HB 2040 -
By Representative Springer
NOT CONSIDERED
Strike everything after the enacting clause and insert the following:
Sec. 1 RCW 31.45.010 and 2012 c 17 s 7 are each amended to read
as follows:
Unless the context clearly requires otherwise, the definitions in
this section apply throughout this ((chapter)) subchapter.
(1) "Applicant" means a person that files an application for a
license under this ((chapter)) subchapter, including the applicant's
sole proprietor, owners, directors, officers, partners, members, and
controlling persons.
(2) (("Borrower" means a natural person who receives a small loan.)) "Check" means the same as defined in RCW 62A.3-104(f) and,
for purposes of conducting the business of making small loans, includes
other electronic forms of payment, including stored value cards,
internet transfers, and automated clearing house transactions.
(3) "Business day" means any day that the licensee is open for
business in at least one physical location.
(4)
(((5))) (3) "Check casher" means an individual, partnership,
unincorporated association, or corporation that, for compensation,
engages, in whole or in part, in the business of cashing checks,
drafts, money orders, or other commercial paper serving the same
purpose.
(((6))) (4) "Check seller" means an individual, partnership,
unincorporated association, or corporation that, for compensation,
engages, in whole or in part, in the business of or selling checks,
drafts, money orders, or other commercial paper serving the same
purpose.
(((7) "Collateral" means the same as defined in chapter 62A.9A RCW.)) (5) "Controlling person" means a person owning or controlling
ten percent or more of the total outstanding shares of the applicant or
licensee, if the applicant or licensee is a corporation, and a member
who owns ten percent or more of a limited liability company or limited
liability partnership.
(8)
(((9) "Default" means the borrower's failure to repay the small
loan in compliance with the terms contained in the small loan agreement
or note or failure to pay any installment plan payment on an
installment plan within ten days after the date upon which the
installment was scheduled to be paid.)) (6) "Department" means the department of financial
institutions.
(10)
(7) "Director" means the director of financial institutions.
(((11))) (8) "Financial institution" means a commercial bank,
savings bank, savings and loan association, or credit union.
(((12) "Installment plan" is a contract between a licensee and
borrower that provides that the loaned amount will be repaid in
substantially equal installments scheduled on or after a borrower's pay
dates and no less than fourteen days apart.)) (9) "Licensee" means a check casher or seller licensed by
the director to engage in business in accordance with this ((
(13)chapter))
subchapter. "Licensee" also means a check casher or seller, whether
located within or outside of this state, who fails to obtain the
license ((or small loan endorsement)) required by this ((chapter))
subchapter.
(((14) "Loaned amount" means the outstanding principal balance and
any fees authorized under RCW 31.45.073 that have not been paid by the
borrower.)) (10) "Person" means an individual, partnership, association,
limited liability company, limited liability partnership, trust,
corporation, and any other legal entity.
(15) "Origination date" means the date upon which the borrower and
the licensee initiate a small loan transaction.
(16) "Outstanding principal balance" of a small loan means any of
the principal amount that has not been paid by the borrower.
(17) "Paid" means that moment in time when the licensee deposits
the borrower's check or accepts cash for the full amount owing on a
valid small loan. If the borrower's check is returned by the
borrower's bank for any reason, the licensee shall not consider the
loan paid.
(18)
(((19) "Principal" means the loan proceeds advanced for the benefit
of the borrower in a small loan, excluding any fee or interest charge.))
(20) "Rescission" means annulling the loan contract and, with
respect to the small loan contract, returning the borrower and the
licensee to their financial condition prior to the origination date of
the loan.
(21) "Small loan" means a loan of up to the maximum amount and for
a period of time up to the maximum term specified in RCW 31.45.073.
(22) "Termination date" means the date upon which payment for the
small loan transaction is due or paid to the licensee, whichever occurs
first.
(23) "Total of payments" means the principal amount of the small
loan plus all fees or interest charged on the loan.
(24) "Trade secret" means the same as defined in RCW 19.108.010.
Sec. 2 RCW 31.45.020 and 2003 c 86 s 2 are each amended to read
as follows:
(1) This ((chapter)) subchapter does not apply to:
(a) Any financial institution or trust company authorized to do
business in Washington;
(b) The cashing of checks, drafts, or money orders by any person
who cashes checks, drafts, or money orders as a convenience, as a minor
part of its customary business, and not for profit;
(c) The issuance or sale of checks, drafts, or money orders by any
corporation, partnership, or association that has a net worth of not
less than three million dollars as shown by audited financial
statements; and
(d) The issuance or sale of checks, drafts, money orders, or other
commercial paper serving the same purpose by any agent of a
corporation, partnership, or association described in (c) of this
subsection.
(2) Upon application to the director, the director may exempt a
person from any or all provisions of this ((chapter)) subchapter upon
a finding by the director that although not otherwise exempt under this
section, the applicant is not primarily engaged in the business of
cashing or selling checks and a total or partial exemption would not be
detrimental to the public.
Sec. 3 RCW 31.45.030 and 2005 c 274 s 255 are each amended to
read as follows:
(1) Except as provided in RCW 31.45.020, no check casher or seller
may engage in business without first obtaining a license from the
director in accordance with this ((chapter)) subchapter. A license is
required for each location where a licensee engages in the business of
cashing or selling checks or drafts.
(2) Each application for a license shall be in writing in a form
prescribed by the director and shall contain the following information:
(a) The legal name, residence, and business address of the
applicant and, if the applicant is a partnership, association, or
corporation, of every member, officer, and director thereof;
(b) The location where the initial registered office of the
applicant will be located in this state;
(c) The complete address of any other locations at which the
applicant proposes to engage in business as a check casher or seller;
and
(d) Such other data, financial statements, and pertinent
information as the director may require with respect to the applicant,
its directors, trustees, officers, members, or agents.
(3) Any information in the application regarding the personal
residential address or telephone number of the applicant, and any trade
secret as defined in RCW 19.108.010 including any financial statement
that is a trade secret, is exempt from the public records disclosure
requirements of chapter 42.56 RCW.
(4) The application shall be filed together with an investigation
and supervision fee established by rule by the director. Such fees
collected shall be deposited to the credit of the financial services
regulation fund in accordance with RCW 43.320.110.
(5)(a) Before granting a license to sell checks, drafts, or money
orders under this ((chapter)) subchapter, the director shall require
that the licensee file with the director a surety bond running to the
state of Washington, which bond shall be issued by a surety insurer
which meets the requirements of chapter 48.28 RCW, and be in a format
acceptable to the director. The director shall adopt rules to
determine the penal sum of the bond that shall be filed by each
licensee. The bond shall be conditioned upon the licensee paying all
persons who purchase checks, drafts, or money orders from the licensee
the face value of any check, draft, or money order which is dishonored
by the drawee bank, savings bank, or savings and loan association due
to insufficient funds or by reason of the account having been closed.
The bond shall only be liable for the face value of the dishonored
check, draft, or money order, and shall not be liable for any interest
or consequential damages.
(b) ((Before granting a small loan endorsement under this chapter,
the director shall require that the licensee file with the director a
surety bond, in a format acceptable to the director, issued by a surety
insurer that meets the requirements of chapter 48.28 RCW. The director
shall adopt rules to determine the penal sum of the bond that shall be
filed by each licensee. A licensee who wishes to engage in both check
selling and making small loans may combine the penal sums of the
bonding requirements and file one bond in a form acceptable to the
director. The bond shall run to the state of Washington as obligee,
and shall run to the benefit of the state and any person or persons who
suffer loss by reason of the licensee's violation of this chapter or
any rules adopted under this chapter. The bond shall only be liable
for damages suffered by borrowers as a result of the licensee's
violation of this chapter or rules adopted under this chapter, and
shall not be liable for any interest or consequential damages.)) The bond shall be continuous and may be canceled by the
surety upon the surety giving written notice to the director and
licensee of its intent to cancel the bond. The cancellation is
effective thirty days after the notice is received by the director.
