BILL ANALYSIS Ó
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THIRD READING
Bill No: AB 2209
Author: Dickinson (D)
Amended: 8/4/14 in Senate
Vote: 21
SENATE BANKING & FINANCIAL INSTITUTIONS COMM. : 9-0, 6/18/14
AYES: Evans, Block, Correa, Hill, Hueso, Morrell, Roth, Torres,
Vidak
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 73-0, 5/23/14 (Consent) - See last page for
vote
SUBJECT : Money Transmission Act
SOURCE : Author
DIGEST : This bill updates the Money Transmission Act (MTA) to
ensure that electronic commerce (e-commerce) transactions are
not inadvertently regulated as money transmission and makes
other changes intended to reflect the increasing use of the
Internet as a platform for the exchange of goods and services.
ANALYSIS :
Existing law:
1. Provides for the MTA, pursuant to AB 2789 (Assembly Banking
and Finance Committee, Chapter 612, Statutes of 2010). The
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bill consolidated the Transmission of Money Abroad Law,
Travelers Checks Act, and the Payment Instruments Law into a
single Money Transmission Act, administered by the Department
of Business Oversight (DBO).
2. Provides that, pursuant to the MTA, money transmission
includes selling or issuing payment instruments, selling or
issuing stored value, and receiving money for transmission.
This bill:
1. Amends the MTA to add a definition of "e-commerce," to mean
any transaction where the payment for goods or services is
initiated via the Internet or mobile application.
2. Provides that the MTA does not apply to a transaction in
which the recipient of the money or other monetary value is
an agent of a payee pursuant to a preexisting written
contract and delivery of the money or other monetary value to
the agent satisfies the payor's obligation to the payee.
Defines "agent" by reference to Section 2295 of the Civil
Code, and defines "payor" and "payee" by reference to one
another (e.g., payee means the provider of goods or services,
who is owed payment from the payor, and payor means the
recipient of goods or services, who owes payment to the
payee).
3. Amends the provision of the MTA giving the Commissioner of
DBO authority to impose any conditions on any authorization,
approval, license, or order issued pursuant to the MTA that
are necessary for the safety and soundness of the licensee,
or reasonable or necessary maintain or enhance consumer
protection.
4. Requires MTA licensees to include in their quarterly reports
to the Commissioner the extent to which the money
transmission volume included in those reports reflects
transactions conducted via mobile application or Internet
website, if such reporting is feasible.
5. Amends the provision of the MTA that exempts certain
licensees from the requirement to provide their agents with
training materials on how to recognize and appropriately
respond to elder or dependent adult financial abuse, by
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additionally exempting licensees who exclusively offer their
services via an Internet Web site, a mobile application, or
both.
6. Adds to the definition of an "eligible security" any
receivable owed by a bank and resulting from a debit-funded
transmission.
7. Authorizes the Commissioner to declare a credit rating agency
to be an eligible securities rating service, as specified.
8. Provides that if a customer's instructions to forward or
transmit money are not complied with by a licensee, and the
money has not yet been forwarded or transmitted by the
licensee, a customer has a right to a refund of his/her
money.
9. Specifies the information that MTA licensees must include on
the receipts they are required to provide to customers.
Clarifies that receipts may be provided electronically for
transactions that are initiated electronically, or when a
customer agrees to receive an electronic receipt.
10.Authorizes the Commissioner to approve disclosures tailored
to licensees or agents that conduct money transmission via an
Internet Web site or a mobile application.
11.Requires any Internet Web site through which a licensee
conducts money transmission to clearly identify the name of
the licensee and any trade names used by the licensee on the
Internet Web site.
12.Adds a requirement that licensees maintain any records
required by the Commissioner.
13.Amends existing provisions of the MTA to authorize the
Commissioner to offer informal guidance to any prospective
applicant for a license under the MTA, regarding the
conditions of licensure that may be applied to that person;
and requires the Commissioner to inform any applicant that
requests that guidance of the minimum net worth, and other
licensing requirements, that may be required of that
applicant, based on the information provided by the applicant
concerning its plan to conduct business under this division,
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and the factors used to make that determination as described
in Financial Code Section 2040.
14.Adds a provision to the MTA providing that if, at any time,
the Commissioner deems it necessary for the general welfare
of the public, he/she may exercise any power set forth in the
MTA with respect to a money transmission business, regardless
of whether an application for a license has been filed with
the Commissioner, a license has been issued, or, if issued, a
license has been surrendered, suspended, or revoked.
