Engrossed
By Senator Dial
Existing law does not provide for the licensing and regulation of deferred presentment check-cashing services.This bill would provide for the State Banking Department to license and regulate individuals engaged in deferred presentment check-cashing services.This bill would provide for license fees, the suspension and revocation of licenses, and the surrender of licenses.This bill would provide for limitation on the maximum fees charged for deferred presentment check-cashing services.This bill would provide for the State Banking Department to promulgate rules and regulations to administer this bill, and would provide for fines and penalties for violations.Amendment 621 of the Constitution of Alabama of 1901 prohibits a general law whose purpose or effect would be to require a new or increased expenditure of local funds from becoming effective with regard to a local governmental entity without enactment by a 2/3 vote unless: it comes within one of a number of specified exceptions; it is approved by the affected entity; or the Legislature appropriates funds, or provides a local source of revenue, to the entity for the purpose.The purpose or effect of this bill would be to require a new or increased expenditure of local funds within the meaning of Amendment 621. However, the bill does not require approval of a local governmental entity or enactment by a 2/3 vote to become effective because it comes within one of the specified exceptions contained in Amendment 621.

A BILL
TO BE ENTITLED
AN ACT
To license and regulate deferred presentment check-cashing services; to provide for definitions; to provide for the administration by the State Banking Department; to provide for exemptions, fines, and penalties; to provide for an appropriation; and in connection therewith would have as its purpose or effect the requirement of a new or increased expenditure of local funds within the meaning of Amendment 621 of the Constitution of Alabama of 1901.
BE IT ENACTED BY THE LEGISLATURE OF ALABAMA:
Section 1. This act shall be known and may be cited as the "Deferred Presentment Services Act." The purpose of this act is to protect consumers who enter into short-term cash advances from abuses that occur in the marketplace. This act shall be liberally construed to effectuate its purpose as a consumer protection statute.
Section 2. As used in this act, the following terms shall have the following meanings:
(1) CHECK. A check signed by the maker and made payable to a person licensed under this act.
(2) DEFERRED PRESENTMENT SERVICES. A transaction pursuant to a written agreement involving the following combination of activities in exchange for a fee:
a. Accepting a check dated on the date it was written and,
b. Holding the check for a period of time prior to presentment for payment or deposit.
(3) DEPARTMENT. The State Banking Department.
(4) LICENSEE. A person licensed to provide deferred presentment services pursuant to this act.
(5) PERSON. An individual, group of individuals, partnership, association, corporation, or any other business unit or legal entity.
(6) SUPERVISOR. The Supervisor of the Bureau of Loans or his or her designee.
Section 3. (a) No person shall engage in the business of deferred presentment services without having first obtained a license from the supervisor. A separate license shall be required for each location from which the business is conducted.
(b) Banks chartered by this state or any other state, banks chartered by the United States, trust companies, savings or building and loan associations, savings banks and other thrift institutions, credit unions, life insurance companies and federally constituted agencies shall be exempt from licensing under this act. Notwithstanding anything to the contrary in this act, this act shall not apply to a bank, credit union, or savings association organized pursuant to the laws of this state or any other state or the laws of the United States or any parent of any of the foregoing entities.
(c) This act shall have no application to persons who do not engage in deferred presentment services.
Section 4. Each applicant for a license shall satisfy all the following requirements to qualify for a license:
(1) The applicant shall have a minimum net worth determined in accordance with generally accepted accounting principles of at least twenty thousand dollars ($20,000) in cash assets or its equivalent available for the operation of each location.
(2) Not have any record on the part of the applicant, any director, officer or shareholder owning more than 25 percent of the applicant, of any court findings of fraud or any official suspension or removal by any agency or department of the United States or any state from participation in the conduct of any lending, deferred presentment or related business.
(3) Not have been convicted of a felony or not be acting as a beneficial owner for someone who has been convicted of a felony.
(4) The requirements set forth in this section shall be continuing in nature.
