BILL NUMBER: SB 1551 AMENDED
BILL TEXT
AMENDED IN SENATE APRIL 8, 2008
AMENDED IN SENATE MARCH 25, 2008
INTRODUCED BY Senator Correa
FEBRUARY 22, 2008
An act to amend Sections 23001, 23027, 23035,
23036, and 23037 of the Financial Code, relating to deferred deposit
transactions.
LEGISLATIVE COUNSEL'S DIGEST
SB 1551, as amended, Correa. Deferred deposit transactions.
Existing law, the California Deferred Deposit Transaction Law,
provides for the regulation and licensure by the Commissioner of
Corporations of persons offering, originating, or making deferred
deposit transactions, which are defined as a transaction whereby a
person defers depositing a customer's personal check until a specific
date pursuant to a written agreement. Existing law requires
advertisements by a deferred deposit transaction licensee to disclose
that the licensee is licensed by the department. Existing law
requires a specified notice to be provided to a customer before
entering into a deferred deposit transaction. Existing law authorizes
a licensee to allow an extension of time, or a payment plan, for
repayment of an existing deferred deposit transaction. Existing law
establishes various prohibited acts applicable to deferred deposit
transactions. A willful violation of California Deferred Deposit
Transaction Law is a crime.
This bill would provide that a deferred deposit
transaction includes transactions whereby a person defers the
electronic debit of a customer's account until a specific date
pursuant to a written agreement. The bill would specify the
contents of the disclosure required for deferred deposit transaction
advertisements and would make the disclosure applicable to licensees'
advertisements on the Internet. The bill would require the notice
for a deferred deposit transaction to be separate from the written
agreement for the transaction and would require the notice to be
initialed by the customer and retained by the licensee in its
books and records . The bill would require information on
charges and fees for a deferred deposit transaction to be provided in
a specified format indicating the corresponding annual percentage
rate. The bill would require the agreement for a deferred deposit
transaction to inform the customer that he or she has a right to
request a written extension agreement or payment plan for the
transaction. The bill would require extension of time and payment
plans for repayment of a deferred deposit transaction to meet
specified documentation requirements. The bill would prohibit a
licensee from referring, or threatening to refer, a customer to a
prosecutor , or a prosecutor's diversion program, for
engaging in a deferred deposit transaction without funds to cover the
personal check. The bill would also prohibit a licensee from
debiting a customer's banking account more than one
additional time 2 additional times for the full
amount of the loan after the due date , unless authorized by
the customer if the customer does not pay off the
loan on its due date and would require a licensee to obtain the
authorization of the customer to debit his or her banking account for
the 2nd additional time .
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.
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, or defers the
electronic debit of a customer's banking account, until a specific
date, pursuant to a written agreement for a fee or other charge, as
provided in Section 23035.
(b) "Commissioner" means the Commissioner of Corporations.
(c) "Department" means the Department of Corporations.
(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 23027 of
the Financial Code is amended to read:
23027. (a) No licensee shall advertise, print, display, publish,
distribute, or broadcast, or cause or permit to be advertised,
printed, displayed, published, distributed or broadcast, in any
manner, any statement or representation with regard to the business
subject to the provisions of this division, including the rates,
terms, or conditions for making or negotiating deferred deposit
transactions, that is false, misleading, or deceptive, or that omits
material information that is necessary to make the statements not
false, misleading, or deceptive.
(b) No licensee shall place an advertisement disseminated
primarily in this state for a deferred deposit transaction unless the
licensee discloses in the printed text of the advertisement, or the
oral text in the case of a radio or television advertisement, that
the licensee is licensed by the department pursuant to this division.
This disclosure shall be as follows: "(licensee's name) is licensed
by the Department of Corporations pursuant to the California Deferred
Deposit Transaction Law."
(c) The commissioner may require that rates of charges or fees, if
stated by the licensee, be stated fully and clearly in the manner
that the commissioner deems necessary to give adequate information
to, or to prevent misunderstanding by, prospective customers.
(d) No advertising copy shall be used after its use has been
disapproved by the commissioner and the licensee is notified in
writing of the disapproval.
(e) The commissioner may require licensees to maintain a file of
all advertising copy for a period of 90 days from the date of its
use. The file shall be available to the commissioner upon request.
(f) All disclosures required under this section shall be in the
same language as the advertisement.
(g) An advertisement by a licensee on the Internet shall satisfy
the requirements of this section.
(h) Copies of all advertising shall be maintained by a licensee
for not less than two years.
SEC. 3. 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 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 notice required under subdivision (c) shall be separate
from the written agreement required under subdivision (a)
and shall satisfy the following:
(1) The customer shall initial the notice to acknowledge receipt.
(2) The licensee
shall retain a copy of the initialed notice in its books and records.
