BILL NUMBER: AB 1973 AMENDED
BILL TEXT
AMENDED IN SENATE JUNE 21, 2000
AMENDED IN ASSEMBLY MAY 26, 2000
AMENDED IN ASSEMBLY MAY 22, 2000
AMENDED IN ASSEMBLY MAY 9, 2000
AMENDED IN ASSEMBLY MAY 1, 2000
AMENDED IN ASSEMBLY APRIL 4, 2000
INTRODUCED BY Assembly Member Wesson
FEBRUARY 18, 2000
An act to amend Sections 1789.31, 1789.33, 1789.35, and 1789.37
of, and to add Section 1789.39 to, the Civil Code, relating to check
cashers.
LEGISLATIVE COUNSEL'S DIGEST
AB 1973, as amended, Wesson. Check cashers: surety bonds.
Existing law defines certain terms for the provisions regulating
deferred deposit transactions by check cashers.
This bill would define the term "consecutive transaction" for the
above provisions to mean a deferred deposit transaction that a check
casher and a customer enter into within 24 hours after
3 business days of a previous deferred deposit
transaction.
Existing law requires that the face amount of a deferred deposit
check not exceed $300 and that a deferred deposit transaction be made
pursuant to a written agreement. Existing law further provides that
a customer who enters into a deferred deposit agreement shall not be
subject to criminal penalty for the failure to comply with that
agreement.
This bill would instead require that the face amount of a deferred
deposit check may not exceed $400 plus a fee, as specified,
$300 plus a specified fee or 25% of a customer's
gross monthly income, whichever is less. This bill would also
require that a check casher provide specified information to
the Department of Justice , and that failure
to provide this information may result in a $1,000 fine. This bill
would further require that a check casher entering into a
deferred deposit transaction with a customer provide the customer
with a written agreement in a specified form. This bill would also
allow a customer who enters into a deferred deposit agreement to
rescind the transaction at no cost at any time prior to the close of
the business day following the date of the transaction by paying the
check casher the amount of money advanced to the customer. The bill
would prohibit a check casher from engaging in specified activities
in conducting a deferred deposit business. This bill would also
require a check casher who conducts deferred deposit transactions to
make available credit counseling information to customers, to hand
this information directly to customers who engage in specified
transactions, and to post a toll-free telephone number, as specified,
for receiving complaints in a readily visible location.
Existing law limits the fee a check casher may charge for a
deferred deposit transaction and requires a check casher to provide
specified information to a customer in a deferred deposit
transaction. Existing law authorizes the Attorney General to
prosecute a civil action to recover civil penalties for violations of
the laws relating to deferred deposit transactions.
This bill would establish a lower fee limit when the customer
engages in the fifth consecutive deferred deposit transaction, as
defined. This bill would prohibit using one deferred deposit
transaction to repay, refinance, or consolidate another deferred
deposit transaction. This bill would require a check casher to give
a customer a specified notice before instituting a civil action to
recover an amount owed on a deferred deposit transaction or reporting
an amount owed as the result of a default on a deferred deposit
transaction to a consumer credit reporting agency. This bill would
also provide that if a customer is unable to pay the amount owed on a
deferred deposit transaction, the customer may contact a credit
counselor, as specified, and arrange an installment repayment plan.
This bill would require a check casher to accept specified
installment repayment plans offered on behalf of a customer and
that 20% of the installment payments shall be provided to the
consumer credit counselor . This bill would also authorize a
district attorney to prosecute a civil action to recover civil
penalties for violations of the laws relating to deferred deposit
transactions.
Existing law requires every owner of a check casher's business to
obtain a permit from the Department of Justice to conduct a check
cashing business, which the applicant is required to renew annually.
Existing law also requires the applicant to pay a fee and be
fingerprinted and the applicant is not permitted to conduct a check
cashing business if he or she has certain felony convictions, as
specified.
