H.B. 47

             1     

DEFERRED DEPOSIT LOAN AMENDMENTS

             2     
2014 GENERAL SESSION

             3     
STATE OF UTAH

             4     
Chief Sponsor: Larry B. Wiley

             5     
Senate Sponsor: ____________

             6     
             7      LONG TITLE
             8      General Description:
             9          This bill modifies the Check Cashing and Deferred Deposit Lending Registration Act to
             10      address deferred deposit loans.
             11      Highlighted Provisions:
             12          This bill:
             13          .    modifies the definition provision;
             14          .    requires a deferred deposit lender to query the database before extending a deferred
             15      deposit loan;
             16          .    provides for reporting requirements;
             17          .    imposes ineligibility conditions;
             18          .    requires the creation of a deferred deposit database;
             19          .    addresses query procedures; and
             20          .    makes technical and conforming amendments.
             21      Money Appropriated in this Bill:
             22          None
             23      Other Special Clauses:
             24          None
             25      Utah Code Sections Affected:
             26      AMENDS:
             27           7-23-102 , as last amended by Laws of Utah 2013, Chapter 73


             28           7-23-401 , as last amended by Laws of Utah 2010, Chapter 102
             29           7-23-503 , as last amended by Laws of Utah 2012, Chapter 323
             30      ENACTS:
             31           7-23-601 , Utah Code Annotated 1953
             32           7-23-602 , Utah Code Annotated 1953
             33           7-23-603 , Utah Code Annotated 1953
             34     
             35      Be it enacted by the Legislature of the state of Utah:
             36          Section 1. Section 7-23-102 is amended to read:
             37           7-23-102. Definitions.
             38          As used in this chapter:
             39          (1) "Annual percentage rate" has the same meaning as in 15 U.S.C. Sec. 1606, as
             40      implemented by regulations issued under that section.
             41          (2) "Business of cashing checks" means cashing a check for consideration.
             42          (3) "Business of deferred deposit lending" means extending a deferred deposit loan.
             43          (4) "Check" is as defined in Section 70A-3-104 .
             44          (5) "Check casher" means a person that engages in the business of cashing checks.
             45          (6) "Deferred deposit database" means the deferred deposit database created in
             46      accordance with Section 7-23-602 .
             47          (7) "Deferred deposit database provider" means:
             48          (a) the department; or
             49          (b) a third party with which the department contracts as provided in Section 7-23-602 .
             50          [(6)] (8) "Deferred deposit lender" means a person that engages in the business of
             51      deferred deposit lending.
             52          [(7)] (9) "Deferred deposit loan" means a transaction [where] when:
             53          (a) a person:
             54          (i) presents to a deferred deposit lender a check written on that person's account; or
             55          (ii) provides written or electronic authorization to a deferred deposit lender to effect a
             56      debit from that person's account using an electronic payment; and
             57          (b) the deferred deposit lender:
             58          (i) provides the person described in Subsection [(7)](9)(a) an amount of money that is


             59      equal to the face value of the check or the amount of the debit less any fee or interest charged
             60      for the transaction; and
             61          (ii) agrees not to cash the check or process the debit until a specific date.
             62          [(8)] (10) (a) "Electronic payment" means an electronic method by which a person:
             63          (i) accepts a payment from another person; or
             64          (ii) makes a payment to another person.
             65          (b) "Electronic payment" includes a payment made through:
             66          (i) an automated clearing house transaction;
             67          (ii) an electronic check;
             68          (iii) a stored value card; or
             69          (iv) an Internet transfer.
             70          [(9)] (11) "Nationwide database" means the Nationwide Mortgage Licensing System
             71      and Registry, authorized under federal licensing requirements for mortgage loan originators.
             72          [(10)] (12) "Rollover" means the extension or renewal of the term of a deferred deposit
             73      loan.
             74          Section 2. Section 7-23-401 is amended to read:
             75           7-23-401. Operational requirements for deferred deposit loans.
             76          (1) If a deferred deposit lender extends a deferred deposit loan, the deferred deposit
             77      lender shall:
             78          (a) post in a conspicuous location on its premises that can be viewed by a person
             79      seeking a deferred deposit loan:
             80          (i) a complete schedule of any interest or fees charged for a deferred deposit loan that
             81      states the interest and fees using dollar amounts;
             82          (ii) a number the person can call to make a complaint to the department regarding the
             83      deferred deposit loan; and
             84          (iii) a list of states where the deferred deposit lender is registered or authorized to offer
             85      deferred deposit loans through the Internet or other electronic means;
             86          (b) enter into a written contract for the deferred deposit loan;
             87          (c) conspicuously disclose in the written contract:
             88          (i) that under Subsection (3)(a), a person receiving a deferred deposit loan may make a
             89      partial payment in increments of at least $5 on the principal owed on the deferred deposit loan


