Bill Text: HI SB2607 | 2010 | Regular Session | Introduced
Bill Title: Activity Desks; Client Trust Accounts
Spectrum: Partisan Bill (Democrat 7-0)
Status: (Passed) 2010-05-28 - (H) Act 150, on 5/28/2010 (Gov. Msg. No. 367). [SB2607 Detail]
Download: Hawaii-2010-SB2607-Introduced.html
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THE SENATE |
S.B. NO. |
2607 |
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TWENTY-FIFTH LEGISLATURE, 2010 |
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STATE OF HAWAII |
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A BILL FOR AN ACT
relating to activity desks.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:
SECTION 1. Chapter 468M, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:
"§468M- Record keeping requirements for client trust accounts. (a) An activity desk shall maintain all books and records necessary to comply with this chapter and any rules adopted pursuant to this chapter and shall make all records relating to client trust accounts available for inspection and audit within three business days of a written request by the director. Nothing in this section shall prevent the director from inspecting or auditing the books and records of an activity desk as otherwise provided pursuant to this chapter or rules adopted by the director pursuant to chapter 91.
(b) An activity desk shall keep and maintain copies of all bank statements, deposit slips, cancelled checks, drafts, and wire or electronic transaction documents relating to client trust accounts for a period of at least two years."
SECTION 2. Section 468M-3, Hawaii Revised Statutes, is amended to read as follows:
"[[]§468M-3[]]
Prohibited acts. No activity desk shall engage in any of the following
practices:
(1) Covering, concealing, or obscuring the name, address, or telephone number of an activity provider in any card or brochure;
(2) Placing a telephone number, address, or other
information on any card, brochure, or other advertising material produced or
published by an activity provider, whether by decal, sticker, stamp, or
otherwise, without identifying the activity desk by name [and],
address[;], and registration number;
(3) Using a promotional card or brochure that does not clearly display the name and telephone number of the activity provider whose activity is being sold or booked when the activity is located in this State;
(4) Withdrawing any funds of a consumer from a client
trust account, other than a sales commission up to a maximum of fifteen per
cent or to make a refund to the consumer, until the activity provider has been
paid; [or]
(5) Failing to possess a current and valid
registration prior to engaging in business or advertising as an activity desk[.];
or
(6) Booking or placing a reservation for activities with an activity provider until full payments for the activity are received by the activity desk or the reservation specifically provides for direct payment of the amounts owed to the activity provider at the time of the activity."
SECTION 3. Section 468M-9, Hawaii Revised Statutes, is amended to read as follows:
"[[]§468M-9[]] Client
trust accounts; maintenance of and withdrawal from such accounts. (a) Within
three business days of receipt, an activity desk shall deposit all sums
received from a consumer[,] for excursions or activities offered by the
activity desk in a trust account maintained in a federally insured financial
institution located in Hawaii. All sums paid by any person to an activity
desk for activities furnished by an activity provider shall be held in trust
for the benefit of the person making the payment and the activity provider.
The activity provider shall be considered the trustee of the funds paid to an
activity desk, less any commission.
(b) The trust account required by this section shall be established and maintained for the benefit of the consumers paying money to the activity desk. The activity desk shall not in any manner encumber the amounts in trust and shall not withdraw money therefrom except:
(1) In partial or full payment for excursion or activities to the activity provider directly providing the services; or
(2) To make refunds as required by this chapter.
(c) This section shall not prevent the withdrawal from the trust account of:
(1) The amount of the sales commission, up to a maximum of fifteen per cent;
(2) Any interest earned and credited to the trust account;
(3) Refunds; or
(4) Remaining funds of a consumer once the activity provider has been paid.
(d) At the time of registration, the activity
desk shall file with the department the account number and the name of the
financial institution at which the trust account is held [or submit a bond
or letter of credit as provided in section 468M-10]. The activity desk
shall notify the department of any change in the account number or location
within one business day of the change.
[(e) The director may, by rule, allow for
the use of other types of funds or accounts provided that the protection for
consumers is no less than that provided by this section.]"
SECTION 4. Section 468M-11, Hawaii Revised Statutes, is amended to read as follows:
"[[]§468M-11[]] Violations;
fraud. Any violations by an activity desk of any law relating to client
trust accounts [or the bond or letter of credit pursuant to section 468M-10]
shall constitute a prima facie showing of fraud on the part of the activity
desk and may not be dischargeable as a debt to a consumer or an activity
provider in any bankruptcy proceeding."
SECTION 5. Section 468M-10, Hawaii Revised Statutes, is repealed.
