AN ACT relating to deferred deposit transactions.
Be it enacted by the General Assembly of the Commonwealth of Kentucky:

Section 1. KRS 368.010 is amended to read as follows:
As used in KRS 368.010 to 368.120 and KRS 368.990, unless the context requires otherwise:
(1) "Check" means any check, draft, money order, personal money order, travelers' check, or other demand instrument for the transmission or payment of money.
(2) "Check cashing" means to cash third-party checks such as payroll and government benefit checks, or other demand instruments.
(3) "Commissioner" means the commissioner of the Department of Financial Institutions, or his duly designated representative.
(4)[(3)] "Consideration" includes any premium charged for the sale of goods or services in excess of the cash price of the goods or services.
(5)[(4)] "Deferred deposit transaction" means, for consideration, accepting a postdated check and holding the postdated check for a period of time prior to deposit or presentment in accordance to an agreement with or any representation made to the maker of the postdated check, whether express or implied.
(6)[(5)] "Deferred deposit service business" means a person who engages in deferred deposit transactions.
(7)[(6)] "Department" means the Department of Financial Institutions.
(8)[(7)] "Licensee" means a person duly licensed by the commissioner under KRS 368.010 to 368.120.
(9)[(8)] "Person" means any individual, partnership, association, joint stock association, trust, corporation, or other entity, but shall not include the United States government or the government of this Commonwealth.
(10) "Postdated check" means any check that is dated ahead and bears a date that has not yet arrived. A postdated check shall not be considered a demand instrument.
Section 2. KRS 368.020 is amended to read as follows:
(1) Except as provided in KRS 368.030, no person shall engage in the business of cashing checks or accepting deferred deposit transactions for a fee or other consideration without having first obtained a license. A separate license shall be required for each location from which the business of cashing checks or accepting deferred deposit transactions is conducted. Any person engaged in that business on the effective date of this section may continue to engage in the business without a license until the commissioner shall have acted upon his application for a license if the application is filed within sixty (60) days after April 14, 1998.
(2) Applicants seeking to engage in the business of check cashing shall have a separate license than applicants seeking to engage in the deferred deposit service business.
(3) Applicants seeking to engage in the deferred deposit service business shall have a separate license than applicants seeking to engage in the business of check cashing.
Section 3. KRS 368.090 is amended to read as follows:
(1) The department shall promulgate[may adopt] reasonable administrative regulations, not inconsistent with law, for the enforcement of KRS 368.010 to 368.120.
(2) To assure compliance with the provisions of KRS 368.010 to 368.120, the department shall[may] examine the business, books, and records of every[any] licensee annually, and each licensee shall pay an examination fee sufficient to cover the cost of the examination based upon fair compensation for time and actual expense as established by administrative regulations of the department.
Section 4. KRS 368.100 is amended to read as follows:
(1) Each licensee shall keep and use in its business any books, accounts, and records the department may require to carry into effect the provisions of KRS 368.010 to 368.120 and the administrative regulations issued under those sections. Every licensee shall preserve the books, accounts, and records for at least two (2) years.
(2) Any fee charged by a licensee for cashing a check shall be disclosed in writing to the bearer of the check prior to cashing the check, and the fee shall be deemed a service fee and not interest.
(3) A deferred deposit service business licensee shall be subject to KRS Chapter 360, and consideration received for cashing a postdated check shall be interest[not charge a service fee in excess of fifteen dollars ($15) per one hundred dollars ($100) on the face amount of the deferred deposit check. A licensee shall prorate any fee, based upon the maximum fee of fifteen dollars ($15). This service fee shall be for a period of fourteen (14) days].
(4)[(3)] Before a licensee shall deposit with any bank or other depository institution a check cashed by the licensee, the check shall be endorsed with the actual name under which the licensee is doing business.
(5)[(4)] No licensee shall cash a check or a postdated check payable to a payee other than a natural person unless the licensee has previously obtained appropriate documentation from the board of directors or similar governing body of the payee clearly indicating the authority of the natural person or persons cashing the check, postdated check, draft, or money order on behalf of the payee.
(6)[(5)] No licensee shall indicate through advertising, signs, billhead, or otherwise that checks or postdated checks may be cashed without identification of the bearer of the postdated check or check; and any person seeking to cash a postdated check or a check shall be required to submit reasonable identification as prescribed by the department. The provisions of this subsection shall not prohibit a licensee from cashing a check or a postdated check simultaneously with the verification and establishment of the identity of the presenter by means other than the presentation of identification.
(7)[(6)] Within five (5) business days after being advised by the payor financial institution that a check, draft, or money order has been altered, forged, stolen, obtained through fraudulent or illegal means, negotiated without proper legal authority, or represents the proceeds of illegal activity, the licensee shall notify the department and the Commonwealth's attorney for the judicial circuit in which the check was received. If a check, draft, or money order is returned to the licensee by the payor financial institution for any of these reasons, the licensee shall not release the check, draft, or money order without the consent of the Commonwealth's attorney or other investigating law enforcement authority.