             90      without incurring additional charges above the charges provided in the written contract;
             91          (ii) that under Subsection (3)(b), a person receiving a deferred deposit loan may rescind
             92      the deferred deposit loan on or before 5 p.m. of the next business day without incurring any
             93      charges;
             94          (iii) that under Subsection (4)(b), the deferred deposit loan may not be rolled over
             95      without the person receiving the deferred deposit loan requesting the rollover of the deferred
             96      deposit loan;
             97          (iv) that under Subsection (4)(c), the deferred deposit loan may not be rolled over if the
             98      rollover requires the person to pay the amount owed by the person under the deferred deposit
             99      loan in whole or in part more than 10 weeks after the day on which the deferred deposit loan is
             100      executed; and
             101          (v) (A) the name and address of a designated agent required to be provided the
             102      department under Subsection 7-23-201 (2)(d)(vi); and
             103          (B) a statement that service of process may be made to the designated agent;
             104          (d) provide the person seeking the deferred deposit loan:
             105          (i) a copy of the written contract described in Subsection (1)(c); and
             106          (ii) written notice that if the person seeking the deferred deposit loan is eligible to enter
             107      into an extended payment plan, the deferred deposit lender provides an extended payment plan
             108      described in Section 7-23-403 ;
             109          (e) orally review with the person seeking the deferred deposit loan the terms of the
             110      deferred deposit loan including:
             111          (i) the amount of any interest rate or fee;
             112          (ii) the date on which the full amount of the deferred deposit loan is due;
             113          (iii) that under Subsection (3)(a), a person receiving a deferred deposit loan may make
             114      a partial payment in increments of at least $5 on the principal owed on the deferred deposit
             115      loan without incurring additional charges above the charges provided in the written contract;
             116          (iv) that under Subsection (3)(b), a person receiving a deferred deposit loan may
             117      rescind the deferred deposit loan on or before 5 p.m. of the next business day without incurring
             118      any charges;
             119          (v) that under Subsection (4)(b), the deferred deposit loan may not be rolled over
             120      without the person receiving the deferred deposit loan requesting the rollover of the deferred


             121      deposit loan; and
             122          (vi) that under Subsection (4)(c), the deferred deposit loan may not be rolled over if the
             123      rollover requires the person to pay the amount owed by the person under the deferred deposit
             124      loan in whole or in part more than 10 weeks after the day on which the deferred deposit loan is
             125      executed; [and]
             126          (f) comply with the following as in effect on the date the deferred deposit loan is
             127      extended:
             128          (i) Truth in Lending Act, 15 U.S.C. Sec. 1601 et seq., and its implementing federal
             129      regulations;
             130          (ii) Equal Credit Opportunity Act, 15 U.S.C. Sec. 1691, and its implementing federal
             131      regulations;
             132          (iii) Bank Secrecy Act, 12 U.S.C. Sec. 1829b, 12 U.S.C. Sec. 1951 through 1959, and
             133      31 U.S.C. Sec. 5311 through 5332, and its implementing regulations; and
             134          (iv) Title 70C, Utah Consumer Credit Code[.]; and
             135          (g) on and after October 1, 2014, before extending a deferred deposit loan, query the
             136      deferred deposit database in accordance with Section 7-23-603 to determine if the person
             137      seeking the deferred deposit loan is ineligible to have a deferred deposit loan as provided in
             138      Section 7-23-601 .
             139          (2) If a deferred deposit lender extends a deferred deposit loan through the Internet or
             140      other electronic means, the deferred deposit lender shall provide the information described in
             141      Subsection (1)(a) to the person receiving the deferred deposit loan:
             142          (a) in a conspicuous manner; and
             143          (b) prior to the person entering into the deferred deposit loan.
             144          (3) A deferred deposit lender that engages in a deferred deposit loan shall permit a
             145      person receiving a deferred deposit loan to:
             146          (a) make partial payments in increments of at least $5 on the principal owed on the
             147      deferred deposit loan at any time prior to maturity without incurring additional charges above
             148      the charges provided in the written contract; and
             149          (b) rescind the deferred deposit loan without incurring any charges by returning the
             150      deferred deposit loan amount to the deferred deposit lender on or before 5 p.m. the next
             151      business day following the deferred deposit loan transaction.


