number and dollar amount of returned
checks.
(g)
(i) The total number and dollar amount of checks
recovered.
(h)
(j) The total number and dollar amount of checks
charged off.
(k) The total number of installment plans entered into.
(l) The minimum, maximum, and average length of installment plans
entered into.
(m) The number of borrowers entering into each permissible number
of deferred deposit transactions, from one transaction to four
transactions, in the previous calendar year.
(n) Any other information that the commissioner believes is
relevant or useful.
SEC. 2. Section 23035 of the Financial
Code is amended to read:
23035. (a) A licensee may defer the deposit of a
customer's personal check for up to 31 days, pursuant to the
provisions of this section. The face amount of the
a customer's personal check shall not exceed
three hundred dollars ($300). A licensee may defer the deposit
of the customer's personal check for a period of not less than 30
days for a face amount of up to one hundred dollars ($100), not less
than 60 days for a face amount of one hundred one dollars
($101) to two hundred dollars ($200), inclusive, and not less than 90
days for a face amount of two hundred one dollars ($201) to three
hundred dollars ($300), inclusive, pursuant to this section.
Each deferred deposit transaction shall be made pursuant to a written
agreement as described in subdivision (e) that has been signed by
the customer and by the licensee or an authorized representative of
the licensee.
(b) A licensee is prohibited from making a deferred deposit
transaction to a customer if making that deferred deposit transaction
would result in a customer entering into more than four deferred
deposit transactions from all licensees in any 12-month period.
(c) A licensee shall underwrite each deferred deposit transaction
to determine a customer's ability to pay the face amount of the check
when due, and shall not enter into a deferred deposit transaction if
the licensee determines, through its underwriting, that the customer'
s total monthly debt service payments, at the time the transaction is
entered, including the amount of the deferred deposit transaction
for which the customer is being considered, and across all
outstanding forms of credit that can be independently verified by the
licensee, exceed 50 percent of the customer's gross monthly income.
(1) The licensee shall seek information and documentation
pertaining to all of a customer's outstanding debt obligations during
the application for a deferred deposit transaction, including loans
that are self-reported by the customer but not available through
independent verification. The licensee shall verify that information
using a credit report from at least one of the three major credit
bureaus or through other available electronic debt verification
services that provide reliable evidence of a customer's outstanding
debt obligations.
(2) The licensee shall not be required to consider loans from
friends or family, for purposes of debt-to-income ratio evaluation.
(b)
(d) A customer who enters into a deferred deposit
transaction and offers a personal check to a licensee pursuant to an
agreement shall not be subject to any criminal penalty for the
failure to comply with the terms of that agreement.
(c)
(e) Before entering into a deferred deposit
transaction, licensees shall distribute to customers a notice that
shall include, but not be limited to, the following:
(1) Information about charges for deferred deposit transactions.
(2) That if the customer's check is returned unpaid, the customer
may be charged an additional fee of up to fifteen dollars ($15).
(3) That the customer cannot be prosecuted in a criminal action in
conjunction with a deferred deposit transaction for a returned check
or be threatened with prosecution.
(4) The department's toll-free telephone number for receiving
calls regarding customer complaints and concerns.
(5) That the licensee may not accept any collateral in conjunction
with a deferred deposit transaction.
(6) That the check is being negotiated as part of a deferred
deposit transaction , commonly referred to as a payday loan,
made pursuant to Section 23035 of the Financial Code and is not
subject to the provisions of Section 1719 of the Civil Code. No
customer may be required to pay treble damages if this check does not
clear.
(d)
(f) The following notices shall be clearly and
conspicuously posted in the unobstructed view of the public by all
licensees in each location of a business providing deferred deposit
transactions in letters not less than one-half inch in height:
(1) The licensee cannot use the criminal process against a
consumer to collect any deferred deposit transaction.
