Bill Text: HI SB2028 | 2018 | Regular Session | Introduced
Bill Title: Relating To Check Cashing.
Spectrum: Partisan Bill (Democrat 9-0)
Status: (Introduced - Dead) 2018-01-19 - Referred to CPH. [SB2028 Detail]
Download: Hawaii-2018-SB2028-Introduced.html
THE SENATE |
S.B. NO. |
2028 |
TWENTY-NINTH LEGISLATURE, 2018 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
relating to check cashing.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. The
legislature finds that deferred deposit agreements, commonly referred to as
payday loans, are small, short term, unsecured loans that borrowers commit to
repay from their next paycheck or a regular income payment. According to a study by the Pew Charitable
Trusts, the majority of borrowers use deferred deposit agreements for recurring
expenses, rather than unexpected expenses or emergencies, because they live
paycheck to paycheck. Furthermore,
deferred deposit agreements often last well beyond a borrower's next paycheck. When fees are included, a typical deferred
deposit loan payment may take one-third of a borrower's next paycheck, an
amount that most consumers who turn to deferred deposit lenders cannot
afford. According to Pew, the average
deferred deposit loan borrower is in debt for almost six months a year and pays
an average of $520 in fees for $375 in credit.
The legislature further finds that existing state law permits check cashers to charge a fee of fifteen per cent of the face value of a check and lend up to a maximum of $600. This fee can amount to an annual percentage rate of four hundred fifty-nine per cent, which can trap Hawaii borrowers in a cycle of high interest loans. The legislature notes that there is a growing trend around the country to provide more consumer protections for deferred deposit loans. According to the Consumer Federation of America, the nationwide trend is toward an annual percentage rate cap at thirty-six per cent or less on these types of small loans. The thirty-six per cent cap also follows precedent established by the federal government, who in 2006 made it illegal to charge more than a thirty-six per cent annual percentage rate on payday loans to active-duty service members and their families.
The legislature additionally finds that deferred deposit loans can be regulated to address certain problems within the industry without denying customers access to these loans. The legislature notes that Colorado and Washington have enacted certain payday reform laws. For example, borrowers in Colorado spent forty-two per cent less annually on deferred deposit loans, while receiving more days of credit, after its 2010 payday lending reforms. Colorado also saw a decline in the number of defaults per borrower and a decrease in the amount of fees for returned checks.
Accordingly, the purpose of this Act is to increase certain consumer protection aspects of the deferred deposit loan industry by:
(1) Specifying that a customer has the right to rescind a deferred deposit by returning the principal amount used to fund the deferred deposit within a specified time frame;
(2) Permitting customers to convert a deferred deposit into an installment loan plan in certain circumstances and specifying requirements for the installment loan plan;
(3) Protecting against harmful collection practices;
(4) Adding a definition for annual percentage rate;
(5) Requiring a check casher to post a notice informing customers that additional options may be available for safe, regulated, lower-cost, small dollar loans;
(6) Requiring a check casher to provide a written agreement to a customer that clearly discloses specific information relating to the cost and fees associated with the deferred deposit, among other things;
(7) Capping the annual percentage rate at thirty-six per cent for deferred deposit of a personal check; and
(8) Permitting prepayment of deferred deposit agreements with no additional fees.
SECTION 2. Chapter 480F, Hawaii Revised Statutes, is amended by adding three new sections to be appropriately designated and to read as follows:
"§480F-A Right of rescission. (a)
A customer shall have the right to rescind a deferred deposit, on or
before the close of business on the next day of business at the location where
the deferred deposit was originated, by returning the principal in cash or the
original check disbursed by the check casher to fund the deferred deposit. The check casher may not charge the customer
for rescinding the loan and shall return to the customer any postdated check taken
as collateral for the deferred deposit or any electronic equivalent.
(b) The check casher shall conspicuously disclose
the right of rescission to the customer in the written agreement made pursuant
to section 480F-4(b).
§480F-B Deferred
deposit loan installment plan; terms; restrictions. (a)
If a customer notifies a check casher in writing that the customer will
be or is unable to repay the deferred deposit prior to the maturity of the loan
term, the check casher shall inform the customer that the customer may convert
the customer's deferred deposit to a loan installment plan pursuant to
subsection (d). The check casher shall
convert the deferred deposit to a loan installment plan if the customer
requests such conversion.
(b) Each agreement for a loan installment plan
shall be in writing and acknowledged by the customer and the check casher. The check casher shall not assess any other
fee, interest charge, or other charge on the customer as a result of converting
the deferred deposit into a loan installment plan.