             152          (4) A deferred deposit lender that engages in a deferred deposit loan may not:
             153          (a) collect additional interest on a deferred deposit loan with an outstanding principal
             154      balance 10 weeks after the day on which the deferred deposit loan is executed;
             155          (b) roll over a deferred deposit loan without the person receiving the deferred deposit
             156      loan requesting the rollover of the deferred deposit loan;
             157          (c) roll over a deferred deposit loan if the rollover requires a person to pay the amount
             158      owed by the person under a deferred deposit loan in whole or in part more than 10 weeks from
             159      the day on which the deferred deposit loan is first executed;
             160          (d) extend a new deferred deposit loan to a person on the same business day that the
             161      person makes a payment on another deferred deposit loan if the payment:
             162          (i) is made at least 10 weeks after the day on which that deferred deposit loan is
             163      extended; and
             164          (ii) results in the principal of that deferred deposit loan being paid in full;
             165          (e) threaten to use or use the criminal process in any state to collect on the deferred
             166      deposit loan; [or]
             167          (f) in connection with the collection of money owed on a deferred deposit loan,
             168      communicate with a person who owes money on a deferred deposit loan at the person's place of
             169      employment if the person or the person's employer communicates, orally or in writing, to the
             170      deferred deposit lender that the person's employer prohibits the person from receiving these
             171      communications[.]; or
             172          (g) extend a deferred deposit loan to a person who is ineligible for the deferred deposit
             173      loan under Section 7-23-601 .
             174          (5) Notwithstanding Subsections (4)(a) and (e), a deferred deposit lender that is the
             175      holder of a check used to obtain a deferred deposit loan that is dishonored may use the
             176      remedies and notice procedures provided in Chapter 15, Dishonored Instruments, except that
             177      the issuer, as defined in Section 7-15-1 , of the check may not be:
             178          (a) asked by the holder to pay the amount described in Subsection 7-15-1 (6)(a)(iii) as a
             179      condition of the holder not filing a civil action; or
             180          (b) held liable for the damages described in Subsection 7-15-1 (7)(b)(vi).
             181          (6) A deferred deposit lender shall keep a record of a query made under Subsection
             182      (1)(g) in accordance with rules made by the department pursuant to Title 63G, Chapter 3, Utah