Whether or not the bond is renewed, continued, reinstated, reissued, or
otherwise extended, replaced, or modified, including increases or
decreases in the penal sum, it shall be considered one continuous
obligation, and the surety upon the bond shall not be liable in an
aggregate or cumulative amount exceeding the penal sum set forth on the
face of the bond. In no event shall the penal sum, or any portion
thereof, at two or more points in time be added together in determining
the surety's liability. The bond shall not be liable for any liability
of the licensee for tortious acts, whether or not such liability is
imposed by statute or common law, or is imposed by contract. The bond
shall not be a substitute or supplement to any liability or other
insurance required by law or by the contract. If the surety desires to
make payment without awaiting court action against it, the penal sum of
the bond shall be reduced to the extent of any payment made by the
surety in good faith under the bond.
(c)
(((d))) (c) Any person who is a purchaser of a check, draft, or
money order from the licensee having a claim against the licensee for
the dishonor of any check, draft, or money order by the drawee bank,
savings bank, or savings and loan association due to insufficient funds
or by reason of the account having been closed, or who obtained a small
loan from the licensee and was damaged by the licensee's violation of
this ((chapter)) subchapter or rules adopted under this ((chapter))
subchapter, may bring suit upon such bond or deposit in the superior
court of the county in which the check, draft, or money order was
purchased, or in the superior court of a county in which the licensee
maintains a place of business. Jurisdiction shall be exclusively in
the superior court. Any such action must be brought not later than one
year after the dishonor of the check, draft, or money order on which
the claim is based. In the event valid claims against a bond or
deposit exceed the amount of the bond or deposit, each claimant shall
only be entitled to a pro rata amount, based on the amount of the claim
as it is valid against the bond, or deposit, without regard to the date
of filing of any claim or action.
(((e))) (d) In lieu of the surety bond required by this section,
the applicant for a check seller license may file with the director a
deposit consisting of cash or other security acceptable to the director
in an amount equal to the penal sum of the required bond. ((In lieu of
the surety bond required by this section, the applicant for a small
loan endorsement may file with the director a deposit consisting of
cash or other security acceptable to the director in an amount equal to
the penal sum of the required bond, or may demonstrate to the director
net worth in excess of three times the amount of the penal sum of the
required bond.))
The director may adopt rules necessary for the proper
administration of the security or to establish reporting requirements
to ensure that the net worth requirements continue to be met. A
deposit given instead of the bond required by this section is not an
asset of the licensee for the purpose of complying with the liquid
asset provisions of this ((chapter)) subchapter. A deposit given
instead of the bond required by this section is a fund held in trust
for the benefit of eligible claimants under this section and is not an
asset of the estate of any licensee that seeks protection voluntarily
or involuntarily under the bankruptcy laws of the United States.
(((f))) (e) Such security may be sold by the director at public
auction if it becomes necessary to satisfy the requirements of this
((chapter)) subchapter. Notice of the sale shall be served upon the
licensee who placed the security personally or by mail. If notice is
served by mail, service shall be addressed to the licensee at its
address as it appears in the records of the director. Bearer bonds of
the United States or the state of Washington without a prevailing
market price must be sold at public auction. Such bonds having a
prevailing market price may be sold at private sale not lower than the
prevailing market price. Upon any sale, any surplus above amounts due
shall be returned to the licensee, and the licensee shall deposit with
the director additional security sufficient to meet the amount required
by the director. A deposit given instead of the bond required by this
section shall not be deemed an asset of the licensee for the purpose of
complying with the liquid asset provisions of this ((chapter))
subchapter.
Sec. 4 RCW 31.45.040 and 2003 c 86 s 4 are each amended to read
as follows:
(1) The director shall conduct an investigation of every applicant
to determine the financial responsibility, experience, character, and
general fitness of the applicant. The director shall issue the
applicant a license to engage in the business of cashing or selling
checks, or both, ((or a small loan endorsement,)) if the director
determines to his or her satisfaction that:
(a) The applicant has satisfied the requirements of RCW 31.45.030;
(b) The applicant is financially responsible and appears to be able
to conduct the business of cashing or selling checks ((or making small
loans)) in an honest, fair, and efficient manner with the confidence
and trust of the community; and
(c) The applicant has the required bonds, or has provided an
acceptable alternative form of financial security.
(2) The director may refuse to issue a license ((or small loan
endorsement)) if he or she finds that the applicant, or any person who
is a director, officer, partner, agent, sole proprietor, owner, or
controlling person of the applicant, has been convicted of a felony in
any jurisdiction within seven years of filing the present application
or is associating or consorting with any person who has been convicted
of a felony in any jurisdiction within seven years of filing the
present application. The term "substantial stockholder" as used in
this subsection, means a person owning or controlling ten percent or
more of the total outstanding shares of the applicant corporation.
(3) A license ((or small loan endorsement)) may not be issued to an
applicant:
(a) Whose license to conduct business under this ((chapter))
subchapter, or any similar statute in any other jurisdiction, has been
suspended or revoked within five years of the filing of the present
application;
(b) Who has been banned from the industry by an administrative
order issued by the director or the director's designee, for the period
specified in the administrative order; or
(c) When any person who is a sole proprietor, owner, director,
officer, partner, agent, or controlling person of the applicant has
been banned from the industry in an administrative order issued by the
director, for the period specified in the administrative order.
(4) A license ((or small loan endorsement)) issued under this
((chapter)) subchapter shall be conspicuously posted in the place of
business of the licensee. The license is not transferable or
assignable.
(5) A license ((or small loan endorsement)) issued in accordance
with this ((chapter)) subchapter remains in force and effect until
surrendered, suspended, or revoked, or until the license expires as a
result of nonpayment of the annual assessment fee.
Sec. 5 RCW 31.45.050 and 2003 c 86 s 5 are each amended to read
as follows:
(1) Each applicant and licensee shall pay to the director an
investigation or examination fee as established in rule and an annual
assessment fee for the coming year in an amount determined by rule as
necessary to cover the operation of the program. The annual assessment
fee is due upon the annual assessment fee due date as established in
rule. Nonpayment of the annual assessment fee may result in expiration
of the license as provided in subsection (2) of this section. In
establishing the fees, the director shall differentiate between check
cashing and check selling ((and making small loans)), and consider at
least the volume of business, level of risk, and potential harm to the
public related to each activity. The fees collected shall be deposited
to the credit of the financial services regulation fund in accordance
with RCW 43.320.110.
(2) If a licensee does not pay its annual assessment fee by the
annual assessment fee due date as specified in rule, the director or
the director's designee shall send the licensee a notice of suspension
and assess the licensee a late fee not to exceed twenty-five percent of
the annual assessment fee as established in rule by the director. The
licensee's payment of both the annual assessment fee and the late fee
must arrive in the department's offices by 5:00 p.m. on the tenth day
after the annual assessment fee due date, unless the department is not
open for business on that date, in which case the licensee's payment of
both the annual assessment fee and the late fee must arrive in the
department's offices by 5:00 p.m. on the next occurring day that the
department is open for business. If the payment of both the annual
assessment fee and the late fee does not arrive prior to such time and
date, then the expiration of the licensee's license is effective at
5:00 p.m. on the thirtieth day after the assessment fee due date. The
director or the director's designee may reinstate the license if,
within twenty days after the effective date of expiration, the
licensee:
(a) Pays both the annual assessment fee and the late fee; and
(b) Attests under penalty of perjury that it did not engage in
conduct requiring a license under this ((chapter)) subchapter during
the period its license was expired, as confirmed by an investigation by
the director or the director's designee.
(3) If a licensee intends to do business at a new location, to
close an existing place of business, or to relocate an existing place
of business, the licensee shall provide written notification of that
intention to the director no less than thirty days before the proposed
establishing, closing, or moving of a place of business.
