PERMANENT RULESDEPARTMENT OF
Filed October 21, 2005,
, effective November 21, 2005
Purpose: The proposed rules repeal the old rules, and
make them comply with the Governor's Executive Order 05-03,
Plain Talk. This will make the rules more user friendly for
licensees and the public.
The proposed rules modernize and clarify existing rules,
and add many changes required by the new law passed in 2003
(SSB 5452, chapter 86, Laws of 2003), and 2005 (ESSB 5415,
chapter 256, Laws of 2005). In summary the proposed rule:
These changes will assist licensees in operating their
businesses in compliance with the new law. It deletes
references to older provisions of the law no longer used by
licensees such as eliminating securities and letters of credit
as alternatives to the required surety bond. The new rule
also clarifies exactly what the director's authorities are in
examinations and investigations. The new law requires that
licensees offer payment plans to borrowers after four
successive loans, and it also requires more disclosures that
the licensee must provide to the borrower. This rule will
assist licensees in providing the payment plan and the
||Incorporates the statutory definitions, including
the amendments and additions from the 2003 act;
||Provides a more detailed description of the
director's authority to conduct examinations and
||Conforms the consequences of late filing of annual
assessment fees to the 2003 statutory changes;
||Eliminates securities and letters of credit as
alternatives to the required surety bond;
||Establishes minimum requirements for small loan
||Provides interpretive guidance regarding payment
||Expands the requirements for disclosure statements
to borrowers; and
||Makes additions to record-keeping requirements.
Citation of Existing Rules Affected by this Order: Repealing chapter 208-630 WAC. Please see below for list of
Statutory Authority for Adoption: RCW 31.04.165.
Other Authority: RCW 43.320.040, 31.45.030, 31.45.050,
Adopted under notice filed as WSR 05-18-095
Number of Sections Adopted in Order to Comply with Federal Statute:
Federal Rules or Standards:
or Recently Enacted State Statutes:
Number of Sections Adopted at Request of a Nongovernmental Entity:
Number of Sections Adopted on the Agency's Own Initiative:
Number of Sections Adopted in Order to Clarify, Streamline, or Reform Agency Procedures:
Number of Sections Adopted Using Negotiated Rule Making:
Pilot Rule Making:
or Other Alternative Rule Making:
Date Adopted: October 17, 2005.
What definitions are required to
understand these rules?
The definitions in RCW 31.45.010 and
this section apply throughout this chapter unless the context
clearly requires otherwise.
"Act" means chapter 31.45 RCW.
"Affiliate" means any person who directly or indirectly
through one or more intermediaries, controls, or is controlled
by, or is in common control with another person.
"Agent" for purposes of RCW 31.45.079 means a person who,
pursuant to the terms of a written agreement and for
compensation, performs small loan agent services on behalf of
an exempt entity.
"Board director" means a director of a corporation or a
person occupying a similar status and performing a similar
function with respect to an organization, whether incorporated
"Close of business" for the purposes of RCW 31.45.86 and
these regulations means the actual time a licensee closes for
business at the location from which a small loan was
originated or 11:59 p.m. Pacific Time, whichever is earlier.
"Department" means the department of financial
"Exempt entity" means a person described in RCW 31.45.020
that is engaged in the business of making small loans.
"Investigation" means an examination undertaken for the
purpose of detecting violations of chapter 31.45 RCW or these
rules or obtaining information lawfully required under chapter 31.45 RCW or these rules.
"License" means a license issued by the director to
engage in the business of check cashing or check selling under
the provision of chapter 31.45 RCW.
"Monetary instrument" means a check, draft, money order
or other commercial paper serving the same purpose.
"Payday advance lender" or "payday lender" means a
licensee under this chapter who has obtained a small loan
endorsement under RCW 31.45.073.
"Payday advance loan," "payday loan" or "deferred deposit
loan" means the same as a small loan.
"Postdated check" means a check delivered prior to its
date, generally payable at sight or on presentation on or
after the day of its date. "Postdated check" does not include
any promise or order made or submitted electronically by a
borrower to a licensee.
"RCW" means the Revised Code of Washington.
"Small loan agent services" means all or substantially
all of the following services:
(1) Marketing and advertising small loans;
(2) Taking small loan applications;
(3) Assisting customers in completing small loan
(4) Providing required disclosures;
(5) Disbursing small loan proceeds;
(6) Collecting small loans;
(7) Retaining documents and records; and
(8) Making reports.
"State" means the state of Washington.
"Unsafe or unsound financial practice" means any action,
or lack of action, the likely consequences of which, if
continued, would impair materially the net worth of a licensee
or create an abnormal risk of loss to its customers.
What does a business have to do to
operate as a check casher and seller, or to make small loans
as a payday lender?
In order to engage in the business of
check cashing and selling, a business must apply and obtain
from the department a check cashing or selling license. A
check casher or seller must first obtain a small loan
endorsement to its license to make small loans in accordance
with chapter 31.45 RCW and this chapter.
How does a business apply for a check
casher's or seller's license or a small loan endorsement to a
check casher's or seller's license?
