BILL ANALYSIS Ó
AB 1113
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Date of Hearing: April 27, 2015
ASSEMBLY COMMITTEE ON BANKING AND FINANCE
Matthew Dababneh, Chair
AB 1113
(Chau) - As Introduced February 27, 2015
SUBJECT: Check Sellers, Bill Payers and Proraters Law
SUMMARY: Requires that a person subject to a desist and refrain
order for violating the Check Sellers, Bill Payers and Proraters
Law (Proraters Law) has 30 days to request a hearing to
challenge the order.
EXISTING LAW:
1)Specifies under the Proraters Law the licensing of entities. A
check seller sells checks, money orders, or drafts to be used
by others for the payment of obligations and the transfer of
money. Most checks and money orders are sold by agents who
split the check fee with the licensee. The checks are sold
through a network of agents such as small markets and check
cashing businesses. A check or money order is usually
purchased to pay rent, utilities, or some other obligation
that must be sent through the mail. In addition, checks are
purchased to send money back to a foreign country. A bill
payer receives money as an agent of an obligor to pay bills.
For this service, it receives a fee from the obligor. A
general prorater contracts with delinquent debtors and
intercedes with creditors to settle debts on behalf of the
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debtor. A special prorater pays its customers' bills as part
of its management of its customers' affairs, and is generally
a business agent or a manager.
2)Provides that if a request for a hearing is made and no
hearing occurs within 30 days then the desist and refrain
order shall be deemed to have been rescinded. (Financial
Code, Section 12103)
FISCAL EFFECT: Unknown
COMMENTS:
Under current law, the Department of Business Oversight (DBO) is
authorized to issue a desist and refrain order to require a
person to cease violations of the Proraters Law. The person may
request an administrative hearing to contest such an order;
however, the law does not specify the time frame by which the
request must be submitted to DBO. This open-ended period creates
uncertainty on whether and when an order has become final. If an
order is not considered final, the DBO cannot use other means to
enforce it, such as a civil action. When a violation is
discovered, DBO sends a letter with a desist and refrain order
that informs the violator of their right to an administrative
hearing, if they opt to challenge the order. The letter notes
that any request for a hearing must be made within 15 days after
service of the order.
There are four different types of businesses licensed under the
Proraters Law: (1) check sellers sell checks, money orders, or
drafts to be used by others for the payment of obligations and
the transfer of money; (2) bill payers receive money as an agent
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of an obligor to pay bills; (3) general proraters contract with
delinquent debtors and intercede with creditors to settle debts
on behalf of the debtors; and (4) special proraters pay
customers' bills as part of the management of their customers'
affairs. Many of these entities operate as debt settlement
companies that for a fee negotiate with creditors on behalf of
consumers to lower their debt.
Non-profit credit counseling organizations are exempt from
licensing under the Proraters Law. A nonprofit credit
counseling agency may rely on the licensing exemption under the
Proraters Law if the organization is in compliance with the
requirements of that section, and the organization files the
documents required under that section.
A nonprofit credit counseling agency must meet the following
requirements in order to receive the exemption:
1)Incorporates in this state or any other state as a nonprofit
corporation and operates pursuant to either the Nonprofit
Public Benefit Corporation Law or the Nonprofit Mutual Benefit
Corporation Law.
2)Its membership is limited to retailers, lenders in the
consumer credit field, educators, attorneys, social service
organizations, employer and employee organizations, and
related groups that serve educational, benevolent, fraternal,
religious, charitable, social, or reformatory purposes.
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3)The organization has as its principal functions the following:
a) Consumer credit education;
b) Counseling on consumer credit problems and family
budgets;
c) Arranging or administering debt management plans. "debt
management plan" means a method of paying debtor's
obligations in installments on a monthly basis; and,
d) Arranging or administering debt settlement plans. "debt
settlement plans" means a method of paying debtor's
obligations in a negotiated amount to each creditor on a
one-time basis.
Among other requirements, the exemption limits monthly fees that
may be charged to a debtor for a debt management plan to the
lesser of 8% of the amount paid to creditors monthly, or $35.
The fees for a debt settlement plan are limited to 15% of the
amount of debt forgiven. An education and counseling fee of $50
may also be charged for either type of plan.
REGISTERED SUPPORT / OPPOSITION:
AB 1113
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Support
None on file.
Opposition
None on file.
Analysis Prepared by:Mark Farouk / B. & F. / (916) 319-3081