PROPOSED RULES
FINANCIAL INSTITUTIONS
Original Notice.
Preproposal statement of inquiry was filed as WSR 04-03-080.
Title of Rule and Other Identifying Information: Regulating check cashers, check sellers, and small loan lenders licensed under chapter 31.45 RCW, and implementing chapter 86, Laws of 2003.
Hearing Location(s): Department of Financial Institutions, 150 Israel Road S.W., Room 319, Tumwater, WA 98501, on October 17, 2005, at 9-11 a.m.
Date of Intended Adoption: October 17, 2005.
Submit Written Comments to: Catherine Mele-Hetter, P.O. Box 41200, Olympia, WA 98504-1200, e-mail cmele-hetter@dfi.wa.gov, fax (360) 586-5068, by October 14, 2005.
Assistance for Persons with Disabilities: Contact Catherine Mele-Hetter by October 10, 2005, TTY (360) 664-8126.
Purpose of the Proposal and Its Anticipated Effects, Including Any Changes in Existing Rules: The proposed rules repeal the old rules, and make them comply with Governor's Executive Order 05-03, Plain talk. This will make the rules more user friendly for licensees and the public.
The proposed rules modernize and clarify existing rules, and add many changes required by the new law passed in 2003 (SSB 5452, chapter 86, Laws of 2003). In summary the proposed rule:
| • | Incorporates the statutory definitions, including the amendments and additions from the 2003 act; |
| • | Provides a more detailed description of the director's authority to conduct examinations and investigations. |
| • | Conforms the consequences of late filing of annual assessment fees to the 2003 statutory changes; |
| • | Eliminates securities and letters of credit as alternatives to the required surety bond; |
| • | Establishes minimum requirements for small loan applications; |
| • | Provides interpretive guidance regarding payment plans; |
| • | Expands the requirements for disclosure statements to borrowers; and |
| • | Makes additions to record-keeping requirements. |
Reasons Supporting Proposal: There was a major statutory rewrite and the rules reflect the changes made by the statute and the governor's executive order.
Statutory Authority for Adoption: RCW 31.04.165.
Statute Being Implemented: Chapter 208-630 WAC.
Rule is not necessitated by federal law, federal or state court decision.
Name of Proponent: Department of Financial Institutions, governmental.
Name of Agency Personnel Responsible for Drafting: Catherine Mele-Hetter, Department of Financial Institutions, 150 Israel Road S.W., Tumwater, WA 98501, (360) 902-0515; Implementation and Enforcement: Chuck Cross, Department of Financial Institutions, 150 Israel Road S.W., Tumwater, WA 98501, (360) 902-8733.
A small business economic impact statement has been prepared under chapter 19.85 RCW.
Introduction: The Department of Financial Institutions ("department") has prepared this SBEIS in compliance with chapter 19.85 RCW, the Regulatory Fairness Act ("RFA"). The preproposal statement of inquiry (form CR-101) was filed at WSR 04-03-080. Although this SBEIS addresses the rules as written on September 30, 2004, the department made changes to mitigate the impact on small businesses as described in the mitigation section of this SBEIS.
Background for Proposed Rule: The legislature passed and the governor signed the first Check Casher, Check Seller, Small Loan Lender Regulatory Act in 1991, codified as chapter 31.45 RCW ("the act"). The act recognizes that borrowers who present a higher than average credit risk can only obtain credit at interest rates higher than those permitted under other legal interest rate limits. The purpose of the act is to authorize those higher rates, while providing appropriate borrower protections.
Rules were adopted under the authority of the original act in 1992 and amended in 1996. The act was extensively amended in 2003 (SSB 5452, chapter 86, Laws of 2003). The proposed rule amendments and additions are in response to those changes, and reflect an attempt to improve regulatory performance.
Description of the Proposed Rule: The proposed rule:
| • | Incorporates the statutory definitions, including the amendments and additions from the 2003 act; |
| • | Provides a detailed description of the director's authority to conduct examinations and investigations; |
| • | Conforms the consequences of late filing of annual assessment fees to the 2003 statutory changes; |
| • | Eliminates securities and letters of credit as alternatives to the required surety bond; |
| • | Establishes minimum requirements for small loan applications; |
| • | Provides interpretive guidance regarding payment plans; |
| • | Expands the requirements for disclosure statements to borrowers; and |
| • | Makes additions to record-keeping requirements; and |
| • | Authorizes special reports as requested by the director in addition to annual reports. |
ELEMENT 1. A brief description of the reporting, record-keeping, and other compliance requirements of the proposed rule and the kinds of professional services that a small business is likely to need in order to comply with the requirements.
RESPONSE:
Reporting: There are new reporting requirements as follows:
1. The new proposal authorizes the department to gather certain information annually. The annual reports include (a) the number of borrowers whose accounts were referred to collection agencies; (b) the number of defaulted loans charged off as a business loss without the intent to make further efforts to collect amounts owed; (c) the number of loans per borrower per year; (d) the total number of loans made for each loan period; (e) the number of rescinded loans; and (f) the number of borrowers entering into a payment plan.
2. The new proposal also authorizes the department to gather certain information by special report. Special reports may include the following: (a) Transaction data concerning numbers of borrowers, frequency of borrowing, size and volume of transactions, transaction period, and such other data necessary to understand business volume and licensee's market; (b) technology and systems information including process, practices, software, data capture, and any means of conducting business with consumers; (c) repayment methods, funds delivery methods, automatic clearing house utilization methods and data, and such other information related to the receipt and delivery of funds in consumer transactions as is deemed necessary to understand and regulate licensees; and (d) any company financial information, business organization information or policies, procedures and practices.
3. The proposed rule requires additional transaction data be compiled on a periodic basis. The additions include (a) the amount of monetary instruments sold; (b) the amount of the fee charged for the monetary instrument; (c) the amount of small loan proceeds disbursed; (d) fees charged for small loans; (e) amount of payments on small loans received; (f) origination date of small loan; (g) termination date of small loan; (h) payment plan dates; and (i) the name, address, and Social Security number, of each small loan borrower.
4. The proposed rule authorizes departmental requests for the previous day's transaction record. Licensees would be required to provide the data within one business day of the request.
Record keeping: The new record-keeping requirements are:
1. Information to demonstrate compliance with the consumer disclosure requirements of WAC 208-630-068;
2. Additions to the individual transaction records requirement to include specified data on the sale of monetary instruments and small loans (current requirements only relate to check cashing);
3. A record of cash disbursed in making small loans is added to the reconciliation of each day's activity;
4. A record of the disbursement of loan proceeds, and the receipt of all payments on the balance of small loans, and whether the disbursement or payment is on a successive loan or payment plan;
5. Personnel files must include employee's full name, date of birth, hire, termination, last known address and Social Security number; and
6. In each loan file, a copy of the application, and the note.
Other compliance requirements: The fee charged for examinations and investigations is increased from $66.81 per hour of staff time, to $69.00 per hour, an increase of $2.19 per hour.
Disclosure of significant developments, such as insolvency, adverse license action by another state, criminal charges against key people affiliated with the licensee, and changes of control of the licensee must be made within fifteen days of the event instead of the current thirty days.
Professional services required: The reporting, record-keeping and other compliance requirements of the proposed rule do not necessarily require professional services. They can be performed by the licensee's office staff. However, many licensees will choose to capture information electronically that will be required repeatedly in subsequent reports. That may require the services of either in-house or contract programmers or system designers.
ELEMENT 2. An analysis of the costs of compliance for identified industries, including costs of equipment, supplies, and increased administrative costs.
RESPONSE: To gather the data necessary to analyze the costs of compliance for the check sellers and check cashers with small loan endorsements, the department sent a survey to all one hundred fifty licensees under the Check Casher and Sellers Act. Forty-five licensees responded for a 30% response rate. Eight of the surveys are not included because the answers were incomplete or inapplicable. Only four of the thirty-seven respondents have more than fifty employees. All other respondents are "small businesses" under RCW 19.85.020. The small businesses that participated in the survey had from one to thirty-two employees. Each survey participant was asked to estimate the cost of each of the proposals that could have a cost impact on the licensee. Most of the respondents did not provide details of their calculations or describe whether the figures they used were for one or multiple reports, therefore, multiple requests could represent higher costs. The table below summarizes the results of the survey. Because the survey allowed anonymous responses, the table is numbered instead of identifying the participant.
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There is a wide range of cost estimates among the respondents. We believe this is due to the estimated cost of the employee(s) responsible for preparing the report (i.e., use of a temporary employee vs. use of the company accountant), the estimated time it would take to gather the information and the fact that some businesses plan on hiring a computer specialist to reprogram their computers to create reports for the items requested.
The four survey participants that were not defined as small businesses because they had more than fifty employees also had widely varying cost estimates. While each was asked to break down the costs, one of the respondents only gave a lump sum total cost estimate for all of the items (#3 in the chart below).
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ELEMENT 3. Whether compliance with the proposed rule will cause businesses to lose sales or revenue.
RESPONSE: The rule does not affect demand for services, or in any way restrict the licensee's ability to provide services. The disclosure requirements are somewhat expanded, and there is some possibility that as a result of enhanced disclosure, some potential borrowers may explore other credit resources. However, since many payday loan borrowers do not qualify for other less costly loan products, it seems highly unlikely that enhanced disclosure will have a measurable effect on volume of business or revenue.
ELEMENT 4. A comparison of compliance costs for the small business segment and the large business segment of the affected industries, and whether the impact on small business is disproportionate.
RESPONSE: As illustrated above, it appears that the cost of compliance for a small business runs from a low of $25.00 per employee to $25,000 per employee with an average of $2,379.59 per employee. For businesses with over fifty employees, the cost of compliance runs from a low of $12.92 per employee to $2,407.62 per employee with an average of $635.42 per employee. Therefore, it does appear that the rules will have a disproportionate impact on small businesses.
ELEMENT 5. Steps taken by the agency under RCW 19.85.030(2) to reduce costs of the proposed rule on small businesses, or reasonable justification for not doing so, addressing the specified mitigation steps.
RESPONSE: We have reviewed the six steps under RCW 19.85.030 (3)(a) through (f). Our analysis is as follows:
(a) Reducing, modifying, or eliminating substantive regulatory requirements: There are three substantive requirements added by the proposed rule: An increase in the hourly staff fee for examinations, enhanced disclosures made to borrowers, and a shortened period for licensees to notify the department of the occurrence of significant developments, such as bankruptcy, adverse actions taken against the license or a criminal conviction of a key person connected with the business.
The examination fee increase amounts to $2.19 per hour. It does not keep pace with inflation since the last hourly fee amount was adopted. The total is less than the amount charged to some other licensees (e.g., money services businesses pay $75 per hour). It is the minimum amount required to cover examination costs, which is the standard the department is required to use.
Enhanced disclosure is required to make key features of the amended act meaningful to consumers. These amendments include a right to rescind a loan, and the right to convert their loan to an installment payment plan after their fourth successive loan. For these rights to be meaningful, borrowers and potential borrowers must be informed that they exist.
The shortened period for informing the department of the occurrence of significant developments affecting the integrity and viability of the business will allow the department to take more timely regulatory action if appropriate. The current deadline of thirty days is long enough for significant harm to consumers to occur. The shorter time period will impose a minimal hardship on licensee.
For these reasons a reduction of these substantive regulatory requirements would be inappropriate.
(b) Simplifying, reducing or eliminating record-keeping and reporting requirements: In accordance with the requirements of RCW 19.85.030 the agency reduced the reporting and record-keeping requirements proposed by the original rule. The old rule proposal required special reports to the director from all licensees holding a small loan endorsement. The special reports were due not later than ninety days following receipt of the request. The special reports included (but were not limited to) the following information:
1. Transaction data concerning numbers of borrowers, frequency of borrowing, size and volume of transactions, transaction period, and such other data necessary to understand business volume and licensee's market;
2. Technology and systems information including process, practices, software, data capture, and any means of conducting business with consumers;
3. Repayment methods, funds delivery methods, automatic clearing house utilization methods and data, and such other information related to the receipt and delivery of funds in consumer transactions as is deemed necessary to understand and regulate licensees;
4. Any company financial information, business organization information, or policies, procedures and practices.
The rule, as filed with the CR-102 on September 7, 2005, requires reporting from most of the small loan endorsement market, but does not require this reporting for small businesses holding small loan endorsements. The new proposed rule requires that licensees with small loan endorsements with total loan volume in principal of over ten million provide the following information yearly to the department. This information is limited to the number of loans per borrower for the period; the number of loans per active military borrower during the period; and the number of loans with terms in each of the following categories for the year: One to seven days; eight to fourteen days; fifteen to twenty-one days; twenty-two to thirty-one days; thirty-two or more days. By requesting much less information in the report, and by reducing the number of licensees required to report, the department has significantly reduced reporting and record-keeping requirements. In addition, the reporting requirements only apply to the larger licensees which usually have the necessary technology to comply with reporting.
Other reporting and record-keeping requirements that are added by the proposed rule are fundamental to the task of regulating and monitoring this comparatively young industry, particularly the small loan part of the industry. Some requirements are for the purpose of demonstrating compliance with statutory duties. For example, RCW 31.45.088 imposes several disclosure requirements on licensees advertising and making small loans. Monitoring compliance with this section would be impossible without the requirement of maintaining appropriate information as required by this proposal.
The reporting and record-keeping requirements that remain unchanged are essential to the monitoring and enforcement mission of the department.
(c) Reducing the frequency of inspections: The statute does not require any particular examination frequency. The current rule requires an examination of each licensee at least every twenty-four months. WAC 208-630-015. The proposed rule eliminates that requirement, and authorizes examinations at any time. In practice, examinations are concentrated on those licensees with identified compliance problems and those that are targeted through consumer complaints. Compliant, well run, complaint-free licensees experience less frequent examinations. To alter that pattern to achieve an overall less frequent exam pattern would be contrary to the department's primary duty to protect consumers from higher risk licensees.
(d) Delaying compliance timetables: Compliance duties connected to time periods are the reporting requirements. WAC 208-630-090(7) retains the current authority of the director to extend the time for compliance upon a written request and good cause shown.
(e) Reducing or modifying fine schedules for noncompliance: The only "fine" or monetary penalty for noncompliance in the proposed rule is the late fee of 25% of the annual assessment for filing the annual assessment late. Various amounts were considered, but it was decided this is the lowest amount likely to deter late filing.
ELEMENT 6. A description of how the agency will involve small business in the development of the proposed rule.
RESPONSE: The agency has appointed an advisory panel composed of industry representatives and consumer advocates to review and assist in developing the proposed rule.
The agency has provided a copy of the CR-101 to all interested persons and all licensees. It will also provide access to those same parties when the CR-102 is filed.
ELEMENT 7. A list of the industry(ies) affected by the proposed rule.
RESPONSE: The industry affected by the proposed rule is check cashers, check sellers and payday loan lenders. Check cashers and sellers must obtain a license before engaging in business. Payday lenders must first obtain a check casher/seller license and then obtain an endorsement that permits them to make payday loans. Not all licensees provide all three services.
A copy of the statement may be obtained by contacting [Catherine Mele-Hetter, 150 Israel Road S.W., Tumwater, WA 98501, (360) 902-0515.]
A cost-benefit analysis is not required under RCW 34.05.328. It is not applicable to these rules.
September 6, 2005
Chuck Cross
Division Director
OTS-8301.2
NEW SECTION
WAC 208-630-110
What definitions are required to
understand these rules?
The definitions in RCW 31.45.010 and
this section apply throughout this chapter unless the context
clearly requires otherwise.
"Act" means chapter 31.45 RCW.
"Affiliate" means any person who directly or indirectly through one or more intermediaries, controls, or is controlled by, or is in common control with another person.
"Agent" for purposes of RCW 31.45.079 means a person who, pursuant to the terms of a written agreement and for compensation, performs small loan agent services on behalf of an exempt entity.
"Board director" means a director of a corporation or a person occupying a similar status and performing a similar function with respect to an organization, whether incorporated or unincorporated.
"Close of business" for the purposes of RCW 31.45.86 and these regulations means the actual time a licensee closes for business at the location from which a small loan was originated or 11:59 p.m. Pacific Time, whichever is earlier.
"Department" means the department of financial institutions.
"Exempt entity" means a person described in RCW 31.45.020 that is engaged in the business of making small loans.
"Investigation" means an examination undertaken for the purpose of detecting violations of chapter 31.45 RCW or these rules or obtaining information lawfully required under chapter 31.45 RCW or these rules.
"License" means a license issued by the director to engage in the business of check cashing or check selling under the provision of chapter 31.45 RCW.
"Monetary instrument" means a check, draft, money order or other commercial paper serving the same purpose.
"Payday advance lender" or "payday lender" means a licensee under this chapter who has obtained a small loan endorsement under RCW 31.45.073.
"Payday advance loan," "payday loan" or "deferred deposit loan" means the same as a small loan.
"Postdated check" means a check delivered prior to its date, generally payable at sight or on presentation on or after the day of its date. "Postdated check" does not include any promise or order made or submitted electronically by a borrower to a licensee.
"RCW" means the Revised Code of Washington.
"Small loan agent services" means all or substantially all of the following services:
(1) Marketing and advertising small loans;
(2) Taking small loan applications;
(3) Assisting customers in completing small loan documentation;
(4) Providing required disclosures;
(5) Disbursing small loan proceeds;
(6) Collecting small loans;
(7) Retaining documents and records; and
(8) Making reports.
"State" means the state of Washington.
"Unsafe or unsound financial practice" means any action, or lack of action, the likely consequences of which, if continued, would impair materially the net worth of a licensee or create an abnormal risk of loss to its customers.
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LICENSING REQUIREMENTS
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(1) An application in a form prescribed by the director including at least the following information:
(a) The legal name, residence, and business address of the applicant if the applicant is an individual or sole proprietorship, and in addition, if the applicant is a partnership, corporation, limited liability company, limited liability partnership, trust, company, or association, the name and address of every member, partner, officer, controlling person, and board director;
(b) The trade name or name under which the applicant will do business under the act;
(c) The street and mailing address of each location in which the applicant will engage in business under the act;
(d) The location at which the applicant's records will be kept; and
(e) Financial statements and any other pertinent information the director may require with respect to the applicant and its board directors, officers, trustees, members, or employees, including information regarding any civil litigation filed within the preceding ten years against the applicant or controlling person of the applicant;
(2) A surety bond and related power of attorney, or other security acceptable to the director in an amount equal to the penal sum of the required bond as set forth in this rule. In lieu of the bond, the applicant may demonstrate to the director net worth in excess of three times the amount of the penal sum of the required bond in accordance with RCW 31.45.030 (5)(b) and (e) and this rule;
(3) A current financial statement as of the most recent quarter end prepared in accordance with generally accepted accounting principles which includes a statement of assets and liabilities and a profit and loss statement;
(4) Information on the applicant's or any affiliate's current or previous small loan or related type business in this state or any other state, including, but not limited to, name, address, city, state, licensing authority, and whether any enforcement action is pending or has been taken against the applicant in any state;
(5) Upon request, a complete set of fingerprints and a recent photograph of each sole proprietor, owner, director, officer, partner, member, and controlling person; and
(6) An application fee.
Any information in the application regarding a personal residential address or telephone number, 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 disclosure requirements of chapter 42.17 RCW.
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| Highest Monthly Liability* |
Required Bond |
Plus Percentage of Excess |
| Up to $50,000 | Highest Monthly Liability or $10,000, whichever is greater |
$0 |
| $50,001 to $100,000 | $50,000 | .5 above $50,000 |
| $100,001 and above | $75,000 | .25 above $100,000 |
| * | The monthly liability is the total sum of checks for a given month. The "highest monthly liability" shall be determined by multiplying the highest monthly liability of checks from the preceding calendar year by seventy-five percent. |
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(1) Time deposit. An assignment in favor of the director of a certificate of deposit. The certificate of deposit must be issued by a financial institution in the state whose deposits or shares are insured by an agency of the government of the United States. The depositor is entitled to receive all interest and dividends on the certificate of deposit.
(2) Demonstration of net worth. A licensee or applicant for a small loan endorsement may demonstrate net worth in excess of three times the amount of the required bond. The licensee shall notify the director within ten business days of any date upon which its net worth decreases below the required amount. A licensee that fails to maintain the required level of net worth and continues to operate under a small loan endorsement will be required to immediately obtain a surety bond and maintain it for five years after the date of noncompliance. During this five-year period, the director will not accept a demonstration of net worth in lieu of a surety bond.
(3) Reports required. A licensee that maintains net worth in lieu of a surety bond shall submit annually to the director an audited financial statement and within forty-five days after the close of each quarter a supplementary year-to-date financial statement prepared in accordance with generally accepted accounting principles. The financial statements must include at a minimum a statement of assets and liabilities and a profit and loss statement. The director may continue to require other documents, agreements or information necessary to properly evaluate and ensure that the licensee remains in compliance with this section.
(4) Bad debts and judgments. A licensee that maintains net worth in lieu of a surety bond may not consider bad debts and certain judgments as assets. The director may approve exceptions in writing. The licensee must charge off its books any debt upon which any payment is six months or more past due. The licensee may not count as an asset any judgment more than two years old which has not been paid. Time consumed by an appeal from a judgment is not counted in the two-year limit.
(5) Noncompliance. A licensee that does not comply with this section must obtain and file with the director a surety bond in the required amount in WAC 208-630-030 by the date specified by the director.
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(a) An applicant for a license or small loan endorsement under chapter 31.45 RCW; or
(b) A controlling person of an applicant for a license under chapter 31.45 RCW.
(2) The director may deny, suspend or revoke a license if the applicant, licensee, or controlling person of the applicant or licensee fails to provide a complete set of fingerprints and a recent photograph on request.
(3) All criminal history record information received by the director is confidential information and is for exclusive use of the director and the division of consumer services. Except on court order or as provided by subsection (4) of this section, or otherwise provided by law, the information may not be released or otherwise disclosed to any other person or agency.
(4) The director may not provide a person being investigated under this section with a copy of the person's criminal history record obtained pursuant to subsection (1) of this section. This subsection does not prevent the director from disclosing to the person the dates and places of arrests, offenses, and dispositions contained in the criminal history records.
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LICENSING FEES
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(a) New license applications;
(b) Small loan endorsement applications;
(c) Additional locations;
(d) Change of control;
(e) Relocation of office;
(f) Voluntary or involuntary liquidation of licensee.
(2) The director may require a lump sum payment in advance to cover the anticipated cost of review and investigation of the activities described in this section.
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If the deposit fee does not cover the costs of investigation and processing, the applicant will pay for any additional cost, which will be itemized and billed by the director.
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EXAMINATION AND INVESTIGATIONThe director or designee may at any time examine the records and documents used in the business of any licensee or licensee's agent wherever located.
The director or designee may examine the records and documents of any person the director believes is engaging in unlicensed business governed by chapter 31.45 RCW wherever located.
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(1) Obtain access, during reasonable business hours, to the offices and places of business, books, accounts, papers, files, records, computers, safes and vaults of any person in possession of information relevant to the examination;
(2) Interview any person the director or designee believes has information relative to the examination, including, but not limited to, any party to the transaction;
(3) Obtain statements in writing by any person, under oath or otherwise, as to all facts and circumstances concerning the matters under examination;
(4) Require the production of copies of any items in subsection (1) of this section;
(5) Require assistance and cooperation, from any licensee or employee or agent of any licensee under examination with respect to the conduct and subject matter of the examination;
(6) Conduct meetings and exit review with owners, managers or employees of the licensee being examined;
(7) Require a response from the subject of the examination.
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(1) Have access to any location where records of the subject of the investigation are located, including offices, places of business, commercial storage facilities, computers, safes and vaults for the purposes of obtaining, reviewing or copying books, accounts, papers, files, or records, including electronic records, or records in any format;
(2) Administer oaths and affirmations;
(3) Subpoena witnesses and compel their attendance at a time and place determined by the director or designee, and compel their testimony regarding any matter related to an investigation or examination under chapter 31.45 RCW or these rules, including:
(a) Testimony regarding the existence, description, nature, custody, condition and location of any relevant evidence;
(b) The identity and location of persons having knowledge of any matter related to the investigation; and
(c) Any matter reasonably calculated to lead to the discovery of material evidence.
(4) Subpoena the production of any books, records in any format, documents or other tangible things, or physical or documentary evidence or matter;
(5) Conduct oral examination, under oath or otherwise, publicly or privately, of any controlling person, employee, agent or independent contractor of a licensee;
(6) Conduct oral examination, under oath or otherwise, publicly or privately, of any person whose testimony is deemed relevant to the investigation;
(7) Copy, or request to be copied, any items described in subsection (1) of this section, or if the director or designee determines that:
(a) There is danger that original records may be destroyed, altered, or removed denying the director access; or
(b) Original documents are necessary for the preparation of criminal referral or trial, the director may take possession of originals of any items described in subsection (1) of this section, regardless of the source of such items. Originals and/or copies taken by the director may be held, returned, or forwarded to other regulatory or law enforcement officials as determined necessary by the director or designee.
(8) Conduct analysis and review of any items described in subsection (1) of this section;
(9) Require assistance, as necessary, from any employee or person subject to investigation under this section with respect to the conduct and subject matter of the investigation;
(10) Conduct meetings and exit reviews with owners, managers, officers, or employees of any person subject to investigation or examination under this chapter;
(11) Conduct meetings and share information with other regulatory or law enforcement agencies; and
(12) Prepare and deliver, as deemed necessary, a report of investigation requiring a response from the recipient.
The director may investigate the business and records of any person who the director has reason to believe is engaging in business which requires a license under chapter 31.45 RCW.
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(2) The director may order the retention of such professionals and specialists as auditors, or investigators to conduct, or assist in the conduct of audits or investigations. Unless the director determines that the person investigated is not required to hold a license or otherwise should not bear the cost, the actual cost of these services will be borne by the person who is the subject of the audit, or investigation.
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ASSESSMENTS AND REPORTING REQUIREMENTS(2) The annual assessment rate is:
(a) For check cashers:
(i) If the volume of checks cashed is one million dollars or less, there is no annual assessment;
(ii) If the volume of checks cashed is over one million dollars, the annual assessment is five hundred thirteen dollars and ninety-five cents per licensed location.
(b) For check sellers:
(i) If the volume of checks sold is one million dollars or less, there is no annual assessment;
(ii) If the volume of checks sold is over one million dollars, the annual assessment is five hundred thirteen dollars and ninety-five cents per licensed location.
(c) For licensees with small loan endorsements, in addition to (a) and/or (b) of this subsection:
(i) If the volume of small loans made is one million dollars or less, there is no annual assessment;
(ii) If the volume of small loans made is over one million dollars, the annual assessment is five hundred thirteen dollars and ninety-five cents per licensed location.
(3) For purposes of this section, "volume" includes all transactions made under this chapter and chapter 31.45 RCW by a Washington licensed check casher or check seller at all licensed locations.
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(1) Pays both the annual assessment fee and the late fee; and
(2) Attests under penalty of perjury that it did not engage in conduct requiring a license under this chapter during the period its license was expired. The director may confirm the licensee's attestation by an investigation.
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(1) On July 1, 2005, the fee and assessment rates as increased in the prior fiscal year, will increase by a percentage rate equal to the fiscal growth factor for the then current fiscal year. As used in this section, "fiscal growth factor" has the same meaning as the term is defined in RCW 43.135.025. However, there will be no rate increase under this subsection (1) for assessments described in WAC 208-630-022 (2)(a)(i), (b)(i) and (c)(i).
(2) The director may round off a rate increase under subsection (1) of this section. However, no rate increase may exceed the applicable fiscal growth factor.
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(1) The consumer services program fund exceeds the projected acceptable minimum fund balance level approved by the office of financial management; and
(2) That such course of action would be fiscally prudent.
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(1) Licensee filing for bankruptcy or reorganization.
(2) Notification of the initiation of license revocation procedures in any state against the licensee.
(3) The filing of criminal charges or a criminal indictment or information, in any way related to check cashing, check selling or small loan activities of the licensee, key officer, board director, or controlling person, including, but not limited to, the handling and/or reporting of moneys received and/or instruments sold.
(4) A licensee, sole proprietor, owner, director, officer, partner, member or controlling person being convicted of a crime.
(5) A change of control. In the case of a corporation, control is defined as a change of ownership by a person or group acting in concert to acquire ten percent of the stock, or the ability of a person or group acting in concert to elect a majority of the board directors or otherwise effect a change in policy of the corporation. The director may require such information as deemed necessary to determine whether a new application is required. In the case of entities other than corporations, change in control shall mean any change in controlling persons of the organization either active or passive. Change of control investigation fees shall be billed to the persons or group at the rate billed for applications.
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REQUIREMENTS FOR CHECK CASHING AND MAKING SMALL LOANS (PAYDAY LENDING)Licensees may rely upon an applicant representation regarding the applicant's military status, and are not required to conduct an independent investigation regarding military status.
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(1) The origination date of the loan;
(2) The principal of the loan;
(3) The manner in which the loan is to be repaid, including a statement of whether any check held in connection with a small loan may be redeemed in cash and if so, a statement of the date and time after which the licensee may choose not to permit redemption;
(4) The termination date of the loan;
(5) The dollar amount of fees and the method of calculating fees;
(6) The annual percentage rate as defined in the federal Truth in Lending Act; and
(7) The signature or electronic signature of the borrower.
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(1) Equal to the total amount of the payment plan divided by the number of payments (subject to reasonable rounding); and
(2) Due at substantially equivalent intervals. For example, a sixty-day, three hundred fifty dollar payment plan entered into on May 1 providing for payments of one hundred twenty dollars on May 20, one hundred twenty dollars on June 11, and one hundred ten dollars on June 29, complies with this rule.
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(2) A licensee must deliver to the borrower at the time the licensee makes the small loan a disclosure of the right to rescind the loan and the right to convert the loan to a payment plan.
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Your right to a payment plan.
If this is your fourth (or greater) successive loan, and if you are not in default, you may convert your loan to a payment plan with us. "Successive loans" means loans made to you by us with no more than three business days between the repayment in full of one loan and the beginning date of the next loan.
A payment plan will allow you, by paying a one time fee equal to the finance charge on your loan, to pay all that you owe in at least three payments over a period of at least sixty days.
Your right to rescind (cancel) this loan. You have the right to rescind (cancel) this loan by returning the amount of the loan in cash, or returning the check given to you by us to our office by the close of business on our next business day following the date of this loan. We may not charge you for canceling the loan and we will return to you any postdated check or electronic equivalent you have given to us.
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(1) A licensee must maintain a record of transactions conducted. Such a record may be limited to the following provided a sufficient audit trail is available through records obtainable from the licensee's bank of account:
(a) Amount of the checks cashed;
(b) Amount of fees charged for cashing the check;
(c) Amount of cash deducted from the transaction for the sales of other services or products;
(d) Amount of each check or monetary instrument sold;
(e) Amount of fee charged for the monetary instrument;
(f) Amount of small loan proceeds disbursed;
(g) Fees charged for small loans;
(h) Amount of payments on small loans received;
(i) Origination date of each small loan;
(j) Termination date of each small loan;
(k) Payment plan payment due dates;
(l) The information required to be maintained for applications in the rule.
(2) Licensees must maintain a cash reconciliation summarizing each day's activity and reconciling cash on hand at the opening of business to cash on hand at the close of business. Such reconciliation must separately reflect cash received from the sale of checks, redemption of returned items, bank cash withdrawals, cash disbursed in cashing of checks, cash disbursed in making small loans, cash received in payment of small loans and bank cash deposits.