Each applicant for a
check casher license, or check seller license, or a small loan
endorsement to a check casher's or seller's license must apply
to the director by filing the following:
(1) An application in a form prescribed by the director
including at least the following information:
(a) The legal name, residence, and business address of
the applicant if the applicant is an individual or sole
proprietorship, and in addition, if the applicant is a
partnership, corporation, limited liability company, limited
liability partnership, trust, company, or association, the
name and address of every member, partner, officer,
controlling person, and board director;
(b) The trade name or name under which the applicant will
do business under the act;
(c) The street and mailing address of each location in
which the applicant will engage in business under the act;
(d) The location at which the applicant's records will be
(e) Financial statements and any other pertinent
information the director may require with respect to the
applicant and its board directors, officers, trustees,
members, or employees, including information regarding any
civil litigation filed within the preceding ten years against
the applicant or controlling person of the applicant;
(2) A surety bond and related power of attorney, or other
security acceptable to the director in an amount equal to the
penal sum of the required bond as set forth in this rule. In
lieu of the bond, the applicant may demonstrate to the
director net worth in excess of three times the amount of the
penal sum of the required bond in accordance with RCW 31.45.030 (5)(b) and (e) and this rule;
(3) A current financial statement as of the most recent
quarter end prepared in accordance with generally accepted
accounting principles which includes a statement of assets and
liabilities and a profit and loss statement;
(4) Information on the applicant's or any affiliate's
current or previous small loan or related type business in
this state or any other state, including, but not limited to,
name, address, city, state, licensing authority, and whether
any enforcement action is pending or has been taken against
the applicant in any state;
(5) Upon request, a complete set of fingerprints and a
recent photograph of each sole proprietor, owner, director,
officer, partner, member, and controlling person; and
(6) An application fee.
Any information in the application regarding a personal
residential address or telephone number, and any trade secret
as defined in RCW 19.108.010 including any financial statement
that is a trade secret is exempt from the public disclosure
requirements of chapter 42.17 RCW.
Once a business finishes the application
process, when does the director issue a license?
director determines that all licensing criteria of chapter 31.45 RCW have been met and the appropriate fees paid, the
director shall issue a nontransferable license for the
applicant to engage in the business of cashing and/or selling
checks or a small loan endorsement to a license.
When does the license expire?
license and small loan endorsement will remain continuously in
effect until surrendered, suspended, or revoked.
Does each location where a licensee
makes small loans have to have a small loan endorsement?
law requires a small loan endorsement for each location where
a licensee makes small loans. These locations include, in
addition to traditional staffed locations, unstaffed locations
at which electronic or telephonic terminals such as facsimile
machines, telephones, computer terminals or similar devices
are available to the public to provide access to small loans,
whether or not the locations are located within the premises
of an exempt entity.
Where may a licensee make small loans?
A small loan endorsement may authorize a licensee to make
small loans at a location other than the licensed location
where it cashes and sells checks.
Is there a bond requirement for
A licensee engaged in any business under chapter 31.45 RCW must obtain a bond. The bond must run to the
benefit of the state and any person or persons who suffer
loss. The licensee must file the bond with the director at
the beginning of each calendar year. The bond must be issued
by a surety which meets the requirements of chapter 48.28 RCW.
The bond form must be acceptable to the director. The
licensee may obtain a copy of an acceptable form from the
What type of bond is necessary and what
are the conditions?
The bond shall be continuous and
conditioned upon the licensee faithfully abiding by chapter 31.45 RCW and all rules in this chapter. It shall also be
conditioned upon the licensee paying all persons who purchase
monetary instruments from the licensee the face value of any
monetary instrument dishonored by the drawee financial
institution due to insufficient funds or by reason of the
account having been closed. The surety shall only be liable
for the face value of the dishonored monetary instrument, and
shall not be liable for any interest or consequential damages.
For a licensee with a small loan endorsement, the bond shall
run to the benefit of the state and any person or persons who
suffer loss due to the licensee's violation of chapter 31.45 RCW or this chapter.
How is a bond canceled?
The bond may be
canceled by the surety by giving written notice to the
director and licensee of its intent to cancel the bond. The
cancellation is effective thirty days after the notice is
received by the director.
What is the liability of the surety
under the bond?
Whether or not the bond is renewed,
continued, reinstated, reissued, or otherwise extended,
replaced, or modified, including increases or decreases in the
penal sum, it shall be considered one continuous obligation,
and the surety shall not be liable in an aggregate or
cumulative amount exceeding the penal sum set forth on the
face of the bond. In no event shall the penal sum, or any
portion thereof, at two or more points in time be added
together in determining the surety's liability. The surety
shall not be liable for any liability of the licensee for
tortious acts, whether or not such liability is imposed by
statute or common law, or is imposed by contract. The bond
shall not be a substitute or supplement to any liability or
other insurance required by law or by contract. If the surety
desires to make payment without awaiting court action against
it, the penal sum of the bond shall be reduced to the extent
of any payment made by the surety in good faith under the
Who may make claims against the bond?
Any person who is a purchaser of a monetary instrument from
the licensee having a claim against the licensee for the
dishonor of any monetary instrument by the drawee financial
institution due to insufficient funds or by reason of the
account having been closed, or any person who obtained a small
loan from the licensee and was damaged by the licensee's
violation of chapter 31.45 RCW or this chapter, may bring suit
upon such bond or deposit in the superior court of the county
in which the monetary instrument was purchased, or in the
superior court of a county in which the licensee maintains a
place of business. Jurisdiction shall be exclusively in the
superior court. Any action must be brought not later than one
year after the dishonor of the monetary instrument on which
the claim is based. If the claims against a bond or deposit
exceed the amount of the bond or deposit, each claimant shall
only be entitled to a pro rata amount, based on the amount of
the claim as it is valid against the bond, or deposit, without
regard to the date of filing of any claim or action.
What if there are claims against the
The licensee must notify the department of any claim
against the bond within ten days after receiving notice of a
What is the amount of bond needed for
licensees engaging only in check selling?
