BILL NUMBER: SB 1483 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY AUGUST 31, 2000
AMENDED IN ASSEMBLY AUGUST 29, 2000
AMENDED IN SENATE APRIL 25, 2000
AMENDED IN SENATE MARCH 20, 2000
INTRODUCED BY Senator Perata
FEBRUARY 10, 2000
An act to amend Sections 1789.30, 1789.31, 1789.35, and
1789.37 of, to repeal Section 1789.33 of, and to add Title 1.6G
(commencing with Section 1789.50) to Part 4 of Division 3 of the
Civil Code, relating to deferred deposit loans. An act
to amend Sections 1789.31, 1789.33, and 1789.35 of, and to add
Section 1789.38 to, the Civil Code, relating to check cashers.
LEGISLATIVE COUNSEL'S DIGEST
SB 1483, as amended, Perata. Deferred deposit loans
Check cashers: deferred deposit transactions .
Existing law defines certain terms for the purpose of 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 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 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.
This bill would provide that the maximum loan amount for a
deferred deposit transaction shall be 25% of the customer's gross
monthly income, as certified by the customer, or $300, whichever is
less, and would revise the fee limit on a deferred deposit loan to
state that the fee shall not exceed 15% of the amount advanced. This
bill would establish a lower maximum loan limit when the customer
engages in a fourth consecutive deferred deposit loan, as defined.
This bill would require a check casher to wait 5 business days after
the fourth consecutive deferred deposit transaction is collected upon
before offering the customer another deferred deposit transaction.
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 and arrange an installment repayment plan.
This bill would require a check casher to accept any reasonable
repayment plan, as specified, offered on behalf of a customer, and
would provide that 20% of the installment payments shall be provided
to the consumer credit counselor. 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 further require a check casher to make
specified information on credit counseling available at the check
casher's place of business.
This bill would also require the Business, Transportation and
Housing Agency to submit a report to the Legislature, on or before
May 15, 2001, making recommendations on specified issues concerning
the deferred deposit industry.
Existing law governs the services provided by check cashers,
including deferred deposit transaction services, as defined.
Existing law also authorizes the Attorney General to bring a civil
action for a violation of these provisions. A person who has been
injured by a violation of these provisions may bring an action to
recover damages and a court may award punitive damages if the court
determines by clear and convincing evidence that the breach or
violation was willful.
This bill would authorize a city attorney or the district
attorney, in addition to the Attorney General, to bring a civil
action for a violation of these provisions.
The bill would also remove references to direct deposit
transactions contained in the above provisions and instead enact the
Deferred Deposit Loan Act. The Deferred Deposit Loan Act would
prohibit any person from engaging in or offering to engage in the
business of making deferred deposit loans, as defined, without first
obtaining a license from the Department of Financial Institutions.
The act would, among other things, establish requirements for
obtaining that license, including the requirement that the applicant
secure a $25,000 surety bond. The act would require a licensee to
file a prescribed annual report regarding transactions governed by
the act, which the Department of Financial Institutions would analyze
and forward to the Legislature. The act would also require the
Department of Financial Institutions to maintain a toll-free
telephone number that consumers may call with complaints, and would
require the Department of Financial Institutions to develop notices
and information that a licensee would be required to provide to
consumers. The act would require that these notices and the deferred
deposit loan agreement be written in languages other than English in
certain instances. The act would impose limits on the fees,
interest rate, number, and amount of deferred deposit loan
transactions that a licensee may transact with a consumer. The act
would provide that if the consumer enters into a consecutive
transaction, as defined, the consumer may elect to participate in an
optional repayment plan, as specified. The act would specify
activities that a licensee is prohibited from pursuing in connection
with a deferred deposit transaction, including threatening to use
criminal process to collect on a deferred deposit check and
attempting to collect damages pursuant to a civil action for a
dishonored check. The act would also provide for civil remedies and
impose criminal penalties for a violation of its provisions. By
creating new crimes, the bill would impose a state-mandated local
program.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes no .
