AN
ACT Relating to creating the financial services regulation fund; amending RCW
43.320.080, 43.320.110, 18.44.121, 19.146.205, 19.146.228, 19.146.280,
31.35.050, 31.35.080, 31.40.070, 31.40.110, 31.45.030, 31.45.050, and
31.45.077; creating a new section; repealing RCW 43.320.120 and 43.320.130;
providing an effective date; and declaring an emergency.
BE IT
ENACTED BY THE LEGISLATURE OF THE STATE OF WASHINGTON:
Sec.
1. RCW
43.320.080 and 1993 c 472 s 22 are each amended to read as follows:
The
director of financial institutions shall maintain an office at the state
capitol, but may with the consent of the governor also maintain branch offices
at other convenient business centers in this state. The director shall keep
books of record of all moneys received or disbursed by the director into or
from the ((banking examination fund, the credit union examination fund, the
securities)) financial services regulation fund, and any other
accounts maintained by the department of financial institutions.
Sec.
2. RCW
43.320.110 and 1995 c 238 s 9 are each amended to read as follows:
There
is created a local fund known as the "((banking examination)) financial
services regulation fund" which shall consist of all moneys received
by the divisions of the department of financial institutions ((from
banks, savings banks, foreign bank branches, savings and loan associations,
consumer loan companies, check cashers and sellers, trust companies and
departments, and escrow agents)), except for the division of securities
which shall deposit thirteen percent of all moneys received, and which
shall be used for the purchase of supplies and necessary equipment ((and));
the payment of salaries, wages, and utilities((,)); the
establishment of reserves; and other incidental costs required for the
proper regulation of ((these companies)) individuals and entities
subject to regulation by the department. The state treasurer shall be the
custodian of the fund. Disbursements from the fund shall be on authorization
of the director of financial institutions or the director's designee. In order
to maintain an effective expenditure and revenue control, the fund shall be subject
in all respects to chapter 43.88 RCW, but no appropriation is required to
permit expenditures and payment of obligations from the fund.
Sec.
3. RCW
18.44.121 and 1999 c 30 s 10 are each amended to read as follows:
The
director shall charge and collect the following fees as established by rule by
the director:
(1)
A fee for filing an original or a renewal application for an escrow agent
license, a fee for each application for an additional licensed location, a fee
for an application for a change of address for an escrow agent, annual fees for
the first office or location and for each additional office or location, and
under RCW 43.135.055 the director shall set the annual fee for an escrow agent
license up to five hundred sixty-five dollars in fiscal year 2000.
(2)
A fee for filing an original or a renewal application for an escrow officer
license, a fee for an application for a change of address for each escrow
officer license being so changed, a fee to activate an inactive escrow officer
license or transfer an escrow officer license, and under RCW 43.135.055 the
director shall set the annual fee for an escrow officer license up to two
hundred thirty-five dollars in fiscal year 2000.
(3)
A fee for filing an application for a duplicate of an escrow agent license or
of an escrow officer license lost, stolen, destroyed, or for replacement.
(4)
A fee for providing license examinations.
(5)
An hourly audit fee. In setting this fee, the director shall ensure that every
examination and audit, or any part of the examination or audit, of any person
licensed or subject to licensing in this state requiring travel and services
outside this state by the director or by employees designated by the director,
shall be at the expense of the person examined or audited at the hourly rate
established by the director, plus the per diem compensation and actual travel
expenses incurred by the director or his or her employees conducting the
examination or audit. When making any examination or audit under this chapter,
the director may retain attorneys, appraisers, independent certified public
accountants, or other professionals and specialists as examiners or auditors,
the cost of which shall be borne by the person who is the subject of the
examination or audit.
In
establishing these fees, the director shall set the fees at a sufficient level
to defray the costs of administering this chapter.
All fees received by the director under this chapter shall be paid
into the state treasury to the credit of the ((banking examination)) financial
services regulation fund.
Sec.
