BILL REQ. #: S-1243.2
| State of Washington | 63rd Legislature | 2013 Regular Session |
READ FIRST TIME 02/11/13.
AN ACT Relating to small consumer installment loans; adding a new chapter to Title 31 RCW; creating a new section; and prescribing penalties.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
NEW SECTION. Sec. 1
(1) "Authenticate" means the same as defined in RCW 62A.9A-102.
(2) "Borrower" means a natural person who receives a small consumer
installment loan.
(3) "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.
(4) "Director" means the director of financial institutions.
(5) "Gross monthly income" means a borrower's or potential
borrower's gross monthly income as demonstrated by documentation of
income, including, but not limited to, a pay stub, documentation
reflecting receipt of public benefits, tax returns, bank statements, or
other documentation showing the source of income. A lender shall
require a borrower or potential borrower to provide a pay stub or other
evidence of income at least once each twelve-month period. This
evidence must not be over forty-five days old when presented.
(6) "License" means a license issued by the director under this
chapter.
(7) "Licensee" means a single small consumer installment lender
licensed by the director to engage in business in accordance with this
chapter. "Licensee" also means a small consumer installment lender,
whether located within or outside of this state, who fails to obtain a
license required by this chapter.
(8) "Loaned amount" means the initial principal amount of the loan
exclusive of any interest, fees, penalties, or charges authorized by
this chapter.
(9) "Person" means an individual, partnership, association, limited
liability company, limited liability partnership, trust, corporation,
and any other legal entity.
(10) "Record" means the same as defined in RCW 62A.1-201.
(11) "Scheduled payment" means any single payment disclosed in a
payment schedule on a federal truth in lending act disclosure.
"Scheduled payment" does not mean an actual payment on a date different
than a payment on the loan payment schedule, or the payment in full of
a loan before the final payment date on the loan payment schedule.
(12) "Small consumer installment loan" means a loan made to a
natural person in a single advance with terms as provided for in this
chapter.
(13) "Truth in lending act" means the truth in lending act, 15
U.S.C. Sec. 1601 and Regulation Z, 12 C.F.R. Part 1026.
NEW SECTION. Sec. 2
(2) This chapter does not apply to the following:
(a) Any person doing business under, and as permitted by, any law
of this state or of the United States relating to banks, savings banks,
trust companies, savings and loan or building and loan associations, or
credit unions; or
(b) Loans made under chapters 19.60, 31.04, and 31.45 RCW.
NEW SECTION. Sec. 3
NEW SECTION. Sec. 4
(a) The legal name, residence, and business address of the
applicant and, if the applicant is a partnership, association, limited
liability company, limited liability partnership, or corporation, of
every member, officer, principal, or director thereof;
(b) The location where the initial registered office of the
applicant will be located;
(c) The complete address of any other locations at which the
applicant currently proposes to engage in making small consumer
installment loans; and
(d) Such other data, financial statements, and pertinent
information as the director may require with respect to the applicant,
its members, principals, or officers.
(2) As part of or in connection with an application for any license
under this section, or periodically upon license renewal, each officer,
director, and owner applicant shall furnish information concerning his
or her identity, including fingerprints for submission to the
Washington state patrol or the federal bureau of investigation for a
state and national criminal history background check, personal history,
experience, business record, purposes, and other pertinent facts, as
the director may reasonably require. As part of or in connection with
an application for a license under this chapter, or periodically upon
license renewal, the director is authorized to receive criminal history
record information that includes nonconviction data as defined in RCW
10.97.030. The director may only disseminate nonconviction data
obtained under this section to criminal justice agencies. This section
does not apply to financial institutions regulated under chapters 31.12
and 31.13 RCW and Titles 30, 32, and 33 RCW.
(3) Any information in the application regarding the personal
residential address or telephone number of the applicant, any financial
information about the applicant and entities owned or controlled by the
applicant, and any trade secret as defined in RCW 19.108.010 including
any financial statement that is a trade secret, is exempt from the
public records disclosure requirements of chapter 42.56 RCW.
(4) The application must be filed together with an application fee
established by rule by the director. The fees collected must be
deposited to the credit of the financial services regulation fund in
accordance with RCW 43.320.110.