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 1789.30 of the Civil Code is
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 three
business days of a previous deferred deposit transaction 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 days, pursuant to the
provisions of this section. The face amount of the check
shall not exceed three hundred dollars ($300). The
maximum loan amount for a deferred deposit transaction shall be 25
percent of the customer's gross monthly income, as certified by the
customer, or three hundred dollars ($300), 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) On the fourth 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 third consecutive deferred
deposit. When the fourth consecutive deferred deposit transaction is
collected upon, the check casher shall wait five business days
before offering the customer another deferred deposit transaction.
(d) If at any time the 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
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.
(1) Nothing in this section shall require the consumer credit
counselor to develop a debt management plan for each customer that
goes beyond the debt that customer owes the check casher.
(2) For the purposes of this section, consultation with a credit
counselor may be in person or over the telephone, provided the credit
counselor is accredited and of good standing.
(3) Twenty percent of the installment repayment plan payments made
to the check casher shall be provided to the consumer credit
counselor to compensate for the services provided under this section.
(e) 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 may ask for an installment
repayment plan within 10 days of the mailing of the notice. A check
casher shall accept any reasonable installment repayment plan 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.
(f) The check casher shall make available to all customers
information on credit counseling and shall place this information in
a readily visible location at the check casher's place of business.
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.
(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 face value of the
check amount advanced .
(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.
(f) 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.
(g) 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.
(h) 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.
(i) 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 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.
(j) A willful violation of this section is a misdemeanor.
(k) 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 1789.38 is added to the Civil Code, to read:
1789.38. On or before May 15, 2001, the Business, Transportation
and Housing Agency shall submit recommendations to the Legislature
outlining the changes that the agency views as appropriate in the
deferred deposit industry with regard to the issues of reporting,
licensing, regulation, auditing, and licensing fees.
amended to read:
1789.30. Every check casher, as applicable to the services
provided, shall post a complete, detailed, and unambiguous schedule
of all fees for (a) cashing checks, drafts, money orders, or other
commercial paper serving the same purpose, (b) the sale or issuance
of money orders, and (c) the initial issuance of any identification
card. Each check casher shall also post a list of valid
identification which is acceptable in lieu of identification provided
by the check casher. The information required by this section shall
be clear, legible, and in letters not less than one-half inch in
height. The information shall be posted in a conspicuous location in
the unobstructed view of the public within the check casher's
premises.
SEC. 2. Section 1789.31 of the Civil Code is amended to read:
1789.31. 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.
SEC. 3. Section 1789.33 of the Civil Code is repealed.
SEC. 4. 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 31/2 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.
(d) A check casher may charge a fee for cashing a personal
check, as posted pursuant to Section 1789.30, in an amount not to
exceed 12 percent of the face value of the check.
(e) 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, a city attorney, 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.
(f) A willful violation of this section is a misdemeanor.
(g) 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. 5. 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, 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 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.
(e) 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.
(f) 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.
(g) 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).
(h) Any person who has twice been found in violation of
subdivision (g) 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 that fine and imprisonment.
(i) 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. 6. Title 1.6G (commencing with Section 1789.50) is added to
Part 4 of Division 3 of the Civil Code, to read:
TITLE 1.6G. DEFERRED DEPOSIT LOANS
CHAPTER 1. GENERAL PROVISIONS
1789.50. It is the intent of the Legislature in enacting this
title to ensure that deferred deposit loans are regulated in a manner
that will best protect the interests of the people of the State of
California. It is further the intent of the Legislature to protect
consumers from misrepresentations and unfair dealings and abuses in
the marketplace with respect to deferred deposit loans and to ensure
that consumers receive adequate disclosure of all relevant terms.
This title shall be liberally construed to achieve these purposes.
1789.51. This title shall be known and may be cited as the
Deferred Deposit Loan Act.
1789.52. For purposes of this title, the following definitions
apply:
(a) "Amount owed" means the sum of the finance charge, and the
deferred deposit loan amount.
(b) "Check" has the meaning provided in Section 3104 of the
Commercial Code.