4. RCW
19.146.205 and 1997 c 106 s 9 are each amended to read as follows:
(1)
Application for a mortgage broker license under this chapter shall be in
writing and in the form prescribed by the director. The application shall
contain at least the following information:
(a)
The name, address, date of birth, and social security number of the applicant,
and any other names, dates of birth, or social security numbers previously used
by the applicant, unless waived by the director;
(b)
If the applicant is a partnership or association, the name, address, date of
birth, and social security number of each general partner or principal of the
association, and any other names, dates of birth, or social security numbers
previously used by the members, unless waived by the director;
(c)
If the applicant is a corporation, the name, address, date of birth, and social
security number of each officer, director, registered agent, and each principal
stockholder, and any other names, dates of birth, or social security numbers
previously used by the officers, directors, registered agents, and principal
stockholders unless waived by the director;
(d)
The street address, county, and municipality where the principal business
office is to be located;
(e)
The name, address, date of birth, and social security number of the applicant's
designated broker, and any other names, dates of birth, or social security
numbers previously used by the designated broker and a complete set of the
designated broker's fingerprints taken by an authorized law enforcement
officer; and
(f)
Such other information regarding the applicant's or designated broker's
background, financial responsibility, experience, character, and general
fitness as the director may require by rule.
(2)
The director may exchange fingerprint data with the federal bureau of
investigation.
(3)
At the time of filing an application for a license under this chapter, each
applicant shall pay to the director the appropriate application fee in an
amount determined by rule of the director in accordance with RCW 43.24.086 to
cover, but not exceed, the cost of processing and reviewing the application.
The director shall deposit the moneys in the ((banking examination)) financial
services regulation fund, unless the consumer services account is created
as a dedicated, nonappropriated account, in which case the director shall
deposit the moneys in the consumer services account.
(4)(a)
Each applicant for a mortgage broker's license shall file and maintain a surety
bond, in an amount of not greater than sixty thousand dollars nor less than
twenty thousand dollars which the director deems adequate to protect the public
interest, executed by the applicant as obligor and by a surety company
authorized to do a surety business in this state as surety. The bonding
requirement as established by the director may take the form of a uniform bond
amount for all licensees or the director may establish by rule a schedule
establishing a range of bond amounts which shall vary according to the annual
average number of loan originators or independent contractors of a licensee. The
bond shall run to the state of Washington as obligee, and shall run first to
the benefit of the borrower and then to the benefit of the state and any person
or persons who suffer loss by reason of the applicant's or its loan
originator's violation of any provision of this chapter or rules adopted under
this chapter. The bond shall be conditioned that the obligor as licensee will
faithfully conform to and abide by this chapter and all rules adopted under
this chapter, and shall reimburse all persons who suffer loss by reason of a
violation of this chapter or rules adopted under this chapter. Borrowers shall
be given priority over the state and other persons. The state and other third
parties shall be allowed to receive distribution pursuant to a valid claim
against the remainder of the bond. In the case of claims made by any person or
entity who is not a borrower, no final judgment may be entered prior to one
hundred eighty days following the date the claim is filed. The bond shall be
continuous and may be canceled by the surety upon the surety giving written
notice to the director of its intent to cancel the bond. The cancellation
shall be 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
penalties imposed on the licensee, including, but not limited to, any increased
damages or attorneys' fees, or both, awarded under RCW 19.86.090. The
applicant may obtain the bond directly from the surety or through a group
bonding arrangement involving a professional organization comprised of mortgage
brokers if the arrangement provides at least as much coverage as is required
under this subsection.
(b)
In lieu of a surety bond, the applicant may, upon approval by the director,
file with the director a certificate of deposit, an irrevocable letter of
credit, or such other instrument as approved by the director by rule, drawn in
favor of the director for an amount equal to the required bond.
(c)
In lieu of the surety bond or compliance with (b) of this subsection, an applicant
may obtain insurance or coverage from an association comprised of mortgage
brokers that is organized as a mutual corporation for the sole purpose of
insuring or self-insuring claims that may arise from a violation of this
chapter. An applicant may only substitute coverage under this subsection for
the requirements of (a) or (b) of this subsection if the director, with the
consent of the insurance commissioner, has authorized such association to
organize a mutual corporation under such terms and conditions as may be imposed
by the director to ensure that the corporation is operated in a financially
responsible manner to pay any claims within the financial responsibility limits
specified in (a) of this subsection.
Sec.
5. RCW
19.146.228 and 1997 c 106 s 13 are each amended to read as follows:
The
director shall establish fees by rule in accordance with RCW 43.24.086
sufficient to cover, but not exceed, the costs of administering this chapter.
These fees may include:
(1)
An annual assessment paid by each licensee on or before a date specified by
rule;
(2)
An investigation fee to cover the costs of any investigation of the books and
records of a licensee or other person subject to this chapter; and
(3)
An application fee to cover the costs of processing applications made to the
director under this chapter.
