BILL NUMBER: AB 786 AMENDED
BILL TEXT
AMENDED IN SENATE JUNE 6, 2013
INTRODUCED BY Assembly Member Dickinson
FEBRUARY 21, 2013
An act to amend Sections 2010, 2040, and 2084
2003, 2010, 2011, 2040, 2082, 2084, 2101, and 2102 of, and
to add Sections 2154 and 2155 and 2174
to, the Financial Code, relating to money transmissions.
LEGISLATIVE COUNSEL'S DIGEST
AB 786, as amended, Dickinson. Money transmissions.
Existing law, the Money Transmission Act, provides for the
regulation of money transmissions by the Department of Financial
Institutions and the Commissioner of Financial Institutions. The
Governor's Reorganization Plan No. 2, as of July 1, 2013, abolishes
the Department of Financial Institutions and transfers its
responsibilities to the Department of Business Oversight and the
Commissioner of Business Oversight.
Existing law , the Money Transmission Act,
requires a person who engages in the business of money transmission
in this state to be licensed by the department. Existing law provides
that only a corporation or limited liability company may be issued a
license under the Money Transmission Act. Existing law exempts
certain persons or entities from the application of the act, as
specified. Existing law authorizes the commissioner, by
regulation or order, to exempt from the act any person or transaction
or class of persons or transactions, if the commissioner finds such
action to be in the public interest and not necessary.
This bill would further exempt from the act a person that delivers
payroll money on behalf of an employer to employees by check or
deposit in a checking or savings account, as specified. The bill
would authorize the commissioner, by regulation or order, to exempt
from all or part of the act any person or transaction or class of
persons or transactions and would require the commissioner to adopt
regulations to carry out and implement this section. The bill
would require the commissioner to make these
exemptions public on the commissioner's Internet Web site, as
specified.
Existing law requires a licensee to maintain tangible shareholders'
equity, as defined, in an amount to be determined from time to time
by the commissioner, but not less than $500,000.
This bill would require an applicant to possess, and a licensee to
maintain at all times, a minimum net worth
tangible shareholder's equity of $100,000 to $500,000,
depending on estimated or actual transaction volume, as determined by
the commissioner. The bill would authorize the commissioner to
increase that net worth requirement to up to $2,000,000, if certain
criteria are met.
Existing law requires a licensee to at all times own eligible
securities, meaning any United States currency eligible security or
foreign currency eligible security, having an aggregate market value
computed in accordance with United States generally accepted
accounting principles, as specified.
This bill would specify that any receivable owed by a bank and
resulting from an automated clearinghouse or credit-funded
transmission is a United States currency eligible security.
Existing law provides that a licensee shall be deemed to own an
eligible security under specified criteria. Existing law provides
that no licensee shall be deemed not to own an eligible security
solely on account of certain facts, provided that, but for that fact,
the licensee would be deemed to own the eligible security.
This bill would provide that no licensee shall be deemed not to
own an eligible security solely on account of the fact that the
licensee holds the eligible security in a custodial capacity as an
agent of its customers in a pooled account in the name of the
licensee, as determined by the commissioner based on specified
factors .
Existing law requires licensee or its agent to forward all money
received for transmission or give instructions committing equivalent
money to the person designated by the customer within 10 days after
receiving that money, unless otherwise ordered by the customer. In
the case of money received for transmission, existing law requires a
receipt to be provided by a licensee or its agent to all customers
and requires that the receipt be made available to the customer in
English and in the language principally used by that licensee or that
agent to advertise at that branch office if other than English.
This bill would provide an exception to these requirements when
the money transmission is for the payment of goods or services and
make a conforming change in this regard.
Existing law sets forth enforcement provisions under the Money
Transmission Act. Existing law authorizes the commissioner to direct
a licensee who is out of compliance with the Money Transmission Act
to comply with the law or discontinue any unsafe or injurious
practices.