(c) "Consecutive transaction" means a deferred deposit transaction
initiated within 72 hours of completion of a previous deferred
deposit transaction.
(d) "Consumer" means any natural person who, singly or jointly
with another consumer, enters into a deferred deposit loan.
(e) "Deferred deposit loan" means any arrangement conducted by any
means in which a person for a fee, service charge, or other
consideration, accepts a check from a consumer and provides a
consumer cash or its equivalent and agrees not to offer the check for
presentment for a period of time. "Deferred deposit loan" does not
include any loan agreement which is entered into with a bank, savings
and loan association, credit union, or other state or federally
regulated financial institution that does not utilize an agency
relationship with a facilitator, as defined in this section.
(f) "Deferred deposit loan amount" means the amount of cash
proceeds provided to a consumer pursuant to a deferred deposit loan,
exclusive of any interest, or administrative or other loan-related
charge.
(g) "Department" means the Department of Financial Institutions.
(h) "Employee" means an individual who works for an employer, is
listed on the employer's payroll records, and is under the employer's
direction and control.
(i) "Facilitator" means any person who facilitates, enables, or
acts as an agent for another person who makes deferred deposit loans.
A facilitator shall be licensed pursuant to the provisions of
Section 1789.60.
(j) "Finance charge" means any payment, charge, fee, cost or
expense, however denominated or expressed, that a consumer contracts
to pay for the privilege of obtaining a deferred deposit loan.
"Finance charge" does not include the amounts, if any, for
delinquency charges, attorney's fees, court costs, or collection
expenses.
(k) "Installment payment" means a partial payment on a deferred
deposit loan made pursuant to Section 1789.62.
(l) "Installment payment term" means a period of time for the
consumer to make an installment payment, that is equal to the
consumer's payroll period or 15 days, whichever is greater.
"Installment payment term" shall in no event exceed 31 days.
(m) "Licensee" means any person licensed by the Department of
Financial Institutions under the provisions of this title to engage
in deferred deposit loans.
(n) "Pay day" means the regular day on which a consumer receives a
payment of earned wages, as provided in Chapter 1 (commencing with
Section 200) of Part 1 of Division 2 of the Labor Code.
(o) "Pay period" means the regular period for which a consumer
receives a payment of earned wages, as provided in Chapter 1
(commencing with Section 200) of Part 1 of Division 2 of the Labor
Code.
(p) "Person" means any natural person, firm, partnership,
association or corporation, or other entity that makes a deferred
deposit loan to a consumer in this state or any facilitator as
defined in this section.
(q) "Principal" means a controlling person of an entity subject to
this title, including, but not limited to, any officer, director,
general partner, or person owning or controlling, directly or
indirectly, 10 percent or more of the outstanding interests or equity
securities of the applicant for a license, or the entity.
(r) "Unpaid balance" means the difference between the amount owed,
and any and all installment payments made pursuant to Section
1789.62.
CHAPTER 2. LICENSING
1789.60. (a) No person shall engage in or offer to engage in the
business regulated by this title without a current license issued by
the department. The following shall be required by the department as
a condition of licensure and license renewal:
(1) That neither the applicant nor any principal of the applicant
has been convicted of or pleaded nolo contendere to a crime.
(2) That the applicant has provided a sworn statement that the
applicant will not violate, or in the case of license renewal has not
violated, any applicable state law when collecting payment or
attempting to collect payment of deferred deposit loans made in this
or any other state.
(3) That the applicant pay a nonrefundable fee established by the
department, in an amount sufficient to cover the costs of the
background check and the administration of this title and the other
provisions of the act which enacted it, but not to exceed four
hundred dollars ($400).
(4) That the applicant secure a surety bond in the amount of
twenty-five thousand dollars ($25,000), payable to the department and
issued by an insurer authorized to do business in this state. A
copy of the bond, including any and all riders and endorsements
executed subsequent to the effective date of the bond, shall be filed
with the department pursuant to procedures which the department
shall establish, and shall be used for the recovery of expenses,
fines, and fees levied by the department in accordance with this
division or for damages or penalties due to consumers as the result
of a licensee's violation of the requirements of this title.