Section 5. Each application for a license shall be in writing and under oath to the supervisor, in a form prescribed by the supervisor, and shall include all of the following:
(1) The legal name, residence, business address, and telephone number of the applicant. If the applicant is a partnership, association, or corporation, the name and address of every member, officer, managing employee, and director.
(2) Other data and information the supervisor may require with respect to the applicant, its directors, trustees, officers, members, managing employees, or agents.
Section 6. Each application for a license shall be accompanied by all of the following:
(1) A license fee of five hundred dollars ($500), which shall not be subject to refund, for each location, office, or branch at which the applicant conducts business. If the applicant operates other licensed business activities at the same location, the license fee shall be one thousand dollars ($1,000) per location.
(2) A financial statement showing applicant has at least twenty thousand dollars ($20,000) in cash assets or its equivalent available for the operation of the business prepared in accordance with standard accounting practices and procedures.
Section 7. (a) Upon the filing of an application in the form prescribed by the supervisor, accompanied by the fee and documents required pursuant to Section 6, the supervisor shall investigate to ascertain whether the qualifications prescribed by Section 4 have been satisfied. If the supervisor finds that the qualifications have been satisfied, and approves the documents, the supervisor shall issue to the applicant a license to engage in the deferred presentment services business in Alabama.
(b) The license shall be kept conspicuously posted in the place of business of the licensee, and shall not be assignable or transferable or removed to another location without permission of the supervisor. A request will be either granted or denied within 15 days of receipt. If permission is denied, the licensee shall have a right to a hearing within 30 days of the denial, and the right of appeal as set forth in Section 10(e).
(c) The annual license fee shall be five hundred dollars ($500) for each office, branch, or place of business of the licensee, which shall be due on August 1 of each year, and shall be for a one-year period ending July 31 following. If the applicant operates other licensed business activities at the same location, the license fee shall be one thousand dollars ($1,000) per location operating with multiple licenses. The license fee shall be delinquent on September 1 of each year, and there shall be a penalty of 10 percent for each month or part thereof that the licensee is delinquent in the payment of such license fee. All license fees and investigation fees collected shall be paid into the special fund pursuant to Section 5-2A-20, Code of Alabama 1975, and used in the supervision and examination of licensees.
(d) Persons operating deferred presentment service locations in business on the effective date of this act shall have until the beginning of the next licensing year after this act becomes effective to apply for a license under this act and to pay the required fee. Upon qualification and payment of the required fee, those persons shall be granted a license under this act.
(e) A licensee may voluntarily surrender its license to the supervisor; however, the licensee shall not be entitled to receive a refund of any licensing fees previously paid. Upon surrender, the licensee shall immediately make available to the supervisor all books, records, and papers required to be created and maintained under this act or regulations promulgated under this act.
Section 8. The prior written approval of the supervisor shall be required for the continued operation of a deferred presentment services business whenever a change in control of a license is proposed. Control in the case of a corporation shall mean direct or indirect ownership, or the right to control, 25 percent or more of the voting shares of the corporation, or the ability of a person to elect a majority of the directors or otherwise effect a change in policy. Control in the case of any other entity shall mean the ability to change the principles of the organization, whether active or passive. The supervisor may require information deemed necessary to determine whether a new application is required.
Section 9. Within 15 days of the occurrence of any one of the following events, a licensee shall file a written report with the supervisor describing the event and its expected impact on the activities of the licensee in this state:
(1) The filing for bankruptcy or reorganization by the licensee.
(2) The institution of revocation or suspension proceedings against the licensee by any state or governmental authority.
(3) The denial of the opportunity to engage in the deferred presentment services business by any state or governmental authority.
(4) Any felony indictment of the licensee or any of its directors, officers, or principles.
(5) Any felony conviction of the licensee or any of its directors, officers, or principles.
(6) All other events as the supervisor may determine and identify by regulation.
Section 10. (a) The supervisor may promulgate reasonable regulations for the execution and enforcement of this act.
