H-0093

AN ACT Relating to check cashers and sellers; amending RCW 19.60.066; adding a new chapter to Title 31 RCW; adding a new section to chapter 42.17 RCW; prescribing penalties; and providing an effective date.

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:

NEW SECTION. Sec. 1. Unless the context clearly requires otherwise, the definitions in this section apply throughout this chapter.

(1) "Check casher" means an individual, partnership, unincorporated association, or corporation that, for compensation, engages, in whole or in part, in the business of cashing checks, drafts, money orders, or other commercial paper serving the same purpose.

(2) "Check seller" means an individual, partnership, unincorporated association, or corporation that, for compensation, engages, in whole or in part, in the business of or selling checks, drafts, money orders, or other commercial paper serving the same purpose.

(3) "Licensee" means a check casher or seller licensed by the supervisor to engage in business in accordance with this chapter.

(4) "Supervisor" means the supervisor of banking.

NEW SECTION. Sec. 2. (1) This chapter does not apply to:

(a) Any bank, trust company, savings bank, savings and loan association, or credit union;

(b) The cashing of checks, drafts, or money orders by any corporation, partnership, association, or person who cashes checks, drafts, or money orders as a convenience, as a minor part of its customary business, and not for profit;

(c) The issuance or sale of checks, drafts, or money orders by any corporation, partnership, or association that has a net worth of not less than five million dollars as shown by audited financial statements; and

(d) The issuance or sale of checks, drafts, money orders, or other commercial paper serving the same purpose by any agent of a corporation, partnership, or association described in (c) of this subsection.

(2) Upon application to the supervisor, the supervisor may exempt a corporation, partnership, association, or other person from any or all provisions of this chapter upon a finding by the supervisor that although not otherwise exempt under this section, the applicant is not primarily engaged in the business of cashing or selling checks and a total or partial exemption would not be detrimental to the public.

NEW SECTION. Sec. 3. (1) Except as provided in section 2 of this act, no check casher or seller may engage in business without first obtaining a license from the supervisor in accordance with this chapter.

(2) Each application for a license shall be in writing in a form prescribed by the supervisor and shall contain the following information:

(a) The legal name, residence, and business address of the applicant and, if the applicant is a partnership, association, or corporation, of every member, officer, and director thereof;

(b) The location where the initial registered office of the applicant will be located in this state;

(c) The complete address of any other locations at which the applicant proposes to engage in business as a check casher or seller;

(d) Such other data, financial statements, and pertinent information as the supervisor may require with respect to the applicant, its directors, trustees, officers, members, or agents.

(3) Any information in the application regarding the personal residential address or telephone number of the applicant is exempt from the public records disclosure requirements of chapter 42.17 RCW.

(4) The application shall be filed together with an investigation and supervision fee established by rule by the supervisor. Such fees collected shall be deposited to the credit of the banking examination fund in accordance with RCW 43.19.095.

(5) (a) If the applicant intends to engage in the business of selling checks, drafts, money orders, or other commercial paper serving the same purpose, the supervisor shall require the applicant to obtain and maintain an adequate fidelity bond or blanket fidelity bond covering each officer, employee, or agent having access to funds collected by or for the licensee. The bond shall be for the protection of the public against loss suffered through embezzlement by any person having access to funds collected by or for the licensee or having authority to draw against such funds, or from mysterious disappearance, theft, holdup, or burglary.

(b) In lieu of providing a bond, the licensee may deposit with the supervisor security in the form and amount determined by the supervisor sufficient to protect the public against loss suffered through embezzlement by any person having access to funds collected by or for the licensee or having authority to draw against such funds, or from mysterious disappearance, theft, holdup, or burglary.

(c) Such security may be sold by the supervisor at public auction if it becomes necessary to satisfy the requirements of this chapter. Notice of the sale shall be served upon the licensee who placed the security personally or by mail. If notice is served by mail, service shall be addressed to the licensee at its address as it appears in the records of the supervisor. Bearer bonds of the United States or the state of Washington without a prevailing market price must be sold at public auction. Such bonds having a prevailing market price may be sold at private sale not lower than the prevailing market price. Upon any sale, any surplus above amounts due shall be returned to the licensee, and the licensee shall deposit with the supervisor additional security sufficient to meet the amount required by the supervisor. A deposit given instead of the bond required by this section shall not be deemed an asset of the licensee for the purpose of complying with the liquid asset provisions of this chapter.

NEW SECTION. Sec. 4. (1) The supervisor shall conduct an investigation of every applicant to determine the financial responsibility, experience, character, and general fitness of the applicant. The supervisor shall issue the applicant a license to engage in the business of cashing or selling checks, or both, if the supervisor determines to his or her satisfaction that:

(a) The applicant is financially responsible and appears to be able to conduct the business of cashing or selling checks in an honest, fair, and efficient manner with the confidence and trust of the community; and

(b) The applicant has the required bonds.