The penal sum of
the surety bond for a person with a check seller license shall
not be less than the amount established in the following
|Up to $50,000
||.5 above $50,000
||.25 above $100,000
* The monthly liability is the total sum of checks for a given
month. The "highest monthly liability" shall be determined by
multiplying the highest monthly liability of checks from the
preceding calendar year by seventy-five percent.
What is the amount of bond needed if a
licensee has a small loan endorsement?
The required penal sum
of the bond for a small loan endorsement must be ten thousand
dollars plus an additional one thousand dollars for each
endorsed branch office beyond one branch.
Does a licensee have any alternative to
maintaining a surety bond?
In lieu of the surety bond
required in this rule, an applicant or licensee may substitute
one of the following alternatives with the approval of the
director. Any alternative to the surety bond shall secure the
same obligations as would the surety bond. The amount of
alternative substituted under subsection (1) or (2) of this
section must be equal to or greater than the amount of the
required surety bond.
(1) Time deposit. An assignment in favor of the director
of a certificate of deposit. The certificate of deposit must
be issued by a financial institution in the state whose
deposits or shares are insured by an agency of the government
of the United States. The depositor is entitled to receive
all interest and dividends on the certificate of deposit.
(2) Demonstration of net worth. A licensee or applicant
for a small loan endorsement may demonstrate net worth in
excess of three times the amount of the required bond. The
licensee shall notify the director within ten business days of
any date upon which its net worth decreases below the required
amount. A licensee that fails to maintain the required level
of net worth and continues to operate under a small loan
endorsement will be required to immediately obtain a surety
bond and maintain it for five years after the date of
noncompliance. During this five-year period, the director
will not accept a demonstration of net worth in lieu of a
(3) Reports required. A licensee that maintains net
worth in lieu of a surety bond shall submit annually to the
director an audited financial statement and within forty-five
days after the close of each quarter a supplementary
year-to-date financial statement prepared in accordance with
generally accepted accounting principles. The financial
statements must include at a minimum a statement of assets and
liabilities and a profit and loss statement. The director may
continue to require other documents, agreements or information
necessary to properly evaluate and ensure that the licensee
remains in compliance with this section.
(4) Bad debts and judgments. A licensee that maintains
net worth in lieu of a surety bond may not consider bad debts
and certain judgments as assets. The director may approve
exceptions in writing. The licensee must charge off its books
any debt upon which any payment is six months or more past
due. The licensee may not count as an asset any judgment more
than two years old which has not been paid. Time consumed by
an appeal from a judgment is not counted in the two-year
(5) Noncompliance. A licensee that does not comply with
this section must obtain and file with the director a surety
bond in the required amount in WAC 208-630-030 by the date
specified by the director.
When and under what circumstances may
the director have access to the criminal history of an
applicant or licensee, or controlling person?
director may review any criminal history record information
maintained by any federal, state, or local law enforcement
agency relating to:
(a) An applicant for a license or small loan endorsement
under chapter 31.45 RCW; or
(b) A controlling person of an applicant for a license
under chapter 31.45 RCW.
(2) The director may deny, suspend or revoke a license if
the applicant, licensee, or controlling person of the
applicant or licensee fails to provide a complete set of
fingerprints and a recent photograph on request.
(3) All criminal history record information received by
the director is confidential information and is for exclusive
use of the director and the division of consumer services.
Except on court order or as provided by subsection (4) of this
section, or otherwise provided by law, the information may not
be released or otherwise disclosed to any other person or
(4) The director may not provide a person being
investigated under this section with a copy of the person's
criminal history record obtained pursuant to subsection (1) of
this section. This subsection does not prevent the director
from disclosing to the person the dates and places of arrests,
offenses, and dispositions contained in the criminal history
Does a licensee have to pay a fee for a
At the time an applicant files for a
license, the applicant must pay to the director a deposit fee
for investigating and processing the application.
How much are the fees for various
license applications, and when does a licensee pay them?
The director shall collect a fee of sixty-nine dollars per
employee hour expended for services, plus actual expenses, for
review, investigation and processing of:
(a) New license applications;
(b) Small loan endorsement applications;
(c) Additional locations;
(d) Change of control;
(e) Relocation of office;
(f) Voluntary or involuntary liquidation of licensee.
(2) The director may require a lump sum payment in
advance to cover the anticipated cost of review and
investigation of the activities described in this section.
What happens if a licensee pays a lump
sum payment in advance, and there is a surplus or deficiency
in the application deposit?
If the deposit required exceeds
the actual amount derived in WAC 208-630-290(1), the amount in
excess shall be refunded.
If the deposit fee does not cover the costs of
investigation and processing, the applicant will pay for any
additional cost, which will be itemized and billed by the
Is the licensee's deposit fee
The deposit fee is not refundable if the
application is denied or withdrawn, or if the license is
issued. The director will apply the deposit fee to the actual
cost of investigating and processing the application.
EXAMINATION AND INVESTIGATION
What examination authority does the
The director determines the frequency of
examinations for the purpose of determining compliance with
chapter 31.45 RCW and these rules.
The director or designee may at any time examine the
records and documents used in the business of any licensee or
licensee's agent wherever located.
The director or designee may examine the records and
documents of any person the director believes is engaging in
unlicensed business governed by chapter 31.45 RCW wherever
May the director accept other reports in
lieu of an examination?