Mortgage brokers shall not be charged investigation fees for the
processing of complaints when the investigation determines that no violation of
this chapter occurred or when the mortgage broker provides a remedy
satisfactory to the complainant and the director and no order of the director
is issued. All moneys, fees, and penalties collected under the authority of
this chapter shall be deposited into the ((banking examination)) financial
services regulation fund, unless the consumer services account is created
as a dedicated, nonappropriated account, in which case all moneys, fees, and
penalties collected under this chapter shall be deposited in the consumer
services account.
Sec.
6. RCW
19.146.280 and 1997 c 106 s 20 are each amended to read as follows:
(1)
There is established the mortgage brokerage commission consisting of five
commission members who shall act in an advisory capacity to the director on
mortgage brokerage issues.
(2)
The director shall appoint the members of the commission, weighing the
recommendations from professional organizations representing mortgage brokers.
At least three of the commission members shall be mortgage brokers licensed
under this chapter and at least one shall be exempt from licensure under RCW
19.146.020(1)(f). No commission member shall be appointed who has had less
than five years' experience in the business of residential mortgage lending. In
addition, the director or a designee shall serve as an ex officio, nonvoting
member of the commission. Voting members of the commission shall serve for
two-year terms with three of the initial commission members serving one-year
terms. The department shall provide staff support to the commission.
(3)
The commission may establish a code of conduct for its members. Any
commissioner may bring a motion before the commission to remove a commissioner
for failing to conduct themselves in a manner consistent with the code of
conduct. The motion shall be in the form of a recommendation to the director
to dismiss a specific commissioner and shall enumerate causes for doing so.
The commissioner in question shall recuse himself or herself from voting on any
such motion. Any such motion must be approved unanimously by the remaining
four commissioners. Approved motions shall be immediately transmitted to the
director for review and action.
(4)
Members of the commission shall be reimbursed for their travel expenses
incurred in carrying out the provisions of this chapter in accordance with RCW
43.03.050 and 43.03.060. All costs and expenses associated with the commission
shall be paid from the ((banking examination)) financial services
regulation fund, unless the consumer services account is created as a
dedicated, nonappropriated account, in which case all costs and expenses shall
be paid from the consumer services account.
(5)
The commission shall advise the director on the characteristics and needs of
the mortgage brokerage profession.
(6)
The department, in consultation with other applicable agencies of state
government, shall conduct a continuing review of the number and type of
consumer complaints arising from residential mortgage lending in the state.
The department shall report its findings to the senate committee on financial
institutions and house of representatives committee on financial institutions
and insurance along with recommendations for any changes in the licensing
requirements of this chapter, biennially by December 1st of each even-numbered
year.
Sec.
7. RCW
31.35.050 and 1994 c 92 s 254 are each amended to read as follows:
(1)
The director is authorized to charge a fee for the estimated direct and
indirect costs for examination and supervision by the director of an
agricultural lender or a subsidiary of an agricultural lender. Excess examiner
time shall be billed at a reasonable rate established by rule.
(2)
All such fees shall be deposited in the ((banking examination)) financial
services regulation fund and administered consistent with the provisions of
RCW 43.320.110.
Sec.
8. RCW
31.35.080 and 1994 c 92 s 257 are each amended to read as follows:
(1)
The director shall adopt rules to enforce the intent and purposes of this
chapter. Such rules shall include, but not be limited to, the following:
(a)
Disclosure of conflicts of interest;
(b)
Prohibition of false statements made to the director on any form required by the
director or during any examination; or
(c)
Prevention of fraud and undue influence within an agricultural lender.
(2)
A violation of any provision of this chapter or any rule of the director
adopted under this chapter by an agent, employee, officer, or director of the
agricultural lender shall be punishable by a fine, established by the director,
not to exceed one hundred dollars for each offense. Each day's continuance of
the violation shall be a separate and distinct offense. All fines shall be credited
to the ((banking examination)) financial services regulation
fund.
(3)
The director may issue and serve upon an agricultural lender a notice of
charges if, in the opinion of the director, the agricultural lender is
violating or has violated the law, rule, or any condition imposed in writing by
the director or any written agreement made by the director.
