What
is the Deferred Presentment Service Transactions Act?
2005 PA 244 creates a new act entitled
the Deferred Presentment Service Transactions Act (DPSTA), to provide a
regulatory framework for the deferment of the presentment (depositing) of
checks by deferred presentment providers (Industry also calls these providers
‘payday lenders’).
Who
is subject to the DPSTA?
Beginning June 1, 2006, all entities
providing deferred presentment services must obtain the appropriate license
from OFIR and comply with the provisions of the DPSTA. A separate
license is required for each location from which the business of providing
deferred presentment service transactions is conducted.
Who
is NOT subject to the DPSTA?
The act does not
apply to a state or nationally chartered bank or a state or federally chartered
savings and loan association, savings bank, or credit union whose deposits
or member accounts are insured by an agency of the United States government.
Can
the Commissioner conduct an investigation or examination of a licensee?
Yes.
How
long must a licensee or any person subject to the act maintain its financial
records and other records that OFIR can examine or investigate?
For at least three years.
What
is the minimum term of a deferred presentment transaction?
Seven days.
How
many deferred presentment transactions can a consumer have open with one
licensee at any one time?
One.
How
many deferred presentment transactions can a consumer have open at any one
time?
Two. A consumer may have a total
of two transactions open at any one time, but not more than one transaction
with the same licensee.
What
is the maximum deferred presentment transaction amount?
$600. A consumer can have two separate
open transactions each in the amount of $600 or less.
What
is the service fee that a licensee may assess to a customer on a deferred
presentment transaction?
For a deferred transaction in the amount
of $600, a service fee in the amount of $76 may be charged. This is
broken down into:
1.
15% for the first $100
2.
14% for the second $100
3.
13% for the third $100
4.
12% for the fourth $100
5.
11% for the fifth $100
6.
11% for the sixth $100
For a $100 deferred presentment transaction
the fee is calculated as $15.
For a $250 deferred presentment transaction
the fee is calculated as $15+$14+$6.50=$35.50.
For a $600 deferred presentment transaction
the fee is calculated as $15+$14+$13+$12+$11+$11=$76.
What
is the verification fee that a licensee may assess to a customer on a deferred
presentment transaction?
$0.45
Is
a licensee required to pay the proceeds of a deferred presentment transaction
to a consumer by check, by money order, or in cash, as requested by the
consumer?
The act requires a licensee to pay the
proceeds of a deferred presentment transaction to a consumer by check, by
money order, or in cash, as requested by the consumer.
Who
is Veritec Solutions, LLC?
Veritec Solutions, LLC (“Veritec”)
is the approved deferred presentment database provider authorized by the
Commissioner to accept and maintain deferred presentment transactions.
Veritec maintains a customer care center, which may be contacted at 1-866-643-7701.
Are all licensed deferred presentment providers required to enter all deferred presentment transactions into the Veritec database?
Yes.
How
does a licensee handle a consumer complaint?
The licensee must enter the complaint
into the Veritec database. The licensee must enter the nature of the
violation, whether the licensee agrees or disagrees that a violation occurred,
a detailed response to the complaint and if restitution was paid to the
consumer.
Can
a deferred presentment service transaction remain open in the State Database
(Veritec) if all the customer owes is the $25.00 returned check charge?
No. The transaction is to be closed
upon repayment of the underlying transaction debt. A deferred presentment
transaction is defined as closed when the licensee receives payment of the
face amount of the check.
If
a customer only owes the $25.00 returned check charge on a deferred presentment
service transaction, can the customer pay the $25.00 returned check charge
with the proceeds of a new deferred presentment service transaction?
Yes. The new deferred presentment
transaction cannot exceed the normal transaction amount and charges required
under the DPSTA
Can
a licensee hold a customer's check beyond the maturity due date and contact
the customer requesting cash to pay off the deferred presentment transaction?
A customer is permitted to redeem a check
by paying cash or its equivalent to the licensee before the maturity date.
After receiving such a payment, the licensee is obligated to return the
check to the drawer. However, if the customer does not redeem the
check before the maturity date, the check must be presented for payment
unless the licensee extends the deferred presentment service agreement under
Section 35(1) of the Deferred Presentment Service Transactions Act.
However, both parties would have to agree to extend the deferred present
service agreement. In no circumstances can the agreement be extended
beyond 31 days.
Can
a licensee delay the autoclose of a deferred presentment transaction?
Yes. A licensee may extend the
maturity date in the Veritec database if there is an agreement to extend
the deferred presentment service agreement. Barring such an agreement,
all checks would have to be presented on the maturity date.
If
a customer enters into a transaction with an original term of 31 days, can
the transaction be extended?
No. A check held under the DPSTA
must be presented for payment within 31 days, unless the individual has
entered into a repayment plan.