(5) That the applicant pay the cost of an examination at a fee of
seventy-five dollars ($75) per hour for each examiner whenever the
department determines that an examination or audit of the licensee is
warranted, plus the travel expenses of any examiner required by the
examination or audit to travel out of state.
(6) That the applicant provide any other information the
department deems necessary to carry out this section.
(b) Each license shall be issued for a term of one year. Licenses
shall be renewed pursuant to the requirements set forth in
subdivision (a).
(c) Not more than one place of business shall be maintained under
the same license, but the department may issue more than one license
to the same licensee upon compliance with all the provisions of this
title governing issuance
of a single license.
(d) Pursuant to a hearing conducted by the Office of
Administrative Hearings, the department may revoke, suspend, or deny
the renewal of a license for any violation of this title or any other
regulation adopted by the department as authorized pursuant to this
title. Nothing in this subdivision shall be construed to prohibit
the imposition of any additional administrative remedies by the
department as authorized under law or to preempt any civil or
criminal liability of the licensee.
(e) The department shall maintain a list of licensees that shall
be available to interested persons and the public upon request.
(f) The department shall establish a complaint process whereby a
consumer may file a complaint against a licensee or employee who
violates any provision of this title. The department shall maintain
a toll-free telephone number to receive calls from consumers
regarding complaints and concerns related to this title.
(g) The department shall investigate complaints and hold hearings
as it deems appropriate. All hearings shall be conducted through the
Office of Administrative Hearings, which may make findings of fact,
conclusions of law, issue cease and desist orders, citations, or
administrative fines, as authorized under law. The hearings shall be
open to the public. The department may refer the matter to the
appropriate law enforcement agency for prosecution under this title.
(h) The department shall develop a list of representative examples
of the dollar cost of loans and payment terms to illustrate loan
structures for dissemination by licensees.
(i) The department shall develop a notice for distribution to
consumers by licensees which informs the consumer about his or her
rights and responsibilities related to deferred deposit loans. The
notice shall include, but not be limited to, notice of the following:
(1) That the consumer is borrowing money that will be repaid when
the check is cashed.
(2) That the consumer may repay the loan at any time before the
check is cashed.
(3) Information about the payment structure for deferred deposit
loans.
(4) That if the consumer cannot repay the loan, or if the consumer'
s checking account has insufficient funds to pay the check, the
consumer may be charged an additional fee of up to fifteen dollars
($15) or the actual amount charged to the check casher by his or her
financial institution, whichever is less.
(5) That the consumer cannot be prosecuted in a criminal action
for passing a bad check or be threatened with prosecution.
(6) That the lender may allow an extension of time for repayment,
but if the lender agrees to an extension, it cannot charge any
additional fee of any kind.
(7) Any additional information that the department may deem
necessary.
(j) On or before January 1, 2002, the department shall forward a
report to the Legislature, including the information required
pursuant to this section, as well as an analysis of that information,
including, but not limited to, growth and trends in the industry,
the impact on consumers, whether consumers are taking loans
simultaneously from multiple licensees, and the feasibility of
tracking these loans.
(k) The department shall also make and file annually as a public
record a composite of the annual reports by licensees and any
comments on the reports that it deems to be in the public interest.
(l) The department shall adopt regulations and procedures as
reasonably necessary to implement the provisions of this title.
CHAPTER 3. DUTIES OF LICENSEE
1789.61. (a) Each licensee shall keep and use books, accounts,
and records that will enable the department to determine if the
licensee is complying with the provisions of this title and shall
maintain any other records as required by the department. The
department or a designee of the department may examine those records
at any reasonable time. All records shall be kept for four years
following the last entry on a loan and according to generally
accepted accounting procedures, which means that an examiner shall be
able to review the recordkeeping and reconcile each consumer loan
with documentation maintained in the consumer's loan file records.
(b) Each licensee shall file an annual report with the department
pursuant to procedures which the department shall establish. These
reports shall include, but not be limited to, the following
information from the previous calender year:
(1) The total number of deferred deposit loans made.