The director or designees may accept
reports prepared by independent certified professionals or
prepared by another state or the federal government in lieu
of, in whole or in part, an examination performed by the
What should a licensee expect the
director to review during an examination?
examinations the director or designee may:
(1) Obtain access, during reasonable business hours, to
the offices and places of business, books, accounts, papers,
files, records, computers, safes and vaults of any person in
possession of information relevant to the examination;
(2) Interview any person the director or designee
believes has information relative to the examination,
including, but not limited to, any party to the transaction;
(3) Obtain statements in writing by any person, under
oath or otherwise, as to all facts and circumstances
concerning the matters under examination;
(4) Require the production of copies of any items in
subsection (1) of this section;
(5) Require assistance and cooperation, from any licensee
or employee or agent of any licensee under examination with
respect to the conduct and subject matter of the examination;
(6) Conduct meetings and exit review with owners,
managers or employees of the licensee being examined;
(7) Require a response from the subject of the
Who pays for the costs of an
Every licensee must pay to the director the
actual cost of examining and supervising each licensed place
of business at the examination hourly rate of sixty-nine
dollars per person per hour expended, plus actual expenses,
which for out-of-state exams includes, without limitation,
travel, lodging and per diem expense.
Whether a business has a license or not,
what should the business know about an investigation?
director or designee may conduct investigations at any time,
in or outside of the state, to determine whether any person
has violated or is about to violate chapter 31.45 RCW, these
rules, or any order issued under these laws and rules. For
that purpose the director or designee may conduct inquiries,
interviews and examinations of any person relevant to the
What powers does the director have
during an investigation?
The director or designee may
investigate the business of a licensee, or other business or
personal financial records of any person subject to
investigation. In conducting investigations, the director or
(1) Have access to any location where records of the
subject of the investigation are located, including offices,
places of business, commercial storage facilities, computers,
safes and vaults for the purposes of obtaining, reviewing or
copying books, accounts, papers, files, or records, including
electronic records, or records in any format;
(2) Administer oaths and affirmations;
(3) Subpoena witnesses and compel their attendance at a
time and place determined by the director or designee, and
compel their testimony regarding any matter related to an
investigation or examination under chapter 31.45 RCW or these
(a) Testimony regarding the existence, description,
nature, custody, condition and location of any relevant
(b) The identity and location of persons having knowledge
of any matter related to the investigation; and
(c) Any matter reasonably calculated to lead to the
discovery of material evidence.
(4) Subpoena the production of any books, records in any
format, documents or other tangible things, or physical or
documentary evidence or matter;
(5) Conduct oral examination, under oath or otherwise,
publicly or privately, of any controlling person, employee,
agent or independent contractor of a licensee;
(6) Conduct oral examination, under oath or otherwise,
publicly or privately, of any person whose testimony is deemed
relevant to the investigation;
(7) Copy, or request to be copied, any items described in
subsection (1) of this section, or if the director or designee
(a) There is danger that original records may be
destroyed, altered, or removed denying the director
(b) Original documents are necessary for the preparation
of criminal referral or trial, the director may take
possession of originals of any items described in subsection
(1) of this section, regardless of the source of such items.
Originals and/or copies taken by the director may be held,
returned, or forwarded to other regulatory or law enforcement
officials as determined necessary by the director or designee.
(8) Conduct analysis and review of any items described in
subsection (1) of this section;
(9) Require assistance, as necessary, from any employee
or person subject to investigation under this section with
respect to the conduct and subject matter of the
(10) Conduct meetings and exit reviews with owners,
managers, officers, or employees of any person subject to
investigation or examination under this chapter;
(11) Conduct meetings and share information with other
regulatory or law enforcement agencies; and
(12) Prepare and deliver, as deemed necessary, a report
of investigation requiring a response from the recipient.
The director may investigate the business and records of
any person who the director has reason to believe is engaging
in business which requires a license under chapter 31.45 RCW.
What are the fees for an investigation?
Unless the person investigated is not required to hold a
license, the person must pay the cost of the investigation at
the hourly rate of sixty-nine dollars per person per hour
expended, plus actual expenses, which for out-of-state
investigations includes, without limitation, travel, lodging
and per diem expense.
May the director hire other specialists
to assist with examinations and investigations, and who will
pay for them?
(1) The director may retain attorneys,
accountants, or other professionals and specialists as
examiners, auditors, or investigators, to conduct, or assist
in the conduct of examinations, or investigations. Fees for
services provided to the director by such professionals and
specialists under this paragraph will be billed at such rates
and in the manner described in WAC 208-630-350 and
(2) The director may order the retention of such
professionals and specialists as auditors, or investigators to
conduct, or assist in the conduct of audits or investigations.
Unless the director determines that the person investigated is
not required to hold a license or otherwise should not bear
the cost, the actual cost of these services will be borne by
the person who is the subject of the audit, or investigation.
ASSESSMENTS AND REPORTING REQUIREMENTS
Once licensed, what fees must a licensee
pay to keep a license current?
(1) The director will charge
each licensee an annual assessment at the rate set forth in
subsection (2) of this section. Assessments for a calendar
year will be computed on total volume of transactions as of
December 31 of the previous calendar year.
(2) The annual assessment rate is:
(a) For check cashers:
(i) If the volume of checks cashed is one million dollars
or less, there is no annual assessment;
(ii) If the volume of checks cashed is over one million
dollars, the annual assessment is five hundred thirteen
dollars and ninety-five cents per licensed location.
(b) For check sellers:
(i) If the volume of checks sold is one million dollars
or less, there is no annual assessment;
(ii) If the volume of checks sold is over one million
dollars, the annual assessment is five hundred thirteen
dollars and ninety-five cents per licensed location.