This bill would require every applicant for a permit to operate a
check cashing business who will engage in deferred deposit
transactions to have a surety bond of $25,000 for the benefit of a
person or persons damaged by a violation of laws regarding check
cashers. The bill would prohibit the applicant from conducting a
check cashing business without this bond. The bill would require
that the bond be filed with the Secretary of State and would require
that the surety notify the applicant and the Secretary of State prior
to the cancellation or termination of the bond, as defined. This
bill would further require the applicant to cease conducting check
cashing business upon the cancellation or termination of the bond
unless a new surety bond is obtained and filed. The bill would
require the Department of Justice to compile a report, as specified,
of aggregate data submitted by check cashers regarding deferred
deposit transactions and to submit this report annually to the
Legislature and make it available to the public. This bill would
also require the Department of Justice to maintain a toll-free
telephone number for receiving complaints from deferred deposit
transaction customers.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 1789.31 of the Civil Code is amended to read:
1789.31. (a) As used in this title, a "check casher" means a
person or entity that for compensation engages, in whole or in part,
in the business of cashing checks, warrants, drafts, money orders, or
other commercial paper serving the same purpose. "Check casher"
does not include a state or federally chartered bank, savings
association, credit union, or industrial loan company. "Check casher"
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 flat
fee not exceeding two dollars ($2) as a service to its customers that
is incidental to its main purpose or business.
(b) As used in this title, "deferred deposit" means a transaction
whereby the check casher refrains from depositing a personal check
written by a customer until a specific date, pursuant to a written
agreement, as provided in Section 1789.33.
(c) As used in this title, "consecutive transaction" means a
deferred deposit transaction in which the check casher enters into a
new deferred deposit transaction with the same customer within
24 hours after three business days of a
previous deferred deposit transaction is
being completed.
SEC. 2. Section 1789.33 of the Civil Code is amended to read:
1789.33. (a) A check casher may defer the deposit of a personal
check written by a customer for up to 30 31
days, pursuant to the provisions of this section. The face
amount of the check shall not exceed four
three hundred dollars ($400) ($300)
plus the fee as provided in subdivision (a) of Section 1789.35
or 25 percent of the customer's gross monthly income, as
certified by the customer, whichever is less . Each deferred
deposit shall be made pursuant to a written agreement that has been
signed by the customer and by the check casher or an authorized
representative of the check casher. The written agreement shall
contain a statement of the total amount of any fees charged for the
deferred deposit, expressed both in United States currency and as an
annual percentage rate (APR). The written agreement shall authorize
the check casher to defer deposit of the personal check until a
specific date not later than 30 days from the date the written
agreement was signed and executed. The written agreement shall not
permit the check casher to accept collateral.
(b) A customer who enters into a deferred deposit agreement and
offers a personal check to a check casher pursuant to that agreement
shall not be subject to any criminal penalty for the failure to
comply with the terms of that agreement.
(c) A check casher who defers deposit of a personal check pursuant
to this title shall provide by March 31 of the year following the
deferred deposit transaction the following information to
the Department of Justice: information specified in
the paragraphs below to the Department of Justice:
(1) The total number of customers who engaged in deferred deposit
transactions and the total number and amount of deposits deferred in
the previous year.
(2) The total number of deferred deposits outstanding as of
December 31 of the previous year.
(3) The minimum, maximum, and average amount of deferred deposits
and fees in the previous year.
(4) The total number of checks that could not be collected upon.
(5) The total number of checks collected upon.
(6) The average number of days a deposit check is deferred.
(7) The total number and amount of returned checks.
The Department of Justice may assess a fine of up to one thousand
dollars ($1,000) for failure to provide this information. Prior to
assessing the fine, the Department of Justice shall send a notice to
the check casher indicating that the check casher has 30 days to
provide the required information. Failure to provide this
information may result in revocation of a check casher's permit to
conduct business.
(d) A check casher may not engage in unfair or deceptive acts,
practices, or advertising in the conduct of a deferred deposit
business.
(e) A customer who enters into a deferred deposit agreement and
offers a personal check pursuant to the agreement may rescind the
deferred deposit transaction at no cost to the customer at any time
prior to the close of business on the business day immediately
following the date of the transaction by paying to the check casher,
in cash, the amount of money advanced to the customer. A check
casher shall permit a customer to provide a cash payment for the
entire amount due under the deferred deposit agreement at any time
prior to the deferred deposit date, if the customer wishes to stop
deposit of the deferred deposit check.
(f) A check casher shall collect past due accounts in a
professional and lawful manner. A check casher shall not use
unlawful threats, intimidation, or harassment to collect accounts.
(g) A check casher who defers deposit of a personal check pursuant
to this title shall post a sign printed in 36-point boldface
type indicating the Department of Justice toll-free telephone
number for receiving complaints from customers engaging in deferred
deposit transactions in a readily visible location at the check
casher's place of business.
