BILL NUMBER: AB 1534 AMENDED
BILL TEXT
AMENDED IN SENATE JULY 5, 2007
AMENDED IN ASSEMBLY JUNE 1, 2007
INTRODUCED BY Assembly Members Nunez and Jones
(Principal coauthor: Assembly Member Bass)
FEBRUARY 23, 2007
An act to amend Sections 23035, 23036, and 23057 of, and
to add Section 23038 to, Section 23057 of the
Financial Code, relating to deferred deposit transactions.
LEGISLATIVE COUNSEL'S DIGEST
AB 1534, as amended, Nunez. Deferred deposit transactions.
Existing law, the California Deferred Deposit Transaction Law,
prohibits a person from offering, originating, or making a deferred
deposit transaction without first obtaining a license from the
Commissioner of Corporations. Existing law requires an
agreement to enter into a deferred deposit transaction to be in
writing and to include specified information and disclosures.
Existing law authorizes a licensee to allow an extension of time, or
a payment plan, for repayment of an existing deferred deposit
transaction but prohibits the licensee from imposing any fee or
charge in conjunction with the extension or payment plan.
Existing law requires the commissioner to, by December 1, 2007,
report to the Governor and the Legislature on its implementation of
the California Deferred Deposit Transaction Law. A willful
violation of the California Deferred Deposit Transaction Law is a
crime.
This bill would require that a deferred deposit
transaction customer be allowed to utilize an extension of time, or a
payment plan, at least once in a 12-month period and to rescind, at
no cost, a deferred deposit transaction agreement on or before the
close of the following business day, and would require the agreement
to inform the customer of those rights. The bill would require a
licensee to implement specified procedures, pursuant to regulations
adopted by the commissioner, to inform consumers of the intended uses
of deferred deposit transaction services. The bill would also
require an additional report to be provided to the Governor and the
Legislature by December 1, 2008, that would include specified
information on deferred deposit transaction customers and the
advertising practices of licensees. the commissioner,
on or before March 1, 2008, to submit a report to the Governor and
the Legislature that, among other things, summarizes the results of a
study on, and includes various information related to, payday loans.
Because a willful violation of the bill's provisions would be a
crime, this 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.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes no .
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. 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 check shall not exceed three hundred
dollars ($300). 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 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) 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 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) 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
two-hundred-dollar ($200) deferred deposit transaction, payable in 14
days and 30 days, respectively, giving the corresponding annual
percentage rate. The information may be provided in a chart as
follows:
Amount Fee Amount of 14-day 30-day
Provided Check APR APR
$100 XX XXX XXX XXX
$200 XX XXX XXX XXX
(e) 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, if applicable as allowed under
subdivision (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) That the customer shall be allowed to utilize an extension of
time, or a payment plan, at least once in a 12-month period.
(13) The customer has the right to rescind, at no cost, a deferred
deposit transaction agreement on or before the close of the
following business day.
(14) Signature space for the customer and signature of the
licensee or authorized representative of the licensee and date of the
transaction.
(15) Any other information that the commissioner shall deem
necessary by regulation.
(f) The notice required by subdivision (c) 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) The written agreement required by subdivision (e) 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) 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) 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. 2. 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 customer shall be allowed to utilize
an extension of time, or a payment plan, at least once in a 12-month
period. 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.
(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 give a customer the right to rescind, at no
cost, a deferred deposit transaction agreement on or before the close
of the following business day.
(h) 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. 3. Section 23038 is added to the Financial
Code, to read:
23038. A licensee shall implement procedures, pursuant to
regulations adopted by the commissioner, to inform consumers of the
intended uses of deferred deposit transaction services. The
regulations adopted by the commissioner shall require these
procedures to include the placement of a customer notice on all
marketing materials, including all television, print, radio, and
Internet advertising, and direct mail and in-store promotional
materials.
SEC. 4. SECTION 1. Section 23057 of
the Financial Code is amended to read:
23057. (a) On December 1, 2007, the commissioner shall report to
the Governor and the Legislature on its implementation of this
division. The report shall include, at a minimum, information
regarding the demand for deferred deposit transactions, the growth
and trends in the industry, common practices for conducting the
business of deferred deposit transactions, the advertising practices
of the industry, including any violations of Section 23027, and any
other information the commissioner deems necessary to inform the
Governor and the Legislature regarding potential legislation that may
be necessary to protect the people of the State of California. The
commissioner's recommendations for future action may include, but are
not limited to, changes in the fees charged to consumers,
specifications regarding the length of time for deferred deposit
transactions, maximum amount provided to consumers, additional
regulation of advertising practices, and the implementation of an
installment loan product in lieu of a deferred deposit transaction as
described in this division.
(b) On December 1, 2008, the commissioner shall report to the
Governor and the Legislature on its implementation of this division.
The report shall include the information set forth in subdivision (a)
and the following additional specific information on a disaggregated
basis by ZIP Code:
(1) The race, income, level of education, and occupation of
typical customers and their expected use of the proceeds of deferred
deposit transactions.
(2) The number of customers each year who enter into deferred
deposit transactions, the minimum, maximum, and average amount of the
transactions, and the number of these transactions that customers
ultimately fail to comply with.
(3) The information necessary to assess the range of advertising
practices being used by licensees, and an evaluation of whether
certain licensees are targeting certain groups of customers with
their products.
(4) The number of customers who enter into deferred deposit
transactions with multiple licensees simultaneously and the number of
simultaneous transactions entered into by these customers.
(5) The number of licensees who issue, and the number of customers
who obtain, back-to-back deferred deposit transactions, including
the number of consecutive transactions taken by customers.
(b) On or before March 1, 2008, the commissioner shall submit a
report, consistent with paragraphs (1) and (2), to the Governor and
the Legislature. If the commissioner submits a report described in
the Request for Proposal issued by the Department of Corporations on
April 16, 2007, as modified in subsequent addenda, that report shall
satisfy the requirements of this subdivision.
(1) The report shall summarize the results of a study on the
payday loan industry, payday loan customers, and payday loan business
practices in California. Information shall be provided in narrative,
tabular, and graphic or pictorial form and shall reflect regional
data based on Zip Codes.
(2) The report shall include, but shall not be limited to, the
following:
(A) Information on the demand for payday loans, as determined by
the needs of the consumer and the demand created by the licensee.
(B) Demographic characteristics of customers who utilize payday
loans, including but not limited to, race, income, level of
education, occupation, and primary language.
(C) The number of customers who obtain payday loans each year.
(D) The minimum, maximum, and average amount of the payday loans.
(E) The number of payday loans that customers fail to repay.
(F) Customers' use of loan proceeds.
(G) Advertising practices of payday lenders.
(H) The number of licensees who issue customers back-to-back
payday loans.
(I) The number of customers who obtain payday loans from multiple
licensees simultaneously and the number of simultaneous loans these
customers obtain.
(J) The number of customers who obtain back-to-back loans and the
number of consecutive loans these customers obtain.
(K) Collection practices of payday lenders.
(L) The number of customers who were required to pay fees for
extensions or payment plans.
(M) The number of customers who were charged late fees by
licensees.
(N) The number of customers who were charged more than a single
nonsufficient funds fee of fifteen dollars ($15).
(c) As the commissioner conducts the studies to provide the
reports required in this section, licensees shall be required to
supply all information the commissioner deems necessary. The studies
shall be made public and may not include any proprietary information.
SEC. 5. 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.