(2) The supervisor may refuse to issue a license if he or she finds that the applicant, or any person who is a director, officer, partner, agent, or substantial stockholder of the applicant, has been convicted of a felony in any jurisdiction or is associating or consorting with any person who has been convicted of a felony in any jurisdiction. The term "substantial stockholder" as used in this subsection, means a person owning or controlling ten percent or more of the total outstanding shares of the applicant corporation.

(3) No license may be issued to an applicant whose license to conduct business under this chapter had been revoked by the supervisor within the twelve-month period preceding the application.

(4) A license issued under this chapter shall be conspicuously posted in the place of business of the licensee. The license is not transferable or assignable.

(5) A license issued in accordance with this chapter remains in force and effect through the remainder of the calendar year following its date of issuance unless earlier surrendered, suspended, or revoked.

(6) The supervisor's investigation and fees required under this chapter shall differentiate between check cashing and check selling activities and take into consideration the level of risk and potential harm to the public related to each such activity.

NEW SECTION. Sec. 5. (1) A license may be renewed upon the filing of an application containing such information as the supervisor may require and by the payment of a fee in an amount determined by the supervisor as necessary to cover the costs of supervision. Such fees collected shall be deposited to the credit of the bank examination fund in accordance with RCW 43.19.095. The supervisor shall renew the license in accordance with the standards for issuance of a new license.

(2) If a licensee intends to do business at a new location, to close an existing place of business, or to relocate an existing place of business, the licensee shall provide written notification of that intention to the supervisor no less than thirty days before the proposed establishing, closing, or moving of a place of business.

NEW SECTION. Sec. 6. (1) A schedule of the fees and the charges for the cashing and selling of checks, drafts, money orders, or other commercial paper serving the same purpose shall be conspicuously and continuously posted in every location licensed under this chapter. The licensee shall provide to its customer a receipt for each transaction. The receipt must include the name of the licensee, the type and amount of the transaction, and the fee or fees charged for the transaction.

(2) Each licensee shall keep and maintain such business books, accounts, and records as the supervisor may require to fulfill the purposes of this chapter. Every licensee shall preserve such books, accounts, and records for at least two years.

(3) A check, draft, or money order sold by a licensee shall be drawn on an account of a licensee maintained at a bank, savings bank, or savings and loan association authorized to do business in the state of Washington.

NEW SECTION. Sec. 7. (1) Except for the activities of a pawnbroker as defined in RCW 19.60.010, no licensee may engage in a loan business or the negotiation of loans or the discounting of notes, bills of exchange, checks, or other evidences of debt on the same premises where a check cashing or selling business is conducted, unless such loan business is a properly licensed consumer finance company or industrial loan company office or other lending activity permitted in the state of Washington and is physically separated from the check cashing or selling business in a manner approved by the supervisor.

(2) No licensee may at any time cash or advance any moneys on a post-dated check or draft. However, a licensee may cash a check payable on the first banking day following the date of cashing if:

(a) The check is drawn by the United States, the state of Washington, or any political subdivision of the state, or by any department or agency of the state or its subdivisions; or

(b) The check is a payroll check drawn by an employer to the order of its employee in payment for services performed by the employee.

(3) No licensee may agree to hold a check or draft for later deposit. A licensee shall deposit all checks and drafts cashed by the licensee as soon as practicable.

(4) No licensee may issue or cause to be issued any check, draft, or money order, or other commercial paper serving the same purpose, that is drawn upon the trust account of a licensee without concurrently receiving the full principal amount, in cash, or by check, draft, or money order from a third party believed to be valid.

(5) No licensee may advertise, print, display, publish, distribute, or broadcast or cause or permit to be advertised, printed, displayed, published, distributed, or broadcast, any statement or representation that is false, misleading, or deceptive, or that omits material information, or that refers to the supervision of the licensee by the state of Washington or any department or official of the state.

(6) Each licensee shall comply with all applicable federal statutes governing currency transaction reporting.

NEW SECTION. Sec. 8. (1) All funds received by a licensee or its agents from the sale of checks, drafts, money orders, or other commercial paper serving the same purpose constitute trust funds owned by and belonging to the person from whom they were received or to the person who has paid the checks, drafts, money orders, or other commercial paper serving the same purpose.

