BILL ANALYSIS Ó AB 786 Page 1 Date of Hearing: May 15, 2013 ASSEMBLY COMMITTEE ON APPROPRIATIONS Mike Gatto, Chair AB 786 (Dickinson) - As Introduced: February 21, 2013 Policy Committee: Banking and Finance Vote: 12-0 Urgency: No State Mandated Local Program: No Reimbursable: SUMMARY This bill makes various changes to the Money Transmission Act (MTA). Specifically, this bill: 1)Exempts from the MTA a person that delivers payroll money on behalf of an employer to employees. 2)Revises the minimum net worth requirements so that an applicant or licensee must maintain minimum net worth ranging from $100,000 to $500,000 depending on the estimated or actual transaction volume, as determined by the commissioner of Department of Business Oversight. Provides the commissioner with authority to increase net worth up to $2,000,000 if the commissioner determines that the higher net worth is necessary to achieve specified purposes. 3)Enhances enforcement of the MTA by providing the commissioner the authority to bring an action to enjoin a person from violating the MTA. Additionally, allows the commissioner to seek 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. FISCAL EFFECT Minor and absorbable costs to the Department of Business Oversight. COMMENTS 1)Purpose . The last five years have witnessed technological AB 786 Page 2 changes that have drastically altered the old business model of remittances, as well as the ways in which consumers pay for goods and services. The traditional model involved visiting the location of a money transmitter agent, but new technologies have completely changed the way in which customers send and use money. 2)Opposition . Think Computer Corporation opposes AB 786. They argue against capital requirements in a non-banking context, arguing they are ineffective. They point out that money transmitters do not make loans so capital requirements must be evaluated in a different light. The argue capital requirements and other restrictions on money lenders have a chilling effect on innovation and investment. 3)Background . In the brief time since the MTA became law, technological innovation in the payments industry has increased as money transmission has transcended into mobile applications and new point of sale (POS) devices. As a result, numerous parties have been raising concerns about the MTA and potential unintended consequences of its application. Five years ago the bulk of money transmission activity involved international remittances where the customer would go to a brick and mortar location to send money to friends or family in other countries, now mobile phone users can use apps to pay for goods and services where the customers payment method (credit card or bank account) sends money to the third party provider and then that provider sends payment to the provider of goods and services. Analysis Prepared by : Roger Dunstan / APPR. / (916) 319-2081