BILL REQ. #:  H-2223.3 

READ FIRST TIME 03/03/05.   

     AN ACT Relating to tax refund anticipation loans; adding a new chapter to Title 19 RCW; and prescribing penalties.

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

NEW SECTION.  Sec. 1   This chapter may be known and cited as the tax refund anticipation loan act.

NEW SECTION.  Sec. 2   The definitions in this section apply throughout this chapter unless the context clearly requires otherwise.
     (1) "Facilitator" means a person who receives or accepts for delivery an application for a refund anticipation loan, delivers a check in payment of refund anticipation loan proceeds, or in any other manner acts to allow the making of a refund anticipation loan. "Facilitator" does not include a bank, thrift, savings association, industrial bank, or credit union operating under the laws of the United States or this state, an affiliate that is a servicer for such an entity, or any person who acts solely as an intermediary and does not deal with a taxpayer in the making of the refund anticipation loan.
     (2) "Person" means an individual, a firm, a partnership, an association, a corporation, or other entity.
     (3) "Lender" means a person who extends credit to a borrower in the form of a refund anticipation loan.
     (4) "Taxpayer" means an individual who files a federal income tax return.
     (5) "Borrower" means a taxpayer who receives the proceeds of a refund anticipation loan.
     (6) "Refund anticipation loan" means a loan borrowed by a taxpayer from a lender based on the taxpayer's anticipated federal income tax refund.
     (7) "Refund anticipation loan fee" means the charges, fees, or other consideration imposed by the lender for a refund anticipation loan. This term does not include any charge, fee, or other consideration usually imposed by the facilitator in the ordinary course of business for nonloan services, such as fees for tax return preparation and fees for electronic filing of tax returns.
     (8) "Refund anticipation loan fee schedule" means a listing or table of refund anticipation loan fees charged by the facilitator or the lender for three or more representative refund anticipation loan amounts. The schedule shall list separately each fee or charge imposed, as well as a total of all fees imposed, related to the making of refund anticipation loans. The schedule shall also include, for each representative loan amount, the estimated annual percentage rate calculated under the guidelines established by the federal truth in lending act, 15 U.S.C. Sec. 1601 et seq.

NEW SECTION.  Sec. 3   (1) No person may individually, or in conjunction or cooperation with another person, solicit the execution of, process, receive, or accept an application or agreement for, a refund anticipation loan without first being licensed with the director as a facilitator.
     (2) This section does not apply to a person doing business as a bank, thrift, industrial bank, savings and loan association, or credit union, under the laws of the United States or of this state.
     (3) This chapter shall preempt and be exclusive of all local acts, statutes, ordinances, and regulations relating to refund anticipation loans. This subsection shall be given retroactive and prospective effect.

NEW SECTION.  Sec. 4   (1) An application to become licensed as a facilitator must be in writing, under oath, and in a form prescribed by the director. The application must contain all information prescribed by the director and must include any licenses that a state or federal entity has issued to the applicant. Each application for a license must be accompanied by a two hundred fifty dollar initial licensing fee for each office where the facilitator intends to facilitate refund anticipation loans.
     (2) Unless the director denies the application, the director shall license the applicant upon the filing of a completed application for a license. The director shall issue and transmit to the applicant a license. If the director denies the application, the director shall notify the applicant of the reasons for the denial within forty-five days of the receipt of the application.
     (3) Upon receipt of a license, the applicant is licensed under this chapter and may engage in the business of facilitating refund anticipation loans at the offices identified on the application for the license.
     (4)(a) In addition to any requirements for a license set forth by rule of the director under this chapter, the director shall consider the facilitator's status as a tax preparer when determining whether to grant, renew, or revoke a facilitator's license.
     (b) A tax preparer owes the consumer a fiduciary duty in connection with performing tax preparation services, the sale of any goods or services, and the offer to assist or assisting a consumer in obtaining a tax refund anticipation loan or other loan related to tax preparation services, and may not engage in any conduct or practice that is deceptive or likely to mislead the consumer. A tax preparer covered by this section owes this duty to the consumer regardless of whether the tax preparer may be acting in part as an agent for another.