(5) Each applicant shall file and maintain a surety bond, approved
by the director, executed by the applicant as obligor and by a surety
company authorized to do a surety business in this state as surety,
whose liability as a surety does not exceed, in the aggregate, the
penal sum of the bond. The penal sum of the bond must be a minimum of
thirty thousand dollars and a maximum of two hundred fifty thousand
dollars based on the annual dollar amount of loans originated. The
bond must run to the state of Washington as obligee for the use and
benefit of the state and of any person or persons who may have a cause
of action against the obligor under this chapter. The bond must be
conditioned that the obligor as licensee will faithfully conform to and
abide by this chapter and all the rules adopted under this chapter.
The bond will pay to the state and any person or persons having a cause
of action against the obligor all moneys that may become due and owing
to the state and those persons under and by virtue of this chapter.
NEW SECTION. Sec. 5
(a) The applicant has satisfied the licensing requirements of this
chapter;
(b) The applicant is financially responsible and appears to be able
to conduct the business of making small consumer installment loans in
an honest, fair, and efficient manner with the confidence and trust of
the community and in accordance with this chapter; and
(c) The applicant has the required bond.
(2) The director may refuse to issue a license if he or she finds
that the applicant, or any person who is a director, officer, partner,
agent, sole proprietor, owner, or controlling person of the applicant,
has been convicted of a felony in any jurisdiction within seven years
of filing the present application or is associating or consorting with
any person who has been convicted of a felony in any jurisdiction
within seven years of filing the present application.
(3) A license may not be issued to an applicant:
(a) Whose license to conduct business under this chapter, or any
similar statute in any other jurisdiction, has been suspended or
revoked within five years of the filing of the present application;
(b) Who has been banned from the industry by an administrative
order issued by the director or the director's designee, for the period
specified in the administrative order; or
(c) Who has advertised or made internet loans in violation of this
chapter.
(4) A license issued in accordance with this chapter remains in
force and effect until surrendered, suspended, or revoked, or until the
license expires as a result of nonpayment of the annual assessment fee
as defined in this chapter.
NEW SECTION. Sec. 6
NEW SECTION. Sec. 7
(1) The interest charged on the loaned amount is less than or equal
to thirty-six percent per annum, exclusive of fees, penalties, or
charges authorized by this chapter;
(2) A maximum loaned amount of one thousand five hundred dollars;
(3) The loaned amount is fully repayable in substantially equal and
consecutive installments according to a payment schedule agreed to by
the parties with not less than fourteen days and not more than thirty-five days between each scheduled payment;
(4) A minimum loan term of six months;
(5) A maximum loan term of eighteen months;
(6) The loan amortizes;
(7) The borrower's repayment obligations are not secured by a lien
on any real or personal property; and
(8) The loan is made primarily for personal, family, or household
purposes.
NEW SECTION. Sec. 8
(1) May charge, contract for, and receive interest of no more than
thirty-six percent per annum on the outstanding unpaid principal
balance of the loaned amount, exclusive of fees, penalties, or charges
authorized by this chapter;
(2) May charge a loan origination fee not to exceed fifteen percent
of the loaned amount, which charge is fully earned at the time the loan
is made and is not subject to refund, except for the full refund of all
charges after rescission as provided in section 12 of this act;
(3) May charge a monthly maintenance fee not to exceed seven
dollars and fifty cents per one hundred dollars of the loaned amount
for each month the loan has an outstanding balance on the first day of
a month, which charge is fully earned on the first day of a month in
which the loan has an outstanding balance and is not subject to refund;
(4) Is prohibited from making a small consumer installment loan to
a borrower if the total of all scheduled payments to be made in any
month exceeds fifteen percent of the borrower's gross monthly income;
(5) May, in the event that any scheduled payment is delinquent ten
days or more:
(a) Charge and collect a penalty of not more than ten percent of
the delinquent payment or payments; or
(b) Declare the entire loan due and payable and proceed to collect
the loan in accordance with this chapter;
(6) May collect from the borrower reasonable attorneys' fees,
actual expenses, and costs incurred in connection with the collection
of any amounts due to a licensee with respect to a small consumer
installment loan;
(7) Is prohibited from charging a prepayment fee. A borrower is
allowed to pay all or part of a loan before the maturity date without
incurring any additional fee;
(8) Is prohibited from requiring a borrower to purchase add-on
products such as credit insurance; and
(9) Is prohibited from charging any other interest, fees,
penalties, or charges, except those provided in subsections (1) through
(3), (5), and (6) of this section.