(c) For licensees with small loan endorsements, in
addition to (a) and/or (b) of this subsection:
(i) If the volume of small loans made is one million
dollars or less, there is no annual assessment;
(ii) If the volume of small loans made is over one
million dollars, the annual assessment is five hundred
thirteen dollars and ninety-five cents per licensed location.
(3) For purposes of this section, "volume" includes all
transactions made under this chapter and chapter 31.45 RCW by
a Washington licensed check casher or check seller at all
What happens if a licensee is late with
an annual assessment fee?
If a licensee does not pay its
annual assessment fee by April 15, the director must send the
licensee a notice of suspension and assess a late fee of
twenty-five percent of the annual assessment fee. The
licensee's payment of both the annual assessment fee and the
late fee must arrive in the department's offices by 5:00 p.m.
on the tenth day after the annual assessment fee due date,
unless the department is not open for business on that date,
then the licensee's payment of both the annual assessment fee
and the late fee must arrive in the department's offices by
5:00 p.m. on the next day the department is open for business.
If the payment of both the annual assessment fee and the late
fee does not arrive prior to such time and date, the
expiration of the licensee's license is effective at 5:00 p.m.
on the thirtieth day after the assessment fee due date.
How can a license be reinstated after it
The director may reinstate the license if, within
twenty days after the effective date of expiration, the
(1) Pays both the annual assessment fee and the late fee;
(2) Attests under penalty of perjury that it did not
engage in conduct requiring a license under this chapter
during the period its license was expired. The director may
confirm the licensee's attestation by an investigation.
When may a licensee expect a fee
The department intends to increase its fee and
assessment rates each year for several bienniums. The
department intends to initiate a rule making for this purpose
each biennium. This rule provides for an automatic annual
increase in the rate of fees and assessments each fiscal year
during the 2005-2007 biennium.
(1) On July 1, 2005, the fee and assessment rates as
increased in the prior fiscal year, will increase by a
percentage rate equal to the fiscal growth factor for the then
current fiscal year. As used in this section, "fiscal growth
factor" has the same meaning as the term is defined in RCW 43.135.025. However, there will be no rate increase under
this subsection (1) for assessments described in WAC 208-630-022 (2)(a)(i), (b)(i) and (c)(i).
(2) The director may round off a rate increase under
subsection (1) of this section. However, no rate increase may
exceed the applicable fiscal growth factor.
How will a licensee know about fee
By June 1 of each year, the director will make
available a chart of the new rates that will take effect on
the immediately following July 1.
When may the director waive fees?
director may waive any or all of the fees and assessments
imposed, in whole or in part, when he or she determines that
both of the following factors are present:
(1) The consumer services program fund exceeds the
projected acceptable minimum fund balance level approved by
the office of financial management; and
(2) That such course of action would be fiscally prudent.
When must a licensee inform the director
of significant changes in business?
A licensee must notify
the director in writing within fifteen days of the occurrence
of any of the following significant developments:
(1) Licensee filing for bankruptcy or reorganization.
(2) Notification of the initiation of license revocation
procedures in any state against the licensee.
(3) The filing of criminal charges or a criminal
indictment or information, in any way related to check
cashing, check selling or small loan activities of the
licensee, key officer, board director, or controlling person,
including, but not limited to, the handling and/or reporting
of moneys received and/or instruments sold.
(4) A licensee, sole proprietor, owner, director,
officer, partner, member or controlling person being convicted
of a crime.
(5) A change of control. In the case of a corporation,
control is defined as a change of ownership by a person or
group acting in concert to acquire ten percent of the stock,
or the ability of a person or group acting in concert to elect
a majority of the board directors or otherwise effect a change
in policy of the corporation. The director may require such
information as deemed necessary to determine whether a new
application is required. In the case of entities other than
corporations, change in control shall mean any change in
controlling persons of the organization either active or
passive. Change of control investigation fees shall be billed
to the persons or group at the rate billed for applications.
REQUIREMENTS FOR CHECK CASHING AND MAKING SMALL LOANS (PAYDAY
What types of information must a
licensee include on a borrower's application for a small loan?
The licensee must require and maintain an application for each
borrower in each small loan transaction. Each application
must contain the borrower's full name, Social Security number
or other unique identifier acceptable to the director, current
address, loan origination date, and whether the applicant is a
military borrower at any time prior to the termination date of
the loan. As used in this section "other unique identifier"
means a state identification card, a passport, a document
issued by the Immigration and Naturalization Service of the
United States that provides identification of the borrower, a
matricula consular, a driver's license, or other forms as
approved by the director.
Licensees may rely upon an applicant representation
regarding the applicant's military status, and are not
required to conduct an independent investigation regarding
How must a licensee maintain customer
small loan applications?
The licensee may maintain a single
master application in paper or electronic form that the
licensee updates each time a customer takes out a new loan.
What information must the note or small
loan agreement contain?
Each small loan made under a small
loan endorsement pursuant to chapter 31.45 RCW must be
evidenced by a written note or loan agreement which must
contain at least the following:
(1) The origination date of the loan;
(2) The principal of the loan;
(3) The manner in which the loan is to be repaid,
including a statement of whether any check held in connection
with a small loan may be redeemed in cash and if so, a
statement of the date and time after which the licensee may
choose not to permit redemption;
(4) The termination date of the loan;
(5) The dollar amount of fees and the method of
(6) The annual percentage rate as defined in the federal
Truth in Lending Act; and
(7) The signature or electronic signature of the
When must a licensee provide a note or
small loan agreement to the borrower?
