BILL REQ. #: S-1539.1
State of Washington | 62nd Legislature | 2011 Regular Session |
READ FIRST TIME 02/17/11.
AN ACT Relating to small loan lead generation; amending RCW 31.45.010, 31.45.073, 31.45.088, 31.45.105, and 31.45.180; adding a new section to chapter 31.45 RCW; and prescribing penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
Sec. 1 RCW 31.45.010 and 2009 c 510 s 2 are each amended to read
as follows:
Unless the context clearly requires otherwise, the definitions in
this section apply throughout this chapter.
(1) "Applicant" means a person that files an application for a
license under this chapter, including the applicant's sole proprietor,
owners, directors, officers, partners, members, and controlling
persons.
(2) "Borrower" means a natural person who receives a small loan.
(3) "Business day" means any day that the licensee is open for
business in at least one physical location.
(4) "Check" means the same as defined in RCW 62A.3-104(f) and, for
purposes of conducting the business of making small loans, includes
other electronic forms of payment, including stored value cards,
internet transfers, and automated clearing house transactions.
(5) "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.
(6) "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.
(7) "Collateral" means the same as defined in chapter 62A.9A RCW.
(8) "Controlling person" means a person owning or controlling ten
percent or more of the total outstanding shares of the applicant or
licensee, if the applicant or licensee is a corporation, and a member
who owns ten percent or more of a limited liability company or limited
liability partnership.
(9) "Default" means the borrower's failure to repay the small loan
in compliance with the terms contained in the small loan agreement or
note or failure to pay any installment plan payment on an installment
plan within ten days after the date upon which the installment was
scheduled to be paid.
(10) "Director" means the director of financial institutions.
(11) "Financial institution" means a commercial bank, savings bank,
savings and loan association, or credit union.
(12) "Installment plan" is a contract between a licensee and
borrower that provides that the loaned amount will be repaid in
substantially equal installments scheduled on or after a borrower's pay
dates and no less than fourteen days apart.
(13) "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.
(14) "Loaned amount" means the outstanding principal balance and
any fees authorized under RCW 31.45.073 that have not been paid by the
borrower.
(15) "Origination date" means the date upon which the borrower and
the licensee initiate a small loan transaction.
(16) "Outstanding principal balance" of a small loan means any of
the principal amount that has not been paid by the borrower.
(17) "Paid" means that moment in time when the licensee deposits
the borrower's check or accepts cash for the full amount owing on a
valid small loan. If the borrower's check is returned by the
borrower's bank for insufficient funds, the licensee shall not consider
the loan paid.
(18) "Person" means an individual, partnership, association,
limited liability company, limited liability partnership, trust,
corporation, and any other legal entity.
(19) "Principal" means the loan proceeds advanced for the benefit
of the borrower in a small loan, excluding any fee or interest charge.
(20) "Rescission" means annulling the loan contract and, with
respect to the small loan contract, returning the borrower and the
licensee to their financial condition prior to the origination date of
the loan.
(21) "Small loan" means a loan of up to the maximum amount and for
a period of time up to the maximum term specified in RCW 31.45.073.
(22) "Small loan lead generation" means directly or indirectly
collecting personal or financial information from a Washington borrower
or potential borrower and selling or distributing that information to
a licensee for the purpose of making a small loan, prior to that
licensee receiving an application for a small loan from that borrower
or potential borrower. "Small loan lead generation" does not require
the making of a small loan. "Small loan lead generation" does not
include directly or indirectly collecting personal or financial
information from a Washington borrower or potential borrower and
distributing or selling that information to a licensee if (a) the
licensee has received an application for a small loan from the borrower
or potential borrower before the information is sold or distributed to
that licensee and (b) the information is provided for use by the
licensee in determining whether to make a loan to the borrower or
potential borrower.
(23) "Termination date" means the date upon which payment for the
small loan transaction is due or paid to the licensee, whichever occurs
first.
(((23))) (24) "Total of payments" means the principal amount of the
small loan plus all fees or interest charged on the loan.
(((24))) (25) "Trade secret" means the same as defined in RCW
19.108.010.
