BILL REQ. #:  H-2324.2 

READ FIRST TIME 03/04/05.   

     AN ACT Relating to small loans; amending RCW 31.45.060, 31.45.073, 31.45.090, and 31.45.100; and adding a new section to chapter 31.45 RCW.

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

Sec. 1   RCW 31.45.060 and 2003 c 86 s 6 are each amended to read as follows:
     (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 director may require in rule to fulfill the purposes of this chapter and shall provide the director with any data required in rule by the department for monitoring the business of check cashing and selling in Washington state and a licensee's participation in furthering financial literacy through the public- private partnership authorized in RCW 28A.300.450. Every licensee shall preserve such books, accounts, and records as required in rule by the director for at least two years from the completion of the transaction. Records may be maintained on an 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 under this chapter.
     (3) A check, draft, or money order sold by a licensee shall be drawn on an account of a licensee maintained in a federally insured financial institution authorized to do business in the state of Washington.

Sec. 2   RCW 31.45.073 and 2003 c 86 s 8 are each amended 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. A licensee may have more than one endorsement.
     (2) The termination date of a small loan may not exceed the origination date of that same small loan by more than forty-five days, including weekends and holidays, unless the term of the loan is extended by agreement of both the borrower and the licensee and no additional fee or interest is charged. The maximum principal amount of any small loan, or the outstanding principal balances of all small loans made by a licensee to a single borrower at any one time, may not exceed seven hundred dollars. Each licensee shall conspicuously disclose in writing to the borrower in the loan application that if the origination date of the small loan is within ten days of the borrower's next payday, the borrower has the option of skipping a payday and having the loan repaid out of a subsequent paycheck within forty-five days at no additional fee or interest.
     (3) 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 first five hundred dollars of principal. If the principal exceeds five hundred dollars, a licensee may charge interest or fees not to exceed in the aggregate ten percent of that portion of the principal in excess of five hundred dollars. If a licensee makes more than one loan to a single borrower, and the aggregated principal of all loans made to that borrower exceeds five hundred dollars at any one time, the licensee may charge interest or fees not to exceed in the aggregate ten percent on that portion of the aggregated principal of all loans at any one time that is in excess of five hundred dollars. The director may determine by rule which fees, if any, are not subject to the interest or fee limitations described in this section. It is a violation of this chapter for any licensee to knowingly loan to a single borrower at any one time, in a single loan or in the aggregate, more than the maximum principal amount described in this section.
     (4) In connection with making a small loan, a licensee may advance moneys on the security of a postdated check. The licensee may not accept any other property, title to property, or other evidence of ownership of property as collateral for a small loan. The licensee may accept only one postdated check per loan as security for the loan. A licensee may permit a borrower to redeem a postdated check with a payment of cash or the equivalent of cash. The licensee may disburse the proceeds of a small loan in cash, in the form of a check, or in the form of the electronic equivalent of cash or a check.
     (5) 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.

Sec. 3   RCW 31.45.090 and 2003 c 86 s 15 are each amended to read as follows:
     (1) Each licensee shall submit to the director, in a form approved by the director, a report containing financial statements as defined by rule covering the calendar year or, if the licensee has an 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 director may require by rule. Any information provided by a licensee in an annual report that constitutes a trade secret under chapter 19.108 RCW is exempt from disclosure under chapter 42.17 RCW, unless aggregated with information supplied by other licensees in such a manner that the licensee's individual information is not identifiable. Any information provided by the licensee that allows identification of the licensee may only be used for purposes reasonably related to the regulation of licensees to ensure compliance with this chapter.
     (2) A licensee whose license has been suspended or revoked shall submit to the director, 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 director shall adopt rules specifying the form and content of such audit reports and may require by rule additional reporting as is necessary for the director to ensure compliance with this chapter.

Sec. 4   RCW 31.45.100 and 2003 c 86 s 16 are each amended to read as follows:
     (1)(a)(i) The director or the director's designee may at any time examine and investigate the business and examine the books, accounts, records, and files, or other information, wherever located, of any licensee or person who the director has reason to believe is engaging in the business governed by this chapter.
     (ii) In conducting the examination of the business, the director shall investigate and assess the record of performance of the business in meeting the credit needs of the entire community in which the business is located, including the needs of low- and moderate-income neighborhoods. However, the director shall not investigate or assess the record of performance of businesses that do not extend credit.
     (b) For these purposes, the director or the director's designee may require the attendance of and examine under oath all persons whose testimony may be required about the business or the subject matter of the investigation. The director or the director's designee may require the production of original books, accounts, records, files, or other information, or may make copies of such original books, accounts, records, files, or other information. The director or the director's designee may issue a subpoena or subpoena duces tecum requiring attendance and testimony, or the production of the books, accounts, records, files, or other information.
     (c) The director shall collect from the licensee the actual cost of the examination or investigation.
     (2) In making an investigation required under subsection (1) of this section, the director shall consider, independent of any federal determination, the following factors in assessing the business's record of performance:
     (a) Activities conducted by the business to ascertain credit needs of its community, including the extent of the business's efforts to communicate with members of its community regarding the credit services being provided by the business;
     (b) The extent of the business's marketing and special credit-related programs to make members of the community aware of the credit services offered by the institution;
     (c) The extent of participation by the institution's board of directors or board of trustees in formulating the business's policies and reviewing its performance with respect to the purposes of the community reinvestment act of 1977;
     (d) Any practices intended to discourage applications for types of credit set forth in the business's community reinvestment act statements;
     (e) The geographic distribution of the business's credit extensions, credit applications, and credit denials;
     (f) Evidence of prohibited discriminatory or other illegal credit practices;
     (g) The business's record of opening and closing offices and providing services at offices;
     (h) The business's participation, including investments, in local community development projects;
     (i) The business's ability to meet various community credit needs based on its financial condition, size, legal impediments, local economic condition, and other factors; and
     (j) Other factors that, in the judgment of the director, reasonably bear upon the extent to which a business is helping to meet the credit needs of its entire community.
     (3) The director shall include as part of the examination report, a summary of the results of the assessment required under subsection (1) of this section and shall assign to each business a numerical community reinvestment rating based on a one through five scoring system. Such numerical scores shall represent performance assessments as follows:
     (a) Excellent performance: 1
     (b) Good performance: 2
     (c) Satisfactory performance: 3
     (d) Inadequate performance: 4
     (e) Poor performance: 5

NEW SECTION.  Sec. 5   A new section is added to chapter 31.45 RCW to read as follows:
     By January 1, 2006, the director shall adopt all rules necessary to implement RCW 31.45.100.