Sec. 6 RCW 31.45.060 and 2003 c 86 s 6 are each amended to read
as follows:
(1) A schedule of the fees and the charges for the cashing and
selling of checks, drafts, money orders, or other commercial paper
serving the same purpose shall be conspicuously and continuously posted
in every location licensed under this ((chapter)) subchapter. The
licensee shall provide to its customer a receipt for each transaction.
The receipt must include the name of the licensee, the type and amount
of the transaction, and the fee or fees charged for the transaction.
(2) Each licensee shall keep and maintain such business books,
accounts, and records as the director may require to fulfill the
purposes of this ((chapter)) subchapter. Every licensee shall preserve
such books, accounts, and records as required in rule by the director
for at least two years from the completion of the transaction. Records
may be maintained on an electronic, magnetic, optical, or other storage
media. However, the licensee must maintain the necessary technology to
permit access to the records by the department for the period required
under this ((chapter)) subchapter.
(3) A check, draft, or money order sold by a licensee shall be
drawn on an account of a licensee maintained in a federally insured
financial institution authorized to do business in the state of
Washington.
Sec. 7 RCW 31.45.070 and 2012 c 17 s 9 are each amended to read
as follows:
(1) No licensee may engage in a loan business; the negotiation of
loans; or the discounting of notes, bills of exchange, checks, or other
evidences of debt in the same premises where a check cashing or selling
business is conducted, unless the licensee:
(a) Is conducting the activities of pawnbroker as defined in RCW
19.60.010;
(b) Is a properly licensed consumer loan company under chapter
31.04 RCW;
(c) Is conducting other lending activity permitted in the state of
Washington; or
(d) Has a small loan endorsement issued under this chapter.
(2) Except as otherwise permitted in this ((chapter)) subchapter,
no licensee may at any time cash or advance any moneys on a postdated
check or draft. However, a licensee may cash a check payable on the
first banking day following the date of cashing if:
(a) The check is drawn by the United States, the state of
Washington, or any political subdivision of the state, or by any
department or agency of the state or its subdivisions; or
(b) The check is a payroll check drawn by an employer to the order
of its employee in payment for services performed by the employee.
(3) Except as otherwise permitted in this ((chapter)) subchapter,
no licensee may agree to hold a check or draft for later deposit. A
licensee must deposit all checks and drafts cashed by the licensee as
soon as practicable.
(4) No licensee may issue or cause to be issued any check, draft,
or money order, or other commercial paper serving the same purpose,
that is drawn upon the trust account of a licensee without concurrently
receiving the full principal amount, in cash, or by check, draft, or
money order from a third party believed to be valid.
(5) Each licensee shall comply with all applicable state and
federal statutes relating to the activities governed by this
((chapter)) subchapter.
Sec. 8 RCW 31.45.090 and 2005 c 274 s 257 are each amended to
read as follows:
(1) Each licensee shall submit to the director, in a form approved
by the director, a report containing financial statements covering the
calendar year or, if the licensee has an established fiscal year, then
for such fiscal year, within one hundred five days after the close of
each calendar or fiscal year. The licensee shall also file such
additional relevant information as the director may require. Any
information provided by a licensee in an annual report that constitutes
a trade secret under chapter 19.108 RCW is exempt from disclosure under
chapter 42.56 RCW, unless aggregated with information supplied by other
licensees in such a manner that the licensee's individual information
is not identifiable. Any information provided by the licensee that
allows identification of the licensee may only be used for purposes
reasonably related to the regulation of licensees to ensure compliance
with this ((chapter)) subchapter.
(2) A licensee whose license has been suspended or revoked shall
submit to the director, at the licensee's expense, within one hundred
five days after the effective date of such surrender or revocation, a
closing audit report containing audited financial statements as of such
effective date for the twelve months ending with such effective date.
(3) The director shall adopt rules specifying the form and content
of such audit reports and may require additional reporting as is
necessary for the director to ensure compliance with this ((chapter))
subchapter.
Sec. 9 RCW 31.45.100 and 2003 c 86 s 16 are each amended to read
as follows:
The director or the director's designee may at any time examine and
investigate the business and examine the books, accounts, records, and
files, or other information, wherever located, of any licensee or
person who the director has reason to believe is engaging in the
business governed by this ((chapter)) subchapter. For these purposes,
the director or the director's designee may require the attendance of
and examine under oath all persons whose testimony may be required
about the business or the subject matter of the investigation. The
director or the director's designee may require the production of
original books, accounts, records, files, or other information, or may
make copies of such original books, accounts, records, files, or other
information. The director or the director's designee may issue a
subpoena or subpoena duces tecum requiring attendance and testimony, or
the production of the books, accounts, records, files, or other
information. The director shall collect from the licensee the actual
cost of the examination or investigation.
Sec. 10 RCW 31.45.105 and 2012 c 17 s 10 are each amended to read
as follows:
(1) It is a violation of this ((chapter)) subchapter for any person
subject to this ((chapter)) subchapter to:
(a) Directly or indirectly employ any scheme, device, or artifice
to defraud or mislead any ((borrower, to defraud or mislead any lender,
or to defraud or mislead any)) person;
(b) Directly or indirectly engage in any unfair or deceptive
practice toward any person; and
(c) Directly or indirectly obtain property by fraud or
misrepresentation((;)).
(d) Make a small loan to any person physically located in
Washington through use of the internet, facsimile, telephone, kiosk, or
other means without first obtaining a small loan endorsement; and
(e) Sell in a retail installment transaction under chapter 63.14
RCW open loop prepaid access (prepaid access as defined in 31 C.F.R.
Part 1010.100(ww) and not closed loop prepaid access as defined in 31
C.F.R. Part 1010.100(kkk))
(2) It is a violation of this ((chapter)) subchapter for any person
subject to this ((chapter)) subchapter to:
(a) Advertise, print, display, publish, distribute, or broadcast or
cause or permit to be advertised, printed, displayed, published,
distributed, or ((broadcast [broadcasted])) broadcasted any statement
or representation that is false, misleading, or deceptive, or that
omits material information;
(b) Fail to pay the annual assessment by the date and time as
specified in RCW 31.45.050;
(c) Fail to pay any other fee, assessment, or moneys due the
department.
(3) In addition to any other penalties, any transaction in
violation of subsection (1) of this section is uncollectible and
unenforceable.
Sec. 11 RCW 31.45.110 and 2012 c 17 s 11 are each amended to read
as follows:
(1) The director may issue and serve upon a licensee or applicant,
or any director, officer, sole proprietor, partner, or controlling
person of a licensee or applicant, a statement of charges if, in the
opinion of the director, any licensee or applicant, or any director,
officer, sole proprietor, partner, or controlling person of a licensee
or applicant:
(a) Is engaging or has engaged in an unsafe or unsound financial
practice in conducting a business governed by this ((chapter))
subchapter;
(b) Is violating or has violated this ((chapter)) subchapter,
including violations of:
(i) Any rules, orders, or subpoenas issued by the director under
any act;
(ii) Any condition imposed in writing by the director in connection
with the granting of any application or other request by the licensee;
or
(iii) Any written agreement made with the director;
(c) Is about to do the acts prohibited in (a) or (b) of this
subsection when the opinion that the threat exists is based upon
reasonable cause;
(d) Obtains a license by means of fraud, misrepresentation,
concealment, or through mistake or inadvertence of the director;
(e) Provides false statements or omits material information on an
application;
(f) Knowingly or negligently omits material information during or
in response to an examination or in connection with an investigation by
the director;
(g) Fails to pay a fee or assessment required by the director or
any multistate licensing system prescribed by the director, or fails to
maintain the required bond or deposit;
(h) Commits a crime against the laws of any jurisdiction involving
moral turpitude, financial misconduct, or dishonest dealings. For the
purposes of this section, a certified copy of the final holding of any
court, tribunal, agency, or administrative body of competent
jurisdiction is conclusive evidence in any hearing under this
((chapter)) subchapter;
(i) Knowingly commits or is a party to any material fraud,
misrepresentation, concealment, conspiracy, collusion, trick, scheme,
or device whereby any other person relying upon the word,
representation, or conduct acts to his or her injury or damage;
(j) Converts any money or its equivalent to his or her own use or
to the use of his or her principal or of any other person;
(k) Fails to disclose any information within his or her knowledge
or fails to produce any document, book, or record in his or her
possession for inspection by the director upon demand;
(l) Commits any act of fraudulent or dishonest dealing. For the
purposes of this section, a certified copy of the final holding of any
court, tribunal, agency, or administrative body of competent
jurisdiction is conclusive evidence in any hearing under this
((chapter)) subchapter;
(m) Commits an act or engages in conduct that demonstrates
incompetence or untrustworthiness, or is a source of injury and loss to
the public;
(n) Violates any applicable state or federal law relating to the
activities governed by this ((chapter)) subchapter.