(2) The schedule of all charges and fees to be charged on those
deferred deposit transactions with an example of all charges and fees
that would be charged on at least a one-hundred-dollar
($100) and a ($100), two-hundred-dollar
($200) ($200), and three-hundred-dollar ($300)
deferred deposit transaction, payable in 14 days and 30
30 days, 60 days, and 90 days, respectively,
giving the corresponding annual percentage rate. The information may
be provided in a chart as follows:
3
6 0-
90-
Amount Amount of day
day
Provided Fee Check 14 30
-day APR APR
APR
$100 XX XXX XXX XXX
XXX
$200 XX XXX XXX XXX
XXX
$300 XX XXX XXX XXX XXX
(e)
(g) An agreement to enter into a deferred deposit
transaction shall be in writing and shall be provided by the licensee
to the customer. The written agreement shall authorize the licensee
to defer deposit of the personal check, shall be signed by the
customer, and shall include all of the following:
(1) A full disclosure of the total amount of any fees charged for
the deferred deposit transaction, expressed both in United States
currency and as an APR as required under the Federal Truth In Lending
Act and its regulations.
(2) A clear description of the customer's payment obligations as
required under the Federal Truth In Lending Act and its regulations.
(3) The name, address, and telephone number of the licensee.
(4) The customer's name and address.
(5) The date to which deposit of check has been deferred (due
date).
(6) The payment plan, or extension
installation plan , if applicable as allowed under subdivision
(c) (b) of Section 23036.
(7) An itemization of the amount financed as required under the
Federal Truth In Lending Act and its regulations.
(8) Disclosure of any returned check charges.
(9) That the customer cannot be prosecuted or threatened with
prosecution to collect.
(10) That the licensee cannot accept collateral in connection with
the transaction.
(11) That the licensee cannot make a deferred deposit transaction
contingent on the purchase of another product or service.
(12) Signature space for the customer and signature of the
licensee or authorized representative of the licensee and date of the
transaction.
(13) Any other information that the commissioner shall deem
necessary by regulation.
(f)
(h) The notice required by subdivision (c)
(e) shall be written and available in the same
language principally used in any oral discussions or negotiations
leading to execution of the deferred deposit agreement and shall be
in at least 10-point type.
(g)
(i) The written agreement required by subdivision
(e) (g) shall be written in the same
language principally used in any oral discussions or negotiations
leading to execution of the deferred deposit agreement; shall not be
vague, unclear, or misleading and shall be in at least 10-point type.
(h)
(j) Under no circumstances shall a deferred deposit
transaction agreement include any of the following:
(1) A hold harmless clause.
(2) A confession of judgment clause or power of attorney.
(3) Any assignment of or order for payment of wages or other
compensation for services.
(4) Any acceleration provision.
(5) Any unconscionable provision.
(i)
(k) If the licensee sells or otherwise transfers the
debt at a later date, the licensee shall clearly disclose in a
written agreement that any debt or checks held or transferred
pursuant to a deferred deposit transaction made pursuant to Section
23035 are not subject to the provisions of Section 1719 of the Civil
Code and that no customer may be required to pay treble damages if
the check or checks are dishonored.
SEC. 3. Section 23036 of the Financial
Code is amended to read:
23036. (a) A fee for a deferred deposit transaction shall not
exceed 15 percent of the face amount of the check.
(b) A licensee may allow an extension of time, or a payment plan,
for repayment of an existing deferred deposit transaction but may not
charge any additional fee or charge of any kind in conjunction with
the extension or payment plan. A licensee that complies with the
provisions of this subdivision shall not be deemed to be in violation
of subdivision (g) of Section 23037.
(b) (1) (A) If a customer notifies a licensee, on or before the
date that the transaction is due, that the customer is unable or will
be unable to repay a deferred deposit transaction when due, the
licensee shall inform the customer that the customer may convert the
deferred deposit transaction to an installment plan. The licensee
shall convert the deferred deposit transaction to an installment plan
at the customer's request.