Are licensees required to close a transaction when the check is deposited or ACH is submitted for payment?
No. Closed in connection with a deferred presentment service transaction is defined as “the check is deposited by the licensee and the licensee has evidence the person has satisfied the obligation”. The transaction should remain open for 5 business days after the check is presented for payment unless the licensee has evidence the check has cleared. If the transaction would be auto-closed by Veritec prior to this time period, a hold should be placed on the transaction.
If the customer has not redeemed his/her check by paying cash to the licensee, should the customer’s check be deposited on the maturity date?
Yes. Unless the customer has requested a repayment plan or the licensee and customer have agreed to an extension..
If an extension is granted on a deferred presentment transaction, must the new maturity date be entered in the Veritec database?
Yes. The licensee should follow the instructions given by Veritec for “extended transactions”.
Can a licensee accept a post-dated check from a customer in connection with a deferred presentment transaction?
No. The check must be dated as of the transaction date. The check should not be post-dated to the maturity date.
2. LICENSE APLLICATION PROCESS
To
conduct business under the DPSTA, what must the entity already engaged in
the business or wanting to enter the business do?
To conduct business under the DPSTA, the entity must be licensed under this act by June 1, 2006, or the entity must have submitted and had accepted by the Commissioner a deferred presentment license application prior to April 1, 2006.
What
information must an applicant for a DPSTA license provide to the Commissioner?
All of the following:
1.
A complete license application.
2.
Accompanying application pages for each additional location.
3.
The deferred presentment investigation/application fee
for each location.
4.
The deferred presentment license fee for each location.
5.
$50,000 surety bond.
6.
Financial statement demonstrating minimum net worth
of $50,000 per location (maximum of $250,000 per entity) determined in accordance
with generally accepted accounting principles.
7.
Any other information the commissioner considers necessary
under the DPSTA.
8.
For a complete list of information required in the application
for a license, you should read the information requested on the application
form.
What
must the Applicant demonstrate to the Commissioner in applying for a license?
The applicant must demonstrate that it has
the financial responsibility, financial condition, business experience,
character, and general fitness to reasonably warrant
a belief that the applicant will conduct its business lawfully and fairly.
What
information may the Commissioner review in determining if an applicant has
the financial responsibility, financial condition, business experience,
character, and general fitness to reasonably warrant a belief that the applicant
will conduct its business lawfully and fairly?
Any of the following:
1.
The relevant business records and the capital adequacy
of the applicant.
2.
The competence, experience, integrity, and financial
ability of any person who is a member, partner, executive officer, or a
shareholder with 10% or more interest in the applicant.
3.
Any record regarding the applicant, or any person referred
to in subparagraph (ii), of any criminal activity, fraud, or other act of
personal dishonesty, any act, omission, or practice that constitutes a breach
of a fiduciary duty, or any suspension, removal, or administrative action
by any agency or department of the United States or any state.
Are
application-investigation fees refundable?
No
What
criteria must an applicant satisfy to have the surety bond qualified?
The following criteria must be met:
1.
The surety bond must be issued by a bonding or insurance
company authorized to do business in this state.
2.
The surety bond is in a principal amount of $50,000.
3.
The surety bond must be payable to the Commissioner
for the benefit of any individuals who are Michigan residents and who are
creditors or claimants of the applicant.
4.
If 1 person owns 20% or more of the ownership interest
in 2 or more licensees, the group of licensees is only obligated to furnish
1(one) $50,000 surety bond.
What
is the financial statement/net worth requirement for an applicant for
a license under the act?
All of the following:
1.
Section 12 of the DPSTA requires the applicant (not
its officers, directors, shareholders) demonstrate a minimum net worth of
$50,000 per location.
2.
The maximum net worth for any entity regardless of the
number of locations is $250,000.
3.
The financial statement is required to be completed
in accordance with Generally Accepted Accounting Principles (GAAP).
Can
a licensee keep and maintain a net worth less than the $50,000 per location
(maximum $250,000) during the licensing year?
A licensee that does not keep and maintain
a net worth of at least $50,000 per location (maximum requirement $250,000)
is in violation of the DPSTA.
Can
a person obtain a license without first obtaining training through Veritec,
the State’s approved database vendor?
No.
When
does a license expire?
Annually on September 30.
When
must the renewal application be received by OFIR each year?
The renewal application must be received
annually by August 1.
Is
a license transferable or assignable?
No.
How
long does the Commissioner have to approve or deny a completed application?
The DPSTA requires the Commissioner to act
on an application within 60 days after the filing of a properly completed
application, or within a longer time period if agreed to by the commissioner
and the applicant. If the commissioner fails to act on an application
within the 60 day or otherwise agreed upon period, the applicant may submit
a written request to the commissioner demanding a hearing before the commissioner
on the question of whether the commissioner should grant a license.