(2) The total number of individual customers.
(3) The total number of consumers who chose the optional payment
plan provided for by Section 1789.62.
(4) The total number of deferred deposit loans outstanding.
(5) The minimum, maximum, and average dollar amount of deferred
deposit loans.
(6) The average annual percentage rate, and the average length, in
days, of deferred deposit loans.
(7) The actual number of repeat consumers.
(8) The actual number of transactions entered into with each
customer during the calendar year.
(9) The average income as disclosed by the consumer pursuant to
Section 1789.62 for each of the following pay periods: one week, two
weeks, and one month.
(10) The total number and dollar amount of returned checks, the
total number and dollar amount of checks recovered, and the total
number and dollar amount of checks charged off as of December 31 of
the previous year.
(11) A sworn statement that the licensee has not used the criminal
process or caused the criminal process to be used in the collection
of any deferred deposit loans or used any civil process to collect
the payment of deferred payment loans not generally available to
creditors to collect on loans in default during the calendar year
ending as of December 31 of the previous year.
(12) Any additional information which the department deems
appropriate.
(13) The licensee shall attest in writing to the accuracy of the
information contained in the required annual reports.
(c) In no case shall a licensee or an employee of the licensee do
any of the following:
(1) Engage in the business of deferred deposit lending unless the
department has first issued a valid license to the licensee.
(2) Enter into more than one deferred deposit loan at a time with
the same consumer.
(3) Accept or use the same check for a subsequent transaction, or
permit a consumer to pay off all or a portion of one deferred deposit
loan with the proceeds of another deferred deposit loan.
(4) Use any deceptive or unfair means to induce a consumer to
tender the entire amount owed for the purpose of entering into
another deferred deposit loan agreement with that consumer as an
alternative to satisfying the obligation of a deferred deposit loan
by means of installment payments.
(5) Attempt to use the check provided by the consumer in a
deferred deposit transaction as security, or accept any collateral
for a deferred deposit loan.
(6) Sell any insurance of any kind whether or not sold in
connection with the making or collecting of a deferred deposit loan.
(7) Enter into a deferred deposit transaction with a minor.
(8) Threaten to use or use the criminal process to collect a
deferred deposit loan.
(9) Threaten to use or use any civil process to collect a deferred
payment loan if that process is not generally available to creditors
to collect on loans in default.
(10) Alter the date or any other information on the check.
(11) Offer any benefit or incentive to a consumer in return for
the consumer referring other potential borrowers to the licensee,
including, but not limited to, discounts, rebates, credits on any
existing or subsequent deferred deposit loan.
(12) Engage in any unfair, unlawful, or deceptive conduct or make
any untrue or misleading statement in connection with the business of
deferred deposit lending, including any violation of this title.
(d) A licensee or an assignee of the licensee may not commence an
action pursuant to the provisions of Section 1719 on a check provided
for a deferred deposit loan.
(e) A licensee shall at all times be legally responsible for the
good conduct in the business of his or her employees or agents.
(f) According to procedures that the department shall establish,
the following information shall be included in notices to be posted
by a licensee in each location of the licensee's business at which
deferred deposit loans are made:
(1) A statement disclosing that the licensee cannot use the
criminal process against a consumer to collect any deferred deposit
loan.
(2) A schedule of interest and fees to be charged on
representative loans, including the actual dollar amount charged and
the corresponding annual percentage rate, based on information
developed by the department.
(g) (1) The notice required by this section and the deferred
deposit loan agreement required by Section 1789.62 shall be written
in the same language as principally used in any oral discussions or
negotiations leading to execution of the loan agreement.
(2) The notices required by paragraph (2) of subdivision (a) and
by Section 1789.62 shall be in English, Spanish, and any other
language in which a significant amount of deferred deposit loan
business is conducted at that location.