This bill would provide that the commissioner has continuous
authority to exercise the powers set forth in this act whether or not
an application for a license has been filed with the commissioner,
any license has been issued, or if issued, has been surrendered,
suspended, or revoked. The bill would authorize the
commissioner to bring an action, or request that the Attorney General
bring an action, against any person who has violated or is about to
violate the act, and would set forth the relief that is authorized,
as specified.
This bill would authorize the commissioner to prepare written
decisions, opinion letters, and other formal written guidance and
would require the commissioner to make public on the commissioner's
Internet Web site all written decisions, opinion letters, and other
formal written guidance.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 2003 of the
Financial Code is amended to read:
2003. For purposes of this division, the following definitions
shall apply:
(a) "Affiliate," when used with respect to a specified person,
means any person controlling, controlled by, or under common control
with, that specified person, directly or indirectly through one or
more intermediaries. For purposes of subdivisions (q) and (v), a
specified person is affiliated with another person if that person
controls, is controlled by, or under common control through the
ownership directly or indirectly of shares or equity securities
possessing more than 50 percent of the voting power of that specified
person.
(b) "Agent" means a person that is not itself
licensed as a money transmitter in California and provides
money transmission in California on behalf of the licensee, provided
that the licensee becomes liable for the money transmission from the
time money or monetary value is received by that person. However,
"agent" does not include any officer or employee of the licensee when
acting as such at an office of a licensee.
(c) "Applicant" means a person that files an application for a
license or for acquisition of control of a licensee under this
division.
(d) "Average daily outstanding" means the amount of outstanding
money transmission obligations in California at the end of each day
in a given period of time, added together, and divided by the total
number of days in that period of time.
(e) "Branch office" means any office in this state of a licensee
or agent at which the licensee receives money or monetary value to
provide money transmission, either directly or through an agent.
(f) "Business day" means one of the following:
(1) When used with respect to any act to be performed in this
state, any day other than Saturday, Sunday, or any other day that is
provided for as a holiday in the Government Code.
(2) When used with respect to any act to be performed in any
jurisdiction other than this state, any day other than a day that is
a legal holiday under the laws of that jurisdiction.
(g) "Commissioner" means the Commissioner of Financial
Institutions.
(h) "Control" has the meaning set forth in Section 1250.
(i) "Day" means calendar day.
(j) "In California" or "in this state" means physically located in
California, or with, to, or from persons located in California.
(k) "Issue" and "issuer" mean, with regard to a payment
instrument, the entity that is the maker or drawer of the instrument
in accordance with the California Commercial Code and is liable for
payment. With regard to stored value, "issue" and "issuer" mean the
entity that is liable to the holder of stored value and has
undertaken or is obligated to pay the stored value. Only a licensee
may issue stored value or payment instruments.
(l) "Licensee" means a corporation or limited liability company
licensed under this division.
(m) "Monetary value" means a medium of exchange, whether or not
redeemable in money.
(n) "Money" means a medium of exchange that is authorized or
adopted by the United States or a foreign government. The term
includes a monetary unit of account established by an
intergovernmental organization or by agreement between two or more
governments.
(o) "Money transmission" means any of the following:
(1) Selling or issuing payment instruments.
(2) Selling or issuing stored value.
(3) Receiving money for transmission.
(p) "Outstanding," with respect to payment instruments and stored
value, means issued or sold by the licensee in the United States and
not yet paid or refunded by the licensee, or issued or sold on behalf
of the licensee in the United States by its agent and reported as
sold, but not yet paid or refunded by the licensee. "Outstanding,"
with respect to receiving money for transmission means all money or
monetary value received in the United States for transmission by the
licensee or its agents but not yet paid to the beneficiaries or
refunded to the person from whom the money or monetary value was
received. All outstanding money transmission of a licensee is and
shall remain a liability of the licensee until it is no longer
outstanding.
(q) "Payment instrument" means a check, draft, money order,
traveler's check, or other instrument for the transmission or payment
of money or monetary value, whether or not negotiable. The term does
not include a credit card voucher, letter of credit, or any
instrument that is redeemable by the issuer for goods or services
provided by the issuer or its affiliate.