A licensee must provide
a copy of the note or loan agreement (or if in electronic
form, make available) to the borrower at the time the borrower
executes the note or loan agreement.
When does a borrower have a right to
enter into a statutory payment plan?
A borrower has a right
to convert a small loan to a statutory payment plan after four
successive loans and prior to default on the last loan.
If a borrower and licensee enter into a
statutory payment plan, what is the term of the payment plan?
A payment plan under the provisions of RCW 31.45.084 must be
for a period of at least sixty days unless a shorter period is
agreed to by both the borrower and the licensee.
If a borrower and licensee enter into a
statutory payment plan, how must the payments be structured?
A payment plan under the provisions of RCW 31.45.084 must
provide for at least three separate payments which, unless
otherwise requested by the borrower and agreed to in writing
by the lender, shall be:
(1) Equal to the total amount of the payment plan divided
by the number of payments (subject to reasonable rounding);
(2) Due at substantially equivalent intervals. For
example, a sixty-day, three hundred fifty dollar payment plan
entered into on May 1 providing for payments of one hundred
twenty dollars on May 20, one hundred twenty dollars on June
11, and one hundred ten dollars on June 29, complies with this
Must a licensee comply with the federal
Truth in Lending Act when entering into a payment plan?
agreement to enter into a payment plan under the provisions of
RCW 31.45.084 must comply with the federal Truth in Lending
Act, 15 U.S.C. Sec. 1601.
May the licensee and the borrower enter
into a payment plan prior to the fourth consecutive loan?
licensee is not prohibited from entering into a payment plan
with a borrower at any time prior to the time a borrower's
right to a statutory payment plan is triggered under RCW 31.45.084. Any payment plan other than a statutory payment
plan may be on any terms on which a licensee and borrower may
What types of disclosures must a
licensee make to a borrower?
(1) A licensee must deliver to
the borrower at the time the licensee makes a small loan, a
disclosure that meets the requirements of all applicable laws,
including the federal Truth in Lending Act.
(2) A licensee must deliver to the borrower at the time
the licensee makes the small loan a disclosure of the right to
rescind the loan and the right to convert the loan to a
What must be included in the
The disclosure referred to in WAC 208-630-560(2)
must be substantially in the following form:
Your right to a payment plan.
If this is your fourth (or greater) successive loan, and
if you are not in default, you may convert your loan to a
payment plan with us. "Successive loans" means loans made to
you by us with no more than three business days between the
repayment in full of one loan and the beginning date of the
A payment plan will allow you, by paying a one time fee
equal to the finance charge on your loan, to pay all that you
owe in at least three payments over a period of at least sixty
Your right to rescind (cancel) this loan. You have the
right to rescind (cancel) this loan by returning the amount of
the loan in cash, or returning the check given to you by us to
our office by the close of business on our next business day
following the date of this loan. We may not charge you for
canceling the loan and we will return to you any postdated
check or electronic equivalent you have given to us.
In addition to providing disclosures to
the borrower, does a licensee have to post any disclosures?
Licensees that make small loans must post at each location
where small loans are made a conspicuous notice substantially
in the form set forth in the preceding question.
How must a licensee format disclosures?
All disclosures must be presented in a manner and physical
format that is clear, conspicuous and designed to call
attention to each right and responsibility of the borrower and
lender being disclosed. Such statements may be provided
separately or included within the note or loan agreement.
What documentation must a licensee keep
to show that the licensee has made the proper disclosures?
licensee must maintain in its files sufficient information to
show compliance with the consumer disclosure requirements of
chapter 31.45 RCW, these rules, and state and federal law.
Are there accounting and financial
records that a licensee must keep?
Licensees must maintain as
a minimum the following records for at least two years.
(1) A licensee must maintain a record of transactions
conducted. Such a record may be limited to the following
provided a sufficient audit trail is available through records
obtainable from the licensee's bank of account:
(a) Amount of the checks cashed;
(b) Amount of fees charged for cashing the check;
(c) Amount of cash deducted from the transaction for the
sales of other services or products;
(d) Amount of each check or monetary instrument sold;
(e) Amount of fee charged for the monetary instrument;
(f) Amount of small loan proceeds disbursed;
(g) Fees charged for small loans;
(h) Amount of payments on small loans received;
(i) Origination date of each small loan;
(j) Termination date of each small loan;
(k) Payment plan payment due dates;
(l) The information required to be maintained for
applications in the rule.
(2) Licensees must maintain a cash reconciliation
summarizing each day's activity and reconciling cash on hand
at the opening of business to cash on hand at the close of
business. Such reconciliation must separately reflect cash
received from the sale of checks, redemption of returned
items, bank cash withdrawals, cash disbursed in cashing of
checks, cash disbursed in making small loans, cash received in
payment of small loans and bank cash deposits.
(3) Records of the disbursement of loan proceeds and the
receipt of all payments on the balance of small loans must be
kept and must indicate the date of the transaction, the
borrower's name, amount, and whether the disbursement or
payment is on a loan or payment plan.
In what form must a licensee maintain
accounting and financial records?
Licensees may maintain
records required in combined form, hand or machine posted, or
automated, and licensees may maintain them on any electronic,
magnetic, optical or other storage media. However the
licensee must maintain the necessary technology to permit
access to the records by the department for the period
required by law.