NEW SECTION. Sec. 9
(1) The name and address of the borrower and the licensee;
(2) The transaction date;
(3) The loaned amount;
(4) A statement of the total amount of finance charges charged,
expressed both as a dollar amount and an annual percentage rate,
calculated in accordance with the truth in lending act;
(5) The installment payment schedule;
(6) The right to rescind the loan on or before the close of
business on the next day of business at the location where the loan was
originated;
(7) A notice to the borrower that delinquency on one scheduled
payment may result in a penalty of not more than ten percent of the
delinquent payment or payments and/or acceleration of the loan; and
(8) A description of the manner and methods by which loan payments
may be made, which include cash, check, automatic clearing house
transactions, debit authorization, or additional method of loan payment
authorized by the director after rule making.
No licensee may condition an extension of credit under a small
consumer installment loan on the borrower's repayment by preauthorized
electronic fund transfers. Payment options including, but not limited
to, automatic clearing house transactions and other electronic fund
transfers may be offered to borrowers as a choice with the method or
methods of payment chosen by the borrower.
NEW SECTION. Sec. 10
(2) 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 fees and charges charged
for the transaction.
NEW SECTION. Sec. 11
NEW SECTION. Sec. 12
NEW SECTION. Sec. 13
(2) Unless invited by the borrower, a licensee may not visit a
borrower's residence or place of employment for the purpose of
collecting a delinquent small consumer installment loan. A licensee
may not impersonate a law enforcement official, or make any statements
which might be construed as indicating an official connection with any
federal, state, county, or city law enforcement agency, or any other
governmental agency, while engaged in collecting a small consumer
installment loan.
(3) A licensee may not communicate with a borrower in such a manner
as to harass, intimidate, abuse, or embarrass a borrower, including but
not limited to communication at an unreasonable hour, with unreasonable
frequency, by threats of force or violence, or by use of offensive
language. A communication is presumed to have been made for the
purposes of harassment if it is initiated by the licensee for the
purposes of collection and:
(a) It is made with a borrower, spouse, or domestic partner in any
form, manner, or place, more than three times in a single week;
(b) It is made with a borrower at his or her place of employment
more than one time in a single week or made to a borrower after the
licensee has been informed that the borrower's employer prohibits these
communications;
(c) It is made with the borrower, spouse, or domestic partner at
his or her place of residence between the hours of 9:00 p.m. and 7:30
a.m.; or
(d) It is made to a party other than the borrower, the borrower's
attorney, the licensee's attorney, or a consumer reporting agency if
otherwise permitted by law except for purposes of acquiring location or
contact information about the borrower.
(4) A licensee is required to maintain a communication log of all
telephone and written communications with a borrower initiated by the
licensee regarding any collection efforts including date, time, and the
nature of each communication.
(5) If a dishonored check is assigned to any third party for
collection, this section applies to the third party for the collection
of the dishonored check.
(6) For the purposes of this section, "communication" includes any
contact with a borrower, initiated by the licensee, in person, by
telephone, or in writing (including e-mails, text messages, and other
electronic writing) regarding the collection of a delinquent small
consumer installment loan, but does not include any of the following:
(a) Communication while a borrower is physically present in the
licensee's place of business;
(b) An unanswered telephone call in which no message (other than a
caller ID) is left, unless the telephone call violates subsection
(3)(c) of this section; and
(c) An initial letter to the borrower that includes disclosures
intended to comply with the federal fair debt collection practices act.
(7) For the purposes of this section:
(a) A communication occurs at the time it is initiated by a
licensee regardless of the time it is received or accessed by the
borrower; and
(b) A call to a number that the licensee reasonably believes is the
borrower's cell phone will not constitute a communication with a
borrower at the borrower's place of employment.
(8) For the purposes of this section, "week" means a series of
seven consecutive days beginning on a Sunday.
NEW SECTION. Sec. 14
(a) The total of all scheduled payments to be made in any month
under all of the small consumer installment loans made by any licensee
to a borrower does not exceed fifteen percent of the borrower's gross
monthly income; and
(b) The unpaid principal balance of any and all small consumer
installment loans to a borrower does not exceed one thousand five
hundred dollars.
(2) The director has broad rule-making authority to adopt and
implement a database system to carry out subsection (1) of this
section. This includes, but is not limited to, taking the steps
necessary to contract a database vendor, and set licensee fees to
operate and administer the database system.
(3) The information in the database described in this section is
exempt from public disclosure under chapter 42.56 RCW.