(2) The statement of charges must be issued under chapter 34.05
RCW. The director or the director's designee may impose the following
sanctions against any licensee or applicant, or any directors,
officers, sole proprietors, partners, controlling persons, or employees
of a licensee or applicant:
(a) ((Deny, revoke, suspend, or condition a license or small loan
endorsement;)) Order the licensee or person to cease and desist from
practices that violate this ((
(b)chapter)) subchapter or constitute unsafe
and unsound financial practices;
(((c))) (b) Impose a fine not to exceed one hundred dollars per day
for each day's violation of this ((chapter)) subchapter;
(((d))) (c) Order restitution or refunds to borrowers or other
parties for violations of this ((chapter)) subchapter or take other
affirmative action as necessary to comply with this ((chapter))
subchapter; and
(((e))) (d) Remove from office or ban from participation in the
affairs of any licensee any director, officer, sole proprietor,
partner, controlling person, or employee of a licensee.
(3) The proceedings to impose the sanctions described in subsection
(2) of this section, including any hearing or appeal of the statement
of charges, are governed by chapter 34.05 RCW.
(4) Unless the licensee or person personally appears at the hearing
or is represented by a duly authorized representative, the licensee is
deemed to have consented to the statement of charges and the sanctions
imposed in the statement of charges.
(5) Except to the extent prohibited by another statute, the
director may engage in informal settlement of complaints or enforcement
actions including, but not limited to, payment to the department for
purposes of financial literacy and education programs authorized under
RCW 43.320.150.
Sec. 12 RCW 31.45.150 and 1994 c 92 s 287 are each amended to
read as follows:
Whenever as a result of an examination or report it appears to the
director that:
(1) The capital of any licensee is impaired;
(2) Any licensee is conducting its business in such an unsafe or
unsound manner as to render its further operations hazardous to the
public;
(3) Any licensee has suspended payment of its trust obligations;
(4) Any licensee has refused to submit its books, papers, and
affairs to the inspection of the director or the director's examiner;
(5) Any officer of any licensee refuses to be examined under oath
regarding the business of the licensee;
(6) Any licensee neglects or refuses to comply with any order of
the director made pursuant to this ((chapter)) subchapter unless the
enforcement of such order is restrained in a proceeding brought by such
licensee;
the director may immediately take possession of the property and
business of the licensee and retain possession until the licensee
resumes business or its affairs are finally liquidated as provided in
RCW 31.45.160. The licensee may resume business upon such terms as the
director may prescribe.
Sec. 13 RCW 31.45.180 and 1994 c 92 s 290 are each amended to
read as follows:
Any person who violates or participates in the violation of any
provision of the rules or orders of the director or of this ((chapter))
subchapter is guilty of a misdemeanor.
Sec. 14 RCW 31.45.190 and 1991 c 355 s 19 are each amended to
read as follows:
The legislature finds and declares that any violation of this
((chapter)) subchapter substantially affects the public interest and is
an unfair and deceptive act or practice and an unfair method of
competition in the conduct of trade or commerce as set forth in RCW
19.86.020. Remedies available under chapter 19.86 RCW shall not affect
any other remedy the injured party may have.
Sec. 15 RCW 31.45.200 and 1994 c 92 s 291 are each amended to
read as follows:
The director has the power, and broad administrative discretion, to
administer and interpret the provisions of this ((chapter)) subchapter
to ensure the protection of the public.
NEW SECTION. Sec. 16 Subject to section 18 of this act, the
following acts or parts of acts are each repealed, effective January 1,
2016:
(1) RCW 31.45.073 (Making small loans -- Endorsement required -- Due
date -- Termination date -- Maximum amount -- Installment plans -- Interest--Fees -- Postdated check or draft as security) and 2009 c 510 s 3, 2003 c
86 s 8, & 1995 c 18 s 2;
(2) RCW 31.45.077 (Small loan endorsement -- Application -- Form--Information -- Exemption from disclosure -- Fees) and 2005 c 274 s 256,
2003 c 86 s 9, 2001 c 177 s 13, & 1995 c 18 s 3;
(3) RCW 31.45.079 (Making small loans -- Agent for a licensee or
exempt entity -- Federal preemption) and 2003 c 86 s 10;
(4) RCW 31.45.082 (Delinquent small loan -- Restrictions on
collection by licensee or third party -- Definitions) and 2009 c 13 s 1
& 2003 c 86 s 11;
(5) RCW 31.45.084 (Small loan installment plan -- Terms--Restrictions) and 2009 c 510 s 4 & 2003 c 86 s 12;
(6) RCW 31.45.085 (Loan application -- Required statement -- Rules) and
2009 c 510 s 5;
(7) RCW 31.45.086 (Small loans -- Right of rescission) and 2003 c 86
s 13;
(8) RCW 31.45.088 (Small loans -- Disclosure requirements--Advertising -- Making loan) and 2003 c 86 s 14;
(9) RCW 31.45.093 (Information system -- Access -- Required
information -- Fees -- Rules) and 2009 c 510 s 6;
(10) RCW 31.45.095 (Report by director -- Contents) and 2009 c 510 s
7; and
(11) RCW 31.45.210 (Military borrowers--Licensee's duty--Definition) and 2005 c 256 s 1.
NEW SECTION. Sec. 17 A new section is added to chapter 31.45 RCW
under the subchapter heading "check cashers and sellers" to read as
follows:
(1) Small loans made pursuant to this chapter as it existed before
the effective date of this section may no longer be made on and after
January 1, 2016, provided the subchapter "small consumer installment
loans" becomes law as it is enacted by the legislature.
(2) All small loan licensees must surrender their small loan
license in accordance with the closure rules adopted by the director
and pay any applicable assessments due. Notwithstanding surrender or
such closure rules, a small loan licensee may collect a small loan with
an outstanding balance.
NEW SECTION. Sec. 18 Sections 1 through 17 of this act take
effect January 1, 2016, provided the subchapter "small consumer
installment loans" becomes law as it is enacted by the legislature.
NEW SECTION. Sec. 19 RCW 31.45.010 through 31.45.210 constitute
the subchapter "check cashers and sellers."
NEW SECTION. Sec. 20
(1) "Authenticate" means the same as defined in RCW 62A.9A-102.
(2) "Borrower" means a natural person who receives a small consumer
installment loan.
(3) "Controlling person" means a person owning or controlling ten
percent or more of the total outstanding shares of the applicant or
licensee, if the applicant or licensee is a corporation, and a member
who owns ten percent or more of a limited liability company or limited
liability partnership.
(4) "Department" means the department of financial institutions.
(5) "Director" means the director of financial institutions.
(6) "Final payment date" means the date of the borrower's last
scheduled payment on a small consumer installment loan.