(b) Prior to the adoption, amendment, or repeal of any regulation, the supervisor shall give at least 35 days' notice of its intended action by filing notice of intended action with the Legislative Reference Service for publication in the Alabama Administrative Monthly. The date of publication in the Alabama Administrative Monthly shall constitute the date of notice. The notice shall include a statement of either the terms or substance of the intended action or a description of the subject and issues involved, shall specify a notice period ending not less than 35 days or more than 90 days from the date of the notice, during which period interested persons may present their views thereon, and shall specify the place where, and the manner in which interested persons may present their views thereon.
(c) All interested persons shall have a reasonable opportunity to submit data, views, or arguments, orally or in writing. The supervisor shall consider all written and oral submissions respecting the proposed regulation. Upon adoption of a regulation, the supervisor, if conflicting views are submitted on the proposed regulation and if requested in writing to do so by an interested person prior to adoption, shall issue a concise statement of the principal reasons for and against its adoption, incorporating therein its reasons for overruling any considerations urged against its adoption.
(d) Notwithstanding any other provision of this act to the contrary, if the supervisor finds that an immediate danger to the public health, safety, or welfare requires adoption of a regulation upon fewer than 35 days' notice or that action is required by or to comply with a federal statute or regulation which requires adoption of a regulation upon fewer than 35 days' notice and states in writing its reasons for that finding, the supervisor may proceed without prior notice or hearing or upon any abbreviated notice and hearing that he or she finds practicable, to adopt an emergency regulation. The regulation shall become effective immediately, unless otherwise stated therein. The regulation may be effective for a period of not longer than 120 days unless within such time the supervisor complies with the procedures set forth in subsections (b) and (c). The adoption of the same or a substantially similar regulation following the procedures set forth in subsections (b) and (c) at any time is not limited by the adoption of a regulation following the emergency regulation procedure set forth in this subsection.
(e) A person who has exhausted all administrative remedies available within the department, other than rehearing, and who is aggrieved by the final decision of the supervisor with respect to a regulation, is entitled to judicial review under this act. All proceedings for review shall be instituted by filing of notice of appeal or review and a cost bond with the supervisor to cover the reasonable costs of preparing the transcript of the proceeding under review, unless waived by the supervisor or the court on a showing of substantial hardship. The notice of appeal and cost bond shall be filed within 42 days after the date the supervisor issued the final regulation. The appeal shall be filed in the Circuit Court of Montgomery County. The regulation shall be in effect pending the outcome of any appeal unless the supervisor stays the effective date of the regulation.
(f) A licensee acting in reasonable reliance upon any regulation promulgated by the supervisor or a decision of an appellate court of this state shall be presumed to have acted in accordance with applicable law, notwithstanding that after such act has occurred, the regulation is amended, rescinded, or determined by judicial or other authority to be incorrect or invalid for any reason or the particular judicial decision is reversed or modified.
Section 11. (a) Each licensee shall keep and use in its business any books, accounts, and records the supervisor may require to carry into effect the provisions of this act and the administrative regulations issued hereunder. If a licensee operates any other business licensed by the department, the deferred presentment check cashing business shall be conducted independently of any other business licensed by the department. Each business shall be conducted through a separate business entity, although both businesses may be operated in the same location. Each licensed business shall maintain separate business records.
(b) For the purpose of determining compliance with this act, the supervisor may, at any reasonable time, cause an examination to be made at the licensee's place of business of the records and transactions of such licensee. As cost of examination, the licensee shall pay the supervisor an examination fee as provided by Section 5-2A-24, Code of Alabama 1975, which shall be collected and paid into the special fund, provided by Section 5-2A-20, Code of Alabama 1975, and used in the supervision and examination of licensees. If a licensee operates any other business licensed by the department, the deferred presentment check cashing business shall be conducted independently of any other business licensed by the department. Each business shall be conducted through a separate business entity, although both businesses may be operated in the same location. Each licensed business shall maintain separate business records. Each licensee shall preserve all relevant records for a period of at least two years after making the last entry on any transaction, and the supervisor shall have free access thereto at the licensee's place of business at all reasonable times. If the supervisor has probable cause to believe that a licensee has engaged in an activity which violates the provisions of this act, the supervisor may compel the production of such books and records of the person as he or she has probable cause to believe are relevant to the alleged violation. Any action arising out of any investigation or examination shall be in the circuit court of the principal place of business of the licensee.
