AN ACT
Relating to small loans by licensed check cashers and sellers; amending RCW
31.45.010, 31.45.030, 31.45.040, 31.45.050, 31.45.070, and 42.17.313; and
adding new sections to chapter 31.45 RCW.
BE IT ENACTED BY THE LEGISLATURE
OF THE STATE OF WASHINGTON:
Sec.
1. RCW
31.45.010 and 1994 c 92 s 274 are each amended to read as follows:
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 director to
engage in business in accordance with this chapter. For purposes of the
enforcement powers of this chapter, including the power to issue cease and
desist orders under RCW 31.45.110, "licensee" also means a check
casher or seller who fails to obtain the license required by this chapter.
(4) "Small
loan" means a loan of up to five hundred dollars for a period of
thirty-one days or less.
(5)
"Director" means the director of financial institutions.
NEW
SECTION. Sec. 2. A new
section is added to chapter 31.45 RCW to read as follows:
(1) No
licensee may engage in the business of making small loans without first
obtaining a small loan endorsement to its license from the director in
accordance with this chapter. An endorsement will be required for each
location where a licensee engages in the business of making small loans, but a
small loan endorsement may authorize a licensee to make small loans at a
location different than the licensed locations where it cashes or sells checks
or drafts. A licensee may have more than one endorsement.
(2) A
licensee that has obtained the required small loan endorsement may charge
interest or fees for small loans not to exceed in the aggregate fifteen percent
of the principal amount borrowed. The director may determine by rule which
fees, if any, are not subject to the fifteen percent limitation.
(3) In
connection with making a small loan, a licensee may advance moneys on the
security of a postdated check or draft provided the time period between the
date the loan is granted and the date of the postdated check does not exceed
thirty-one days. A licensee shall deposit all postdated checks or drafts as
soon as practicable after the date of the check or draft has passed.
(4) No
person may at any time cash or advance any moneys on a postdated check or draft
in excess of the amount of goods or services purchased without first obtaining
a small loan endorsement to a check casher or check seller license.
NEW
SECTION. Sec. 3. A new
section is added to chapter 31.45 RCW to read as follows:
(1)
Each application for a small loan endorsement to a check casher or check seller
license must be in writing and in a form prescribed by the director and shall
contain the following information:
(a)
The legal name, residence, and business address of the applicant, and if the
applicant is a partnership, corporation, or association, the name and address
of every member, partner, officer, and director thereof;
(b)
The street and mailing address of each location where the licensee will engage
in the business of making small loans;
(c) A
surety bond, or other security allowed under RCW 31.45.030, in the amount
required; and
(d)
Any other pertinent information, including financial statements, as the
director may require with respect to the licensee and its directors, officers,
trustees, members, or employees.
(2)
Any information in the application regarding the licensee's personal
residential address or telephone number is exempt from the public records
disclosure requirements of chapter 42.17 RCW.
(3)
The application shall be filed together with an investigation and supervision
fee established by rule by the director. Fees collected shall be deposited to
the credit of the banking examination fund in accordance with RCW 43.320.110.
Sec.
4. RCW
31.45.030 and 1994 c 92 s 276 are each amended to read as follows:
(1)
Except as provided in RCW 31.45.020, no check casher or seller may engage in
business without first obtaining a license from the director in accordance with
this chapter. A license is required for each location where a licensee
engages in the business of cashing or selling checks or drafts.
(2)
Each application for a license shall be in writing in a form prescribed by the
director 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
director 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 director. Such fees collected shall be
deposited to the credit of the banking examination fund in accordance with RCW
43.320.110.
(5)(a)
Before granting a license to sell checks, drafts, or money orders under this
chapter, the director shall require that the licensee file with the director a
surety bond running to the state of Washington, which bond shall be issued by a
surety insurer which meets the requirements of chapter 48.28 RCW, and be in a
format acceptable to the director. The director shall adopt rules to determine
the penal sum of the bond that shall be filed by each licensee. The bond shall
be conditioned upon the licensee paying all persons who purchase checks,
drafts, or money orders from the licensee the face value of any check, draft,
or money order which is dishonored by the drawee bank, savings bank, or savings
and loan association due to insufficient funds or by reason of the account
having been closed. The bond shall only be liable for the face value of the
dishonored check, draft, or money order, and shall not be liable for any
interest or consequential damages.
(b)
Before granting a small loan endorsement under this chapter, the director shall
require that the licensee file with the director a surety bond, in a format
acceptable to the director, issued by a surety insurer that meets the
requirements of chapter 48.28 RCW. The director shall adopt rules to determine
the penal sum of the bond that shall be filed by each licensee. A licensee who
wishes to engage in both check selling and making small loans may combine the
penal sums of the bonding requirements and file one bond in a form acceptable
to the director. The bond shall run to the state of Washington as obligee, and
shall run to the benefit of the state and any person or persons who suffer loss
by reason of the licensee's violation of this chapter or any rules adopted
under this chapter. The bond shall only be liable for damages suffered by
borrowers as a result of the licensee's violation of this chapter or rules
adopted under this chapter, and shall not be liable for any interest or
consequential damages.