(r) "Person" means an individual, corporation, business trust,
estate, trust, partnership, proprietorship, syndicate, limited
liability company, association, joint venture, government,
governmental subdivision, agency or instrumentality, public
corporation or joint stock company, or any other organization or
legal or commercial entity, provided, however, that "person," when
used with respect to acquiring control of or controlling a specified
person, includes any combination of two or more persons acting in
concert.
(s) "Receiving money for transmission" or "money received for
transmission" means receiving money or monetary value in the United
States for transmission within or outside the United States by
electronic or other means. The term does not include sale or issuance
of payment instruments and stored value.
(t) "Record" means information that is inscribed on a tangible
medium or that is stored in an electronic or other medium and is
retrievable in perceivable form.
(u) "State" means a state of the United States, the District of
Columbia, Puerto Rico, the United States Virgin Islands, or any
territory or insular possession subject to the jurisdiction of the
United States.
(v) "Stored value" means monetary value representing a claim
against the issuer that is stored on an electronic or digital medium
and evidenced by an electronic or digital record, and that is
intended and accepted for use as a means of redemption for money or
monetary value or payment for goods or services. The term does not
include a credit card voucher, letter of credit, or any stored value
that is only redeemable by the issuer for goods or services provided
by the issuer or its affiliate, except to the extent required by
applicable law to be redeemable in cash for its cash value.
(w) "Traveler's check" means an instrument that meets all of the
following:
(1) Is designated on its face by the term "traveler's check" or by
any substantially similar term or is commonly known and marketed as
a traveler's check.
(2) Contains a provision for a specimen signature of the purchaser
to be completed at the time of purchase.
(3) Contains a provision for a countersignature of the purchaser
to be completed at the time of negotiation.
SECTION 1. SEC. 2. Section 2010 of
the Financial Code is amended to read:
2010. This division does not apply to the following:
(a) The United States or a department, agency, or instrumentality
thereof, including any federal reserve bank and any federal home loan
bank.
(b) Money transmission by the United States Postal Service or by a
contractor on behalf of the United States Postal Service.
(c) A state, county, city, or any other governmental agency or
governmental subdivision of a state.
(d) A commercial bank or industrial bank, the deposits of which
are insured by the Federal Deposit Insurance Corporation or its
successor, or any foreign (other nation) bank that is licensed under
Article 3 (commencing with Section 1800) of Chapter 20 or that is
authorized under federal law to maintain a federal agency or federal
branch office in this state; a trust company licensed pursuant to
Section 1042 or a national association authorized under federal law
to engage in a trust banking business; an association or federal
association, as defined in Section 5102 the deposits of which are
insured by the Federal Deposit Insurance Corporation or its
successor; and any federally or state chartered credit union the
member accounts of which are insured or guaranteed as provided in
Section 14858.
(e) Electronic funds transfer of governmental benefits for a
federal, state, county, or local governmental agency by a contractor
on behalf of the United States or a department, agency, or
instrumentality thereof, or a state or governmental subdivision,
agency, or instrumentality thereof.
(f) A board of trade designated as a contract market under the
federal Commodity Exchange Act (7 U.S.C. Secs. 1-25,
1-25, incl.) or a person that, in the ordinary
course of business, provides clearance and settlement services for a
board of trade to the extent of its operation as or for such a board.
(g) A person that provides clearance or settlement services
pursuant to a registration as a clearing agency or an exemption from
registration granted under the federal securities laws to the extent
of its operation as such a provider.
(h) An operator of a payment system to the extent that it provides
processing, clearing, or settlement services, between or among
persons excluded by this section, in connection with wire transfers,
credit card transactions, debit card transactions, stored value
transactions, automated clearing house transfers, or similar funds
transfers, to the extent of its operation as such a provider.
(i) A person registered as a securities broker-dealer under
federal or state securities laws to the extent of its operation as
such a broker-dealer.