Section 12. (a) Subject to the following subsections, every licensee under this chapter may charge and collect a maximum fee on any deferred presentment transaction not to exceed seventeen and one-half percent (17.5%) of the cash advanced. Each licensee may renew or extend a deferred presentment transaction with the same customer no more than three additional times at this fee.
(b) If a customer fails to redeem their check after renewing or extending an initial deferred presentment transaction three times, licensees shall provide the customer the option of an extended repayment program for the full amount of the held check. In lieu of a licensee's depositing the customer's held check, the customer may pay a one-time five ($5) dollar program fee to extend the repayment of the full amount of the held check. The extended repayment program shall allow the customer a total repayment period of one month per one hundred ($100) dollars owed for transactions in amounts of $300 or less. For transactions in amounts greater than $300, a customer shall be allowed a total repayment period of six months. Customers shall make equal monthly installment payments for the total amount owed. Upon payment of a monthly installment, the customer shall execute another check for the net amount owed less the amount of the installment payment and the licensee shall return the previously held check. If a customer has opted for the extended repayment program, then the licensee may not present the customer's check for deposit unless the customer's monthly installment payment is more than ten days late. For purposes of this section, subsequent deferred presentment transactions will be deemed to be associated with prior transactions if executed before the next business day of the last check redemption or payoff. The supervisor may promulgate regulations to prevent evasions of this customer repayment program.
(c) No other fees or charges of any kind may be charged or collected from customers except those authorized by this chapter. No person shall use any device, subterfuge, or pretense whatsoever, such as catalog sales, discount vouchers, Internet or phone card clubs, or any agreement, including agreements with affiliated persons, with the intent to obtain greater charges than otherwise would be authorized by this act.
Section 13. (a) A licensee may not accept a check for the purpose of a deferred presentment transaction without first receiving from the customer a written certification that the account upon which the check is drawn is legitimate and open. A customer shall also disclose in writing whether he or she has a total of five hundred dollars ($500) or more in deferred presentment checks held by any other check casher.
(b) Before a licensee shall present for payment or deposit a check accepted by the licensee, the check shall be endorsed with the actual name under which the licensee is doing business.
(c) Any agreement for deferred presentment of a check shall be in writing and signed by the maker of the check. The maker of a check shall have the right to redeem the check from the licensee before the agreed date of deposit upon payment to the licensee of the amount of the check. If a licensee accepts a partial payment, the check may not be presented for deposit nor may the licensee charge any additional fee. A licensee shall not defer presentment of any personal check for less than five days nor more than 31 calendar days after the date the check is tendered to the licensee.
(d) The licensee shall notify the district attorney for the circuit in which the check was received within five business days after being advised by the payer financial institution that a check or draft has been altered, forged, stolen, obtained through fraudulent or illegal means, negotiated without proper legal authority, or represents the proceeds of illegal activity. If a check or draft is returned to the licensee by the payer financial institution for any of these reasons, the licensee shall not release the check, draft, or money order without the consent of the district attorney or other investigating law enforcement authority.
(e) A licensee shall comply with all provisions of state and federal law regarding cash transactions and cash transaction reporting.