NEW SECTION.  Sec. 5   (1) Each license for a facilitator of refund anticipation loans expires on December 31st following the date it was issued. Before the license expires, the facilitator may renew the license by filing with the director an application for renewal in the form and containing all information prescribed by the director. Each application for renewal of a license must be accompanied by a two hundred fifty dollar renewal fee for each office where the facilitator intends to facilitate refund anticipation loans during the succeeding year.
     (2) Upon the filing of an application for renewal of a license, the director may renew the license. If the director does not renew the license, the director shall notify the facilitator, stating the reasons for the denial.
     (3) The director shall establish rules defining the time frame in which the application required under this section must be filed, and the time frame in which the department must process and notify the applicant of the department's decision regarding the application.

NEW SECTION.  Sec. 6   (1) For all refund anticipation loans, a facilitator must provide a clear disclosure statement to the borrower, prior to the borrower's completion of the application. The disclosure statement required under this subsection must be printed in a minimum of ten-point type. Further, the disclosure statement must contain the following:
     (a) The refund anticipation loan fee schedule; and
     (b) A written statement containing the following elements:
     (i) That a refund anticipation loan is a loan, and is not the borrower's actual income tax refund;
     (ii) That the taxpayer can file an income tax return electronically without applying for a refund anticipation loan;
     (iii) The average times according to the internal revenue service within which a taxpayer who does not obtain a refund anticipation loan can expect to receive a refund if the taxpayer's return is (A) filed electronically and the refund is directly deposited to the taxpayer's bank account or mailed to the taxpayer, and (B) mailed to the internal revenue service and the refund is directly deposited to the taxpayer's bank account or mailed to the taxpayer;
     (iv) That the internal revenue service does not guarantee that it will pay the full amount of the anticipated refund and it does not guarantee a specific date that a refund will be deposited into a taxpayer's financial institution account or mailed to a taxpayer;
     (v) That the borrower is responsible for repayment of the loan and related fees in the event that the tax refund is not paid or paid in full;
     (vi) The estimated time within which the loan proceeds will be paid to the borrower if the loan is approved; and
     (vii) The fee that will be charged, if any, if the borrower's loan is not approved.
     (2) The following additional information must be provided to the borrower of a refund anticipation loan before consummation of the loan transaction:
     (a) The estimated total fees for obtaining the refund anticipation loan; and
     (b) The estimated annual percentage rate for the borrower's refund anticipation loan, using the guidelines established under the federal truth in lending act (15 U.S.C. Sec. 1601 et seq.).

NEW SECTION.  Sec. 7   A borrower may rescind a loan, on or before the close of business on the next day of business at the location where the loan was originated, by returning the principal in cash or the original check disbursed by the facilitator to fund the refund anticipation loan. The facilitator may not charge the borrower for rescinding the loan and shall return to the borrower any postdated check taken as security for the loan or any electronic equivalent. The facilitator shall conspicuously disclose to the borrower this right of rescission in writing in the disclosure statement required under section 6(1) of this act.

NEW SECTION.  Sec. 8   It is unlawful for a facilitator of a refund anticipation loan to engage in any of the following activities:
     (1) Misrepresent a material factor or condition of a refund anticipation loan;
     (2) Fail to process the application for a refund anticipation loan promptly after the consumer applies for the loan;
     (3) Engage in any dishonest, fraudulent, unfair, unconscionable, or unethical practice or conduct in connection with a refund anticipation loan;
     (4) Arrange for a creditor to take a security interest in any property of the consumer other than the proceeds of the consumer's tax refund to secure payment of the loan;
     (5) Impose charges, fees, or other consideration for a refund anticipation loan. This does not preclude any charge, fee, or other consideration usually imposed by the facilitator in the ordinary course of business for nonloan services, such as fees for tax return preparation and fees for electronic filing of tax returns;
     (6) Offer a refund anticipation loan that exceeds the amount of the anticipated tax refund less any refund anticipation loan fees; and
     (7) Act as a facilitator unless they are authorized as an electronic return originator by the internal revenue service at the time.

NEW SECTION.  Sec. 9   Any person who knowingly and willfully violates this chapter is guilty of a misdemeanor and shall be fined up to five hundred dollars for each offense.

NEW SECTION.  Sec. 10   The legislature finds that the practices covered by this chapter are matters vitally affecting the public interest for the purpose of applying the consumer protection act, chapter 19.86 RCW. A violation of this chapter is not reasonable in relation to the development and preservation of business and is an unfair or deceptive act in trade or commerce and an unfair method of competition for the purpose of applying the consumer protection act, chapter 19.86 RCW.

NEW SECTION.  Sec. 11   Sections 1 through 10 of this act constitute a new chapter in Title 19 RCW.