(j) A person that delivers payroll money on behalf of an employer
to employees by check or deposit into a checking or savings account
at a bank, savings bank, savings and loan association, savings
association, or credit union, if that delivery is the only money
transmission activity of which the person engages.
(k) A person listed under subdivision (d) is exempted from all the
provisions of this division, except Sections 2062 and 2063.
SEC. 3. Section 2011 of the Financial
Code is amended to read:
2011. (a) The commissioner may, by
regulation or order, either unconditionally or upon specified terms
and conditions or for specified periods, exempt from all or part
of this division any person or transaction or class of persons
or transactions, if the commissioner finds such action to be in the
public interest and that the regulation of such persons or
transactions is not necessary for the purposes of this division.
The commissioner shall post on the commissioner's Internet Web site
a list of all persons, transactions, or classes of person
or transactions exempt pursuant to this section, and the part or
parts of this division from which they are exempt.
(b) The commissioner shall adopt regulations to carry out and
implement this section.
SEC. 2. SEC. 4. Section 2040 of the
Financial Code is amended to read:
2040. (a) An applicant shall possess, and a licensee shall
maintain at all times, a minimum net worth computed in
accordance with generally accepted accounting principles
tangible shareholder's equity of one hundred thousand
dollars ($100,000) to five hundred thousand dollars ($500,000),
depending on estimated or actual transaction volume, as determined by
the commissioner.
(b) The commissioner may increase the amount of net worth required
of an applicant or licensee, up to a maximum of two million dollars
($2,000,000), if the commissioner determines, with respect to the
applicant or licensee, that a higher net worth is necessary to
achieve the purposes of this division based on the following
factors :
(1) The nature and volume of the projected or established
business.
(2) The number of locations at or through which money transmission
is or will be conducted.
(3) The amount, nature, quality, and liquidity of its assets.
(4) The amount and nature of its liabilities.
(5) The history of its operations and prospects for earning and
retaining income.
(6) The quality of its operations.
(7) The quality of its management.
(8) The nature and quality of its principals.
(9) The nature and quality of the persons in control.
(10) The history of its compliance with applicable state and
federal law.
(11) Any other factor the commissioner considers relevant.
(c) The commissioner at any time may require a licensee to write
down any asset held by it to a valuation that will represent its then
fair market value. Any receivable or debt due to a licensee that is
past due and unpaid for the period of one year shall be charged off,
unless it is well secured or is in process of collection.
(d) The aggregate value of a licensee's accounts receivable,
excluding money transmission receivables, loans or extensions of
credit to any one person, or that person's affiliates, cannot exceed
50 percent of the licensee's tangible shareholders' equity without
the advanced written approval of the commissioner. Whenever such
amount equals or exceeds 20 percent of the licensee's tangible
shareholders' equity, the licensee shall maintain records evidencing
such amount and any security or other source of payment for the
amount owed, and such other records as the commissioner may require
by order or regulation.
(e) The commissioner shall adopt regulations to carry out and
implement the factors described in subdivision (b).
SEC. 5. Section 2082 of the Financial
Code is amended to read:
2082. (a) "Eligible security" means any United States currency
eligible security or foreign currency eligible security.
(b) For the purposes of this division, the following are United
States currency eligible securities:
(1) Cash.
(2) Any deposit in an insured bank or an insured savings and loan
association or insured credit union.
(3) Any bond, note, or other obligation that is issued or is
guaranteed by the United States or any agency of the United States.
(4) Any bond, note, or other obligation that is issued or
guaranteed by any state of the United States or by any governmental
agency of or within any state of the United States and that is
assigned an eligible rating by an eligible securities rating service.
(5) Any bankers acceptance that is eligible for discount by a
federal reserve bank.
(6) Any commercial paper that is assigned an eligible rating by an
eligible rating securities service.
(7) Any bond, note, or other obligation that is assigned an
eligible rating by an eligible securities rating service.