May the director ask a licensee for
records regarding the previous day's transactions?
request of the director or director's designee a licensee must
within one business day make available, either directly or
through a third party, a record of the previous day's
What specific accounting records must a
Licensees must maintain a general ledger
containing records of all assets, liabilities, capital,
income, and expenses. The licensee must post a general ledger
from the daily record of checks cashed or other record of
original entry, at least monthly, and it must be maintained in
such manner as to facilitate the preparation of an accurate
trial balance of accounts in accordance with generally
accepted accounting practices.
May a licensee maintain a consolidated
general ledger if the licensee has two or more locations?
licensee may maintain a consolidated general ledger reflecting
activity at two or more locations by the same licensee
provided that the licensee maintain books of original entry
separately for each location.
What must a licensee have in employees'
Every licensee must maintain personnel files
for its employees. Each file must contain the employee's full
name, date of birth, date of hire and date of termination,
last known address and Social Security number.
For licensees with small loan
endorsements what information must the licensee keep in every
For licensees with small loan endorsements, each
loan file must contain at least a copy of the application, a
copy of the note or loan agreement and a copy of any
disclosure statement. As used in this section, "application"
means any information received by the licensee from the
borrower for the purposes of making a lending decision,
including, but not limited to, personal employment history and
Are there specific banking requirements
for check sellers?
All monetary instruments issued by check
sellers must be drawn on a financial institution domiciled in
the United States.
When must a check casher deposit a
Once a licensee cashes a monetary
instrument the licensee must send the monetary instrument for
deposit to the licensee's account at a depository financial
institution located in Washington state or send it for
collection not later than the close of business on the third
business day after the day on which the licensee accepted the
monetary instrument for cash. This subsection does not apply
if the licensee accepted the monetary instrument as part of a
small loan transaction under chapter 31.45 RCW.
When may a licensee deposit a monetary
instrument accepted in the course of making a small loan?
licensee with a small loan endorsement may not deposit a
monetary instrument accepted in the course of making a small
loan under the act prior to the termination date and any time
disclosed on the note or small loan agreement.
What other federal and state laws and
regulations must a licensee comply with?
Each licensee must
comply with applicable federal and state laws including, but
not limited to, the following:
(1) Chapter 63.29 RCW, the Uniform Unclaimed Property
(2) The federal Truth in Lending Act.
Is a licensee required to register with
the Secretary of the Treasury?
Each licensee must register
with the Secretary of the Treasury of the United States if
required by 31 U.S.C. Section 5330 or any regulations
What records and actions does a licensee
need to take to assure the licensee is correctly reporting
under the Bank Secrecy Act?
Each licensee shall maintain
detailed records to satisfy currency transaction reporting and
suspicious activity reporting requirements of the United
States Treasury Department.
Each licensee shall implement an antimoney laundering
program that includes the development of internal policies,
procedures and controls, training of employees, the
appointment of a compliance officer, and the appointment of an
external reviewer of the antimoney laundering program if
required by 31 U.S.C. Section 5318(h).
What obligation does a licensee have to
assure that employees comply with the laws and rules regarding
payday lending and check cashing and selling?
shall ensure that any employee or person who engages in
business on behalf of the licensee under authority granted by
chapter 31.45 RCW has sufficient understanding of the statutes
and rules applicable to its business to assure compliance with
such statutes and rules.
What fees may licensees charge to
collect a delinquent small loan?
A licensee when collecting a
delinquent small loan may:
(1) Agree with the borrower for the payment of fees for a
credit report received from a recognized credit reporting
company when the licensee pays these fees to an unaffiliated
third party for services. In no event may the fee exceed the
actual cost charged by the provider of the credit report.
(2) Charge or collect a fee equal to or less than
twenty-five dollars for a check returned unpaid by the bank
drawn upon. Only one fee may be collected with respect to a
particular check even if it has been redeposited and returned
more than once.
What are the legal restrictions on
making small loans?
A licensee with a small loan endorsement
is subject to various restrictions.
May a licensee allow a borrower to
refinance or "rollover" a small loan with another small loan?
A licensee may not allow a borrower to use a new small loan to
pay off an existing small loan by the same lender or an
affiliate of the lender. Licensees may not apply the proceeds
from any small loan to any other loan from the same lender or
affiliate of the lender.
May a licensee use a name or place of
business other than that named on the license or small loan
A licensee may not make any loan under authority
granted by chapter 31.45 RCW under any name or at any place of
business other than that named on the license and small loan
What is the limit on the amount of
checks a licensee may hold from one borrower?
A licensee may
not hold a check or checks in an aggregate face amount of more
than seven hundred dollars plus allowable fees from any one
borrower at any one time.
May a licensee holding a borrower's
check for a period longer than the statutory limit of
forty-five days charge additional fees?
A licensee may hold a
check for more than forty-five days if requested to do so by
the borrower. The licensee may not charge additional fees for
holding the check.
May a licensee charge additional fees to
cash monetary instruments issued as part of a small loan?
licensee may not charge an additional fee to cash a monetary
instrument issued as part of a small loan made under chapter 31.45 RCW.
May a licensee charge any fees if a
borrower decides to convert their loan to a payment plan?
licensee may not charge any fee or impose any other burden
upon the decision of a borrower to convert their small loan to
a payment plan as provided under RCW 31.45.084, other than the
terms and conditions expressly authorized by RCW 31.45.084.
What are a licensee's annual financial
and reporting requirements?
Each licensee must submit the
reports of its Washington activities described in this
section, on a form prescribed and made available by the
director, due not later than one hundred five days after the
close of the calendar year (or fiscal year if a licensee has
established a fiscal year different from the calendar year).