(B) Each agreement for an installment plan shall be in writing and
acknowledged by both the customer and the licensee. The licensee may
not assess any other fee, interest charge, or other charge on the
customer as a result of converting the small loan into an installment
plan. The installment plan shall provide for the payment of the
total of payments due on the deferred deposit transaction over a
period not less than 90 days for a deferred deposit transaction of
one hundred dollars ($100) or less, not less than 180 days for a
deferred deposit transaction of between one hundred one dollars
($101) and two hundred dollars ($200), inclusive, and not less than
270 days for a deferred deposit transaction of between two hundred
one dollars ($201) and three hundred dollars ($300), inclusive.
(C) The customer may pay the total amount due at any time. The
licensee may not charge any penalty, fee, or charge to the customer
for prepayment of the loan installment plan by the customer.
(D) Each licensee shall conspicuously disclose to each customer in
the deferred deposit transaction agreement or note that the customer
has access to an installment plan, as provided for in this
subdivision. A licensee's failure to provide an installment plan in
accordance with this section constitutes a violation of this
division.
(2) The licensee shall return any postdated checks that the
customer has given to the licensee for the original deferred deposit
transaction at the initiation of the installment plan.
(3) A licensee may accept postdated checks for installment plan
payments at the time the installment plan is originated. If any check
accepted as payment under the installment plan is dishonored, the
licensee may not charge the customer any fee for the dishonored
check. If a customer defaults on the installment plan, the licensee
may charge the customer a one-time installment plan default fee of
twenty-five dollars ($25).
(4) A licensee that complies with the provisions of this
subdivision shall not be deemed to be in violation of subdivision (g)
of Section 23037.
(c) A licensee shall not enter into an agreement for a deferred
deposit transaction with a customer during the period of time that an
earlier written agreement for a deferred deposit transaction for the
same customer is in effect with any licensee, as reflected by
the database established pursuant to Section 23036.5 .
(d) A licensee who enters into a deferred deposit transaction
agreement, or any assignee of that licensee, shall not be entitled to
recover damages for that transaction in any action brought pursuant
to, or governed by, Section 1719 of the Civil Code.
(e) A fee not to exceed fifteen dollars ($15) may be charged for
the return of a dishonored check by a depositary institution in a
deferred deposit transaction. A single fee charged pursuant to this
subdivision is the exclusive charge for a dishonored check. No fee
may be added for late payment.
(f) No amount in excess of the amounts authorized by this section
shall be directly or indirectly charged by a licensee pursuant to a
deferred deposit transaction.
(g) A licensee shall be subject to the provisions of Title 1.6C
(commencing with Section 1788) of Part 4 of Division 3 of the Civil
Code.
SEC. 4. Section 23036.5 is added to the
Financial Code , to read:
23036.5. (a) The commissioner, by contract with a third-party
provider or otherwise, shall develop and implement a common database
with real-time access, via an Internet connection, by means of which
a licensee may determine all of the following:
(1) Whether a customer has an outstanding deferred deposit
transaction with any licensee.
(2) Whether the customer is eligible for a loan under subdivision
(b) of Section 23035 and subdivision (c) of Section 23036.
(3) Whether the customer is in an installment plan.
(4) Any other information necessary to comply with this division.
(b) Licensees shall do all of the following:
(1) Before entering into a deferred deposit transaction with a
customer, determine using the database whether the customer has a
deferred deposit transaction in effect with any licensee so as to
comply with subdivision (c) of Section 23036.
(2) Before entering into a deferred deposit transaction,
accurately and immediately submit to the database any data in the
format that the commissioner may require by rule or order, including
the customer's name, social security number or employment
authorization alien number, address, driver's license number, amount
of the transaction, date of transaction, date that the completed
transaction is closed, income by category established by the
commissioner, ZIP Code where the transaction occurs, gender, and any
additional information required by the commissioner.
(3) Promptly correct any incorrect data entered into the database
that was previously submitted.
(4) Use the database provider's toll-free telephone number to
obtain authorization for each transaction during any time that the
licensee is experiencing technical difficulties.
(5) Obtain authorization from the department if the licensee needs
additional time to meet the requirement of entering the information
in the database.