(a)
The notice shall contain a statement of the facts constituting the alleged
violation or practice and shall fix a time and place at which a hearing will be
held to determine whether an order to cease and desist should issue against the
agricultural lender. The hearing shall be set not earlier than ten days nor
later than thirty days after service of the notice unless a later date is set
by the director at the request of the agricultural lender.
Unless
the agricultural lender appears at the hearing by a duly authorized
representative, it shall be deemed to have consented to the issuance of the
cease and desist order. In the event of consent or if, upon the record made at
the hearing, the director finds that any violation or practice specified in the
notice of charges has been established, the director may issue and serve upon
the agricultural lender an order to cease and desist from the violation or practice.
The order may require the agricultural lender and its directors, officers,
employees, and agents to cease and desist from the violation or practice and
may require the agricultural lender to take affirmative action to correct the
conditions resulting from the violation or practice.
(b)
A cease and desist order shall become effective at the expiration of ten days
after the service of the order upon the agricultural lender concerned, except
that a cease and desist order issued upon consent shall become effective at the
time specified in the order and shall remain effective as provided in the order
unless it is stayed, modified, terminated, or set aside by action of the
director or a reviewing court.
Sec.
9. RCW
31.40.070 and 1994 c 92 s 266 are each amended to read as follows:
(1)
The director is authorized to charge a fee for the estimated direct and
indirect costs of the following:
(a)
An application for a license and the investigation thereof;
(b)
An application for approval to acquire control of a licensee and the
investigation thereof;
(c)
An application for approval for a licensee to merge with another corporation,
an application for approval for a licensee to purchase all or substantially all
of the business of another person, or an application for approval for a
licensee to sell all or substantially all of its business or of the business of
any of its offices to another licensee and the investigation thereof;
(d)
An annual license;
(e)
An examination by the director of a licensee or a subsidiary of a licensee.
Excess examiner time shall be billed at a reasonable rate established by rule.
(2)
A fee for filing an application with the director shall be paid at the time the
application is filed with the director.
(3)
All such fees shall be deposited in the ((banking examination)) financial
services regulation fund and administered consistent with the provisions of
RCW 43.320.110.
Sec.
10. RCW
31.40.110 and 1994 c 92 s 270 are each amended to read as follows:
(1)
The director shall adopt rules to enforce the intent and purposes of this
chapter. Such rules shall include, but need not be limited to, the following:
(a)
Disclosure of conflicts of interest;
(b)
Prohibition of false statements made to the director on any form required by
the director or during any examination requested by the director; or
(c)
Prevention of fraud and undue influence by a licensee.
(2)
A violation of any provision of this chapter or any rule of the director
adopted under this chapter by an agent, employee, officer, or director of the
licensee shall be punishable by a fine, established by the director, not to
exceed one hundred dollars for each offense. Each day's continuance of the
violation shall be a separate and distinct offense. Each such fine shall be
credited to the ((banking examination)) financial services regulation
fund.
Sec.
11. RCW
31.45.030 and 1995 c 18 s 4 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)) financial
services regulation 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.
(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. 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.
(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.
12. RCW
31.45.050 and 1996 c 13 s 2 are each amended to read as follows:
(1)
Each applicant and licensee shall pay to the director an investigation fee and
an annual assessment fee in an amount determined by rule of the director as
necessary to cover the operation of the program. In establishing the fees, the
director shall differentiate between check cashing and check selling and making
small loans, and consider at least the volume of business, level of risk, and
potential harm to the public related to each activity. The fees collected
shall be deposited to the credit of the ((banking examination)) financial
services regulation fund in accordance with RCW 43.320.110.
(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.
13. RCW
31.45.077 and 1995 c 18 s 3 are each amended 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)) financial services
regulation fund in accordance with RCW 43.320.110.
NEW
SECTION. Sec. 14. All
funds in the banking examination fund under RCW 43.320.110, credit unions
examination fund under RCW 43.320.120, and securities regulation fund under RCW
43.320.130 shall be transferred and credited to the financial services
regulation fund on the effective date of this act.
NEW
SECTION. Sec. 15. The
following acts or parts of acts are each repealed:
(1) RCW
43.320.120 (Credit unions examination fund) and 1993 c 472 s 26
& 1981 c 241 s 2; and
(2) RCW
43.320.130 (Securities regulation fund) and 1993 c 472 s 27.
NEW
SECTION. Sec. 16. This
act is necessary for the immediate preservation of the public peace, health, or
safety, or support of the state government and its existing public
institutions, and takes effect July 1, 2001.