(2) All such trust funds shall be deposited in a bank, savings bank, or savings and loan association located in Washington state in an account or accounts in the name of the licensee designated "trust account," or by some other appropriate name indicating that the funds are not the funds of the licensee or of its officers, employees, or agents. Such funds are not subject to attachment, levy of execution, or sequestration by order of a court except by a payee, assignee, or holder in due course of a check, draft, or money order sold by a licensee or its agent. Funds in the trust account, together with funds and checks on hand and in the hands of agents held for the account of the licensee at all times shall be at least equal to the aggregate liability of the licensee on account of checks, drafts, money orders, or other commercial paper serving the same purpose that are sold.

(3) The supervisor shall adopt rules requiring the licensee to periodically withdraw from the trust account the portion of trust funds earned by the licensee from the sale of checks, drafts, money orders, or other commercial paper serving the same purpose. If a licensee has accepted, in payment for a check, draft, money order, or commercial paper serving the same purpose issued by the licensee, a check or draft that is subsequently dishonored, the supervisor shall prohibit the withdrawal of earned funds in an amount necessary to cover the dishonored check or draft.

(4) If a licensee or its agent commingles trust funds with its own funds, all assets belonging to the licensee or its agent are impressed with a trust in favor of the persons specified in subsection (1) of this section in an amount equal to the aggregate funds that should have been segregated. Such trust continues until an amount equal to the necessary aggregate funds have been deposited in accordance with subsection (2) of this section.

(5) Upon request of the supervisor, a licensee shall furnish to the supervisor an authorization for examination of financial records of any trust fund account established for compliance with this section.

(6) The supervisor may adopt any rules necessary for the maintenance of trust accounts, including rules establishing procedures for distribution of trust account funds if a license is suspended, terminated, or not renewed.

NEW SECTION. Sec. 9. (1) Each licensee shall submit to the supervisor, in a form approved by the supervisor, a report containing financial statements covering the calendar year or, if the licensee has an a established fiscal year, then for such fiscal year, within one hundred five days after the close of each calendar or fiscal year. The licensee shall also file such additional relevant information as the supervisor may require.

(2) A licensee whose license has been suspended or revoked shall submit to the supervisor, at the licensee's expense, within one hundred five days after the effective date of such surrender or revocation, a closing audit report containing audited financial statements as of such effective date for the twelve months ending with such effective date.

(3) The supervisor shall adopt rules specifying the form and content of such audit reports and may require additional reporting as is necessary for the supervisor to ensure compliance with this chapter.

NEW SECTION. Sec. 10. The supervisor may at any time investigate the business and examine the books, accounts, records, and files of any licensee or person who the supervisor has reason to believe is engaging in the business governed by this chapter. The supervisor shall collect from the licensee, the actual cost of the

examination.

NEW SECTION. Sec. 11. (1) The supervisor may issue and serve upon a licensee a notice of charges if, in the opinion of the supervisor, any licensee:

(a) Is engaging or has engaged in an unsafe or unsound practice in conducting the business governed by this chapter;

(b) Is violating or has violated the law, rule, or any condition imposed in writing by the supervisor in connection with the granting of any application or other request by the licensee or any written agreement made with the supervisor; or

(c) Is about to do the acts prohibited in (a) or (b) of this subsection when the opinion that the threat exists is based upon reasonable cause.

(2) The notice shall contain a statement of the facts constituting the alleged violation or violations or the practice or practices and shall fix a time and place at which a hearing will be held to determine whether an order to cease and desist should be issued against the licensee. The hearing shall be set not earlier than ten days nor later than thirty days after service of the notice unless a later date is set by the supervisor at the request of the licensee.

Unless the licensee personally appears at the hearing or by a duly authorized representative, the licensee is deemed to have consented to the issuance of the cease and desist order. In the event of this consent or if upon the record made at the hearing the supervisor finds that any violation or practice specified in the notice of charges has been established, the supervisor may issue and serve upon the licensee an order to cease and desist from the violation or practice. The order may require the licensee and its directors, officers, employees, and agents to cease and desist from the violation or practice and may require the licensee to take affirmative action to correct the conditions resulting from the violation or practice.

(3) A cease and desist order becomes effective upon the expiration of ten days after the service of the order upon the licensee concerned, except that a cease and desist order issued upon consent becomes effective at the time specified in the order and remains effective as provided in the order unless it is stayed, modified, terminated, or set aside by action of the supervisor or a reviewing court.

NEW SECTION. Sec. 12. Whenever the supervisor determines that the acts specified in section 11 of this act or their continuation is likely to cause insolvency or substantial injury to the public, the supervisor may also issue a temporary order requiring the licensee to cease and desist from the violation or practice. The order becomes effective upon service upon the licensee and remains effective unless set aside, limited, or suspended by a court under section 13 of this act pending the completion of the administrative proceedings under the notice and until such time as the supervisor dismisses the charges specified in the notice or until the effective date of the cease and desist order issued against the licensee under section 11 of this act.