             183      Administrative Rulemaking Act.
             184          Section 3. Section 7-23-503 is amended to read:
             185           7-23-503. Reporting by commissioner.
             186          (1) Subject to Subsection (2), as part of the commissioner's annual report to the
             187      governor and Legislature under Section 7-1-211 , the commissioner shall report to the governor
             188      and Legislature on:
             189          (a) the operations on an aggregate basis of deferred deposit lenders operating in the
             190      state[.]; and
             191          (b) the information required to be reported under Section 7-23-602 .
             192          (2) In preparing the report required by Subsection (1), the commissioner:
             193          (a) shall include in the report for the immediately preceding calendar year aggregate
             194      information from the one or more operations statements filed under Subsection 7-23-201 (2)(e)
             195      by deferred deposit lenders for that calendar year;
             196          (b) shall include in the report:
             197          (i) the total number of written complaints concerning issues material to deferred
             198      deposit loan transactions received by the department in a calendar year from persons who have
             199      entered into a deferred deposit loan with a deferred deposit lender;
             200          (ii) for deferred deposit lenders who are registered with the department:
             201          (A) the number of the complaints described in Subsection (2)(b)(i) that the department
             202      considers resolved; and
             203          (B) the number of the complaints described in Subsection (2)(b)(i) that the department
             204      considers unresolved; and
             205          (iii) for deferred deposit lenders who are not registered with the department:
             206          (A) the number of the complaints described in Subsection (2)(b)(i) that the department
             207      considers resolved; and
             208          (B) the number of the complaints described in Subsection (2)(b)(i) that the department
             209      considers unresolved; [and]
             210          (c) shall include the information required under Section 7-23-602 ; and
             211          [(c)] (d) may not include in the report information from an operations statement filed
             212      with the department that could identify a specific deferred deposit lender.
             213          Section 4. Section 7-23-601 is enacted to read:


             214     
Part 6. Deferred Deposit Database Program

             215          7-23-601. Ineligibility.
             216          (1) A person is ineligible to obtain a deferred deposit loan if the person:
             217          (a) has two deferred deposit loans outstanding;
             218          (b) borrows in aggregate, including the deferred deposit loan being applied for, more
             219      than 25% of the person's net monthly income for all outstanding deferred deposit loans at the
             220      same time; or
             221          (c) has obtained 10 deferred deposit loans in the preceding 12 months.
             222          (2) The department shall by rule, made in accordance with Title 63G, Chapter 3, Utah
             223      Administrative Rulemaking Act, establish the method to determine 25% of a person's net
             224      monthly income.
             225          Section 5. Section 7-23-602 is enacted to read:
             226          7-23-602. Deferred Deposit Database Program established.
             227          (1) (a) There is established the Deferred Deposit Database Program to create a deferred
             228      deposit database to verify whether a person seeking a deferred deposit loan is ineligible to have
             229      a deferred deposit loan under Section 7-23-601 .
             230          (b) The program shall be administered by the department and require the department to
             231      implement by October 1, 2014, a common database with real-time access by deferred deposit
             232      lenders through an Internet connection or other electronic means.
             233          (c) The deferred deposit database shall be accessible to the department and a deferred
             234      deposit lender to verify whether a person seeking a deferred deposit loan is ineligible for the
             235      deferred deposit loan under Section 7-23-601 .
             236          (d) (i) The department may contract in accordance with Title 63G, Chapter 6a, Utah
             237      Procurement Code, with a third party to establish and maintain the deferred deposit database
             238      for the purpose of determining whether a person seeking a deferred deposit loan is ineligible
             239      for the deferred deposit loan under Section 7-23-601 .
             240          (ii) If the department contracts with a third party, the commissioner shall:
             241          (A) ensure that the third party selected as the deferred deposit database provider
             242      operates the deferred deposit database pursuant to this part;
             243          (B) consider the third party's cost of service and ability to meet the requirements of this
             244      part; and