(6) Satisfy the requirements of this section.
(c) A licensee shall continue to enter and update all required
information for any deferred deposit transactions subject to this
division that are outstanding or have not yet expired after the date
on which the licensee no longer has the license required by this
division. Within 10 business days after ceasing to make loans subject
to this division, the licensee shall submit a plan for continuing
compliance with this subdivision to the commissioner for approval.
The commissioner shall promptly approve or disapprove the plan and
may require the licensee to submit a new or modified plan that
ensures compliance with this subdivision.
(d) While operating the database, the database provider shall do
all of the following:
(1) Establish and maintain a process, including, but not limited
to, a toll-free telephone number for responding to transaction
verification requests due to technical difficulties occurring with
the database that prevent a licensee from accessing the database via
the Internet, including, but not limited to, multiple call centers
located in the United States by the third-party provider.
(2) Take all reasonable measures, including, but not limited to,
complying with any applicable federal and state provisions to prevent
identity theft.
(3) Provide accurate and secure receipt, transmission, and storage
of customer data.
(4) Immediately report any technical difficulties that prevent the
licensee from immediately entering into the database all
transactions undertaken during that time.
(e) The commissioner shall adopt rules to administer and enforce
this section and to ensure that the database is used by licensees in
accordance with this section, including, but not limited to, all of
the following:
(1) A rule requiring that data are retained in the database only
as required to ensure licensee compliance with this section.
(2) A rule requiring that identifying borrower information be
deleted from the database on a regular and routine basis, 12 months
after the transaction is closed.
(3) A rule requiring the archiving of deleted data.
(4) A rule prohibiting the database from ranking the credit
worthiness of a borrower.
(5) A rule requiring that data collected pursuant to this section
be used only as prescribed in this section and for no other purpose.
(6) A rule authorizing imposition of a fee, per transaction, for
data required to be submitted. The fee shall not exceed the
reasonable costs of entering the data into the database and shall not
include any costs paid by the commissioner to the provider for
operating the database. The fee shall be payable to the database
provider in a manner prescribed by the commissioner. A licensee may
not charge a customer all or part of the fee.
(7) A rule authorizing and establishing procedures for persons to
request reports and or data from the database provider, provided that
any identifying customer information is removed before disclosure.
(f) The commissioner shall investigate and enforce any violation
of this section and shall not delegate that responsibility to any
third-party provider.
(g) The commissioner shall make a determination that the database
is fully operational and shall send written notification of all of
the following to each licensee subject to the provisions of this
section:
(1) That the database has been implemented.
(2) The exact date that the database shall be considered
operational triggering licensee's duties under subdivision (b).
(h) (1) The database established under this section shall not be
considered a public record open to inspection under Section 6253 of
the Government Code.
(2) Notwithstanding paragraph (1), persons may request and the
database provider shall provide, reports or data from the database,
provided that all identifying customer information is removed before
any disclosure by the database provider.
SEC. 5. The Legislature finds and declares that
Section 4 of this act, which adds Section 23036.5 to the Financial
Code, imposes a limitation on the public's right of access to the
meetings of public bodies or the writings of public officials and
agencies within the meaning of Section 3 of Article I of the
California Constitution. Pursuant to that constitutional provision,
the Legislature makes the following finding to demonstrate the
interest protected by this limitation and the need for protecting the
interest:
Records of deferred deposit transaction customers include personal
financial information, which must be protected to avoid identity
theft and other misuse. Therefore, the health and safety of the
people of California are enhanced by limiting access of deferred
deposit transaction data to ensure that customer information remains
confidential.
SEC. 6. No reimbursement is required by this act
pursuant to Section 6 of Article XIII B of the California
Constitution because the only costs that may be incurred by a local
agency or school district will be incurred because this act creates a
new crime or infraction, eliminates a crime or infraction, or
changes the penalty for a crime or infraction, within the meaning of
Section 17556 of the Government Code, or changes the definition of a
crime within the meaning of Section 6 of Article XIII B of the
California Constitution.