(h) The check casher shall provide a written agreement to each
customer who enters into a deferred deposit transaction. This
agreement shall be completed and signed in the presence of the
customer and the check casher may not change the agreement without
the customer's knowledge and consent. The written agreement
shall be in at least 10-point type and , subject to any changes
the Department of Justice may make to conform with applicable federal
laws and regulations, shall be in substantially the following
form:
DEFERRED DEPOSIT SERVICE AGREEMENT &
DISCLOSURE STATEMENT
CREDITOR: ________________ ADDRESS:__________________
CUSTOMER: ________________ TELEPHONE NO.:____________
CHECK NO.: _______________
DEFERRED DEPOSIT DATE:
__________________________
DEFERRED DEPOSIT FEE: U.S. $ ____
Disclosure #: ___________
DISCLOSURES UNDER FEDERAL RESERVE REGULATION Z
------------------------------------------------------------
'ANNUAL ' FINANCE ' AMOUNT ' TOTAL OF '
'PERCENTAGE ' CHARGE ' FINANCED ' PAYMENT '
'RATE ' ' ' '
'The cost of your 'The dollar ' The amount ' The amount '
'credit as a 'amount the ' of credit ' you will have'
'yearly rate. 'credit will ' provided to ' paid after '
' 'cost you. ' you or on ' you have made'
' ' ' your behalf.' all payments '
' ' ' ' as scheduled.'
' ' ' ' '
' ____% ' $____ ' $____ ' $____ '
'_________________'____________'____________ '______________'
' '
'Your payment schedule will be: '
'-----------------------------------------------------------'
'Number of ' Amount of ' When Payments '
'Payments ' Payments ' are Due '
'_____________'________________'____________________________'
' ' ' '
'_____________'________________'____________________________'
' Prepayment: If you pay off early, you will not be '
' entitled to a refund of part of the finance charge. '
' See the agreement below for additional information '
' about nonpayment and default. '
'___________________________________________________________'
___________________________________________________________
' Itemization of the Amount Financed of $ ____ '
' '
' $____ Amount given to you directly. '
' $____ Prepaid finance charge. '
'___________________________________________________________'
AGREEMENT
Pursuant to this Agreement, you authorize The Company
to defer deposit of the personal check identified above
by Check Number until the Deferred Deposit Date set
forth above. The fee for the deferred deposit is set
forth above expressed both in U.S. currency and as an
annual percentage rate. You acknowledge receipt of the
"Amount Given to You Directly" shown above, and represent
that you have not entered into an earlier deferred deposit
agreement with The Company that is still in effect. You
agree not to close the account that the check, draft, or
electronic debit is drawn on, or take any other action to
forestall the payment of the check, draft, or electronic
debit. If, after deposit, the check is returned to us
unpaid for any reason: (1) you agree to pay The Company
a returned check charge of $15; and (2) you authorize
The Company toinitiate to initiate
electronic or paper
debits to the checking account at the institution on
which the check, which is subject to the Agreement,
is drawn.
This authorization remains in full force and effect
until The Company has received written notice of its
termination, and until The Company has had a reasonable
opportunity to act on this authorization. The Company
is not permitted to accept collateral in connection
with this service.
Caution: It is important that you read the contract
thoroughly before you sign it.
You acknowledge that you have read this Agreement completely
before signing below, and you have received a copy of this
Agreement.
_____________________________ ______________________
Customer Signature Date
By __________________________ ______________________
Authorized Representative Date
______________________________________________________
' We promote the responsible use of deferred deposit '
' by our customers. We do not permit customers to '
' continually pay fees for a single Deferred Deposit, '
' as such practices lead to high costs for a single '
' Deferred Deposit. High costs for a single Deferred '
' Deposit are not in the best interest of our '
' customers or The Company. Therefore, all Deferred '
' Deposits must be paid in full on or before the '
' agreed deposit date. If you cannot pay the '
' Deferred Deposit in full, you may contact an '
' approved consumer credit counselor who can assist '
' you in creating an installment repayment plan. '
'-----------------------------------------------------'
SEC. 3. Section 1789.35 of the Civil Code is amended to read:
1789.35. (a) A check casher shall not charge a fee for cashing a
payroll check or government check in excess of 3 percent if
identification is provided by the customer, or 3.5 percent without
the provision of identification, of the face amount of the check, or
three dollars ($3), whichever is greater. Identification, for
purposes of this section, is limited to a California driver's
license, a California identification card, or a valid United States
military identification card.
(b) A check casher may charge a fee of no more than ten dollars
($10) to set up an initial account and issue an optional
identification card for providing check cashing services. A
replacement optional identification card may be issued at a cost not
to exceed five dollars ($5).