(c) The loan installment plan agreement shall provide payment terms for the total amount due on the deferred deposit as follows:
(1) For a loan
amount of $400 or less, a period of at least ninety days; provided that the loan term shall
not be longer than one hundred eighty days; and
(2) For a loan amount over $400, a period of no more than one hundred eighty days;
(d)
Payments for the loan installment plan shall not exceed
five per cent of a customer's monthly gross income calculated at the time of
conversion from a deferred deposit to a loan installment plan. The loan installment plan shall provide for
equal installment payments; provided that the final loan installment payment
may be a balance of the loan installment plan.
(e) The customer shall provide proof of income at
the time of the conversion from a deferred deposit to a loan installment plan;
provided that if the customer fails to provide proof of income or does not have
income, the deferred deposit shall become due and payable.
(f) All outstanding principal, costs, and fees
allowed by this chapter, associated with the deferred deposit loan converted to
a loan installment plan, shall be amortized over the life of the loan
installment plan.
(g) The customer may pay the balance of the loan
installment plan at any time. The check
casher shall not charge any penalty, fee, or charge to the customer for
prepayment of the loan installment plan by the customer. If the customer prepays the loan installment
prior to the maturity of the loan installment term, the check casher shall
refund to the customer a prorated portion of the unearned cost and fees, based
upon the ratio of time left before maturity to the loan installment term.
(h) The check casher shall conspicuously disclose
the availability of a loan installment plan to the customer in the written
agreement made pursuant to section 480F-4(b).
(i) A check casher's violation of any of the
requirements for loan installment plans shall be a violation of this chapter.
§480F-C Restrictions on collection by check casher
or third party. (a) A check casher may not threaten criminal
prosecution as a method of collecting a delinquent deferred deposit or threaten
to take any legal action against the customer that is not otherwise permitted
by law.
(b) Unless invited by the customer, a check
casher shall not visit a customer's residence or place of employment for the
purpose of collecting a delinquent deferred deposit. A check casher shall not impersonate a law
enforcement officer or make any statements that might be construed as
indicating an official connection with any federal, state, or county law
enforcement agency or any other governmental agency while engaged in collecting
a deferred deposit.
(c) A check casher shall not communicate with a customer in a manner intended to harass, intimidate, abuse, or embarrass a customer, including but not limited to communication at an unreasonable hour, with unreasonable frequency, by threats of force or violence, or by use of offensive language. A communication shall be presumed to have been made for the purposes of harassment if it is initiated by the check casher for the purposes of collection and the communication is made:
(1) With a customer
or the customer's spouse in any form, manner, or place, more than three times
in a seven-day period;
(2) With a customer
at the customer's place of employment more than one time in a seven-day period
or to a customer after the check casher has been informed that the customer's
employer prohibits such communications;
(3) With the
customer or the customer's spouse at the customer's place of residence between
the hours of 9:00 p.m. and 7:30 a.m.; or
(4) To a party other than the customer, the customer's attorney, the check casher's attorney, or a consumer reporting agency if otherwise permitted by law except for purposes of acquiring location or contact information about the customer.
(d) A check casher shall maintain a communication
log of all telephone and written communications with a customer initiated by
the check casher regarding any collection efforts, including date, time, and
the nature of each communication.
(e) This section shall apply to any employee, agent, or third party assignee of a check casher, for purposes of collection."
SECTION 3. Section 480F-1, Hawaii Revised Statutes, is amended by adding a new definition to be appropriately inserted and to read as follows:
""Annual percentage rate" means the rate charged for borrowing, expressed as a single percentage number that represents the actual yearly cost of funds over the term of a loan and includes any fees or additional costs associated with the transaction. The annual percentage rate shall be determined in accordance with the federal Truth in Lending Act for closed-end loans."
SECTION 4. Section 480F-2, Hawaii Revised Statutes, is amended to read as follows:
"[[]§480F-2[]] Posting and notice of fees charged. Any person who cashes one or more checks for
a fee shall:
(1) Post in a conspicuous place in every location at which the person does business a notice that sets forth:
(A) The fees charged
for cashing a check, for selling or issuing a money order, and for the initial
issuance of any membership or identification cards; [and]
(B) That consumer
complaints about the check cashing business may be filed with the department of
commerce and consumer affairs, and includes and identifies the telephone number
of the consumer information service of the department of commerce and consumer
affairs; and
(C) An acknowledgment that additional options may be available for safe, regulated, lower-cost, small dollar loans, and includes a statement encouraging customers to explore all options for small dollar loans;
(2) Provide written notice to each customer of the fees charged for cashing checks that is separate from and in addition to any posted notice;
(3) Obtain a written acknowledgment from the customer that written notice of the fees charged for cashing checks was provided; and
(4) Provide each customer a receipt documenting any and all fees charged."
