BILL REQ. #:  Z-0872.2 

Read first time 01/13/12.   Referred to Committee on Financial Institutions, Housing & Insurance.

     AN ACT Relating to making technical corrections, modernizing statutes, and streamlining enforcement authorities of nondepository institutions regulated by the department of financial institutions; amending RCW 31.04.027, 31.04.065, 31.04.093, 31.04.145, 31.04.224, 31.45.010, 31.45.070, 31.45.105, 31.45.110, 19.146.200, and 19.144.020; reenacting and amending RCW 31.04.025; adding a new section to chapter 31.45 RCW; adding a new section to chapter 19.146 RCW; adding new sections to chapter 18.44 RCW; and adding new sections to chapter 19.230 RCW.

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

Sec. 1   RCW 31.04.025 and 2011 c 191 s 1 and are each reenacted and amended to read as follows:
     (1) Each loan made to a resident of this state by a licensee, or persons subject to this chapter, is subject to the authority and restrictions of this chapter, unless such loan is made under the authority of chapter 63.14 RCW.
     (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;
     (b) Entities making loans under chapter 19.60 RCW (pawnbroking);
     (c) Entities ((making loans)) conducting transactions under chapter 63.14 RCW (retail installment sales of goods and services), unless the goods being sold in a retail installment sale are prepaid access devices as defined in 31 C.F.R. Parts 1010-1022;
     (d) Entities making loans under chapter 31.45 RCW (check cashers and sellers);
     (e) Any person making a loan primarily for business, commercial, or agricultural purposes unless the loan is secured by a lien on the borrower's primary residence;
     (f) Any person making loans made to government or government agencies or instrumentalities or making loans to organizations as defined in the federal truth in lending act;
     (g) Entities making loans under chapter 43.185 RCW (housing trust fund);
     (h) Entities making loans under programs of the United States department of agriculture, department of housing and urban development, or other federal government program that provides funding or access to funding for single-family housing developments or grants to low-income individuals for the purchase or repair of single-family housing;
     (i) Nonprofit housing organizations making loans, or loans made, under housing programs that are funded in whole or in part by federal or state programs if the primary purpose of the programs is to assist low-income borrowers with purchasing or repairing housing or the development of housing for low-income Washington state residents; and
     (j) Entities making loans which are not residential mortgage loans under a credit card plan; and
     (k) Individuals employed by a licensed residential loan servicing company, unless so required by federal law or regulation.
     (3) The director may, at his or her discretion, waive applicability of the consumer loan company licensing provisions of this chapter to other persons, not including individuals subject to the S.A.F.E. act, making or servicing loans when the director determines it necessary to facilitate commerce and protect consumers. The director may adopt rules interpreting this section.

Sec. 2   RCW 31.04.027 and 2011 c 191 s 2 are each amended to read as follows:
     It is a violation of this chapter for a licensee, its officers, directors, employees, or independent contractors, or any other person subject to this chapter to:
     (1) 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;
     (2) Directly or indirectly engage in any unfair or deceptive practice toward any person;
     (3) Directly or indirectly obtain property by fraud or misrepresentation;
     (4) Solicit or enter into a contract with a borrower that provides in substance that the consumer loan company may earn a fee or commission through the consumer loan company's best efforts to obtain a loan even though no loan is actually obtained for the borrower;
     (5) Solicit, advertise, or enter into a contract for specific interest rates, points, or other financing terms unless the terms are actually available at the time of soliciting, advertising, or contracting;
     (6) Fail to make disclosures to loan applicants as required by RCW 31.04.102 and any other applicable state or federal law;
     (7) 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 residential mortgage loan or engage in bait and switch advertising;
     (8) Negligently make any false statement or knowingly and willfully make any omission of material fact in connection with any reports filed with the department by a licensee or in connection with any investigation conducted by the department;
     (9) Make any payment, directly or indirectly, to any appraiser of a property, for the purposes of influencing the independent judgment of the appraiser with respect to the value of the property;
     (10) Accept from any borrower at or near the time a loan is made and in advance of any default an execution of, or induce any borrower to execute, any instrument of conveyance, not including a mortgage or deed of trust, to the lender of any ownership interest in the borrower's primary residence that is the security for the borrower's loan;
     (11) Obtain at the time of closing a release of future damages for usury or other damages or penalties provided by law or a waiver of the provisions of this chapter; ((or))
     (12) 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, 15 U.S.C. Sec. 1601 and regulation Z, 12 C.F.R. Sec. 226, the real estate settlement procedures act, 12 U.S.C. Sec. 2601 and regulation X, 24 C.F.R. Sec. 3500, or the equal credit opportunity act, 15 U.S.C. Sec. 1691 and regulation B, Sec. 202.9, 202.11, and 202.12, or any other applicable state or federal statutes((, as now or hereafter amended, in any advertising of residential mortgage loans or any other consumer loan company activity)) or regulations; or
     (13) Make loans from any unlicensed location.