(7) "Gross monthly income" means a borrower's or potential
borrower's gross monthly income as demonstrated by documentation of
income, including, but not limited to, a pay stub, documentation
reflecting receipt of public benefits, tax returns, bank statements, or
other documentation showing the source of income. A lender shall
require a borrower or potential borrower to provide a pay stub or other
evidence of income at least once every one hundred eighty days. This
evidence must not be over forty-five days old when presented.
(8) "License" means a license issued by the director under this
subchapter.
(9) "Licensee" means a single small consumer installment lender
licensed by the director to engage in business in accordance with this
subchapter. "Licensee" also means a small consumer installment lender,
whether located within or outside of this state, who fails to obtain a
license required by this subchapter.
(10) "Loaned amount" means the initial principal amount of the loan
exclusive of any interest, fees, penalties, or charges authorized by
this subchapter.
(11) "Military borrower" means:
(a) A "covered borrower" as defined in 32 C.F.R. Sec. 323.3; and
(b)(i) A member of the reserve components of the United States
army, navy, air force, marine corps, coast guard, army national guard,
or air national guard; and
(ii) A spouse or dependent child of a person under (b)(i) of this
subsection.
(12) "Person" means an individual, partnership, association,
limited liability company, limited liability partnership, trust,
corporation, and any other legal entity.
(13) "Record" means the same as defined in RCW 62A.1-201.
(14) "Scheduled payment" means any single payment disclosed in a
payment schedule on a federal truth in lending act disclosure.
"Scheduled payment" does not mean an actual payment on a date different
than a payment on the loan payment schedule, or the payment in full of
a loan before the final payment date on the loan payment schedule.
(15) "Small consumer installment loan" means a loan made to a
natural person in a single advance with terms as provided for in this
subchapter.
(16) "Truth in lending act" means the truth in lending act, 15
U.S.C. Sec. 1601 and Regulation Z, 12 C.F.R. Part 1026.
NEW SECTION. Sec. 21
(2) This subchapter does not apply to the following:
(a) Any person doing business under, and as permitted by, any law
of this state or of the United States relating to banks, savings banks,
trust companies, savings and loan or building and loan associations, or
credit unions; or
(b) Loans made under chapters 19.60, 31.04, and 31.45 RCW.
NEW SECTION. Sec. 22
NEW SECTION. Sec. 23
(a) The legal name, residence, and business address of the
applicant and, if the applicant is a partnership, association, limited
liability company, limited liability partnership, or corporation, of
every member, officer, principal, or director thereof;
(b) The location where the initial registered office of the
applicant will be located;
(c) The complete address of any other locations at which the
applicant currently proposes to engage in making small consumer
installment loans; and
(d) Such other data, financial statements, and pertinent
information as the director may require with respect to the applicant,
its members, principals, or officers.
(2) As part of or in connection with an application for any license
under this section, or periodically upon license renewal, each officer,
director, and owner applicant shall furnish information concerning his
or her identity, including fingerprints for submission to the
Washington state patrol or the federal bureau of investigation for a
state and national criminal history background check, personal history,
experience, business record, purposes, and other pertinent facts, as
the director may reasonably require. As part of or in connection with
an application for a license under this subchapter, or periodically
upon license renewal, the director is authorized to receive criminal
history record information that includes nonconviction data as defined
in RCW 10.97.030. The director may only disseminate nonconviction data
obtained under this section to criminal justice agencies. This section
does not apply to financial institutions regulated under chapters 31.12
and 31.13 RCW and Titles 30, 32, and 33 RCW.
(3) Any information in the application regarding the personal
residential address or telephone number of the applicant, any financial
information about the applicant and entities owned or controlled by the
applicant, and any trade secret as defined in RCW 19.108.010 including
any financial statement that is a trade secret, is exempt from the
public records disclosure requirements of chapter 42.56 RCW.
(4) The application must be filed together with an application fee
established by rule by the director. The fees collected must be
deposited to the credit of the financial services regulation fund in
accordance with RCW 43.320.110.
(5) Each applicant shall file and maintain a surety bond, approved
by the director, executed by the applicant as obligor and by a surety
company authorized to do a surety business in this state as surety,
whose liability as a surety does not exceed, in the aggregate, the
penal sum of the bond. The penal sum of the bond must be a minimum of
thirty thousand dollars and a maximum of two hundred fifty thousand
dollars based on the annual dollar amount of loans originated. The
bond must run to the state of Washington as obligee for the use and
benefit of the state and of any person or persons who may have a cause
of action against the obligor under this subchapter. The bond must be
conditioned that the obligor as licensee will faithfully conform to and
abide by this subchapter and all the rules adopted under this
subchapter. The bond will pay to the state and any person or persons
having a cause of action against the obligor all moneys that may become
due and owing to the state and those persons under and by virtue of
this subchapter.
NEW SECTION. Sec. 24
(a) The applicant has satisfied the licensing requirements of this
subchapter;
(b) The applicant is financially responsible and appears to be able
to conduct the business of making small consumer installment loans in
an honest, fair, and efficient manner with the confidence and trust of
the community and in accordance with this subchapter; and
(c) The applicant has the required bond.
(2) The director may refuse to issue a license if he or she finds
that the applicant, or any person who is a director, officer, partner,
agent, sole proprietor, owner, or controlling person of the applicant,
has been convicted of a felony in any jurisdiction within seven years
of filing the present application or is associating or consorting with
any person who has been convicted of a felony in any jurisdiction
within seven years of filing the present application.
(3) A license may not be issued to an applicant:
(a) Whose license to conduct business under this subchapter, or any
similar statute in any other jurisdiction, has been suspended or
revoked within five years of the filing of the present application;
(b) Who has been banned from the industry by an administrative
order issued by the director or the director's designee, for the period
specified in the administrative order; or
(c) Who has advertised or made internet loans in violation of this
subchapter.
(4) A license issued in accordance with this subchapter remains in
force and effect until surrendered, suspended, or revoked, or until the
license expires as a result of nonpayment of the annual assessment fee
as defined in this subchapter.
NEW SECTION. Sec. 25
NEW SECTION. Sec. 26
(1) The interest charged on the loaned amount is less than or equal
to thirty-six percent per annum, exclusive of fees, penalties, or
charges authorized by this subchapter;
(2) A maximum loaned amount of one thousand dollars;
(3) The loaned amount is fully repayable in substantially equal and
consecutive installments according to a payment schedule agreed to by
the parties with not less than fourteen days and not more than thirty-five days between each scheduled payment;
(4) A minimum loan term of ninety days;
(5) A maximum loan term of one hundred eighty-three days;
(6) The loan amortizes;
(7) The borrower's repayment obligations are not secured by a lien
on any real or personal property; and
(8) The loan is made primarily for personal, family, or household
purposes.
NEW SECTION. Sec. 27
(1) May charge, contract for, and receive interest of no more than
thirty-six percent per annum on the outstanding unpaid principal
balance of the loaned amount, exclusive of fees, penalties, or charges
authorized by this subchapter;
(2) May charge a loan origination fee on a small consumer
installment loan not to exceed fifteen percent of the loaned amount.