SECTION 5. Section 480F-4, Hawaii Revised Statutes, is amended to read as follows:
"§480F-4 Deferred deposits, when allowed. (a) No check casher may defer the deposit of a check except as provided in this section.
(b)
Each deferred deposit shall be made pursuant to a written agreement that
has been signed by the customer and the check casher or an authorized
representative of the check casher. The
written agreement shall contain [a]:
(1) The name of the customer;
(2) The transaction
date;
(3) The principal
amount of the deferred deposit;
(4) The annual
percentage rate charged for the deferred deposit;
(5) A statement
of the total amount of any fees charged for the deferred deposit, expressed
both in United States currency and as an annual percentage rate[.];
(6) The dollar
amount of each periodic payment that is due over the life of the deferred
deposit;
(7) The name,
address, and telephone number of any agent or third-party assignee involved in
the deferred deposit;
(8) A notice that
the customer has the right to rescind a deferred deposit pursuant to the
requirements of section 480F-A; and
(9) A notice that the customer has the ability to convert a deferred deposit into a loan installment plan pursuant to the requirements of section 480F-B.
The written
agreement shall authorize the check casher to defer deposit of the personal
check until a specific date not later than thirty-two days from the date the
written agreement was signed. The
written agreement shall not permit the check casher to accept collateral[.],
except for the customer's postdated personal check in an amount permitted by
this chapter.
(c)
The face amount of the check shall not exceed $600 and the deposit of a
personal check written by a customer pursuant to a deferred deposit transaction
may be deferred for no more than thirty-two days. A check casher may charge [a fee for] an
annual percentage rate of no more than thirty-six per cent for deferred
deposit of a personal check [in an amount not to exceed fifteen per cent of
the face amount of the check]. Any
fees, costs, and interest charged for deferred deposit of a personal
check in compliance with this [section] chapter shall be exempt
from chapter 478.
(d) The check casher shall not charge any
penalty, fee, or charge to the customer for prepayment of the deferred deposit
by the customer. If the customer prepays
the deferred deposit prior to the maturity of the loan term, the check casher
shall refund to the customer a prorated portion of any unearned cost and fees,
based upon the ratio of time left before maturity to the loan term.
[(d)] (e) A check casher shall not enter into an
agreement for deferred deposit with a customer during the period of time that
an earlier agreement for a deferred deposit for the same customer is in
effect. A deferred deposit transaction
shall not be repaid, refinanced, or consolidated by or with the proceeds of
another deferred deposit transaction.
[(e)] (f) A check casher who enters into a deferred
deposit agreement and accepts a check passed on insufficient funds, or any
assignee of that check casher, shall not be entitled to recover damages in any
action brought pursuant to or governed by chapter 490. Instead, the check casher may charge and
recover a fee for the return of a dishonored check in an amount not greater
than $20.
[(f)] (g) No amount in excess of the amounts authorized
by this section and no collateral products such as insurance shall be directly
or indirectly charged by a check casher pursuant or incident to a deferred
deposit agreement."
SECTION 6. In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.
SECTION 7. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 8. This Act shall take effect upon its approval.
INTRODUCED BY: |
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Report Title:
Check Cashing; Deferred Deposit Agreements; Fees; Annual Percentage Rate; Right to Rescind; Installment Loan Plan; Collection Practices
Description:
Specifies a customer has the right to rescind a deferred deposit by returning the principal amount used to fund the deferred deposit within a specified time frame. Permits customers to convert a deferred deposit into an installment loan plan in certain circumstances and specifies requirements for the installment loan plan. Protects against harmful collection practices. Defines annual percentage rate. Requires a check casher to post a notice informing customers that additional options may be available for safe, regulated, lower-cost, small dollar loans. Requires a check casher to provide a written agreement to a customer that clearly discloses specific information relating to the cost and fees associated with the deferred deposit, among other things. Caps the annual percentage rate at thirty-six per cent for deferred deposit of a personal check. Permits prepayment of deferred deposit agreements with no additional fees.
The summary description
of legislation appearing on this page is for informational purposes only and is
not legislation or evidence of legislative intent.