(f) A licensee shall provide each prospective customer, before consummation of the deferred presentment agreement, a written explanation, in clear, understandable language, of the fees to be charged by the licensee, and the date on which the check will be deposited or presented by the licensee. All fees associated with deferred presentment transactions shall be disclosed as finance charges pursuant to the Federal Truth-in-Lending Act, 15 U.S.C. Section 1605, its regulations, 12 C.F.R. Part 226 and Official Staff Commentary as adopted by the Federal Reserve Board. The supervisor may promulgate rules establishing additional requirements in order to assure complete and accurate disclosure. The consumer, prior to entering into a deferred presentment transaction, shall receive and acknowledge an accurate and complete notification and disclosure of the itemized and total amounts of all fees and other costs that will or potentially could be imposed as a result of such agreement. This subsection shall not create any inference that a particular method of disclosure was required prior to the effective date of this act.
(g) A licensee shall issue a copy of the written agreement to each person for whom a licensee defers deposit of a check. The written agreement shall include the information described in subsection (f) and the extended repayment program described in subsection 12(b).
(h) If a check is returned to the licensee from a payer financial institution due to insufficient funds or closed account, the licensee shall have the right to all civil remedies allowed by law to collect the check and shall be entitled to recover the returned check fee authorized by Section 8-8-15, Code of Alabama 1975, court costs and a reasonable attorney's fee paid to an attorney who is not a salaried employee of the licensee. The attorney fee may not exceed 15 percent of the face amount of the check. No individual who issues a personal check to a licensee for the purpose of a deferred presentment transaction under this act shall be convicted pursuant to Section 13A-9-13.1, Code of Alabama 1975, if the check is returned due to insufficient funds. Checks returned to the licensee due to a closed account may be collected pursuant to Section 13A-9-13.1, Code of Alabama 1975.
(i) No licensee may alter or delete the date on any check accepted by the licensee. No licensee may accept an undated check or a check dated on a date other than the date on which the licensee accepts the check.
(j) No licensee shall engage in unfair or deceptive acts, practices, or advertising in the conduct of the licensed business.
(k) Consistent with the nature of a deferred presentment transaction, no licensee shall require a customer to provide security for the transaction or require the customer to provide a guaranty from another person.
(l) Each licensee shall pay all proceeds in cash for any check cashed.
(m) Every licensee shall conspicuously and continuously display a schedule of all fees, charges, and penalties for all services provided by the licensee. The schedule of fees shall contain the following statement in bold type: NOTICE FEES FOR PAYDAY LOANS MAY BE SIGNIFICANTLY HIGHER THAN FOR OTHER TYPES OF LOANS.
(n) No licensee shall have more than one deferred presentment check outstanding at any time from any one customer per location. A deferred presentment check to any one customer shall not exceed five hundred dollars ($500).
Section 14. (a) If the supervisor determines that an applicant is not qualified to receive a license, the supervisor shall notify the applicant in writing that the application has been denied, stating the basis for denial.
(b) If the supervisor denies an application, or if the supervisor fails to act on an application within 90 days after the filing of a properly completed application, the applicant may make a written demand to the supervisor for a hearing before the supervisor on the question of whether the license should be granted.
(c) At the hearing, the burden of proving that the applicant is entitled to a license shall be on the applicant. A decision of the supervisor following any hearing on the denial of a license may be subject to review by the Circuit Court of Montgomery County.
Section 15. (a) The supervisor may, after notice and hearing, suspend or revoke any license if the supervisor finds that the licensee has knowingly or through lack of due care committed any of the following actions:
(1) Failed to pay the annual license fee imposed by this act or an examination fee imposed by the supervisor under the authority of this act.
(2) Committed fraud, engaged in a dishonest activity, or made misrepresentations.
(3) Violated a provision of this act, an administrative regulation issued pursuant to this act, or has violated any other law in the course of its or his or her dealings as a licensee.
(4) Made a false statement in the application for the license or failed to give a true reply to a question in the application.
(5) Demonstrated incompetence or untrustworthiness to act as a licensee.
(6) Entered or caused to be entered or allowed to be entered any false information on any business record of the licensed activity, including, but not limited to, any information in customer agreements and on deferred presentment checks.
(b) If the reason for revocation or suspension of a license of the licensee at any one location is of general application to all locations operated by a licensee, the supervisor may revoke or suspend all licenses issued to a licensee.