(8)[(7)] No licensee shall alter or delete the date on any check or postdated check accepted by the licensee.
(9)[(8)] No licensee shall engage in unfair or deceptive acts, practices, or advertising in the conduct of the licensed business.
(10)[(9)] No licensee shall require a customer to provide security for the transaction or require the customer to provide a guaranty from another person.
(11)[(10)] A deferred deposit service business licensee shall not have more than one deferred deposit transaction from any one (1) customer at any one time, with a face value greater than five hundred dollars ($500).
(12)[(11)] Each deferred deposit service business licensee shall inquire of any person seeking to present a deferred deposit transaction, whether the person has any outstanding deferred deposit transactions from any deferred deposit service business licensees. If the customer represents in writing that the customer has no more than one (1) deferred deposit transaction outstanding to any deferred deposit service business licensee and that the face value of the outstanding deferred deposit transaction issued by the customer does not equal or exceed five hundred dollars ($500), a deferred deposit service business licensee may accept a deferred deposit transaction in an amount that, when combined with the customer's other outstanding deferred deposit transaction, does not exceed five hundred dollars ($500). If the customer represents in writing that the customer has more than one (1) deferred deposit transaction outstanding to any deferred deposit service business licensee or if the face value of the deferred deposit transaction issued by the customer equals or exceeds five hundred dollars ($500), a deferred deposit service business licensee shall not accept another deferred deposit transaction from that customer until the customer represents to the deferred deposit service business licensee in writing that the customer qualifies to issue a new deferred deposit transaction under the requirements set forth in this section.
(13)[(12)] A deferred deposit service business licensee shall not use any device or agreement, including agreements with affiliated deferred deposit service business licensees, with the intent to obtain greater charges than are authorized in this section.
(14)[(13)] No deferred deposit service business licensee shall agree to hold a deferred deposit transaction for more than sixty (60) days.
(15)[(14)] Each deferred deposit transaction shall be made according to a written agreement that shall be dated and signed by the customer and the deferred deposit service business licensee or an authorized agent of the deferred deposit service business licensee, and made available to the department upon request. The customer shall receive a copy of this agreement.
(16)[(15)] A deferred deposit service business licensee or its affiliate shall not for a fee renew, roll over, or otherwise consolidate a deferred deposit transaction for a customer.
(17)[(16)] No individual who enters into a deferred deposit transaction with a deferred deposit service business licensee shall be convicted under the provisions of KRS 514.040.
(18)[(17)] No deferred deposit service business licensee who enters into a deferred deposit transaction with an individual shall prosecute or threaten to prosecute an individual under the provisions of KRS 514.040.
(19)[(18)] Each deferred deposit service business licensee shall conspicuously display in every deferred deposit business location a sign that gives the following notice: "No person who enters into a post-dated check or deferred deposit check transaction with this business establishment will be prosecuted or convicted of writing cold checks or of theft by deception under the provisions of KRS 514.040.
Section 5. KRS 368.102 is amended to read as follows:
(1) Each licensee who engages in deferred deposit transactions shall give the customer the disclosures required by the Consumer Credit Protection Act (15 U.S.C. sec. 1601). Proof of this disclosure shall be made available to the department upon request.
(2) Each check cashing licensee shall conspicuously display a schedule of all fees, and charges for all services provided by the licensee that are authorized by KRS 368.010 to 368.120. Each deferred deposit service business shall conspicuously display interest rates for all services provided by the licensee that are authorized by KRS 368.010 to 368.120. The notice shall be posted at the office and every branch office of the licensee.
(3) A licensee may charge, collect, and receive check collection charges made by a financial institution for each check returned or dishonored for any reason, provided that the terms and conditions upon which check collection charges will be charged to the customer are set forth in the written disclosure.
(4) Any personal check or postdated check accepted from a customer shall[must] be payable to the licensee.
(5) 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.
HB102

HB 102 (BR 1212) - J. Coleman
AN ACT relating to deferred deposit transactions.
Amend KRS 368.010 to define "check cashing", to clarify that a deferred deposit transaction means accepting a postdated check, and to define "postdated check"; amend KRS 368.020 to clarify that check cashing businesses and deferred deposit service businesses have separate licenses; amend KRS 368.090 to require the Department of Financial Institutions to promulgate administrative regulations and to conduct annual examinations of the business records of a licensee; amend 368.100 to establish that a deferred deposit service business is subject to KRS Chapter 360 relating to interest and usury; amend KRS 368.102 to require deferred deposit service businesses to display interest rates.
(Prefiled by the sponsor(s))

Jan 8-introduced in House; to Banking and Insurance (H)
Jan 10-posted in committee