Summary

Sponsor: Representative Green
Topic: Deferred Presentment Services Act
Committee: Insurance and Financial Services

The bill starts off with definitions integral to the act, namely ‘deferred presentment service' and ‘commissioner'. ‘Deferred presentment service' would be defined as a transaction between a licensee and an issuer of a check where the licensee accepts the check, agrees to hold it for a period of time and pays the issuer the amount of the check, less the permitted fee. The term ‘commissioner' would refer to the commissioner of the Financial Institutions Bureau (FIB), within the Department of Consumer and Industry Services.

An individual wishing to practice deferred presentment services would be required to be licensed by the FIB, and must have a license for each location where the services would be conducted. To obtain a license an individual would have to have at least $50,000 per location in liquid assets, with a maximum of $250,000 required per licensed entity, and must be able to show that they have the general knowledge and proper character to conduct such business transactions. The commissioner may review any business records, capital adequacy reports and criminal records of the primary licensee or the licensee's partner/shareholder. The partner is subject to this scrutiny only if he/she has more then a 25% interest in the applicant.

The application for licensure must include the legal name and residence of the applicant along with any partners, officers or directors. The location of the intended office should also be disclosed. Five hundred dollars should also accompany the application, which would serve as the licensure fee for the first year. There should be a separate fee enclosed for each separate location. Finally, the application should include a balance sheet and income statement from the previous year of business. In the case of new licensees, they must include a balance sheet and a projected income statement.

Once a license is granted, it must be conspicuously posted at the place of business for all customers to see. The license would be in effect through the fiscal year, ending September 30, unless suspended or revoked. Licenses granted under this act are not transferable. If there is a change in control of a licensee (25% or more of the voting share), the commissioner has to approve. In addition, an individual must notify the commissioner at least five days in advance of changing the licensee's business location or name.

A licensee must file a report with the commissioner within fifteen days of any of the following events: filing for bankruptcy or reorganization, revocation or suspension proceedings initiated by any state or governmental authority, any felony indictment of licensee or members, or any felony conviction. The commissioner also has the option of expanding these situations by way of the promulgation of a rule. Any order or regulation adopted shall be mailed to each license holder at least thirty days before the effective act.

The commissioner has the reserved right to examine any relevant books, records or document of a licensee. For this reason, the licensee is required to preserve all relevant business records for two years.

A licensee may charge a fee of no more then 18% of the amount paid to the issuer for services. The maximum amount a licensee may pay to a check issuer is $500. The settled upon fee must be in a written agreement, signed by both the licensee and the issuer. The issuer has the option of redeeming the check if they can pay the full amount back, but a licensee cannot defer presentment or negotiation of a check for any more then 31 calendar days.

If a licensee finds out that the check accepted was fraudulent in some manner, the licensee must notify the county prosecutor where the transaction took place within five business days. In this case, the licensee can employ any civil means necessary to collect the balance of the check. They are also entitled to a $20 returned check fee. However, the issuer of a check in a deferred presentment service agreement shall not be subject to any criminal penalty relating to the check agreement.

The licensee may pay an issuer by either check, money order or cash. Also, the terms of the agreement and explanation of charges must also be posted at the business site. A licensee cannot roll over or renew a transaction with the same issuer more then four times. A licensee also cannot enter into a new agreement with the issuer until he/she has either redeemed or deposited the check.

In an individual's application for licensure is denied, the commissioner must notify the individual in writing the basis for the denial. The applicant has the right to demand a hearing in front of the commissioner. After a hearing, the commissioner has the right to either suspend or revoke a license if the individual failed to pay a fee, committed and fraud, violated this act or any pertaining rule, lied on the application or demonstrated incompetency or untrustworthiness.

If after a hearing the commissioner finds the individual to be in violation of this act, the commissioner can order them to cease and desist all associated activity, refund and fees collected or order them to pay a civil penalty of not more then $1,000 for each violation of for each day a violation has occurred and continued.