Sec. 2 RCW 31.45.073 and 2009 c 510 s 3 are each amended to read
as follows:
(1) No ((licensee)) person may engage in the business of making
small loans without first obtaining the license required in RCW
31.45.030 and 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) A licensee must set the due date of a small loan on or after
the date of the borrower's next pay date. If a borrower's next pay
date is within seven days of taking out the loan, a licensee must set
the due date of a small loan on or after the borrower's second pay date
after the date the small loan is made. 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 all licensees to a single borrower
at any one time, may not exceed seven hundred dollars or thirty percent
of the gross monthly income of the borrower, whichever is lower. A
licensee is prohibited from making a small loan to a borrower who is in
default on another small loan until after that loan is paid in full or
two years have passed from the origination date of the small loan,
whichever occurs first.
(3) A licensee is prohibited from making a small loan to a borrower
in an installment plan with any licensee until after the plan is paid
in full or two years have passed from the origination date of the
installment plan, whichever occurs first.
(4) A borrower is prohibited from receiving more than eight small
loans from all licensees in any twelve-month period. A licensee is
prohibited from making a small loan to a borrower if making that small
loan would result in a borrower receiving more than eight small loans
from all licensees in any twelve-month period.
(5) 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.
(6) 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.
(7) 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:
Any person in the business of small loan lead generation must be
licensed under this chapter. The director may establish a different
yearly assessment for small loan lead generators and may waive certain
licensing requirements for small loan lead generators by rule as
necessary to implement this chapter and to protect consumers.
Sec. 4 RCW 31.45.088 and 2003 c 86 s 14 are each amended to read
as follows:
(1) When advertising the availability of small loans, if a licensee
includes in an advertisement the fee or interest rate charged by the
licensee for a small loan, then the licensee shall also disclose the
annual percentage rate resulting from this fee or interest rate.
(2) When advertising the availability of small loans, compliance
with all applicable state and federal laws and regulations, including
the truth in lending act, 15 U.S.C. Sec. 1601 and Regulation Z, 12
C.F.R. Sec. (([Part])) Part 226 constitutes compliance with subsection
(1) of this section.
(3) When making a small loan, each licensee shall disclose to the
borrower the terms of the small loan, including the principal amount of
the small loan, the total of payments of the small loan, the fee or
interest rate charged by the licensee on the small loan, and the annual
percentage rate resulting from this fee or interest rate.
(4) When making a small loan, disclosure of the terms of the small
loan in compliance with all applicable state and federal laws and
regulations, including the truth in lending act, 15 U.S.C. Sec. 1601
and Regulation Z, 12 C.F.R. Sec. (([Part])) Part 226 constitutes
compliance with subsection (3) of this section.
(5) When engaging in small loan lead generation, a person required
to be licensed under this chapter must conspicuously disclose that:
(a) They are not the entity that will be providing a small loan to
the consumer;
(b) The consumer's personal and financial information will be sold
or provided to one or more licensees with a small loan endorsement; and
(c) The small loan lead generator is licensed by the state of
Washington.
(6) When advertising the availability of small loans, a person
required to be licensed under this chapter must disclose their
Washington license number in the advertisement.
Sec. 5 RCW 31.45.105 and 2007 c 81 s 1 are each amended to read
as follows:
(1) It is a violation of this chapter for any person subject to
this chapter to:
(a) Directly or indirectly employ any scheme, device, or artifice
to defraud or mislead any borrower, to defraud or mislead any lender,
or to defraud or mislead any person;
(b) Directly or indirectly engage in any unfair or deceptive
practice toward any person;
(c) Directly or indirectly obtain property by fraud or
misrepresentation; ((and))
(d) Make a small loan to any person physically located in
Washington through use of the internet, facsimile, telephone, kiosk, or
other means without first obtaining a small loan endorsement;
(e) Engage in small loan lead generation through use of the
internet, facsimile, telephone, kiosk, or other means without first
obtaining a license and small loan endorsement under this chapter; or
(f) Provide small loan lead generation for any person required to
obtain a license or small loan endorsement under this chapter who has
not obtained such a license or small loan endorsement, or any person
whose license or small loan endorsement is expired, suspended, or
revoked.
(2) In addition to any other penalties, any transaction in
violation of subsection (1) of this section is uncollectible and
unenforceable.
Sec. 6 RCW 31.45.180 and 1994 c 92 s 290 are each amended to read
as follows:
(1) Any person who violates or participates in the violation of any
provision of the rules or orders of the director or any provision of
this chapter, except RCW 31.45.105(1) (e) and (f), is guilty of a
misdemeanor.
(2) Any person who violates or participates in the violation of RCW
31.45.105(1) (e) and (f) is guilty of a class B felony.