(c)
The bond shall be continuous and may be canceled by the surety upon the surety
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. 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 upon the bond 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 bond 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 the 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
bond.
(d)
Any person who is a purchaser of a check, draft, or money order from the
licensee having a claim against the licensee for the dishonor of any check,
draft, or money order by the drawee bank, savings bank, or savings and loan
association due to insufficient funds or by reason of the account having been
closed, or who obtained a small loan from the licensee and was damaged by
the licensee's violation of this chapter or rules adopted under this chapter,
may bring suit upon such bond or deposit in the superior court of the county in
which the check, draft, or money order 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 such action must be brought not
later than one year after the dishonor of the check, draft, or money order on
which the claim is based. In the event valid 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.
(((b)))
(e) In lieu of the surety bond required by this section, the applicant for
a check seller license may file with the director a deposit consisting of
cash or other security acceptable to the director in an amount equal to the
penal sum of the required bond. ((The director may adopt rules necessary
for the proper administration of the security. 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.))
In lieu of the surety bond required by this section, the applicant for a small
loan endorsement may file with the director a deposit consisting of cash or
other security acceptable to the director in an amount equal to the penal sum
of the required bond, or may demonstrate to the director net worth in excess of
three times the amount of the penal sum of the required bond.
The
director may adopt rules necessary for the proper administration of the
security or to establish reporting requirements to ensure that the net worth
requirements continue to be met. A deposit given instead of the bond required
by this section is not an asset of the licensee for the purpose of complying
with the liquid asset provisions of this chapter. A deposit given instead of
the bond required by this section is a fund held in trust for the benefit of eligible
claimants under this section and is not an asset of the estate of any licensee
that seeks protection voluntarily or involuntarily under the bankruptcy laws of
the United States.
(((c)))
(f) Such security may be sold by the director 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 director. 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 director additional security sufficient to
meet the amount required by the director. 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.
Sec.
5. RCW
31.45.040 and 1994 c 92 s 277 are each amended to read as follows:
(1)
The director shall conduct an investigation of every applicant to determine the
financial responsibility, experience, character, and general fitness of the
applicant. The director shall issue the applicant a license to engage in the
business of cashing or selling checks, or both, or a small loan endorsement,
if the director 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 or making small loans in an
honest, fair, and efficient manner with the confidence and trust of the
community; and
(b)
The applicant has the required bonds, or has provided an acceptable
alternative form of financial security.
(2)
The director may refuse to issue a license or small loan endorsement 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 or small loan endorsement may be issued to an applicant whose
license to conduct business under this chapter had been revoked by the director
within the twelve-month period preceding the application.
(4) A
license or small loan endorsement 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 or small loan endorsement issued in accordance with this chapter
remains in force and effect ((through the remainder of the calendar year
following its date of issuance)) for a period of five years from the
date it is issued unless earlier surrendered, suspended, or revoked. However,
the initial small loan endorsement is effective until the next expiration date
of the underlying license, unless earlier surrendered, suspended, or revoked.
(6)
The director's investigation and fees required under this chapter shall
differentiate between check cashing and check selling ((activities)) and
making small loans, and take into consideration the level of risk and
potential harm to the public related to each such activity.
Sec.
6. RCW
31.45.050 and 1994 c 92 s 278 are each amended to read as follows:
(1) A
license or small loan endorsement may be renewed upon the filing of an
application containing such information as the director may require and by the
payment of a fee in an amount determined by the director as necessary to cover
the costs of supervision. Such fees collected shall be deposited to the credit
of the banking examination fund in accordance with RCW 43.320.110. The
director 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 director no less than thirty
days before the proposed establishing, closing, or moving of a place of
business.
Sec.
7. RCW
31.45.070 and 1994 c 92 s 280 are each amended to read as follows:
(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 director)) the licensee:
(a)
Is conducting the activities of pawnbroker as defined in RCW 19.60.010;
(b)
Is a properly licensed consumer loan company;
(c)
Is conducting other lending activity permitted in the state of Washington; or
(d)
Has a small loan endorsement.
(2) Except
as otherwise permitted in this chapter, no licensee may at any time cash or
advance any moneys on a postdated 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) Except
as otherwise permitted in this chapter, 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.
Sec.
8. RCW
42.17.313 and 1991 c 355 s 22 are each amended to read as follows:
Information
in an application for licensing or a small loan endorsement under ((RCW
31.45.030)) chapter 31.45 RCW regarding the personal residential
address, telephone number of the applicant, or financial statement is exempt
from disclosure under this chapter.