NEW SECTION. Sec. 15
NEW SECTION. Sec. 16
(a) Fail to make disclosures to loan applicants as required by any
applicable federal law;
(b) 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;
(c) Directly or indirectly engage in any unfair or deceptive
practice toward any person;
(d) Directly or indirectly obtain property by fraud or
misrepresentation;
(e) Make a small consumer installment loan to any person physically
located in Washington through the use of the internet, facsimile,
telephone, kiosk, or other means without first obtaining a license;
(f) Make, in any manner, any false or deceptive statement or
representation with regard to the rates, points, or other financing
terms or conditions for a small consumer installment loan or engage in
bait and switch advertising;
(g) Negligently make any false statement or knowingly and willfully
make any omission of material fact in connection with any reports filed
with the department of financial institutions by a licensee or in
connection with any investigation conducted by the department of
financial institutions;
(h) Advertise any rate of interest without conspicuously disclosing
the annual percentage rate implied by that rate of interest or
otherwise fail to comply with any requirement of the truth in lending
act, or any other applicable state or federal statutes or regulations;
(i) Make small consumer installment loans from any unlicensed
location;
(j) Fail to comply with all applicable state and federal statutes
relating to the activities governed by this chapter; or
(k) Fail to pay any other fee, assessment, or moneys due the
department of financial institutions.
(2) In addition to any other penalties, any transaction in
violation of subsection (1) of this section is uncollectible and
unenforceable.
NEW SECTION. Sec. 17
(2) Nonlicensees are prohibited from advertising or making small
consumer installment loans via the internet.
NEW SECTION. Sec. 18
(2) If a licensee does not pay its annual assessment fee by the
annual assessment fee due date as specified in rule, the director or
the director's designee shall send the licensee a notice of expiration
and assess the licensee a late fee not to exceed fifteen percent of the
annual assessment fee as established in rule by the director. The
licensee's payment of both the annual assessment fee and the late fee
must arrive in the department of financial institutions' offices by
5:00 p.m. on the tenth day after the annual assessment fee due date,
unless the department of financial institutions is not open for
business on that date, in which case the licensee's payment of both the
annual assessment fee and the late fee must arrive in the department of
financial institutions' offices by 5:00 p.m. on the next occurring day
that the department of financial institutions is open for business. If
the payment of both the annual assessment fee and the late fee does not
arrive prior to such time and date, then the expiration of the
licensee's license is effective at 5:00 p.m. on the thirtieth day
after the assessment fee due date. The director or the director's
designee may reinstate the license if, within fifteen days after the
effective date of expiration, the licensee pays the annual assessment
fee and the late fee.
(3) 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.
NEW SECTION. Sec. 19
NEW SECTION. Sec. 20
NEW SECTION. Sec. 21
(a) State that an order is sought under this section;
(b) Adequately specify the documents, records, evidence, or
testimony; and
(c) Include a declaration made under oath that an investigation is
being conducted for a lawfully authorized purpose related to an
investigation within the director's authority and that the subpoenaed
documents, records, evidence, or testimony are reasonably related to an
investigation within the director's authority.
(2) When an application under this section is made to the
satisfaction of the court, the court must issue an order approving the
subpoena. An order under this subsection constitutes authority of law
for the director to subpoena the documents, records, evidence, or
testimony.
(3) The director or authorized assistants may seek approval and a
court may issue an order under this section without prior notice to any
person, including the person to whom the subpoena is directed and the
person who is the subject of an investigation. An application for
court approval is subject to the fee and process set forth in RCW
36.18.012(3).
NEW SECTION. Sec. 22
(2) The director shall adopt rules specifying the form and content
of annual reports and may require additional reporting as is necessary
for the director to ensure compliance with this chapter.
(3) 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 the suspension or revocation, a
closing audit report containing audited financial statements as of the
effective date for the twelve months ending with the effective date.
(4) The director is authorized to enter into agreements or sharing
arrangements regarding licensee reports, examination, or investigation
information with other governmental agencies, the conference of state
bank supervisors, the American association of residential mortgage
regulators, the national association of consumer credit administrators,
or other associations representing governmental agencies as established
by rule, regulation, or order of the director.