(c) A check casher shall provide a receipt to the customer for
each transaction. When any customer enters into three consecutive
deferred deposit agreements, the check casher shall, at that time,
hand directly to the customer information on credit counseling
programs in the vicinity of the check casher's business. The check
casher shall also make available for all customers information on
credit counseling and shall place this information in a readily
visible location at the check casher's place of business.
(d) Subject to the limitations of Section 1789.33, a check casher
may charge a fee for cashing a personal check, as posted pursuant to
Section 1789.30, for immediate deposit in an amount not to exceed 12
percent of the face value of the check, or for deferred deposit in an
amount not to exceed 15 percent of the amount advanced. A check
casher may not charge a fee of more than 12
10 percent of the amount advanced on the fifth consecutive
deferred deposit transaction, as provided for in subdivision (e).
(e) A check casher shall not enter into an agreement for a
deferred deposit with a customer during the period of time that an
earlier written agreement for a deferred deposit for the same
customer is in effect. Except as provided in subdivision (f),
the fee and principal for each deferred deposit transaction shall be
paid in full by the deferred deposit date. A deferred deposit
transaction may not be repaid, refinanced, or consolidated with the
proceeds of another deferred deposit transaction. On the fifth
consecutive deferred deposit transaction, a check casher may not
offer the customer a deferred deposit for more than 50 percent of the
amount of the fourth consecutive deferred deposit. When the fifth
consecutive deferred deposit transaction is collected upon, the check
casher shall wait three five business
days before offering the customer another deferred deposit
transaction.
(f) (1) Prior to filing a civil action to collect an amount owed
on a deferred deposit transaction or reporting an amount owed because
of a default on a deferred deposit transaction to a consumer credit
reporting agency, the check casher shall first provide the customer a
written notice stating that the customer's obligation must be paid
in full and, if the obligation is not going to be paid, that the
customer must contact a consumer credit counselor and arrange for an
installment repayment plan within 10 days of the mailing of the
notice. A check casher shall accept any reasonable installment
repayment plan offered by a consumer credit counselor on the behalf
of a customer that provides for the repayment of all amounts owed the
check casher over a period not to exceed four of the customer's
regular pay periods.
(2) If a customer is unable to pay the amount owed on the deferred
deposit transaction, the customer may contact a credit counselor to
seek assistance in arranging for an installment repayment plan. A
check casher shall accept any reasonable installment repayment plan
offered by a consumer credit counselor on the behalf of a customer
that provides for the repayment of all amounts owed the check casher
over a period not to exceed four of the customer's regular pay
periods. 20 percent of the installment repayment plan payments
shall be provided to the consumer credit counselor to compensate for
the credit counseling services provided.
(3) For the purposes of this subdivision, a consumer credit
counselor shall be a member in good standing with the National
Foundation of Credit Counselors or shall be accredited by the Council
on Accreditation of Services for Families and Children.
(g) A check casher who enters into a deferred deposit agreement
and accepts a check passed on insufficient funds, or any assignee of
that check casher, shall not be entitled to recover damages in any
action brought pursuant to, or governed by, Section 1719.
(h) For a transaction pursuant to Section 1789.33, a fee not to
exceed fifteen dollars ($15) may be charged for the return of a
dishonored check by a depositary institution. The fee may be
collected by a check casher who holds a valid permit issued pursuant
to Section 1789.37, when acting under the authority of that permit.
(i) No amount in excess of the amounts authorized by this section
shall be directly or indirectly charged by a check casher pursuant to
a deferred deposit agreement.
(j) Any person who violates any provision of this section shall be
liable for a civil penalty not to exceed two thousand dollars
($2,000) for each violation, which shall be assessed and recovered in
a civil action brought in the name of the people of the State of
California by the Attorney General or a district attorney in any
court of competent jurisdiction. Any action brought pursuant to this
subdivision shall be commenced within four years of the date on
which the act or transaction upon which the action is based occurred.
(k) A willful violation of this section is a misdemeanor.
(l) Any person who is injured by any violation of this section may
bring an action for the recovery of damages, an equity proceeding to
restrain and enjoin those violations, or both. The amount awarded
may be up to three times the damages actually incurred, but in no
event less than the amount paid by the aggrieved consumer to a person
subject to this section. If the plaintiff prevails, the plaintiff
shall be awarded reasonable attorney's fees and costs. If a court
determines by clear and convincing evidence that a breach or
violation was willful, the court, in its discretion, may award
punitive damages in addition to the amounts set forth above.
SEC. 4. Section 1789.37 of the Civil Code is amended to read:
1789.37. (a) Every owner of a check casher's business shall
obtain a permit from the Department of Justice to conduct a check
casher's business.