Sec. 3   RCW 31.04.065 and 1991 c 208 s 7 are each amended to read as follows:
     The license shall state the address at which the business is to be conducted and shall state fully the name of the licensee, and if the licensee is a copartnership or association, the names of its members, and if a corporation, the date and place of its incorporation. ((The licensee shall conspicuously post the license in the place of business of the licensee.)) The license is not transferable or assignable.

Sec. 4   RCW 31.04.093 and 2010 c 35 s 6 are each amended to read as follows:
     (1) The director shall enforce all laws and rules relating to the licensing and regulation of licensees and persons subject to this chapter.
     (2) The director may deny applications for licenses for:
     (a) Failure of the applicant to demonstrate within its application for a license that it meets the requirements for licensing in RCW 31.04.045 and 31.04.055;
     (b) Violation of an order issued by the director under this chapter or another chapter administered by the director, including but not limited to cease and desist orders and temporary cease and desist orders;
     (c) Revocation or suspension of a license to conduct lending or residential mortgage loan servicing, or to provide settlement services associated with lending or residential mortgage loan servicing, by this state, another state, or by the federal government within five years of the date of submittal of a complete application for a license; or
     (d) Filing an incomplete application when that incomplete application has been filed with the department for sixty or more days, provided that the director has given notice to the licensee that the application is incomplete, informed the applicant why the application is incomplete, and allowed at least twenty days for the applicant to complete the application.
     (3) The director may suspend or revoke a license issued under this chapter if the director finds that:
     (a) The licensee has failed to pay any fee due the state of Washington, has failed to maintain in effect the bond or permitted substitute required under this chapter, or has failed to comply with any specific order or demand of the director lawfully made and directed to the licensee in accordance with this chapter;
     (b) The licensee, either knowingly or without the exercise of due care, has violated any provision of this chapter or any rule adopted under this chapter; or
     (c) A fact or condition exists that, if it had existed at the time of the original application for the license, clearly would have allowed the director to deny the application for the original license. The director may revoke or suspend only the particular license with respect to which grounds for revocation or suspension may occur or exist unless the director finds that the grounds for revocation or suspension are of general application to all offices or to more than one office operated by the licensee, in which case, the director may revoke or suspend all of the licenses issued to the licensee.
     (4) The director may impose fines of up to one hundred dollars per day upon the licensee, its employee or loan originator, or other person subject to this chapter for:
     (a) Any violation of this chapter; or
     (b) Failure to comply with any order or subpoena issued by the director under this chapter.
     (5) The director may issue an order directing the licensee, its employee or loan originator, or other person subject to this chapter to:
     (a) Cease and desist from conducting business in a manner that is injurious to the public or violates any provision of this chapter;
     (b) Take such affirmative action as is necessary to comply with this chapter; or
     (c) Make a refund or restitution to a borrower or other person who is damaged as a result of a violation of this chapter.
     (6) The director may issue an order removing from office or prohibiting from participation in the affairs of any licensee, or both, any officer, principal, employee or loan originator, or any person subject to this chapter for:
     (a) False statements or omission of material information from an application for a license that, if known, would have allowed the director to deny the original application for a license;
     (b) Conviction of a gross misdemeanor involving dishonesty or financial misconduct or a felony;
     (c) Suspension or revocation of a license to engage in lending or residential mortgage loan servicing, or perform a settlement service related to lending or residential mortgage loan servicing, in this state or another state;
     (d) Failure to comply with any order or subpoena issued under this chapter; ((or))
     (e) A violation of RCW 31.04.027, 31.04.102, 31.04.155, or 31.04.221;
     (7) 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 for purposes of financial literacy and education programs authorized under RCW 43.320.150. If any person subject to this chapter makes a payment to the department under this section, the person may not advertise such payment.
     (((7))) (8) Whenever the director determines that the public is likely to be substantially injured by delay in issuing a cease and desist order, the director may immediately issue a temporary cease and desist order. The order may direct the licensee to discontinue any violation of this chapter, to take such affirmative action as is necessary to comply with this chapter, and may include a summary suspension of the licensee's license and may order the licensee to immediately cease the conduct of business under this chapter. The order shall become effective at the time specified in the order. Every temporary cease and desist order shall include a provision that a hearing will be held upon request to determine whether the order will become permanent. Such hearing shall be held within fourteen days of receipt of a request for a hearing unless otherwise specified in chapter 34.05 RCW.
     (((8))) (9) A licensee may surrender a license by delivering to the director written notice of surrender, but the surrender does not affect the licensee's civil or criminal liability, if any, for acts committed before the surrender, including any administrative action initiated by the director to suspend or revoke a license, impose fines, compel the payment of restitution to borrowers or other persons, or exercise any other authority under this chapter.
     (((9))) (10) The revocation, suspension, or surrender of a license does not impair or affect the obligation of a preexisting lawful contract between the licensee and a borrower.
     (((10))) (11) Every license issued under this chapter remains in force and effect until it has been surrendered, revoked, or suspended in accordance with this chapter. However, the director may on his or her own initiative reinstate suspended licenses or issue new licenses to a licensee whose license or licenses have been revoked if the director finds that the licensee meets all the requirements of this chapter.

Sec. 5   RCW 31.04.145 and 2009 c 120 s 8 are each amended to read as follows:
     (1) For the purpose of discovering violations of this chapter or securing information lawfully required under this chapter, the director may at any time, either personally or by designees, investigate or examine the loans and business and, wherever located, the books, accounts, records, papers, documents, files, and other information used in the business of every licensee and of every person who is engaged in the business making or assisting in the making of loans at interest rates authorized by this chapter, whether the person acts or claims to act as principal or agent, or under or without the authority of this chapter. ((For these purposes,)) The director or designated representative((s)):
     (a) Shall have free access to the offices and places of business, books, accounts, papers, documents, other information, records, files, safes, and vaults of all such persons((. The director or persons designated by the director)) during normal business hours;
     (b) May require the attendance of and examine under oath all persons whose testimony may be required about the loans or the business or the subject matter of any investigation, examination, or hearing and may require such person to produce books, accounts, papers, records, files, and any other information the director or designated persons deem relevant to the inquiry((. The director));
     (c) May require the production of original books, accounts, papers, records, files, and other information; may require that such original books, accounts, papers, records, files, and other information be copied; or may make copies ((himself or herself or by designee)) of such original books, accounts, papers, records, files, or other information((. If a licensee or person does not attend and testify, or does not produce the requested books, accounts, papers, records, files, or other information, then the director or designated persons));
     (d) May issue a subpoena or subpoena duces tecum requiring attendance by any person identified in this section or compelling production of ((the)) any books, accounts, papers, records, files, or other documents or information identified in this section.
     (2) The director shall make such periodic examinations of the affairs, business, office, and records of each licensee as determined by rule.
     (3) Every licensee examined or investigated by the director or the director's designee shall pay to the director the cost of the examination or investigation of each licensed place of business as determined by rule by the director.
     (4) In order to carry out the purposes of this section, the director may:
     (a) Retain attorneys, accountants, or other professionals and specialists as examiners, auditors, or investigators to conduct or assist in the conduct of examinations or investigations;
     (b) Enter into agreements or relationships with other government officials or regulatory associations in order to improve efficiencies and reduce regulatory burden by sharing resources, standardized or uniform methods or procedures, and documents, records, information, or evidence obtained under this section;
     (c) Use, hire, contract, or employ public or privately available analytical systems, methods, or software to examine or investigate the licensee, individual, or person subject to chapter 120, Laws of 2009;
     (d) Accept and rely on examination or investigation reports made by other government officials, within or without this state;
     (e) Accept audit reports made by an independent certified public accountant for the licensee, individual, or person subject to chapter 120, Laws of 2009 in the course of that part of the examination covering the same general subject matter as the audit and may incorporate the audit report in the report of the examination, report of investigation, or other writing of the director; or
     (f) Assess the licensee, individual, or person subject to chapter 120, Laws of 2009 the cost of the services in (a) of this subsection.

Sec. 6   RCW 31.04.224 and 2009 c 120 s 11 are each amended to read as follows:
     The following are exempt from licensing as mortgage loan originators under this chapter:
     (1) Registered mortgage loan originators, or any individual required to be registered;
     (2) A licensed attorney who negotiates the terms of a residential mortgage loan on behalf of a client as an ancillary matter to the attorney's representation of the client, unless the attorney is compensated by a lender, a mortgage broker, or other mortgage loan originator or by any agent of a lender, mortgage broker, or other mortgage loan originator; ((or))
     (3) Any individual who offers or negotiates terms of a residential mortgage loan with or on behalf of an immediate family member; or
     (4) Any individual who offers or negotiates terms of a residential mortgage loan secured by a dwelling that served as the individual's residence.

Sec. 7   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, whether located within or outside of this state, who fails to obtain the license or small loan endorsement 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)) any reason, 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) "Termination date" means the date upon which payment for the small loan transaction is due or paid to the licensee, whichever occurs first.
     (23) "Total of payments" means the principal amount of the small loan plus all fees or interest charged on the loan.
     (24) "Trade secret" means the same as defined in RCW 19.108.010.

NEW SECTION.  Sec. 8   A new section is added to chapter 31.45 RCW to read as follows:
     Applicants may be required to make application through a multistate licensing system as prescribed by the director. Existing licensees may be required to transition onto a multistate licensing system as prescribed by the director.

Sec. 9   RCW 31.45.070 and 2003 c 86 s 7 are each amended to read as follows:
     (1) No licensee may engage in a loan business ((or)); the negotiation of loans; or the discounting of notes, bills of exchange, checks, or other evidences of debt ((on)) in the same premises where a check cashing or selling business is conducted, unless the licensee:
     (a) Is conducting the activities of pawnbroker as defined in RCW 19.60.010;
     (b) Is a properly licensed consumer loan company under chapter 31.04 RCW;
     (c) Is conducting other lending activity permitted in the state of Washington; or
     (d) Has a small loan endorsement issued under this chapter.
     (2) Except as otherwise permitted in this chapter, no licensee may at any time cash or advance any moneys on a postdated check or draft. However, a licensee may cash a check payable on the first banking day following the date of cashing if:
     (a) The check is drawn by the United States, the state of Washington, or any political subdivision of the state, or by any department or agency of the state or its subdivisions; or
     (b) The check is a payroll check drawn by an employer to the order of its employee in payment for services performed by the employee.
     (3) Except as otherwise permitted in this chapter, no licensee may agree to hold a check or draft for later deposit. A licensee ((shall)) must deposit all checks and drafts cashed by the licensee as soon as practicable.
     (4) No licensee may issue or cause to be issued any check, draft, or money order, or other commercial paper serving the same purpose, that is drawn upon the trust account of a licensee without concurrently receiving the full principal amount, in cash, or by check, draft, or money order from a third party believed to be valid.
     (5) ((No licensee may advertise, print, display, publish, distribute, or broadcast or cause or permit to be advertised, printed, displayed, published, distributed, or broadcast, any statement or representation that is false, misleading, or deceptive, or that omits material information, or that refers to the supervision of the licensee by the state of Washington or any department or official of the state.
     (6))) Each licensee shall comply with all applicable state and federal statutes ((governing currency transaction reporting)) relating to the activities governed by this chapter.

Sec. 10   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; and
     (e) Sell in a retail installment transaction under chapter 63.14 RCW a prepaid access device, as defined in 31 C.F.R. Parts 1010-1022.
     (2) It is a violation of this chapter for any person subject to this chapter to:
     (a) Advertise, print, display, publish, distribute, or broadcast or cause or permit to be advertised, printed, displayed, published, distributed, or broadcast any statement or representation that is false, misleading, or deceptive, or that omits material information;
     (b) Fail to pay the annual assessment by the date and time as specified in RCW 31.45.050;
     (c) Fail to pay any other fee, assessment, or moneys due the department.
     (3) In addition to any other penalties, any transaction in violation of subsection (1) of this section is uncollectible and unenforceable.

Sec. 11   RCW 31.45.110 and 2003 c 86 s 17 are each amended to read as follows:
     (1) The director may issue and serve upon a licensee or applicant, or any director, officer, sole proprietor, partner, or controlling person of a licensee or applicant, a statement of charges if, in the opinion of the director, any licensee or applicant, or any director, officer, sole proprietor, partner, or controlling person of a licensee or applicant:
     (a) Is engaging or has engaged in an unsafe or unsound financial practice in conducting ((the)) a business ((of a check seller)) governed by this chapter;
     (b) Is violating or has violated this chapter, including violations of:
     (i) Any rules, orders, or subpoenas((, any rule adopted under chapter 86, Laws of 2003, any order issued under chapter 86, Laws of 2003, any subpoena issued under chapter 86, Laws of 2003, or)) issued by the director under any act;
     (ii) Any condition imposed in writing by the director ((or the director's designee)) in connection with the granting of any application or other request by the licensee; or
     (iii) Any written agreement made with the director;
     (c) Is about to do the acts prohibited in (a) or (b) of this subsection when the opinion that the threat exists is based upon reasonable cause;
     (d) Obtains a license by means of fraud, misrepresentation, concealment, or through mistake or inadvertence of the director;
     (e) Provides false statements or ((omissions of)) omits material information on ((the)) an application ((that, if known, would have allowed the director to deny the application for the original license));
     (f) Knowingly or negligently omits material information during or in response to an examination or in connection with an investigation by the director;
     (g) 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 or deposit;
     (((g))) (h) Commits a crime against the laws of ((the state of Washington or any other state or government)) 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))) (i) 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))) (j) Converts any money or its equivalent to his or her own use or to the use of his or her principal or of any other person;
     (((j))) (k) Fails((, upon demand by the director or the director's designee,)) to disclose any information within his or her knowledge ((to,)) or fails to produce any document, book, or record in his or her possession for inspection ((of,)) by the director ((or the director's designee)) upon demand;
     (((k))) (l) Commits any act of fraudulent or dishonest dealing((, and)). For the purposes of this section, a certified copy of the final holding of any court, tribunal, agency, or administrative body of competent jurisdiction ((regarding that act)) is conclusive evidence in any hearing under this chapter; ((or
     (l))) (m) Commits an act or engages in conduct that demonstrates incompetence or untrustworthiness, or is a source of injury and loss to the public;
     (n) Violates any applicable state or federal law relating to the activities governed by this chapter.
     (2) The statement of charges ((shall)) 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 ((the)) a license or small loan endorsement;
     (b) Order the licensee or person to cease and desist from practices ((in violation of)) that violate this chapter or ((practices that)) constitute unsafe and unsound financial practices ((in the sale of checks));
     (c) Impose a fine not to exceed one hundred dollars per day for each day's violation of this chapter;
     (d) Order restitution or refunds to borrowers or other parties ((damaged by the licensee's)) 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.
     (3) In imposing the sanctions referenced in subsection (2) of this section against any director, officer, sole proprietor, partner, controlling person, limited liability company, partnership, limited liability partnership, or other business entity, the individual or entity may be held liable for the sanctions if the individual or entity:
     (a) Directed or instructed the conduct that was in violation of this chapter, or had knowledge of the specific conduct and approved or allowed the conduct; or
     (b) Knew, or by the exercise of reasonable care should have known, of the conduct in time to prevent it, or minimize the consequences, and did not.
     (4) The proceedings to impose the sanctions described in subsection (2) 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 for purposes of financial literacy and education programs authorized under RCW 43.320.150.

Sec. 12   RCW 19.146.200 and 2006 c 19 s 9 are each amended to read as follows:
     (1) A person, unless specifically exempted from this chapter under RCW 19.146.020, may not engage in the business of a mortgage broker or loan originator without first obtaining and maintaining a license under this chapter.
     (2) A person may not bring a suit or action for the collection of compensation in connection with a residential mortgage loan unless the plaintiff alleges and proves that he or she was a duly licensed mortgage broker, or exempt from the license requirement of this chapter, at the time of offering to perform or performing any such an act or service regulated by this chapter.
     (3) ((A mortgage broker license must be prominently displayed in the mortgage broker's place of business.
     (4))) Every licensed mortgage broker must at all times have a designated broker responsible for all activities of the mortgage broker in conducting the business of a mortgage broker. A designated broker, principal, or owner who has supervisory authority over a mortgage broker is responsible for a licensee's, employee's, or independent contractor's violations of this chapter and its rules if:
     (a) The designated broker, principal, or owner directs or instructs the conduct or, with knowledge of the specific conduct, approves or allows the conduct; or
     (b) The designated broker, principal, or owner who has supervisory authority over the licensed mortgage broker knows or by the exercise of reasonable care and inquiry should have known of the conduct, at a time when its consequences can be avoided or mitigated and fails to take reasonable remedial action.

NEW SECTION.  Sec. 13   A new section is added to chapter 19.146 RCW to read as follows:
     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 for purposes of financial literacy and education programs authorized under RCW 43.320.150. If any person subject to this chapter makes a payment to the department under this section, the person may not advertise such payment.

NEW SECTION.  Sec. 14   A new section is added to chapter 18.44 RCW to read as follows:
     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 for purposes of financial literacy and education programs authorized under RCW 43.320.150.

NEW SECTION.  Sec. 15   A new section is added to chapter 18.44 RCW to read as follows:
     Applicants may be required to make application through a multistate licensing system as prescribed by the director. Existing licensees may be required to transition onto a multistate licensing system as prescribed by the director.

NEW SECTION.  Sec. 16   A new section is added to chapter 19.230 RCW to read as follows:
     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 for purposes of financial literacy and education programs authorized under RCW 43.320.150.

NEW SECTION.  Sec. 17   A new section is added to chapter 19.230 RCW to read as follows:
     Applicants may be required to make application through a multistate licensing system as prescribed by the director. Existing licensees may be required to transition onto a multistate licensing system as prescribed by the director.

Sec. 18   RCW 19.144.020 and 2008 c 108 s 3 are each amended to read as follows:
     (1) In addition to any other requirements under federal or state law, a residential mortgage loan may not be made unless a disclosure summary of all material terms, as adopted by the department in subsection (2) of this section, is placed on a separate sheet of paper and has been provided by a financial institution to the borrower within three business days following receipt of a loan application. If any material terms of the residential mortgage loan change before closing, a new disclosure summary must be provided to the borrower within three days of any such change or at least three days before closing, whichever is earlier.
     (2) The department shall adopt, by rule, a disclosure summary form with a content and format containing simple, plain-language terms that are reasonably understandable to the average person without the aid of third-party resources and shall include, but not be limited to, the following items: Fees and discount points on the loan; interest rates of the loan; broker fees; the broker's yield spread premium as a dollar amount; whether the loan contains prepayment penalties; whether the loan contains a balloon payment; whether the property taxes and property insurance are escrowed; whether the loan payments will adjust at the fully indexed rates; and whether there is a price added or premium charged because the loan is based on reduced documentation.
     (3) The director may, at his or her discretion, require by rule other information relating to a residential mortgage loan to be included in the disclosure summary if the director determines that it is necessary to protect consumers. The director may adopt rules creating a standard form of disclosure summary to be used as a guide by financial institutions in fulfilling the requirements of this section.
     (4) Disclosure in compliance with the real estate settlement procedures act, 12 U.S.C. Sec. 2601, and Regulation X, 24 C.F.R. Sec. 3500, as it exists on the effective date of this section, shall be deemed to comply with the disclosure requirements of this section. If needed, the director may adopt rules to implement and incorporate other changes in the disclosure summary as necessary due to federal law.