Background
The MTA that is the subject of this bill has been operative in
California since July 2011, pursuant to AB 2789 (Assembly
Banking and Finance Committee, Chapter 612, Statutes of 2010).
AB 2789 combined three separate, related laws into a single MTA,
which preserved all of the substantive provisions of each of the
three, previously separate laws, and added a handful of new,
substantive provisions. The most important of those new,
substantive provisions:
1. Regulated the issuance of open loop, stored value cards by
nondepository institutions . Stored value cards may be either
closed loop (redeemable by the issuer for goods or services
provided by the issuer or its affiliate; e.g., a Starbucks
card) or open loop (redeemable for goods or services at
multiple vendors; e.g., a Visa gift card).
2. Regulated domestic (intra-U.S.) money transmission . Prior to
enactment of AB 2789, international money transmission by
nondepository institutions was regulated under California's
Transmission of Money Abroad Law, but domestic money
transmission by nondepository institutions was not. AB 2789
required nondepository institutions that transmit money
domestically, or abroad, or both, to obtain an MTA license.
3. Brought some previously unlicensed money transmitters into
California's regulatory scheme . Prior to enactment of AB
2789, California's Transmission of Money Abroad Law did not
have a physical presence requirement (thus, certain
Internet-based money transmitters could legally operate in
California without a license). Under AB 2789, any money
transmitter that does business with a person located in
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California requires a license.
Last year, Assemblyman Dickinson carried AB 786 (Chapter 533,
Statutes of 2013) to ameliorate some unintended consequences
resulting from inclusion of the three provisions listed
immediately above into AB 2789, and to begin updating
California's MTA to reflect electronic commerce transactions.
This bill is a follow-up to AB 786; it continues the process of
updating and clarifying the MTA, particularly as the law applies
to transactions initiated over the Internet and via mobile
applications.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 8/5/14)
California Chamber of Commerce
California Retailers Association
TechAmerica
TechNet
OPPOSITION : (Verified 8/5/14)
ITC Financial Licenses
ARGUMENTS IN SUPPORT : Proponents support this bill based on
its provision ensuring that the MTA does not apply to entities
which act as merchants' agents in a payor/payee context. They
state, "This change is critical to companies that operate online
marketplaces...Requiring the operators of every marketplace to
obtain a MTA license is inconsistent with the overall intent of
the MTA and will be very costly to the operators of those
companies, the small businesses that use those marketplaces,
and, ultimately, consumers. The small businesses that utilize
marketplaces to sell their goods would, at a minimum, be forced
to pay more to bring their products and services to market, thus
harming themselves and consumers. At worst, the cost of
complying with the MTA will cause marketplace operators to shut
down, depriving small businesses of the opportunity to use those
platforms to reach consumers."
ARGUMENTS IN OPPOSITION : ITC Financial Licenses states, "We
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believe that codifying the 'agent of the payee' exemption poses
significant risks to consumers, because it would permit the
transmission of consumer funds to and from third party
intermediaries without the need for such third parties to obtain
a money transmitter license or be authorized as an 'agent' of a
licensed money transmitter under California law. As a result,
none of the consumer protections established under California's
MTA - for example, consumer disclosure, receipt, permissible
investment, and recordkeeping and reporting obligations - would
apply to the benefit of consumers."
ITC is concerned that the exemption contained in this bill
allows entities to engage in all of the following types of money
transmission without any regulatory oversight: bill payments,
payments to merchants for goods and services, online accounts
(e.g., PayPal accounts), and payments to virtual currency
exchanges or payments made using virtual currency.
ASSEMBLY FLOOR : 73-0, 5/23/14
AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,
Bocanegra, Bonta, Bradford, Brown, Buchanan, Ian Calderon,
Campos, Chau, Chávez, Chesbro, Conway, Cooley, Dababneh,
Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox, Frazier,
Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon, Gorell,
Gray, Grove, Hagman, Hall, Holden, Jones, Jones-Sawyer,
Levine, Linder, Logue, Lowenthal, Maienschein, Mansoor,
Medina, Mullin, Muratsuchi, Nazarian, Olsen, Pan, Patterson,
Perea, John A. Pérez, Quirk, Quirk-Silva, Rendon,
Ridley-Thomas, Rodriguez, Salas, Skinner, Stone, Ting, Wagner,
Waldron, Weber, Wieckowski, Wilk, Williams, Yamada, Atkins
NO VOTE RECORDED: Bonilla, Harkey, Roger Hernández, Melendez,
Nestande, V. Manuel Pérez, Vacancy
MW:d 8/5/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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