The fee is earned at the time the small consumer installment loan is
made and up to half of which is subject to a pro rata refund. If the
small consumer installment loan is paid in full prior to the final
payment date, the borrower is entitled to a refund equal to fifty
percent of the loan origination fee multiplied by a fraction whose
numerator is the number of days between the date on which the loan is
paid in full and the final payment date, and whose denominator is the
number of days in the original loan term. Notwithstanding this
subsection, a small consumer installment loan licensee must provide a
full refund of all charges after rescission as provided in section 31
of this act;
(3) May charge a monthly maintenance fee on a small consumer
installment loan not to exceed seven dollars and fifty cents per one
hundred dollars of the loaned amount for each month in which the loan
has an outstanding balance, which charge is fully earned every thirty
days after the origination date of the loan and is not subject to
refund. Notwithstanding this subsection, monthly maintenance fees for
a loan shall not exceed sixty dollars per month;
(4) Is prohibited from making a small consumer installment loan to
a borrower if the total of all scheduled payments to be made in any
month exceeds fifteen percent of the borrower's gross monthly income;
(5) May, in the event that any scheduled payment is delinquent ten
days or more:
(a) Charge and collect a penalty of not more than twenty-five
dollars per loan; or
(b) Declare the entire loan due and payable and proceed to collect
the small consumer installment loan, including the interest, loan
origination fee, and monthly maintenance fees that would have been due
if the loan had been paid in full on the final payment date;
(6) May collect from the borrower reasonable attorneys' fees,
actual expenses, and costs incurred in connection with the collection
of any amounts due to a licensee with respect to a small consumer
installment loan;
(7) Is prohibited from charging a prepayment fee. A borrower is
allowed to pay all or part of a loan before the maturity date without
incurring any additional fee;
(8) Is prohibited from requiring a borrower to purchase add-on
products such as credit insurance; and
(9) Is prohibited from charging any other interest, fees,
penalties, or charges, except those provided in subsections (1) through
(3), (5), and (6) of this section.
NEW SECTION. Sec. 28
(1) The name and address of the borrower and the licensee;
(2) The transaction date;
(3) The loaned amount;
(4) A statement of the total amount of finance charges charged,
expressed both as a dollar amount and an annual percentage rate,
calculated in accordance with the truth in lending act;
(5) The installment payment schedule;
(6) The right to rescind the loan on or before the close of
business on the next day of business at the location where the loan was
originated;
(7) A notice to the borrower that delinquency on one scheduled
payment may result in a penalty of not more than twenty-five dollars
per loan and/or acceleration of the loan;
(8) A description of the manner and methods by which loan payments
may be made, which include cash, check, automatic clearing house
transactions, debit authorization, or additional method of loan payment
authorized by the director after rule making; and
(9) A notice to the borrower in at least ten-point type that
states:
A SMALL CONSUMER INSTALLMENT LOAN IS NOT INTENDED TO MEET LONG-TERM
FINANCIAL NEEDS.
A SMALL CONSUMER INSTALLMENT LOAN SHOULD BE USED ONLY TO MEET
SHORT-TERM CASH NEEDS.
WHILE YOU ARE NOT REQUIRED TO REPAY THIS LOAN BEFORE ITS DUE DATE,
IT IS IN YOUR BEST INTEREST TO DO SO. THE SOONER YOU REPAY THE LOAN,
THE LESS IN INTEREST, FEES, AND OTHER CHARGES YOU WILL PAY.
No licensee may condition an extension of credit under a small
consumer installment loan on the borrower's repayment by preauthorized
electronic fund transfers. Payment options including, but not limited
to, automatic clearing house transactions and other electronic fund
transfers may be offered to borrowers as a choice with the method or
methods of payment chosen by the borrower.
NEW SECTION. Sec. 29
(2) The licensee shall provide to its customer a receipt for each
transaction. The receipt must include the name of the licensee, the
type and amount of the transaction, and the fees and charges charged
for the transaction.
NEW SECTION. Sec. 30
NEW SECTION. Sec. 31
NEW SECTION. Sec. 32
(2) Unless invited by the borrower, a licensee may not visit a
borrower's residence or place of employment for the purpose of
collecting a delinquent small consumer installment loan. A licensee
may not impersonate a law enforcement official, or make any statements
which might be construed as indicating an official connection with any
federal, state, county, or city law enforcement agency, or any other
governmental agency, while engaged in collecting a small consumer
installment loan.
(3) A licensee may not communicate with a borrower in such a manner
as to harass, intimidate, abuse, or embarrass a borrower, including but
not limited to communication at an unreasonable hour, with unreasonable
frequency, by threats of force or violence, or by use of offensive
language. A communication is presumed to have been made for the
purposes of harassment if it is initiated by the licensee for the
purposes of collection and:
(a) It is made with a borrower, spouse, or domestic partner in any
form, manner, or place, more than three times in a single week;
(b) It is made with a borrower at his or her place of employment
more than one time in a single week or made to a borrower after the
licensee has been informed that the borrower's employer prohibits these
communications;
(c) It is made with the borrower, spouse, or domestic partner at
his or her place of residence between the hours of 9:00 p.m. and 7:30
a.m.; or
(d) It is made to a party other than the borrower, the borrower's
attorney, the licensee's attorney, or a consumer reporting agency if
otherwise permitted by law except for purposes of acquiring location or
contact information about the borrower.
(4) A licensee is required to maintain a communication log of all
telephone and written communications with a borrower initiated by the
licensee regarding any collection efforts including date, time, and the
nature of each communication.
(5) If a dishonored check is assigned to any third party for
collection, this section applies to the third party for the collection
of the dishonored check.
(6) For the purposes of this section, "communication" includes any
contact with a borrower, initiated by the licensee, in person, by
telephone, or in writing (including e-mails, text messages, and other
electronic writing) regarding the collection of a delinquent small
consumer installment loan, but does not include any of the following:
(a) Communication while a borrower is physically present in the
licensee's place of business;
(b) An unanswered telephone call in which no message (other than a
caller ID) is left, unless the telephone call violates subsection
(3)(c) of this section; and
(c) An initial letter to the borrower that includes disclosures
intended to comply with the federal fair debt collection practices act.
(7) For the purposes of this section:
(a) A communication occurs at the time it is initiated by a
licensee regardless of the time it is received or accessed by the
borrower; and
(b) A call to a number that the licensee reasonably believes is the
borrower's cell phone will not constitute a communication with a
borrower at the borrower's place of employment.
(8) For the purposes of this section, "week" means a series of
seven consecutive days beginning on a Sunday.
NEW SECTION. Sec. 33
(a) The total of all scheduled payments to be made in any month
under all of the small consumer installment loans made by any licensee
to a borrower does not exceed fifteen percent of the borrower's gross
monthly income; and
(b) The unpaid principal balance of any and all small consumer
installment loans to a borrower does not exceed one thousand dollars.
(2) A borrower is prohibited from receiving more than eight small
consumer installment loans from all licensees in any twelve-month
period. A licensee is prohibited from making a small consumer
installment loan to a borrower if making that small consumer
installment loan would result in a borrower receiving more than eight
small consumer installment loans from all licensees in any twelve-month
period.
(3) A licensee is prohibited from extending a small consumer
installment loan to a borrower who:
(a) Is in default on another small consumer installment loan until
after that loan is paid in full or two years have passed from the
origination date of the small consumer installment loan, whichever
occurs first; or
(b) Is in a repayment plan for a small consumer installment loan
with another licensee.
(4) A licensee is prohibited from extending a small consumer
installment loan at any time to a borrower who:
(a) Has a small loan made by a licensee under chapter 31.45 RCW; or
(b) Is in an installment plan under RCW 31.45.088.
(5) The director has broad rule-making authority to adopt and
implement a database system to carry out subsection (1) of this
section. This includes, but is not limited to, taking the steps
necessary to contract a database vendor, and set licensee fees to
operate and administer the database system.
(6) The information in the database described in this section is
exempt from public disclosure under chapter 42.56 RCW.
NEW SECTION. Sec. 34
(2) The director must adopt rules to implement this section.
NEW SECTION. Sec. 35
(a) Is required to make the repayment plan offer available to the
borrower for a period of at least thirty days after the date of the
offer; and
(b) Is not required to make such an offer more than once for each
loan.
