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.