How
will applicants and licensees know what amounts the fees will be?
If the applicant or licensee has Internet
access, then the applicant or licensee can check the OFIR web site.
If
the applicant or licensee does not have Internet access, what should it
do?
The applicant should call OFIR at 877-999-6442.
3. REPAYMENT PLAN
Are
licensees required to inform customers about eligibility of a repayment
plan?
Yes, licensees are to notify customers that a repayment
option is available if the customer is entering into his/her eighth deferred
presentment service transaction within any 12-month period.
Are
deferred presentment transactions that occurred prior to June 1, 2006 considered
in determining eligibility of a repayment plan?
No.
Are
licensees authorized to collect a fee when entering into an eligible repayment
plan with a customer?
Yes, licensees are authorized to collect a fee of $15
from a customer for administration of the repayment plan. Customers
become eligible for a repayment plan for any transaction that occurs after
entering into his/her eighth deferred presentment service transaction within
any 12-month period.
A
written repayment plan allows a customer to make 3 equal installment payments
on their next 3 paydays. Some customers are paid every two weeks, which
extends the repayment plan out 1 ½ months, while some customers are
paid monthly (such as Social Security), which would extend the repayment
plan out 3 months. Is a deferred presentment provider required to wait until
the completion of the Repayment Plan term (such as 1 ½ to 3 months)
before presenting the check or entering the check into the check-clearing
process, if the customer that entered into the written repayment plan agreement
defaults on any of the 3 equally scheduled payments by not making the payments
when due as agreed, or can the deferred presentment provider present the
check or enter the check into the check-clearing process after the customer
defaults by not making a payment when due? (i.e. If the customer defaults
on the first payment, must the deferred presentment provider wait until
the end of the repayment plan to present the customer's check?)
A written repayment plan is a separate contract from
the initial deferred presentment transaction. If the customer defaults
on any periodic payment during the repayment agreement, the customer has
defaulted on the repayment plan, which would permit the deferred presentment
provider to deposit the check on the original deferred presentment transaction.
Is
a customer required to come into a licensed branch location to enter into
and sign the written repayment plan?
Section 35(2), MCL 487.2155(2) provides for a "written
repayment plan." A request for a repayment plan can be either verbal
or in writing, but the actual repayment plan agreement must be in writing,
and would not be effective until signed by both parties
At
what point is the customer officially entering into a Written Repayment
Plan - when they call or when they sign the Written Repayment Plan?
Section 35(2), MCL 487.2155(2) provides for a "written
repayment plan." A request for a repayment plan can be either verbal
or in writing, but the actual repayment plan agreement must be in writing,
and would not be effective until signed by both parties.
If
a customer, eligible for a repayment plan, does not request verbally or
in writing to enter into a repayment plan prior to the deferred presentment
transaction maturity due date, can the licensee present the customer's check
into the check-clearing process on the maturity due date?
Yes. It would not be a violation of the act to
present the customer's check into the check-clearing process on the maturity
due date.
If
a customer's check is presented into the check-clearing process on the maturity
due date, can a customer request and enter into a written repayment plan
during the time period the customer's check is in the check clearing process?
After a check has been presented for payment, a licensee
is not required to enter into a repayment plan on the deferred presentment
transaction unless the check is dishonored.
If
a customer pays a transaction in full and the transaction is closed in the
State Database, is a licensee required to void the paid transaction and
refund the payment to the customer, if the customer requests a written repayment
plan within 30 days of the transaction maturity date?
No. A customer would only be able to elect a repayment
plan in a situation where he or she failed to redeem a check and the check
is not honored. If the customer presents payment on or before the
maturity due date fulfilling his/her obligation to the licensee and the
deferred presentment transaction, then the transaction cannot be reopened
or a repayment plan entered into with the customer.
Is
the customer required to make the first payment under the repayment plan
on the date when the plan is entered into?
No. The drawer must repay the transaction in 3
equal installments with 1 installment due on each of the customer’s
next 3 dates he/she receives regular wages from an employer
or other regular source of income. The first payment is not due until
the customer’s first regular pay date after the repayment
plan agreement is signed.
After
a customer enters into a repayment plan, do they have to wait until they
have had an additional 8 transactions before being eligible for another
repayment plan?
No. Any individual who has had 8 transactions
in the previous 12-month period is eligible for the repayment plan.
If
an individual is in a repayment plan at one licensee are they also eligible
to enter a repayment plan with another licensee?
Yes. An individual can enter into two repayment
plans at the same time.
Is the customer required to present a new check(s) for a repayment plan?
No. The licensee is required to keep the original check. The customer is to pay the licensee the 3 equal installments on the dates designated on the repayment plan agreement. At the end of the repayment plan the customer’s original check should be returned.
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