(8) Any share of an investment company that is an open-end
management company, that is registered under the Investment Company
Act of 1940 (15 U.S.C. Sec. 80a-1 et seq.), that holds itself out to
investors as a money market fund, and that operates in accordance
with all provisions of the Investment Company Act of 1940, and the
regulations of the Securities and Exchange Commission applicable to
money market funds, including Section 270.2a-7 of the regulations of
the Securities and Exchange Commission (17 C.F.R. 270.2a-7).
For purposes of this paragraph and paragraph (9), "investment
company," "management company," and "open-end" have the meanings set
forth in Sections 3, 4, and 5, respectively, of the Investment
Company Act of 1940 (15 U.S.C. Secs. 80a-4 and 80a-5, respectively).
(9) Any share of an investment company that is an open-end
management company, that is registered under the Investment Company
Act of 1940 (15 U.S.C. Sec. 80a-1 et seq.), and that invests
exclusively in securities that constitute eligible securities that
comply with valuation requirements of this division.
(10) Any account due to any licensee from any agent in the United
States on account of the receipt of money on behalf of the licensee
for money transmission by the agent, if the account is current and
not past due or otherwise doubtful of collection.
(11) Any other security or class of securities that the
commissioner has by regulation or order declared to be eligible
securities.
(12) Any receivable owed by a bank and resulting from an automated
clearinghouse or credit-funded transmission.
(c) "Foreign currency eligible security" means any of the
following that is denominated in a foreign currency:
(1) Cash.
(2) Any deposit in an office of a bank acceptable to the
commissioner that is located in a foreign country.
(3) Any other security or class of securities that the
commissioner has by regulation or order declared to be eligible
securities pursuant to Section 2086.
(d) For the purposes of this division, "value" means the
following:
(1) When used with respect to an eligible security owned by a
licensee of the type described in paragraph (10) of subdivision (b),
net carrying value as determined in conformity with United States
generally accepted accounting principles. However, in computing the
value of the account, any amount that consists of money that has not
been remitted to the licensee or refunded within 45 business days of
receipt by the agent shall be excluded from the value of the account
and shall be excluded from the calculation of eligible securities.
(2) Market value when used with respect to any other eligible
security owned by a licensee.
SEC. 3. SEC. 6. Section 2084 of the
Financial Code is amended to read:
2084. (a) A licensee shall be deemed to own an eligible security
only if the following apply:
(1) The licensee owns the eligible security solely and exclusively
in its own right, both of record and beneficially.
(2) The eligible security is not subject to any pledge, lien, or
security interest.
(3) The licensee can freely negotiate, assign, or otherwise
transfer the eligible security.
(b) Notwithstanding subdivision (a), no licensee shall be deemed
not to own an eligible security solely on account of any of the
following facts, provided that, but for that fact, the licensee would
be deemed to own the eligible security under the provisions of
subdivision (a):
(1) The fact that the eligible security is owned of record by a
documented nominee of the licensee or by a securities depository.
(2) The fact that the licensee has pledged the eligible security
with the United States or any state of the United States to secure
payment by the licensee of transmission money.
(3) The fact that the licensee holds the eligible security in a
custodial capacity as an agent of its customers in a pooled account
titled in the name of the licensee for the benefit of its customers.
(c) The commissioner shall make a determination of the application
of paragraph (3) of subdivision (b) on a case-by-case
basis. based on the following:
(1) The amount, nature, quality, and liquidity of the licensee's
assets.
(2) The amount and nature of the licensee's liabilities.
(3) The history of the licensee's compliance with applicable state
and federal law.
SEC. 7. Section 2101 of the Financial
Code is amended to read:
2101. Every licensee or its agent shall forward all money
received for transmission or give instructions committing equivalent
money to the person designated by the customer within 10 days after
receiving that money, unless otherwise ordered by his or her customer
or when the transmission is for the payment of goods or
services .
SEC. 8. Section 2102 of the Financial
Code is amended to read:
2102. (a) Every licensee or its agent shall refund to the
customer within 10 days of receipt of the customer's written request
for a refund any and all money received for transmission unless any
of the following occurs:
(1) The money has been forwarded within 10 days of the date of
receipt.