(c) A hearing shall be held on written notice given at least 20 days prior to the date of the hearings.
Section 16. If, after a hearing, the supervisor finds that a person has violated this act, or any administrative regulation issued pursuant to this act, the supervisor may take any one or more of the following enforcement actions:
(1) Order the person to cease and desist violating the act or any administrative rules issued pursuant thereto.
(2) Require the refund of any fees collected by such person in violation of this act.
(3) Order the person to pay to the supervisor a civil penalty of not more than one thousand dollars ($1,000) for each transaction in violation of this act or for each day that a violation has occurred and continues.
Section 17. (a) The supervisor may enter into consent orders at any time with any person to resolve any matter arising under this act. A consent order shall be signed by the person to whom it is issued, or a duly authorized representative, and shall indicate agreement to the terms contained therein. A consent order need not constitute an admission by any person that any provision of this act, or any rule, regulation, or order promulgated or issued pursuant to this act has been violated, nor need it constitute a finding by the supervisor that such person has violated any provision of this act or any rule, regulation, or order promulgated or issued hereunder.
(b) Notwithstanding the issuance of a consent order, the supervisor may seek civil or criminal penalties or compromise civil penalties concerning matters encompassed by the consent order.
(c) In cases involving extraordinary circumstances requiring immediate action, the supervisor may take any enforcement action authorized by this act without providing the opportunity for a prior hearing, but shall promptly afford a subsequent hearing upon an application to rescind the action taken which is filed with the supervisor within 20 days after receipt of the emergency action of the supervisor.
Section 18. (a) Any person aggrieved by the conduct of a licensee under this act in connection with the regulated activities of the licensee may file a written complaint with the supervisor who may investigate the complaint.
(b) In the course of the investigation of the complaint, the supervisor has all of the following powers to:
(1) Subpoena witnesses.
(2) Administer oaths.
(3) Examine any individual under oath.
(4) Compel the production of records, books, papers, contracts, or other documents relevant to the investigation.
(c) If a person fails to comply with a subpoena of the supervisor under this act or to testify concerning any matter about which the person may be interrogated under this act, the supervisor may petition any court of competent jurisdiction for enforcement.
(d) The license of any licensee under this act who fails to comply with a subpoena of the supervisor may be suspended pending compliance with the subpoena.
(e) Any person who is injured by any violation of this act may bring an action for the recovery of damages, or an equity proceeding to restrain and enjoin those violations, or both.
Section 19. Every licensee shall conspicuously post a sign, as designed by the department, notifying the public of the pertinent provisions of this act and any consequences related to entering into a deferred presentment agreement pursuant to this act.
Section 20. A person who willfully makes charges in excess of those permitted by Section 12(c) or a person who willfully engages in the business of cashing deferred presentment checks in violation of Section 3(a), or both, is guilty of a Class B misdemeanor for the first offense and a Class B felony for the second or subsequent offense.
Section 21. There is appropriated sixty thousand dollars ($60,000) to the State Banking Department from the Banking Assessments Fees Fund for the fiscal year ending September 30, 2002, to be utilized for the implementation and administration of this act. All license fees and administrative penalties collected shall be paid into the special fund provided by Section 5-2A-20, Code of Alabama 1975, and used in the supervision and examination of licensees.
Section 22. The provisions of this act shall in no way be construed to take away or negatively impact the consumers' claims in pending lawsuits against persons operating deferred presentment locations on or before the effective date of this act.
Section 23. Although this bill would have as its purpose or effect the requirement of a new or increased expenditure of local funds, the bill is excluded from further requirements and application under Amendment 621 because the bill defines a new crime or amends the definition of an existing crime.
Section 24. The provisions of this act are severable. If any part of this act is declared invalid or unconstitutional, that declaration shall not affect the part which remains.
Section 25. This act shall become effective immediately upon approval by the Governor, or its otherwise becoming law.