NEW SECTION. Sec. 23
NEW SECTION. Sec. 24
(a) Is engaging or has engaged in an unsafe or unsound financial
practice in conducting a business governed by this chapter;
(b) Is violating or has violated this chapter, including violations
of:
(i) Any rules, orders, or subpoenas issued by the director under
any act;
(ii) Any condition imposed in writing by the director in connection
with the granting of any application or other request by the licensee;
or
(iii) Any written agreement made with the director;
(c) Obtains a license by means of fraud, misrepresentation, or
concealment;
(d) Provides false statements or omits material information on an
application;
(e) Knowingly or negligently omits material information during or
in response to an examination or in connection with an investigation by
the director;
(f) Fails to pay a fee or assessment required by the director or
any multistate licensing system prescribed by the director, or fails to
maintain the required bond;
(g) Commits a crime against the laws of any jurisdiction involving
moral turpitude, financial misconduct, or dishonest dealings. For the
purposes of this section, a certified copy of the final holding of any
court, tribunal, agency, or administrative body of competent
jurisdiction is conclusive evidence in any hearing under this chapter;
(h) Knowingly commits or is a party to any material fraud,
misrepresentation, concealment, conspiracy, collusion, trick, scheme,
or device whereby any other person relying upon the word,
representation, or conduct acts to his or her injury or damage;
(i) Wrongly converts any money or its equivalent of any other
person to his or her own use or to the use of his or her principal;
(j) Fails to disclose to the director any material information
within his or her knowledge or fails to produce any document, book, or
record in his or her possession for inspection by the director upon
lawful demand;
(k) Commits any act of fraudulent or dishonest dealing. For the
purposes of this section, a certified copy of the final holding of any
court, tribunal, agency, or administrative body of competent
jurisdiction is conclusive evidence in any hearing under this chapter;
(l) Commits an act or engages in conduct that demonstrates
incompetence or untrustworthiness, or is a source of injury and loss to
the public; or
(m) Violates any applicable state or federal law relating to the
activities governed by this chapter.
(2) The director may issue and serve upon a licensee or applicant,
or any director, officer, sole proprietor, partner, or controlling
person of the licensee or applicant, a statement of charges if the
director has reasonable cause to believe that the licensee or applicant
is about to do acts prohibited in subsection (1) of this section.
(3) The statement of charges must be issued under chapter 34.05
RCW. The director or the director's designee may impose the following
sanctions against any licensee or applicant, or any directors,
officers, sole proprietors, partners, controlling persons, or employees
of a licensee or applicant:
(a) Deny, revoke, suspend, or condition a license;
(b) Order the licensee or person to cease and desist from practices
that violate this chapter;
(c) Impose a fine not to exceed one hundred dollars per day per
violation of this chapter;
(d) Order restitution or refunds to borrowers or other affected
parties for violations of this chapter or take other affirmative action
as necessary to comply with this chapter; and
(e) Remove from office or ban from participation in the affairs of
any licensee any director, officer, sole proprietor, partner,
controlling person, or employee of a licensee.
(4) The proceedings to impose the sanctions described in subsection
(3) of this section, including any hearing or appeal of the statement
of charges, are governed by chapter 34.05 RCW.
(5) Unless the licensee or person personally appears at the hearing
or is represented by a duly authorized representative, the licensee is
deemed to have consented to the statement of charges and the sanctions
imposed in the statement of charges.
(6) Except to the extent prohibited by another statute, the
director may engage in informal settlement of complaints or enforcement
actions including, but not limited to, payment to the department of
financial institutions for purposes of financial literacy and education
programs authorized under RCW 43.320.150.
NEW SECTION. Sec. 25
NEW SECTION. Sec. 26
NEW SECTION. Sec. 27
NEW SECTION. Sec. 28
NEW SECTION. Sec. 29
NEW SECTION. Sec. 30
NEW SECTION. Sec. 31
(1) The number of branches and total locations;
(2) The number of loans made during 2014;
(3) Loan volume;
(4) Average loan amount;
(5) Total fees charged, in total and by category of fee or other
charge;
(6) Average payment per month, in total and by category of fee or
other charge;
(7) Average income of borrower;
(8) The number of borrowers who are in the military;
(9) Borrower frequency;
(10) The number of unique customers;
(11) Average length of loan repayment;
(12) The number of borrowers taking out the maximum loan amount;
(13) The number of borrowers who went into default;
(14) Average length of time a borrower has a loan before a borrower
goes into default;
(15) Any legislative recommendations by the director; and
(16) Any other information that the director believes is relevant
or useful.
NEW SECTION. Sec. 32
NEW SECTION. Sec. 33 If any portion of this act is vetoed by the
governor, this entire act is null and void.
NEW SECTION. Sec. 34 Sections 1 through 32 of this act
constitute a new chapter in Title