Licensees must make each report for the prior calendar year or
fiscal year, which shall be referred to in these rules as the
"period." A consolidated annual report must contain:
(1) The total number of employees and annual payroll
during the period;
(2) The total number and dollar volume of transactions
during the period;
(3) The total dollar amount of fees collected during the
(4) The total number and dollar amount of undeposited
checks taken or held in connection with check cashing and
small loan endorsement business at the end of the period;
(5) The total number and dollar amount of returned (NSF)
checks taken or held in connection with check cashing and
small loan business at the end of the period, and the total
dollar amount of fees collected for returned (NSF) checks
during the period;
(6) The total number and dollar amount of charge-offs
(losses), net of any recoveries, for the period;
(7) The total dollar amount of net income before and
after taxes earned under authority of this chapter.
Who may a licensee hire to prepare the
financial statements in the annual report?
statements contained in the annual report may be prepared by
outside accountants or by the licensee's own accountants.
What information must a licensee have in
the annual assessment report?
An annual assessment report
(1) The total dollar volume of checks cashed during the
period, if applicable; and
(2) The total dollar volume of checks sold during the
period, if applicable.
If licensee has a small loan
endorsement, what other reports must be filed?
licensees with small loan endorsements a report containing the
(1) The total dollar volume of small loans made during
the period, including payment plan loans;
(2) The total number of loans made for the period;
(3) The total number of borrowers for the period;
(4) The number of borrowers whose accounts were referred
to collection agencies;
(5) The number of loans rescinded during the period;
(6) The number of borrowers entering into a payment plan;
(7) The number of loans made to borrowers to be paid
through an ACH (automated clearing house) or other electronic
(8) The number of loans made to borrowers through other
than a physical visit to the licensee's location (e.g.,
internet, telephone, etc.); and
(9) The number of active military borrowers during the
If a licensee has a loan volume of at
least ten million dollars in principal in the year prior, what
additional reports must the licensee file with the director?
For licensees with small loan endorsements and total loan
volume of at least ten million dollars in principal in the one
year period just prior to the period under report, a report
containing the following in a form prescribed by the director:
(1) The number of loans per borrower for the period;
(2) The number of loans per military borrower during the
(3) The number of loans with terms in each of the
following categories for the period:
(a) One to seven days;
(b) Eight to fourteen days;
(c) Fifteen to Twenty-one days;
(d) Twenty-two to thirty-one days; and
(e) Thirty-two or more days.
What must a check seller report when
surrendering or revoking a license?
A licensee engaged in the
business of selling monetary instruments whose license has
been surrendered or revoked shall submit to the director, at
its own expense, on or before one hundred five days after the
effective date of such surrender or revocation, a closing
annual report containing audited financial statements as of
such effective date. This closing annual report shall cover
the twelve months ending with such closure date or for such
other period as the director may specify. If the report,
certificate, or opinion of the independent accountant is in
any way qualified, the director may require the licensee to
take such action as appropriate to permit an independent
accountant to remove such qualification from the report,
certificate, or opinion. Such report shall include relevant
information specified by the director.
What must a licensee, other than a check
seller, report when surrendering or revoking a license?
licensee not engaged in the business of selling monetary
instruments whose license has been surrendered or revoked
shall submit to the director at its own expense, on or before
one hundred five days after the effective date of such
surrender or revocation, a closing annual report covering the
twelve months ending with such closure date or for such other
period as the director may specify. Financial statements
contained in this closing report may be prepared by outside
accountants or by the licensee's own accountants.
What additional information must a
licensee include with annual reports and financial statements?
The reports and financial statements in the consolidated
annual report, the report for all licensees with small loan
endorsements, and the report for licensees with small loan
endorsements over ten million dollars in principal in the one
year prior to the reporting period must include at least a
balance sheet and a statement of income together with such
other relevant information as the director may require,
prepared in accordance with general accepted accounting
principles. The reports and financial statements in the
report for licensees with small loan endorsements over ten
million dollars in the one year prior to the reporting period
must be accompanied by a report, certificate, or opinion of an
independent certified public accountant or independent public
accountant. The audits shall be conducted in accordance with
generally accepted auditing standards.
May a licensee request an extension of
time to comply with reporting requirements?
For good cause
and upon written request, the director may extend the time for
compliance with reporting requirements.
Under what circumstances would a
licensee submit unaudited financial statements to the
A licensee shall, when requested by the director,
for good cause, submit its unaudited financial statement,
prepared in accordance with generally accepted accounting
principles and consisting of at least a balance sheet and
statement of income as of the date and for the period
specified by the director.
When may the director reject financial
statements and other reports submitted to the director by the
The director may reject any financial statement,
report, certificate, or opinion filed pursuant to this
section. The director must notify the licensee or other
person required to make such filing of its rejection and the
How much time does a licensee have to
correct the deficiency in financial statements or other
Within thirty days after the receipt of such notice,
the licensee or other person shall correct such deficiency.
The director shall retain a copy of all filings so rejected.
What are the trust accounting
requirements that a licensee must comply with?
(1) At least
monthly a licensee in the business of selling checks shall
withdraw from the trust account an amount equal to fees earned
for the corresponding period from the sale of monetary
instruments. The remaining balance of the trust account must
be sufficient to cover all monetary instruments that remain
outstanding and drawn against the trust account.
(2) A licensee is prohibited from allowing the bank of
account to charge back checks or drafts deposited to the trust
account and subsequently dishonored against said trust
(3) A licensee, whose license has been suspended,
terminated, or not renewed, shall not make withdrawals from
the trust account without the director's consent, until a
closing report has been received according to these rules.
The following sections of the Washington Administrative Code are repealed: