SB1413

Report Title:

Check Cashing; Deferred Deposits

Description:

Amends the deferred deposit check cashing provisions of section 480F. Increases the penalties for violation of the Act. Implements a licensure requirement for deferred deposit check cashing businesses.

THE SENATE	S.B. NO.	1413
TWENTY-THIRD LEGISLATURE, 2005
STATE OF HAWAII

A BILL FOR AN ACT

RELATING TO CHECK CASHING.

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

SECTION 1. Chapter 480F, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§480F- Information and annual reports. (a) Each check casher shall keep and use books, accounts, and records that will enable the director to determine if the check casher is complying with the provisions of this chapter, and shall keep other records as the director requires.

(b) Each check casher shall file an annual report with the department on or before the last day of March for the calendar year ending as of December 31st of the previous year, referred to in this section as the reporting period. The report shall be made on forms prescribed by the director, and shall be verified by the oath or affirmation of the owner, manager, or president of the check casher. The report shall disclose in detail:

(1) The check casher's resources, assets, and liabilities at the beginning and the end of the reporting period;

(2) The check casher's income, expense, gain, loss, and a reconciliation of its surplus or net worth with the balance sheets, and the ratio of the profits to the assets reported;

(3) The total number of deferred deposit agreements made during the reporting period;

(4) The total number of outstanding deferred deposit agreements;

(5) The minimum, maximum, and average dollar amount of all checks that were the subjects of a deferred deposit agreement;

(6) The average annual percentage rate and the average number of days the deposit of a check was deferred;

(7) The total number and dollar amounts of returned checks, the total number and dollar amounts of checks recovered, and the total number and dollar amounts of checks charged off during the reporting period; and

(8) Verification that the check casher has not used the criminal process, or caused the criminal process to be used, in the collection of any deferred deposits, or used any civil process to collect the payment of deferred deposits not generally available to creditors to collect on loans in default.

(c) The director shall compile annual reports of deferred deposit agreements from the information provided under this section, and shall provide a copy to the governor and the legislature. Annual reports shall be available to interested parties and to the general public.

(d) Each check casher shall file a copy of the agreement described in section 480F-4 with the director prior to the date of commencement of business at each location, and at the time as revisions are made to the agreement."

SECTION 2. Chapter 480F, Hawaii Revised Statutes, is amended by adding a new section to be appropriately designated and to read as follows:

"§480F- Prohibited acts. No check casher shall:

(1) Include in the agreement required in section 480F-4 any of the following provisions:

(A) A hold harmless clause;

(B) A confession of judgment clause;

(D) A mandatory arbitration clause;

(E) Any assignment of or order for payment of wages or other compensation for services;

(F) A provision in which the consumer agrees not to assert any claim or defense arising out of the agreement;

(G) A waiver of any provision of this chapter; or

(2) Sell any insurance of any kind whether or not sold in connection with the making or collecting of a deferred deposit loan."

SECTION 3. Section 480F-1, Hawaii Revised Statutes, is amended by adding a new definition to be appropriately inserted and to read as follows:

""Director" means the director of commerce and consumer affairs."

SECTION 4. Section 480F-2, Hawaii Revised Statutes, is amended to read as follows:

"[[]§480F-2[]] Posting and notice of fees charged. Any person who cashes one or more checks for a fee shall:

(1) Post in a conspicuous place in every location at which the person does business a notice that sets forth:

(A) The fees charged for cashing a check, for selling or issuing a money order, [~~and~~] for the initial issuance of any membership or identification cards, and for deferred deposits; and

(B) That consumer complaints about the check cashing business may be filed with the department of commerce and consumer affairs, and includes and identifies the telephone number of the consumer information service of the department of commerce and consumer affairs;

(2) Provide written notice to each customer of the fees charged for cashing checks and for deferred deposits that is separate from and in addition to any posted notice;

(3) Obtain a written acknowledgment from the customer that written notice of the fees charged for cashing checks and for deferred deposits was provided; and

(4) Provide each customer a receipt documenting any and all fees charged[.], and documenting the balance owed each time the customer makes a payment."

SECTION 5. Section 480F-4, Hawaii Revised Statutes, is amended to read as follows:

"§480F-4 Deferred deposits, when allowed. (a) No check casher may defer the deposit of a check except as provided in this section.

(b) Each deferred deposit shall be made pursuant to a written agreement that has been signed by the customer and the check casher or an authorized representative of the check casher. The written agreement shall provide the name, address, and telephone number of the check casher, and the name and title of the authorized representative who signs the agreement on behalf of the check casher. The written agreement shall contain a statement of the total amount of any fees and interest charged for the deferred deposit, expressed both in United States currency and as an annual percentage rate[.] not to exceed thirty-six percent per annum, and a clear description of the customer's payment obligations. As used in this section, per annum is defined as a three hundred sixty-five day year. The written agreement shall authorize the check casher to defer deposit of the personal check until a specific date [~~not later than thirty-two days~~] calculated as a minimum of two weeks for each $50 of the face amount of the check from the date the written agreement was signed. The written agreement shall include a statement that the check casher is prohibited from using the criminal process to collect the deferred deposit should the check be passed on insufficient funds. The written agreement also shall include a statement in at least fourteen point bold typeface located immediately preceding the customer's signature "You cannot be prosecuted in criminal court to collect this loan." The written agreement shall not permit the check casher to accept collateral.

(c) The face amount of the check shall be at least $50, and shall not exceed [~~$600~~] $300 and the deposit of a personal check written by a customer pursuant to a deferred deposit transaction [~~may~~] shall be deferred for a minimum term of no less than two weeks for each $50 of the face amount of the check [~~no more than thirty-two days~~]. A check casher may charge a fee for deferred deposit of a personal check in an amount not to exceed [~~fifteen per cent of the face amount of the check.~~]$5. Any fees charged for deferred deposit of a personal check in compliance with this section shall be exempt from chapter 478.

(d) A check casher shall not enter into an agreement for deferred deposit with a customer during the period of time that an earlier agreement for a deferred deposit for the same customer is in effect. A deferred deposit transaction shall not be repaid, refinanced, or consolidated by or with the proceeds of another deferred deposit transaction.

(e) A check casher who enters into a deferred deposit agreement and accepts a check passed on insufficient funds, or any assignee of that check casher, shall not be entitled to recover damages in any action brought pursuant to or governed by chapter 490. Instead, the check casher may charge and recover a fee for the return of a dishonored check in an amount not greater than [~~$20.~~] $15.

(f) No amount in excess of the amounts authorized by this section and no collateral products such as insurance shall be directly or indirectly charged by a check casher pursuant or incident to a deferred deposit agreement.

(g) Upon receipt of a check pursuant to a deferred deposit agreement the check casher shall immediately stamp the back of the check with an endorsement that states "This check is being negotiated as part of a deferred deposit loan pursuant to HRS section 480F and any holder of this check takes it subject to all claims and defenses of the maker."

(h) A customer shall be permitted to make partial payments in increments of at least $5 toward the face value of the deferred deposit check. The check casher shall provide each customer a receipt documenting the amount paid and the balance owed.

(i) Unearned interest charges resulting from repayment of a deferred deposit before its due date must be rebated to the consumer based on a method at least as favorable to the consumer as the actuarial method would be.

(j) Prior to entering into a deferred deposit agreement, the check casher shall provide each customer with a pamphlet prepared by the director, or at the direction of the director, that explains in plain English as well as other languages in which a significant amount of deferred deposit business is conducted, that:

(1) Explains all of the consumer's rights and responsibilities in a deferred deposit transaction;

(2) Includes the telephone number of the consumer information service of the department of commerce and consumer affairs for concerns or complaints by consumers; and

(3) Informs consumers that the consumer information service of the department of commerce and consumer affairs can provide information about whether complaints have been filed, and the resolution of such complaints."

SECTION 6. Section 480F-5, Hawaii Revised Statutes, is amended to read as follows:

"[[]§480F-5[]] Exemptions. This chapter shall not apply to:

(1) Any person who is principally engaged in the bona fide retail sale of goods or services, and who, either as incident to or independent of the retail sale or service, from time to time cashes items for a fee or other consideration, where not more than $2[~~, or two per cent of the amount of the check, whichever is greater,~~] is charged for the service;

(2) Any person authorized to engage in business as a bank, trust company, savings bank, savings and loan association, financial services loan company, or credit union under the laws of the United States, any state or territory of the United States, or the District of Columbia[.], to the extent that each is exempt from the provisions of this Act regarding limitations on interest rates and fees, provided however that all other provisions shall apply."

SECTION 7. Section 480F-6, Hawaii Revised Statutes, is amended to read as follows:

"[[]§480F-6[]] Penalties. (a) Any person who violates this chapter shall be deemed to have engaged in an unfair or deceptive act or practice in the conduct of any trade or commerce within the meaning of section 480-2(a). Aggrieved consumers may seek those remedies set forth in section 480-13(b).

(b) Any person who is not a consumer and is injured by a wilful violation of the chapter may bring an action for the recovery of damages, a proceeding to restrain and enjoin those violations, or both. If judgment is for the plaintiff, the plaintiff shall be awarded a sum not less than $1,000 or threefold damages, whichever sum is greater, for each violation, to be increased by the director to reflect inflation, and reasonable attorneys' fees together with the costs of suit.

(c) A wilful violation of this chapter shall be punishable by a fine of up to [~~$500~~] $1000 and up to [~~thirty days~~] six months imprisonment[.] or both.

(d) A customer who enters into a written deferred deposit agreement and offers a personal check to a check casher pursuant to that agreement shall not be subject to any criminal penalty for failure to comply with the terms of that agreement unless the check is dishonored because the customer closed the account or stopped payment on the check.

(e) The civil remedies provided in this section are cumulative.

(f) The violation of any provision of this chapter, except as the result of accidental or bona fide error of computation, renders the deferred deposit agreement void, and the check casher shall have no right to collect, receive, or retain any principal, interest, or other charges whatsoever in connection with it."

SECTION 8. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 9. This Act shall take effect upon its approval.

INTRODUCED BY:	_____________________________