(3) Records of the disbursement of loan proceeds and the receipt of all payments on the balance of small loans must be kept and must indicate the date of the transaction, the borrower's name, amount, and whether the disbursement or payment is on a loan or payment plan.
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(1) Chapter 63.29 RCW, the Uniform Unclaimed Property Act; and
(2) The federal Truth in Lending Act.
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Each licensee shall implement an antimoney laundering program that includes the development of internal policies, procedures and controls, training of employees, the appointment of a compliance officer, and the appointment of an external reviewer of the antimoney laundering program if required by 31 U.S.C. Section 5318(h).
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(1) Agree with the borrower for the payment of fees for a credit report received from a recognized credit reporting company when the licensee pays these fees to an unaffiliated third party for services. In no event may the fee exceed the actual cost charged by the provider of the credit report.
(2) Charge or collect a fee equal to or less than twenty-five dollars for a check returned unpaid by the bank drawn upon. Only one fee may be collected with respect to a particular check even if it has been redeposited and returned more than once.
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(1) The total number of employees and annual payroll during the period;
(2) The total number and dollar volume of transactions during the period;
(3) The total dollar amount of fees collected during the period;
(4) The total number and dollar amount of undeposited checks taken or held in connection with check cashing and small loan endorsement business at the end of the period;
(5) The total number and dollar amount of returned (NSF) checks taken or held in connection with check cashing and small loan business at the end of the period, and the total dollar amount of fees collected for returned (NSF) checks during the period;
(6) The total number and dollar amount of charge-offs (losses), net of any recoveries, for the period;
(7) The total dollar amount of net income before and after taxes earned under authority of this chapter.
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(1) The total dollar volume of checks cashed during the period, if applicable; and
(2) The total dollar volume of checks sold during the period, if applicable.
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(1) The total dollar volume of small loans made during the period, including payment plan loans;
(2) The total number of loans made for the period;
(3) The total number of borrowers for the period;
(4) The number of borrowers whose accounts were referred to collection agencies;
(5) The number of loans rescinded during the period;
(6) The number of borrowers entering into a payment plan;
(7) The number of loans made to borrowers to be paid through an ACH (automated clearing house) or other electronic transaction;
(8) The number of loans made to borrowers through other than a physical visit to the licensee's location (e.g., internet, telephone, etc.); and
(9) The number of active military borrowers during the period.
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(1) The number of loans per borrower for the period;
(2) The number of loans per military borrower during the period; and
(3) The number of loans with terms in each of the following categories for the period:
(a) One to seven days;
(b) Eight to fourteen days;
(c) Fifteen to Twenty-one days;
(d) Twenty-two to thirty-one days; and
(e) Thirty-two or more days.
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(2) A licensee is prohibited from allowing the bank of account to charge back checks or drafts deposited to the trust account and subsequently dishonored against said trust account.
(3) A licensee, whose license has been suspended, terminated, or not renewed, shall not make withdrawals from the trust account without the director's consent, until a closing report has been received according to these rules.
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The following sections of the Washington Administrative Code are repealed:
| WAC 208-630-005 | Definitions. |
| WAC 208-630-010 | Application deposit fee. |
| WAC 208-630-015 | Examinations. |
| WAC 208-630-020 | Schedule of fees paid by licensees and applicants. |
| WAC 208-630-021 | Application review and investigation fee. |
| WAC 208-630-022 | Annual assessment charge. |
| WAC 208-630-023 | Examination fees. |
| WAC 208-630-02303 | Fee increase. |
| WAC 208-630-02305 | Waiver of fees. |
| WAC 208-630-025 | Application for small loan endorsement to a check casher or check seller license. |
| WAC 208-630-030 | Surety bond. |
| WAC 208-630-035 | Alternatives to the surety bond. |
| WAC 208-630-040 | Access to criminal history information. |
| WAC 208-630-050 | Issuance of license or small loan endorsement. |
| WAC 208-630-060 | Disclosure of significant developments. |
| WAC 208-630-065 | The note. |
| WAC 208-630-068 | Contents of disclosure statement to borrower. |
| WAC 208-630-070 | Accounting and financial records. |
| WAC 208-630-075 | Monetary instruments -- Deposit requirements. |
| WAC 208-630-080 | Licensees are required to comply with federal and state laws including but not limited to the following. |
| WAC 208-630-085 | Licensee with small loan endorsement -- Powers -- Restrictions. |
| WAC 208-630-090 | Audit report by licensee -- Financial statements. |
| WAC 208-630-095 | Knowledge of the law and regulations. |
| WAC 208-630-100 | Trust accounts -- Limitations and prohibitions. |