BILL ANALYSIS
SB 1959
Page 1
SENATE THIRD READING
SB 1959 (Calderon)
As Amended July 2, 1996
Majority vote
SENATE VOTE: 23-7
BANKING AND FINANCE 11-0 APPROPRIATIONS 15-3
Ayes: Poochigian, Ackerman,
Aguiar,
Baldwin, Bordonaro, Brewer,
Gallegos, House, Martinez,
Morrissey, Olberg,
Takasugi,
Thompson, Villaraigosa,
Woods
Nays: Brown, Archie-Hudson,
Morrow
SUMMARY: Provides for deferred deposits or "payday loans" made by
check cashers. Specifically, this bill:
1) Allows a check casher to advance cash to a consumer against a
personal check of up to $300 made out to the check casher for
the amount advanced, less a fee, and the check casher would
then hold and not deposit the personal check in the check
cashers account for a period of no more than 30 days.
2) Requires every deferred deposit transaction to be made pursuant
to a written agreement that has been signed and mandates
disclosure of any fees to be charged by the check casher.
3) Requires that the fee a check casher would charge to a customer
to cash that postdated personal check would be capped at 15% of
the amount of the check.
4) Requires that a person in violation of these provisions shall
be liable for a civil penalty not to exceed $2,000.
5) Requires that a check casher shall not enter into an agreement
for a deferred deposit with a customer if it already has
entered into an existing agreement for the same service with
that customer until that first agreement has expired.
6) Requires that a check casher shall not accept tangible personal
property from customers under this section.
7) Adds a United States military identification card to the list
of approved identification documents including a California
drivers license or identification card.
FISCAL EFFECT: Unknown
EXISTING LAW provides that:
SB 1959
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1) All check cashers obtain a permit from the state Attorney
General's office to conduct a check casher's business.
2) It is a misdemeanor for a check casher to charge a fee for
cashing a payroll check or government check in excess of 3% of
the face amount of the check if identification is provided by
the customer, or 3.5% of the face amount of the check if
identification is not provided.
3) Identification is limited to a California driver's license or a
California identification card.
4) No person shall make a loan to a borrower primarily for
personal, family or household purposes without first obtaining
a consumer finance lender's license with the Commissioner of
Corporations.
5) Consumer finance lender licensees may not charge rates on the
unpaid principal balance for consumer finance loans per month
in excess of the following:
a) 2-1/2% on loans of $0 to $225.
b) 2% on loans from $225 to $900.
c) 1-1/2% on loans from $900 to $1,650.
d) 1% on loans from $1,650 to $2,500.
BACKGROUND: The question of whether or not this transaction is a
loan is an undecided one in California. This bill, if enacted,
would give tacit statutory sanction to the position that the
above-described transaction is in fact not a loan to be governed
by the Consumer Finance Lenders Law by specifically authorizing
this practice under the laws governing check cashers. This
practice of cashing post-dated checks has been specifically
prohibited in other states, including New Jersey and Delaware.
ARGUMENTS IN SUPPORT: Many individuals face an occasional
emergency for small amounts of money for a short term. These
individuals have no other resources such as credit cards, close
family or other financial assets to draw from. This service is
already being provided in at least half the states across the
United States, driven by the market demand and the consumer's need
for this service. This bill gives customers access to short-term
loans while at the same time providing greater consumer protection
than now exists.
ARGUMENTS IN OPPOSITION: The opponent of this bill, Consumers
Union, opposes this bill on two counts: first, they claim that
this bill, as currently drafted, contains a loophole which would
allow a check casher to assign the personal check to a debt
collection or check-guarantee service who could then pursue
damages in municipal court and/or hold the threat of criminal
penalties over the head of the check writer, something this bill
currently prevents the check casher from doing directly.
SB 1959
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Secondly, they argue that the 15% cap on immediately deposited
checks (as opposed to deferred deposits) is outrageously high and
that a cap of 8.5% for immediately deposited checks is more
reasonable given the relative lack of risk involved in immediately
cashing a check because of the ability to verify that the account
the check is drawn on has sufficient funds prior to cashing such
check.
Analysis prepared by: Blake Campbell / abf / (916) 324-7317FN
027174