(2) The repayment plan offer must:
(a) Be in writing and sent to the borrower's last known address;
(b) State the date by which the borrower must act to enter into a
repayment plan;
(c) Explain the procedures the borrower must follow to enter into
a repayment plan;
(d) If the licensee requires the borrower to make an initial
payment to enter into a repayment plan, explain the requirement and
state the amount of the initial payment and the date the initial
payment must be made;
(e) State that the borrower has the opportunity to enter into a
repayment plan with a term of at least ninety days after the date the
repayment plan is entered into; and
(f) Include the following amounts:
(i) The total of payments or the remaining balance on the original
loan;
(ii) Any payments made on the loan;
(iii) Any charges added to the loan amount allowed pursuant to the
provisions of this subchapter; and
(iv) The total amount due if the borrower enters into a repayment
plan.
(3) Under the terms of any repayment plan pursuant to this section:
(a) The borrower must enter into the repayment plan not later than
thirty days after the date of the repayment plan offer, unless the
licensee allows a longer period;
(b) The licensee must allow the period for repayment to extend at
least ninety days after the date of the repayment plan, unless the
borrower agrees to a shorter term; and
(c) The licensee may require the borrower to make an initial
payment of not more than twenty percent of the total amount due under
the terms of the repayment plan.
(4) If the licensee and borrower enter into a repayment plan
pursuant to this section, the licensee shall honor the terms of the
repayment plan, and the licensee shall not:
(a) Except as otherwise provided by this subchapter, charge any
other amount to a borrower, including, without limitation, any amount
or charge payable directly or indirectly by the borrower and imposed
directly or indirectly by the licensee as an incident to or as a
condition of entering into a repayment plan. Such an amount includes,
without limitation:
(i) Any interest, regardless of the name given to the interest,
other than the interest charged pursuant to the original loan agreement
at a rate which does not exceed the annual percentage rate charged
during the term of the original loan agreement; or
(ii) Any origination fees, set-up fees, collection fees,
transaction fees, negotiation fees, handling fees, processing fees,
late fees, default fees, or any other fees, regardless of the name
given to the fee;
(b) Accept any security or collateral from the borrower to enter
into the repayment plan;
(c) Sell to the borrower any insurance or require the borrower to
purchase insurance or any other goods or services to enter into the
repayment plan; and
(d) Attempt to collect an amount that is greater than the amount
owed under the terms of the repayment plan.
(5) If the licensee and borrower enter into a repayment plan
pursuant to this section, the licensee shall:
(a) Prepare a written agreement establishing the repayment plan;
and
(b) Give the borrower a copy of the written repayment agreement.
The written repayment agreement must:
(i) Be signed by the licensee and borrower; and
(ii) Contain all of the terms of the repayment plan, including,
without limitation, the total amount due under the terms of the
repayment plan.
(6) If the borrower defaults on the repayment plan, the licensee
may, to collect the outstanding balance, commence any civil action
and/or pursue any remedy as otherwise authorized by law.
(7) The repayment plan in this section applicable to small consumer
installment loans is different than the installment plan applicable to
small loans.
NEW SECTION. Sec. 36
NEW SECTION. Sec. 37
(a) Fail to make disclosures to loan applicants as required by any
applicable federal law;
(b) Directly or indirectly employ any scheme, device, or artifice
to defraud or mislead any borrower, to defraud or mislead any lender,
or to defraud or mislead any person;
(c) Directly or indirectly engage in any unfair or deceptive
practice toward any person;
(d) Directly or indirectly obtain property by fraud or
misrepresentation;
(e) Make a small consumer installment loan to any person physically
located in Washington through the use of the internet, facsimile,
telephone, kiosk, or other means without first obtaining a license;
(f) Make, in any manner, any false or deceptive statement or
representation with regard to the rates, points, or other financing
terms or conditions for a small consumer installment loan or engage in
bait and switch advertising;
(g) Negligently make any false statement or knowingly and willfully
make any omission of material fact in connection with any reports filed
with the department of financial institutions by a licensee or in
connection with any investigation conducted by the department of
financial institutions;
(h) Advertise any rate of interest without conspicuously disclosing
the annual percentage rate implied by that rate of interest or
otherwise fail to comply with any requirement of the truth in lending
act, or any other applicable state or federal statutes or regulations;
(i) Make small consumer installment loans from any unlicensed
location;
(j) Fail to comply with all applicable state and federal statutes
relating to the activities governed by this subchapter; or
(k) Fail to pay any other fee, assessment, or moneys due the
department.
(2) In addition to any other penalties, any transaction in
violation of subsection (1) of this section is uncollectible and
unenforceable.
NEW SECTION. Sec. 38
(2) Nonlicensees are prohibited from advertising or making small
consumer installment loans via the internet.
NEW SECTION. Sec. 39
(2) If a licensee does not pay its annual assessment fee by the
annual assessment fee due date as specified in rule, the director or
the director's designee shall send the licensee a notice of expiration
and assess the licensee a late fee not to exceed fifteen percent of the
annual assessment fee as established in rule by the director. The
licensee's payment of both the annual assessment fee and the late fee
must arrive in the department of financial institutions' offices by
5:00 p.m. on the tenth day after the annual assessment fee due date,
unless the department of financial institutions is not open for
business on that date, in which case the licensee's payment of both the
annual assessment fee and the late fee must arrive in the department of
financial institutions' offices by 5:00 p.m. on the next occurring day
that the department of financial institutions is open for business. If
the payment of both the annual assessment fee and the late fee does not
arrive prior to such time and date, then the expiration of the
licensee's license is effective at 5:00 p.m. on the thirtieth day
after the assessment fee due date. The director or the director's
designee may reinstate the license if, within fifteen days after the
effective date of expiration, the licensee pays the annual assessment
fee and the late fee.
(3) If a licensee intends to do business at a new location, to
close an existing place of business, or to relocate an existing place
of business, the licensee shall provide written notification of that
intention to the director no less than thirty days before the proposed
establishing, closing, or moving of a place of business.
NEW SECTION. Sec. 40
NEW SECTION. Sec. 41
NEW SECTION. Sec. 42
(a) State that an order is sought under this section;
(b) Adequately specify the documents, records, evidence, or
testimony; and
(c) Include a declaration made under oath that an investigation is
being conducted for a lawfully authorized purpose related to an
investigation within the director's authority and that the subpoenaed
documents, records, evidence, or testimony are reasonably related to an
investigation within the director's authority.
(2) When an application under this section is made to the
satisfaction of the court, the court must issue an order approving the
subpoena. An order under this subsection constitutes authority of law
for the director to subpoena the documents, records, evidence, or
testimony.
(3) The director or authorized assistants may seek approval and a
court may issue an order under this section without prior notice to any
person, including the person to whom the subpoena is directed and the
person who is the subject of an investigation. An application for
court approval is subject to the fee and process set forth in RCW
36.18.012(3).
NEW SECTION. Sec. 43
(2) The director shall adopt rules specifying the form and content
of annual reports and may require additional reporting as is necessary
for the director to ensure compliance with this subchapter.
(3) A licensee whose license has been suspended or revoked shall
submit to the director, at the licensee's expense, within one hundred
five days after the effective date of the suspension or revocation, a
closing audit report containing audited financial statements as of the
effective date for the twelve months ending with the effective date.
(4) The director is authorized to enter into agreements or sharing
arrangements regarding licensee reports, examination, or investigation
information with other governmental agencies, the conference of state
bank supervisors, the American association of residential mortgage
regulators, the national association of consumer credit administrators,
or other associations representing governmental agencies as established
by rule, regulation, or order of the director.