(2) Instructions have been given committing an equivalent amount
of money to the person designated by the customer within 10 days of
the date of the receipt of the money from the customer.
(3) The customer instructs the licensee to transmit the money at a
time beyond 10 days. If the customer gives instructions as to when
the money shall be forwarded or transmitted and the moneys have not
yet been forwarded or transmitted, the licensee or its agent shall
refund the customer's money within 10 days of receipt of the customer'
s written request for a refund.
(4) Refund would violate law.
(b) In the case of money received for transmission, except for
money transmission for the payment of goods or services, a
receipt shall be provided by a licensee or its agent to all customers
which shall be made available to the customer in English and in the
language principally used by that licensee or that agent to
advertise, solicit, or negotiate, either orally or in writing, at
that branch office if other than English. The receipt shall either
include or have attached a conspicuous statement in English and in
the language principally used by the licensee or that agent to
advertise, solicit, or negotiate, either orally or in writing at that
branch office if other than English in a size equal to at least 10
point bold type, as follows:
RIGHT TO REFUND
""You, the customer, are entitled to a refund
of the money to be transmitted as the result of
this agreement if _____ (name of licensee) does
not forward the money received from you within
10 days of the date of its receipt, or does not
give instructions committing an equivalent
amount of money to the person designated by you
within 10 days of the date of the receipt of
the funds from you unless otherwise instructed
by you.
by you or when the transmission is for the
payment of goods or services.
If your instructions as to when the moneys
shall be forwarded or transmitted are not
complied with and the money has not yet been
forwarded or transmitted, you have a right to a
refund of your money.
If you want a refund, you must mail or deliver
your written request to _____ (name of
licensee) at _____ (mailing address of
licensee). If you do not receive your refund,
you may be entitled to your money back plus a
penalty of up to $1,000 and attorney's fees
pursuant to Section 2102 of the California
Financial Code.''
(c) A cause of action under this section may be brought in small
claims court if it does not exceed the jurisdiction of that court, or
in any other appropriate court. The customer shall be entitled to
recover each of the following:
(1) Any and all money received for transmission, plus any fees and
charges paid by the customer.
(2) A penalty in an amount not to exceed one thousand dollars
($1,000). The court shall award the prevailing party costs and
attorney's fees.
SEC. 4. SEC. 9. Section 2154 is
added to the Financial Code, to read:
2154. Whenever the commissioner deems it necessary for the
general welfare of the public, he or she has continuous authority to
exercise the powers set forth in this division whether or not an
application for a license has been filed with the commissioner, any
license has been issued, or if issued, has been surrendered,
suspended, or revoked.
SEC. 5. Section 2155 is added to the Financial
Code, to read:
2155. (a) Whenever the commissioner believes from evidence
satisfactory to the commissioner that any person has violated or is
about to violate a provision of this division, or a provision of any
order, license, decision, demand, requirement, or any regulation
adopted pursuant to this division, the commissioner may, in the
commissioner's discretion, bring an action, or the commissioner may
request the Attorney General to bring an action in the name of the
people of the State of California, against that person to enjoin that
person from continuing that violation or doing any act in
furtherance of the violation. Upon a proper showing, a permanent or
preliminary injunction, restraining order, or writ of mandate shall
be granted and other ancillary relief may be granted, as appropriate.
(b) If the commissioner determines that it is in the public
interest, the commissioner may include in any action authorized by
subdivision (a), a claim for ancillary relief, including, but not
limited to, a claim for restitution, disgorgement, or damages on
behalf of the persons injured by the act or practice constituting the
subject matter of the action. The court shall have jurisdiction to
award additional relief.
SEC. 10. Section 2174 is added to the
Financial Code , to read:
2174. (a) The commissioner may prepare written decisions, opinion
letters, and other formal written guidance to be issued to persons
seeking clarification regarding the requirements of this division.
(b) The commissioner shall make public on the commissioner's
Internet Web site all written decisions, opinion letters, and other
formal written guidance issued to persons seeking clarification
regarding the requirements of this division.