SB 515, as amended, Jackson. Deferred deposit transactions.
Existing law, the California Deferred Deposit Transaction Law, provides for the licensure and regulation by the Commissioner of Corporations of persons engaged in the business of originating or making deferred deposit transactions, as defined. Existing law requires a licensee to file an annual report with the commissioner, on or before March 15 of each year. Existing law requires the commissioner to prepare an annual consolidated report based upon specified information received from licensees. Existing law authorizes the commissioner to suspend or revoke the license of a license that fails to file the annual report. Existing law makes a willful violation of the California Deferred Deposit Transaction Law a crime.
The Governor’s Reorganization Plan No. 2 of the 2011-12 Regular Session provides that, on and after July 1, 2013, the responsibilities of the Department of Corporations and the Commissioner of Corporations shall be transferred to the Department of Business Oversight and the Deputy Commissioner of Business Oversight for the Division of Corporations.
This bill instead would require a licensee to file the annual report described above by March 20 of each year. The bill would make additional changes to conform with the Governor’s Reorganization Plan No. 2.end delete
Fiscal committee: yes.
State-mandated local program:
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The people of the State of California do enact as follows:
Section 23001 of the Financial Code is amended to read:
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 until a specific date, pursuant to a written agreement for a fee or other charge, as provided in Section 23035.
(b) “Commissioner” means the Deputy Commissioner of Business Oversight for the Division of Corporations.
(c) “Department” means the Department of Business Oversight.
(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.
Section 23026 of the Financial Code is amended to read:
On or before March
begin delete 20end delete of each year, beginning March 2006, each licensee shall file an annual report with the commissioner pursuant to procedures that the begin delete deputyend delete commissioner shall establish. begin delete The licensee’s annual report shall be kept confidential pursuant to Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1 of the Government Code and any regulations adopted thereunder.end delete The annual
consolidated report shall be prepared by the begin delete deputyend delete commissioner and made available to the public. For the previous calendar year, these reports shall include the following:
(a) The total number and dollar amount of deferred deposit transactions made by the licensee.
The total number of individual customers who entered into deferred deposit transactions.
The minimum, maximum, and average amount of deferred deposit transactions.
The average annual percentage rate of deferred deposits.
begin delete averageend delete number of days of deferred deposit transactions.
The total number and dollar amount of returned checks.
The total number and dollar amount of checks recovered.
The total number and dollar amount of checks charged off.
begin deleteA licensee may defer the deposit of a customer’s personal check for up to 31 days, pursuant to the provisions of this section. end deleteThe face amount of begin delete theend delete 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.
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.
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.
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
begin delete ($100) and aend delete two-hundred-dollar begin delete ($200)end delete deferred deposit transaction, payable in begin delete 14 days and 30end delete days, respectively, giving the corresponding annual percentage rate. The information may be provided in a chart as follows:
Amount of Check
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).
begin delete payment plan, or extensionend delete, if applicable as allowed under subdivision begin delete (c)end delete 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) Signature space for the customer and signature of the licensee or authorized representative of the licensee and date of the transaction.
(13) Any other information that the commissioner shall deem necessary by regulation.
The notice required by subdivision
begin delete (c)end delete 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.
The written agreement required by subdivision
begin delete (e)end delete 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.
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.
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.
(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.end delete
(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 be subject to the provisions of Title 1.6C (commencing with Section 1788) of Part 4 of Division 3 of the Civil Code.