CHAPTER 4. RIGHTS AND RESTRICTIONS FOR DEFERRED DEPOSIT LOANS
1789.62. (a) Before entering into a deferred deposit loan, the
licensee shall deliver to the consumer a notice prepared by the
department pursuant to Section 1789.60 regarding the consumer's
rights, including the toll-free telephone number of the department
for receiving calls regarding consumer complaints and concerns. The
notice shall be signed and dated by the consumer, and a copy provided
to the consumer. The original shall be kept on file by the
licensee.
(b) Before entering into a deferred deposit loan with a consumer,
the licensee shall require the consumer to provide proof of income.
No licensee shall enter into a deferred deposit loan the amount of
which exceeds 25 percent of the consumer's earned wages for a pay
period, or more than three hundred dollars ($300), whichever is less.
(c) (1) Every agreement for a deferred deposit loan shall be
contained in a single document which shall set forth all of the
agreements of the licensee and the consumer with respect to the
rights and obligations of each party.
(2) The licensee shall provide the consumer, or each consumer if
there is more than one, with a copy of the loan document.
(3) Every deferred deposit loan agreement shall be in at least
10-point type. The deferred deposit loan agreement shall clearly and
conspicuously contain all of the following:
(A) The name, address, and telephone number of the licensee making
the deferred deposit loan, and the name of the individual employee
who signs the agreement on behalf of the licensee.
(B) An itemization of the fees and interest charges to be paid by
the consumer, including a representation of the fees in terms of an
annual percentage rate.
(C) Disclosures required by the federal Truth-in-Lending Act (15
U.S.C. Sec. 1601 et seq.), regardless of whether that act applies to
the particular deferred deposit loan.
(D) A clear description of the consumer's payment obligations
under the loan.
(E) In a manner that is more conspicuous than the other
information provided in the loan document and that is in at least
14-point boldface type, the following statement: "You cannot be
prosecuted or threatened with prosecution in a criminal action to
collect this loan." The notice shall be located immediately above
the space reserved for the consumer's signature.
(4) Under no circumstances shall a deferred deposit loan agreement
include any of the following:
(A) A hold harmless clause.
(B) A confession of judgment clause.
(C) A waiver of the right to a jury trial, if applicable, in any
action brought by or against a consumer.
(D) A mandatory arbitration clause.
(E) Any assignment of or order for payment of wages or other
compensation for services.
(F) A provision in which the consumer agrees not to assert any
claim or defense arising out of the loan agreement.
(d) A deferred deposit loan transaction shall be structured as
follows:
(1) The maximum loan amount shall be 25 percent of the consumer's
earned wages for the consumer's pay period or three hundred dollars
($300), whichever is less.
(2) The finance charge on a deferred deposit loan may not exceed
15 percent of the deferred deposit loan amount.
(3) To obtain a deferred deposit loan, a consumer shall provide to
a licensee one check made payable to the licensee in the amount
equal to the sum of the deferred deposit loan amount and the finance
charge on that deferred deposit loan. At the time a consumer and
licensee enter into a deferred deposit loan, the licensee may not
accept more than one check. The licensee may not offer for
presentment a check written by a consumer to obtain a deferred
deposit loan until the end of the consumer's pay period, as defined
in Section 1789.52. If a consumer does not have a regular pay
period, the pay period shall be deemed to be at least 15 days.
(4) The deferred deposit loan agreement shall set forth a schedule
for repayment.
(5) If a consumer enters into a consecutive transaction, the
consumer may choose to participate in an optional repayment plan
provided for in this section.
(A) The consumer shall repay the full amount owed in four equal
installment payments.
(B) At the time of payment of each of the first three installment
payments, the consumer shall provide to the licensee sufficient cash
to satisfy the installment payment due and a new check made payable
to the licensee in the amount of the remaining unpaid balance. In
exchange for the consumer's new check, the licensee shall return to
the consumer the check previously being held pursuant to the deferred
deposit loan agreement.
(C) The first installment payment term shall commence on the date
upon which the licensee and a consumer enter into a deferred deposit
loan agreement. The first installment payment shall be due and
payable on the final day of the first installment payment term, or on
the consumer's next regularly scheduled payday, whichever is later.