NEW SECTION. Sec. 44
NEW SECTION. Sec. 45
(a) Is engaging or has engaged in an unsafe or unsound financial
practice in conducting a business governed by this subchapter;
(b) Is violating or has violated this subchapter, including
violations of:
(i) Any rules, orders, or subpoenas issued by the director under
any act;
(ii) Any condition imposed in writing by the director in connection
with the granting of any application or other request by the licensee;
or
(iii) Any written agreement made with the director;
(c) Obtains a license by means of fraud, misrepresentation, or
concealment;
(d) Provides false statements or omits material information on an
application;
(e) Knowingly or negligently omits material information during or
in response to an examination or in connection with an investigation by
the director;
(f) Fails to pay a fee or assessment required by the director or
any multistate licensing system prescribed by the director, or fails to
maintain the required bond;
(g) Commits a crime against the laws of any jurisdiction involving
moral turpitude, financial misconduct, or dishonest dealings. For the
purposes of this section, a certified copy of the final holding of any
court, tribunal, agency, or administrative body of competent
jurisdiction is conclusive evidence in any hearing under this
subchapter;
(h) Knowingly commits or is a party to any material fraud,
misrepresentation, concealment, conspiracy, collusion, trick, scheme,
or device whereby any other person relying upon the word,
representation, or conduct acts to his or her injury or damage;
(i) Wrongly converts any money or its equivalent of any other
person to his or her own use or to the use of his or her principal;
(j) Fails to disclose to the director any material information
within his or her knowledge or fails to produce any document, book, or
record in his or her possession for inspection by the director upon
lawful demand;
(k) Commits any act of fraudulent or dishonest dealing. For the
purposes of this section, a certified copy of the final holding of any
court, tribunal, agency, or administrative body of competent
jurisdiction is conclusive evidence in any hearing under this
subchapter;
(l) Commits an act or engages in conduct that demonstrates
incompetence or untrustworthiness, or is a source of injury and loss to
the public; or
(m) Violates any applicable state or federal law relating to the
activities governed by this subchapter.
(2) The director may issue and serve upon a licensee or applicant,
or any director, officer, sole proprietor, partner, or controlling
person of the licensee or applicant, a statement of charges if the
director has reasonable cause to believe that the licensee or applicant
is about to do acts prohibited in subsection (1) of this section.
(3) The statement of charges must be issued under chapter 34.05
RCW. The director or the director's designee may impose the following
sanctions against any licensee or applicant, or any directors,
officers, sole proprietors, partners, controlling persons, or employees
of a licensee or applicant:
(a) Deny, revoke, suspend, or condition a license;
(b) Order the licensee or person to cease and desist from practices
that violate this subchapter;
(c) Impose a fine not to exceed one hundred dollars per day per
violation of this subchapter;
(d) Order restitution or refunds to borrowers or other affected
parties for violations of this subchapter or take other affirmative
action as necessary to comply with this subchapter; and
(e) Remove from office or ban from participation in the affairs of
any licensee any director, officer, sole proprietor, partner,
controlling person, or employee of a licensee.
(4) The proceedings to impose the sanctions described in subsection
(3) of this section, including any hearing or appeal of the statement
of charges, are governed by chapter 34.05 RCW.
(5) Unless the licensee or person personally appears at the hearing
or is represented by a duly authorized representative, the licensee is
deemed to have consented to the statement of charges and the sanctions
imposed in the statement of charges.
(6) Except to the extent prohibited by another statute, the
director may engage in informal settlement of complaints or enforcement
actions including, but not limited to, payment to the department of
financial institutions for purposes of financial literacy and education
programs authorized under RCW 43.320.150.
NEW SECTION. Sec. 46
NEW SECTION. Sec. 47
NEW SECTION. Sec. 48
NEW SECTION. Sec. 49
NEW SECTION. Sec. 50
NEW SECTION. Sec. 51
NEW SECTION. Sec. 52
(1) The number of branches and total locations;
(2) The number of loans made during 2014;
(3) Loan volume;
(4) Average loan amount;
(5) Total fees charged, in total and by category of fee or other
charge;
(6) Average payment per month, in total and by category of fee or
other charge;
(7) Average income of borrower;
(8) The number of borrowers who are in the military;
(9) Borrower frequency;
(10) The number of unique customers;
(11) Average length of loan repayment;
(12) The number of borrowers taking out the maximum loan amount;
(13) The number of borrowers who went into default;
(14) Average length of time a borrower has a loan before a borrower
goes into default;
(15) Any legislative recommendations by the director; and
(16) Any other information that the director believes is relevant
or useful.
NEW SECTION. Sec. 53
NEW SECTION. Sec. 54
NEW SECTION. Sec. 55 (1) Sections 20 through 54 of this act take
effect January 1, 2014.
(2) The director or the director's designee shall take the actions
necessary to ensure sections 20 through 54 of this act are implemented
on January 1, 2014.
NEW SECTION. Sec. 56 Sections 20 through 54 of this act are each
added to chapter 31.45 RCW and codified with the subchapter heading of
"small consumer installment loans.""
Correct the title.
EFFECT: A framework for a new consumer loan product is created.
No person may engage in advertising or making small consumer
installment loans without first obtaining a license from the Department
of Financial Institutions (DFI). A process for obtaining a license is
created. The DFI may investigate licensees and may take disciplinary
actions against licensees and persons who are the directors, officers,
and employees of licensees. Licensees are prohibited from engaging in
a number of business practices, including specified collection
practices.
A licensee may loan a maximum of $1,000 in a small consumer
installment loan. The minimum length of a small consumer installment
loan is 90 days. The maximum length of a small consumer installment
loan is 183 days.
A licensee may charge up to 15% of the amount of a small consumer
installment loan as an origination fee. A portion of the loan
origination fees may be refundable. If a borrower fully repays a loan
prior to the date full repayment is due, a licensee must provide a
refund. The refund is equal to 50% of the origination fee multiplied
by a fraction based on how early the loan was repaid.
A licensee may charge an interest fee of 36% APR on the outstanding
balance of the small consumer installment loan.
A licensee may charge a monthly maintenance fee of 7.5% on the
original loaned amount. The fee is earned after each 30 day period,
not after the first day of each month. The monthly fee is capped at a
maximum of $60 for any month it is due.
If a borrower is 10 days late on a scheduled payment, a licensee
may declare the entire loan due, including the origination fee,
interest, and the monthly maintenance fees that would have been due if
the loan was paid in full on the due date. A licensee may also charge
a $25 delinquency fee and may collect reasonable attorneys' fees,
actual expenses, and costs in collecting the amounts due.
Prior to a civil action for collection, a licensee must offer a
borrower a repayment plan prior to bringing a civil action on a loan in
default. The offer must be open to the borrower for at least 30 days.
A repayment plan must be for at least 90 days unless the borrower
agrees to a shorter term. A licensee may charge up to 20% of the total
amount due as an initial payment. A licensee may charge fees and sums
incurred prior to the default and the applicable delinquency fees. A
licensee may not charge any other fee or interest for a repayment plan.
If a borrower defaults on a repayment plan, a licensee may pursue any
legal remedy to collect the outstanding balance on the repayment plan.
Additional disclosure language is prescribed.
Active and reserve duty military members, spouses of members, and
dependent children of members are ineligible for a small consumer
installment loan. A licensee may rely on a safe harbor, adopted by
rule, in determining if a borrower is ineligible as a military
borrower.
A borrower may not have simultaneous installment loans at multiple
lenders even if the loans are within the aggregate limit and meet the
gross monthly income restrictions. A borrower may not have a small
loan (also known as a payday loan) and a small consumer installment
loan simultaneously.
The maximum dollar amount that can be loaned and the maximum
monthly maintenance fee must be adjusted annually by the Director of
the Department of Financial Institutions based on a formula that
includes a stated Consumer Price Index.
One dollar from each small consumer installment loan transaction
must be remitted to the DFI to be used for financial literacy and
education.
If small consumer installment loan provisions in the bill are
enacted, the existing statutory provisions that provide a regulatory
framework for payday loans are expired on January 1, 2016. Payday loan
lenders must surrender their license endorsement. Payday lenders are
allowed to collect outstanding payday loans. Payday lenders must wind
down their payday loan business in accordance with DFI rules but may
not make new payday loans.
The act is effective on January 1, 2014.