["[§468M-10] Performance bond and
irrevocable letter of credit as alternative to client trust account required of
activity desks; coverage amount and computation; annual report and option;
adjustments; coverage upon transfer. (a) If a client trust account
is not established and maintained as required under section 468M-9, no activity
desk shall be permitted to operate in the State unless the activity desk:
(1) Posts a bond which is a performance or
financial guaranty type bond naming the director as the obligee and which may
be canceled only if the activity desk gives sixty days prior written notice to
the surety or if the surety gives thirty days prior written notice to the
director of cancellation of the bond; or
(2) Obtains an irrevocable letter of credit
which is a guarantee of payment for a term of one year naming the director as
beneficiary, with a provision for automatic extension for additional annual
periods, and which may be canceled only if the activity desk gives prior
written notice by certified mail to the director and to the issuer at least
ninety days before the letter's expiration date or the date on which the
activity desk intends the letter to cease being effective or the issuer gives
prior written notice by certified mail to the director at least sixty days
before the expiration date.
(b) The bond or letter of credit shall be
issued by a surety or federally insured lending institution authorized to do
business in the State to indemnify any consumer who may suffer loss as a result
of nonperformance by an activity desk.
(c) An activity desk shall not provide the
required coverage through multiple bonds or irrevocable letters of credit but
shall provide either a single bond or a single irrevocable letter of credit.
An activity desk may substitute the bond with an irrevocable letter of credit.
An activity desk may substitute the bond with an irrevocable letter of credit
and vice versa pursuant to subsection (h), but shall not provide one in
addition to the other to reach the required aggregate amount of coverage. If
an activity desk has more than one branch desk location, the bond or
irrevocable letter of credit shall cover all locations and computations on the
coverage amount shall be based on the total net sales revenues of all branch
locations.
(d) Upon cancellation or expiration of the
bond or letter of credit, the surety or insurer shall remain liable for any
claims against the bond or letter of credit for a period of six months;
provided that:
[(1)] The debts were incurred while the bond
or letter of credit was in effect; and
[(2)] The director notifies the surety or
insurer, as the case may be, of any claims within ninety days of discovery of
any claims.
(e) The surety or insurer is not required
to release any moneys or collateral to the activity desk during the six months
after cancellation of the bond or expiration of the letter of credit.
(f) The amount of coverage shall be equal
to the average monthly net sales revenues of the activity desk as determined
for the twelve-month period ending on the last sales period ending date of the
fifth month prior to the anniversary date of the bond or the irrevocable letter
of credit; provided that the amount of coverage of the bond or irrevocable
letter of credit shall not be less than $50,000 and shall not be more than
$100,000. Any activity desk providing a bond or irrevocable letter of credit
for the first time during the period beginning on September 1, 1992, and ending
on March 31, 1993, shall base its initial coverage amount on the twelve-month
period ending on June 30, 1992. If an activity desk does not have a full
twelve-month period on which to base the amount, the amount shall not be less
than the average monthly net sales revenues as determined for the months
available; provided that this amount shall not be less than $75,000,
notwithstanding the minimum amount of $50,000 for regularly computed coverage.
(g) No later than four months before the
anniversary date of coverage, each activity desk shall submit a notarized
annual report to the department verifying the monthly net sales revenue figures
for the twelve-month period upon which the amount of the bond or irrevocable
letter of credit is based. However, each activity desk shall have the option
not to submit the annual report if the activity desk provides a bond or an
irrevocable letter of credit for the maximum amount of $100,000.
(h) Each activity desk shall review the
desk's coverage at least once each year and shall increase or decrease the
amount of the coverage as necessary according to the computation method in
subsection (f) at the time coverage is renewed on the anniversary date or on
other dates if coverage is reinstated or replaced; provided that any downward
adjustment in coverage shall not result in coverage below $50,000.
A bond shall be accepted as replacement for
another bond or an irrevocable letter of credit and an irrevocable letter of
credit shall be accepted as replacement for another irrevocable letter of
credit or a bond if:
(1) The effective date of a replacement
bond is prior to or on the cancellation date of the bond being replaced;
(2) Where a letter of credit is about to
expire, the effective date of the replacement bond is prior to or on the same
date as the date of expiration of the irrevocable letter of credit and the
replacement bond is received by the director before that expiration date;
(3) The replacement irrevocable letter of
credit is received by the director at least fifteen days prior to the
expiration date of the irrevocable letter of credit being replaced; or
(4) The replacement irrevocable letter of
credit is received by the director on or before the cancellation date of the
bond.
(i) An activity desk whose bond or letter
of credit has been cancelled or has expired may continue to operate the
activity desk provided the desk establishes the client trust account at least
two months prior to the cancellation or expiration of the bond or letter of
credit, and shall not be allowed to replace the client trust account with a
bond or letter of credit for at least one year.
(j) Failure to have in effect a client
trust account, or current bond or letter of credit shall result in automatic
forfeiture of the registration. An activity desk whose registration is
forfeited shall apply as a new applicant for registration."]
SECTION 6. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.
SECTION 7. This Act shall take effect on July 1, 2010.
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INTRODUCED BY: |
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Report Title:
Activity Desks; Client Trust Accounts
Description:
Establishes record keeping requirements for client trust accounts held by activity desks. Clarifies that activity desks shall include registration numbers on all advertising materials. Prohibits an activity desk from booking or placing a reservation for activities with an activity provider until payment is received or direct payment to the provider is arranged. Repeals authority to substitute a bond or letter of credit for client trust account.
The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.