In no event shall an installment payment term exceed 31 days. Each
subsequent installment payment term thereafter shall commence on the
day the prior installment payment became due and payable. Each
installment payment thereafter shall be due and payable on the final
day of that installment payment term.
(D) To satisfy the obligation of the fourth installment payment,
the consumer may either:
(i) Inform a licensee to present for payment the consumer's check
being held pursuant to the deferred deposit loan agreement.
(ii) Tender to the licensee an amount in cash equal to the final
installment payment in exchange for the consumer's check being held
pursuant to the deferred deposit loan agreement.
(E) A consumer may pay an amount greater than the minimum required
for each installment payment at any time on or before the due date
of the installment payment. Payment by a consumer prior to the due
date of an installment payment shall not alter the due date of the
next installment payment as provided for in this subdivision.
(F) If a consumer fails to make a required installment payment in
a timely manner as provided for in this section, the consumer shall
be in default of the deferred deposit loan agreement.
(G) After each payment is made, the licensee shall give to the
person making the payment a signed, dated receipt showing the amount
paid and the balance due on the loan.
(e) A consumer subject to a deferred deposit loan agreement may at
any time satisfy the agreement by either of the following:
(1) Providing written authorization to a licensee to present the
consumer's check for payment on a date other than that set forth in
the agreement. The licensee shall keep a copy of the written
authorization in the consumer's loan file. The licensee shall not
offer a consumer's check for presentment without that authorization
from the consumer.
(2) Tendering to the licensee the entire amount owed in cash in
exchange for the consumer's check being held pursuant to the deferred
deposit loan agreement.
(f) Pursuant to a deferred deposit loan, a licensee may not
directly or indirectly charge an amount in excess of the amounts
authorized by this section and Section 1789.64.
1789.63. Upon the receipt of the check from the consumer for a
deferred deposit loan, the licensee shall immediately stamp the back
of the check with an endorsement that states: "This check is being
negotiated as part of a deferred deposit loan made pursuant to
Section 1789.62 of the Civil Code and is not subject to the
provisions of Section 1719 of the Civil Code."
1789.64. If there are insufficient funds to pay a check on the
date of presentment, a licensee may charge a fee, not to exceed the
lesser of fifteen dollars ($15) or the fee imposed upon the licensee
by the financial institution. The licensee shall not collect more
than one such fee with respect to a particular check even if the
check has been deposited more than once. A fee charged pursuant to
this subdivision is a licensee's exclusive charge for late payment.
CHAPTER 5. REMEDIES
1789.67. (a) The remedies provided herein are cumulative and
apply to licensees and their employees.
(b) The violation of any provision of this title, or any
regulation adopted thereunder, except as the result of accidental or
bona fide error of computation, renders the loan void, and the person
shall have no right to collect, receive, or retain any principal,
interest, or other charges whatsoever with respect to the loan.
(c) A consumer damaged by a violation of this title is entitled to
recover all of the following:
(1) Actual damages.
(2) The consumer's reasonable attorney's fees and costs.
(3) 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.
(4) Equitable relief as the court deems proper.
(d) Any person, including any member, officer, or director of a
licensee, who willfully violates any provision of this title is
guilty of a misdemeanor.
(e) Any waiver or modification of the provisions of this title by
the consumer shall be void and unenforceable as contrary to public
policy.
(f) The rights, remedies, and penalties established by this title
are cumulative to the rights, remedies, or penalties established
under other laws.
(g) If any portion of this title or the application thereof to any
person or circumstances is held invalid, that invalidity shall not
affect other provisions or applications of the title that can be
given effect without the invalid provision or application, and to
this end the provisions of this title are severable.
SEC. 7. No reimbursement is required by this act pursuant to
Section 6 of Article XIIIB of the California Constitution because the
only costs that may be incurred by a local agency or school district
will be incurred because this act creates a new crime or infraction,
eliminates a crime or infraction, or changes the penalty for a crime
or infraction, within the meaning of Section 17556 of the Government
Code, or changes the definition of a crime within the meaning of
Section 6 of Article XIIIB of the California Constitution.