(a). A licensee shall request that a customer initial
the notice to acknowledge receipt and shall retain a copy of the
initialed notice in its books and records. Failure of a licensee to
obtain a customer's initials on the notice shall constitute a
rebuttable presumption that the notice was not provided to the
customer.
(e) 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 shall be provided in a chart as
follows:
------------------------------------------------------
|Amount Amount of 14-day 30-day |
|Provided Fee Check APR APR |
+-------------+------+-------------+---------+---------+
|$100 XX XXX XXX XXX |
| |
|$200 XX XXX XXX XXX |
------------------------------------------------------
(f) 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 (c) 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 has the right to request a written
extension agreement or payment plan from the licensee.
(13) Signature space for the customer and signature of the
licensee or authorized representative of the licensee and date of the
transaction.
(14) Any other information that the commissioner shall deem
necessary by regulation.
(g) 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.
(h) 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.
(i) 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.
(j) 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. 4. 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.
(c) A payment plan under subdivision (b) shall satisfy all of the
following:
(1) The plan shall be in writing.
(2) The plan shall include the payment dates and the amount of
each payment.
(3) The plan shall be signed by the customer.
(4) A signed copy of the plan shall be maintained in the licensee'
s books and records.
(d) The allowance of an extension of time for repayment of an
existing deferred deposit transaction under subdivision (b) shall
satisfy one of the following:
(1) Be documented by a written agreement signed by the borrower
and including the terms of the extension.
(2) Be documented by a confirmation letter to the customer
confirming the approved terms of the extension of time.
(c) A payment plan under subdivision (b) shall be in writing and
shall include the payment dates and the amount of each payment. If
the plan is signed by the customer, a signed copy of the plan shall
be provided to the customer and maintained in the licensee's books
and records. If the customer declines to sign the plan, the licensee
shall mail a confirmation letter to the customer confirming the
approved payment dates and amounts.
(e)
(d) 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.
(f)
(e) 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.
(g)
(f) 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.
(h)
(g) 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.
(i)
(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. 5. SEC. 4. Section 23037 of the
Financial Code is amended to read:
23037. In no case shall a licensee do any of the following:
(a) Accept or use the same check for a subsequent transaction, or
permit a customer to pay off all or a portion of one deferred deposit
transaction with the proceeds of another.
(b) Accept any collateral for a deferred deposit transaction.
(c) Make any deferred deposit transaction contingent on the
purchase of insurance or any other goods or services.
(d) Enter into a deferred deposit transaction with a person
lacking the capacity to contract.
(e) Alter the date or any other information on a check.
(f) Engage in any unfair, unlawful, or deceptive conduct, or make
any statement that is likely to mislead in connection with the
business of deferred deposit transactions.
(g) Accept more than one check for a single deferred deposit
transaction.
(h) Take any check, instrument, or form in which blanks are left
to be filled in after execution.
(i) Offer, arrange, act as an agent for, or assist a deferred
deposit originator in any way in the making of a deferred deposit
transaction unless the deferred deposit originator complies with all
applicable federal and state laws and regulations, including the
provisions of this division.
(1) The prohibition specified in this subdivision does not apply
to the arranger, agent, or assistant to a state or federally
chartered bank, thrift, savings association, or industrial loan
company where the state or federally chartered bank, thrift, savings
association, or industrial loan company satisfies all of the
following:
(A) It initially advances the loan proceeds to the customer.
(B) It does not sell, assign, or transfer a preponderant economic
interest in the deferred deposit transaction to the arranger, agent,
or assistant, or an affiliate or subsidiary of the state or federally
chartered bank, thrift, savings association, or industrial loan
company, unless selling, assigning, or transferring a preponderant
economic interest is expressly permitted by the primary regulator of
the state or federally chartered bank, thrift, savings association,
or industrial loan company.
(C) It develops the deferred deposit transaction product or
products on its own.
(2) If a licensee offers, arranges, acts as an agent for, or
assists a state or federally chartered bank, thrift, savings
association, or industrial loan company in any way in the making of a
deferred deposit transaction and the state or federally chartered
bank, thrift, savings association, or industrial loan company meets
the standards set forth in paragraph (1), the licensee shall comply
with all other provisions in this division to the extent they are not
preempted by other state and federal laws.
(j) Refer, or threaten to refer, a customer to a prosecutor
or a prosecutor's diversion program, established pursuant to Section
1001.60 of the Penal Code, for engaging in a
deferred deposit transaction without funds to cover the personal
check.
(k) Debit, or attempt to debit, a customer's banking account more
than one additional time two additional times
for the full amount of the loan after the due date ,
unless the customer authorizes an additional debit attempt after the
licensee's second debit attempt. if the customer does
not pay off the loan on its due date. Before presenting an unpaid
check, check image, or electronic payment order a second time, a
licensee shall obtain the customer's written authorization
regarding the date and amount the customer authorizes the licensee
to debit from his or her account.
SEC. 6. 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.