(b) All applications for a permit to conduct a check casher's
business shall be filed with the department in writing, signed by the
applicant if an individual or by a member or officer authorized to
sign if the applicant is a corporation or other entity, and shall
state the name of the business, the type of business engaged in,
whether the applicant intends to enter into deferred deposit
agreements, and the business address. Each applicant shall be
fingerprinted.
(c) Each applicant for a permit to conduct a check casher's
business shall pay a fee not to exceed the cost of processing the
application, fingerprinting the applicant, and checking or obtaining
the criminal record of the applicant, at the time of filing the
application.
(d) Each applicant for a permit to conduct a check casher's
business who engages in deferred deposit transactions shall maintain
a bond issued by a surety company admitted to do business in this
state. The principal sum of the bond shall be twenty-five thousand
dollars ($25,000). A copy of the bond shall be filed with the
Secretary of State.
(1) The bond required by this section shall be in favor of, and
payable to, the people of the State of California and shall be for
the benefit of a person or persons damaged by a violation of this
title.
(2) (A) An applicant may not conduct any check cashing business
without having a current surety bond in the amount prescribed by this
section and without filing a copy of the bond with the Secretary of
State.
(B) Thirty days prior to the cancellation or termination of a
surety bond required by this section, the surety shall send a written
notice of that cancellation or termination to both the applicant and
the Secretary of State, identifying the bond and the date of
cancellation or termination.
(C) If the applicant fails to obtain a new bond and file a copy of
that bond with the Secretary of State by the effective date of the
cancellation or termination of the former bond, the applicant shall
cease to conduct any check cashing business unless and until the time
when a new surety bond is obtained and a copy of that bond is filed
with the Secretary of State.
(e) Each applicant shall annually, beginning one year from the
date of issuance of a check casher's permit, file an application for
renewal of the permit with the department, along with payment of a
renewal fee not to exceed the cost of processing the application for
renewal and checking or obtaining the criminal record of the
applicant.
(f) The department shall deny an application for a permit to
conduct a check casher's business, or for renewal of a permit, if the
applicant has a felony conviction involving dishonesty, fraud, or
deceit, provided the crime is substantially related to the
qualifications, functions, or duties of a person engaged in the
business of check cashing.
(g) The department shall adopt regulations to implement this
section, and shall determine the amount of the application fees
required by this section. The department shall prescribe forms for
the applications and permit required by this section, which shall be
uniform throughout the state.
(h) In any action brought by a city attorney or district attorney
to enforce a violation of this section, any owner of a check casher's
business who engages in the business of check cashing without
holding a current and valid permit issued by the department pursuant
to this section is subject to a civil penalty, as follows:
(1) For the first offense, not more than one thousand dollars
($1,000).
(2) For the second offense, not more than five thousand dollars
($5,000).
(i) Any person who has twice been found in violation of
subdivision (h) and who, within 10 years of the date of the first
offense, engages in the business of check cashing without holding a
current and valid permit issued by the department pursuant to this
section is guilty of a misdemeanor punishable by imprisonment in the
county jail not exceeding six months, or by a fine not exceeding five
thousand dollars ($5,000), or by both.
(j) All civil penalties, forfeited bail, or fines received by any
court pursuant to this section shall, as soon as practicable after
the receipt thereof, be deposited with the county treasurer of the
county in which the court is situated. Fines and forfeitures so
deposited shall be disbursed pursuant to the Penal Code. Civil
penalties so deposited shall be paid at least once a month as
follows:
(1) Fifty percent to the Treasurer by warrant of the county
auditor drawn upon the requisition of the clerk or judge of the
court, to be deposited in the State Treasury on order of the
Controller.
(2) Fifty percent to the city treasurer of the city, if the
offense occurred in a city, otherwise to the treasurer of the county
in which the prosecution is conducted.
Any money deposited in the State Treasury under this section which
is determined by the Controller to have been erroneously deposited
therein shall be refunded, subject to approval of the State Board of
Control prior to the payment of the refund, out of any money in the
State Treasury which is available by law for that purpose.
SEC. 5. Section 1789.39 is added to the Civil Code, to read:
1789.39. (a) The Department of Justice shall maintain a toll-free
telephone number for receiving complaints from customers of check
cashers conducting deferred deposit transactions.
(b) The Department of Justice shall compile an annual report of
data submitted by check cashers as required by subdivision (c) of
Section 1789.33. This data shall be aggregated and may not identify
the proprietary data of individual check cashers. This report shall
be submitted annually to the Legislature and shall be available to
the public.