NEW SECTION. Sec. 13. Within ten days after a licensee has been served with a temporary cease and desist order, the licensee may apply to the superior court in the county of its principal place of business for an injunction setting aside, limiting, or suspending the order pending the completion of the administrative proceedings pursuant to the notice served under section 12 of this act. The superior court has jurisdiction to issue the injunction.

NEW SECTION. Sec. 14. In the case of a violation or threatened violation of a temporary cease and desist order issued under section 12 of this act, the supervisor may apply to the superior court of the county of the principal place of business of the licensee for an injunction.

NEW SECTION. Sec. 15. Whenever as a result of an examination or report it appears to the supervisor that:

(1) The capital of any licensee is impaired;

(2) Any licensee is conducting its business in such an unsafe or unsound manner as to render its further operations hazardous to the public;

(3) Any licensee has suspended payment of its trust obligations;

(4) Any licensee has refused to submit its books, papers, and affairs to the inspection of the supervisor or the supervisor's examiner;

(5) Any officer of any licensee refuses to be examined under oath regarding the business of the licensee;

(6) Any licensee neglects or refuses to comply with any order of the supervisor made pursuant to this chapter unless the enforcement of such order is restrained in a proceeding brought by such licensee;

the supervisor may immediately take possession of the property and business of the licensee and retain possession until the licensee resumes business or its affairs are finally liquidated as provided in section 16 of this act. The licensee may resume business upon such terms as the supervisor may prescribe.

NEW SECTION. Sec. 16. Whenever the supervisor has taken possession of the property and business of a licensee, the supervisor may petition the superior court for the appointment of a receiver to liquidate the affairs of the licensee. During the time that the supervisor retains possession of the property and business of a licensee, the supervisor has the same powers and authority with reference to the licensee as is vested in the supervisor with respect to industrial loan companies, and the licensee has the same rights to hearings and judicial review as are granted to industrial loan companies.

NEW SECTION. Sec. 17. Every licensee violating or failing to comply with any provision of this chapter or any lawful direction or requirement of the supervisor is subject, in addition to any penalty otherwise provided, to a penalty of not more than one hundred dollars for each offense, to be recovered by the attorney general in a civil action in the name of the state. Each day's continuance of the violation is a separate and distinct offense.

NEW SECTION. Sec. 18. Any person who violates or participates in the violation of any provision of the rules or orders of the supervisor or of this chapter is guilty of a misdemeanor.

NEW SECTION. Sec. 19. The legislature finds and declares that any violation of this chapter substantially affects the public interest and is an unfair and deceptive act or practice and an unfair method of competition in the conduct of trade or commerce as set forth in RCW 19.86.020. Remedies available under chapter 19.86 RCW shall not affect any other remedy the injured party may have.

NEW SECTION. Sec. 20. The supervisor has the power, and broad administrative discretion, to administer and interpret the provisions of this chapter to ensure the protection of the public.

Sec. 21. RCW 19.60.066 and 1984 c 10 s 12 are each amended to read as follows:

It is a gross misdemeanor under chapter 9A.20 RCW for:

(1) Any person to remove, alter, or obliterate any manufacturer's make, model, or serial number, personal identification number, or identifying marks engraved or etched upon an item of personal property that was purchased, consigned, or received in pledge;

(2) Any person to knowingly make, cause, or allow to be made any false entry or misstatement of any material matter in any book, record, or writing required to be kept under this chapter;

(3) Any pawnbroker or second-hand dealer to receive any property from any person under the age of eighteen years, any person under the influence of intoxicating liquor or drugs, or any person known to the pawnbroker or second-hand dealer as having been convicted of burglary, robbery, theft, or possession of or receiving stolen property within the past ten years whether the person is acting in his or her own behalf or as the agent of another; ((or))

(4) Any pawnbroker to engage in the business of cashing or selling checks, drafts, money orders, or other commercial paper serving the same purpose unless the pawnbroker complies with the provisions of chapter 31.-- RCW (sections 1 through 20 of this act); or

(5) Any person to violate knowingly any other provision of this chapter.

NEW SECTION. Sec. 22. A new section is added to chapter 42.17 RCW to read as follows:

Information in an application for licensing under section 3 of this act regarding the personal residential address or telephone number of the applicant is exempt from disclosure under this chapter.

NEW SECTION. Sec. 23. Sections 1 through 20 of this act shall constitute a new chapter in Title 31 RCW.

NEW SECTION. Sec. 24. This act shall take effect January 1, 1992. The supervisor shall take such steps as are necessary to ensure that this act is implemented on its effective date.