HB 500/FN (BR 295) - J. Bell, T. Riner, T. Burch, R. Damron, J. Glenn, J. Jenkins, D. Owens, J. Richards, T. Thompson, J. Tilley, T. Turner, R. Wilkey
AN ACT relating to deferred deposit transactions.
Create new sections of Subtitle 9 of KRS Chapter 286 to require the Executive Director of the Office of Financial Institutions to develop a database of deferred deposit transactions and to promulgate regulations specifying the information required of licensees; to require the office to file an annual report regarding deferred deposit transaction licensees' activities with the Legislative Research Commission; amend KRS 286.9-100 to reduce the service fee for a transaction charged by a licensee from $15 to $12 for a period of 30 days, rather than 14 days; provide that a licensee shall access the database, required by this Act, to ascertain if a customer has outstanding deferred deposit transactions with other licensees that would result in a debt in excess of $500; prohibit refinancing of a deferred deposit transaction and prohibit pay off of a deferred deposit transaction and immediate entry into a new transaction within 72 hours; and provide that failure of any deferred deposit transaction to comply with KRS 286.9-100 shall void the transaction from its inception.
HB 500 - AMENDMENTS
HCS/FN - Delete original provisions; amend KRS 286.9-010 to define terms relating to deferred deposit transactions and the business of check cashing; amend KRS 286.9-070 to clarify that deferred deposit and check cashing licenses expire yearly; to require that a licensee acquire written approval from the office of insurance prior to implementing a change of control in the licensee's business and to provide for the process of abandonment of a licensure application; amend KRS 286.9-080 to provide that licenses may be reinstated within 31 days of expiration; amend KRS 286.9-100 to reduce the maximum service fees from $15 per $100 in proceeds to $13 per $100 in proceeds; alter payday lending transactions from the discount method to the add-on method; reduce the time to report illegal activity from 5 days to 2 days; create language anticipating the establishment of a statewide database; create a new subsection to prohibit any licensee from entering into a new deferred deposit transaction with a customer within 24 hours of any licensee closing a deferred deposit transaction with that customer and provide verification procedures; provide that it shall be illegal to charge any fee in connection with a deferred deposit transaction that is not provided for in subtitle 9 of KRS Chapter 286; restrict the amount a customer may borrow from a payday lender to no more than 30% of the customer's gross monthly income; provide for rescission of the transaction before close of business on the day following execution of the transaction without any charge to the customer; amend KRS 286.9-110 to add enforcement methods; provide additional criteria that may result in enforcement; provide that a person who is the subject of a license denial shall not be eligible to reapply for licensure for 1 year, and a person with a revoked license may not reapply for 3 years and 2 revocations shall permanently ban a former licensee; provide that any person whose license has been denied, suspended, revoked, or surrendered in lieu of revocation or suspension shall not participate in any business activity under subtitle 9 of KRS Chapter 286 and shall not engage in any business activity on the premises of a licensee under subtitle 9; amend KRS 286.9-040 creates a new subsection to provide that surrender or revocation of a license shall not affect any civil or criminal liability for acts committed during licensure, nor affect the obligation of any preexisting contract, nor does surrender or expiration affect a suspension or revocation proceeding; authorize the office to pursue debts and fines through the Department of Revenue with jurisdiction in Franklin Circuit Court, or any court of competent jurisdiction, for injunctive relief; amend KRS 286.9-040 to allow the use of surety bonds as a deposit, increase the tiered deposit requirements up to a maximum of $500,000 rather than $200,000, require that all deposits shall provide for suit, shall be made payable to the executive director and be available for recovery of expenses, fines, and fees levied by the executive director, and establish a 3 year statute of limitations for actions against bonds or other deposits; create a new section of subtitle 9 of KRS Chapter 286 to provide that all deferred deposit transactions made with an unlicensed person are void, or may be deemed void by the executive director if he determines there is a violation of this subtitle; create a new section of subtitle 9 of KRS Chapter 286 to provide for implementation of a common database with real-time access through an Internet connection by July 1, 2009 for the purpose of licensee submission of transaction and customer information and to permit the executive director to determine whether licensees and customers are complying with this subtitle; create a new section to establish civil penalties of $1000 to $5000 per violation per day, to be assessed by the executive director plus the state's expenses and costs for litigation; create new sections of subtitle 9 of KRS Chapter 286 to allow for the use of consent orders and provide such orders are a matter of public record and to provide that the executive director may stay, suspend, or postpone the effective date of an order pending the administrative proceeding upon written request by the affected person, licensee, or agent; require compliance with applicable federal and state laws; require all licensees to file all reports from the United States Treasury Financial Crimes Enforcement Network with the executive director; require licensees to maintain an agent for service of process; require licensees to retain records for a minimum of 3 years unless federal law requires a longer period; allow records to be maintained electronically; require appointment of a custodian to store records if a licensee's business ceases to operate; prohibit the renewal or extension of a deferred presentment service agreement for a fee; authorize repayment plans for a customer who is seeking the 6th loan in a 12-month period and require the licensee to inform the customer of the repayment plan option; provide that a licensee shall be liable for damages if a check or debit is submitted for payment prior to the expiration of the term of the repayment plan; authorize the executive director to issue emergency orders suspending, limiting, or restricting the license of any person; change the annual report due date from September 1 to March 1 and add additional reporting requirements; provide the process for administrative action by the office; provide that the affairs of a licensee are subject to examination at the direction of the executive director at any time, without notice to the licensee; exempt the United States and any state government from the provisions of this subtitle; make technical corrections; require disclosures be made in writing and in advance of a transaction; provide that any person operating without a license shall be guilty of a Class D felony and that intentional violation of the subtitle shall be a Class A misdemeanor.
HCA (1, J. Bell) - Delete "electronic instrument" from the definition of "Payment instrument."
HFA (1/FN, J. Bell) - Amend Section 1 to delete debit and electronic instrument references; amend Section 4 to reinstate the current fee of $15 per $100 borrowed; substitute "the previous business day" for the 24 hour "cooling-off" period throughout the bill; restrict the number of deferred deposit transactions that a customer may have at one time, with a total maximum of $500; require a licensee to offer a repayment plan before the maturity date of the sixth consecutive loan to one customer; delete the 12 month restriction on the 6 transactions and authorize the customer to enter into a deferred deposit transaction after completion of a repayment plan; delete reference to "automated clearing house"; define for purposes of the database "payment instrument" to include debit and electronic fund transfer or any other form of electronic transmission; effective January 1, 2009, except Section 8, relating to establishment of the database, which becomes effective on July 1, 2009.
HFA (2/FN, K. Upchurch) - Delete all language in the bill and insert a provision to require the Interim Joint Committee on banking and Insurance to study the business of deferred deposit transactions and the impact of these transactions on the citizens of the Commonwealth; require the study to include recommendations regarding KRS 286.9-010 to 286.9-990; and, require a report to the Legislative Research Commission no later than December 1, 2008.
Feb 11-introduced in House
Feb 12-to Banking & Insurance (H)
Mar 3-posted in committee
Mar 13-reported favorably, 1st reading, to Calendar with Committee Substitute, committee amendment (1)
Mar 14-2nd reading, to Rules
Mar 17-posted for passage in the Regular Orders of the Day for Tuesday, March 18, 2008
Mar 19-floor amendments (1) and (2) filed to Committee Substitute
Mar 20-3rd reading; floor amendment (2) defeated ; passed 56-35 with Committee Substitute, floor amendment (1)
Mar 21-received in Senate
Mar 26-to Appropriations & Revenue (S)