             245          (C) ensure that the third party can provide accurate and secure receipt, transmission,
             246      and storage of data.
             247          (iii) A contract may not obligate the department to pay a third party deferred deposit
             248      database provider more money than is paid in fees collected under Subsection 7-23-603 (2).
             249          (iv) A third party deferred deposit database provider shall use the data collected under
             250      this part only as prescribed in this part and in the contract with the department and for no other
             251      purpose.
             252          (e) The department shall investigate violations of and enforce this part. The
             253      department may not delegate its responsibilities under this Subsection (1)(e).
             254          (2) The department shall establish guidelines to be followed by the deferred deposit
             255      database provider so that a deferred deposit lender can efficiently:
             256          (a) report information to the deferred deposit database under Subsection (3); and
             257          (b) access the deferred deposit database under Section 7-23-603 .
             258          (3) The department shall by rule made in accordance with Title 63G, Chapter 3, Utah
             259      Administrative Rulemaking Act, provide:
             260          (a) for the reporting by a deferred deposit lender to the deferred deposit database the
             261      information required to determine whether a person seeking a deferred deposit loan is ineligible
             262      for the deferred deposit loan under Section 7-23-601 , including the amount of any outstanding
             263      deferred deposit loan and the amount of the deferred deposit loan for which a person is
             264      applying;
             265          (b) that when the deferred deposit database provider receives notification that a
             266      deferred deposit loan is closed, the deferred deposit database provider shall designate the
             267      transaction as closed in the deferred deposit database immediately, but in no event after 11:59
             268      p.m. on the day the deferred deposit database provider receives the notification;
             269          (c) for the archiving and retention of information on the deferred deposit database; and
             270          (d) for the deferred deposit database provider to establish and maintain a process for
             271      responding to queries that due to technical difficulties the deferred deposit lender cannot access
             272      through the Internet or other electronic means.
             273          (4) If the department contracts with a third party provider, the department:
             274          (a) may maintain access to data in the deferred deposit database, including transactions
             275      archived under Subsection (3)(c) for examination, investigation, or legislative or policy review;


             276      and
             277          (b) may not obtain or access a Social Security number, driver license number, or other
             278      state-issued identification number in the deferred deposit database except as provided in this
             279      Subsection (4).
             280          (5) A deferred deposit lender violates this chapter if the deferred deposit lender
             281      knowingly or with reckless disregard:
             282          (a) fails to report information required to be reported under Subsection (3); or
             283          (b) reports inaccurate information required to be reported under Subsection (3).
             284          (6) (a) Information regarding a person's transactional history provided to, maintained
             285      in, or accessed from the deferred deposit database is confidential and, except as provided in
             286      Subsection (6)(b):
             287          (i) is not subject to discovery, subpoena, or similar compulsory process in any civil,
             288      judicial, administrative, or legislative proceeding;
             289          (ii) a person with lawful access to the information may not be compelled to testify with
             290      regard to the information; and
             291          (iii) is not subject to Title 63G, Chapter 2, Government Records Access and
             292      Management Act.
             293          (b) Subsections (6)(a)(i) and (ii) do not apply to a civil, judicial, or administrative
             294      action brought to enforce this chapter.
             295          (7) A person who knowingly engages in the following is guilty of a third degree felony:
             296          (a) places false information on the deferred deposit database; or
             297          (b) releases or discloses information from the deferred deposit database for a purpose
             298      other than those authorized in this part or to a person who is not entitled to the information.
             299          (8) A person injured by a third party deferred deposit database provider's violation of
             300      this part may maintain a civil cause of action against the third party deferred deposit database
             301      provider and may recover actual damages plus reasonable attorney fees and court costs.
             302          (9) The state is not liable to any person for gathering, managing, or using the
             303      information in the deferred deposit database.
             304          (10) The department shall include in the report required under Section 7-23-503
             305      aggregate information regarding the number of times in a calendar year a person is found to be
             306      ineligible under Section 7-23-601 to have extended a deferred deposit loan and the grounds for


             307      the ineligibility.
             308          (11) (a) A deferred deposit lender shall notify the deferred deposit database provider if
             309      the deferred deposit lender stops extending deferred deposit loans.
             310          (b) If a deferred deposit lender stops extending deferred deposit loans, the deferred
             311      deposit database provider shall designate all open transactions with that deferred deposit lender
             312      closed in the deferred deposit database 60 days after the date the deferred deposit lender stops
             313      extending deferred deposit loans, unless the deferred deposit lender reports to the deferred
             314      deposit database provider before the expiration of the 60-day period which of its transactions
             315      remain open and the specific reason each transaction remains open.
             316          Section 6. Section 7-23-603 is enacted to read:
             317          7-23-603. Query of deferred deposit database.
             318          (1) On and after October 1, 2014, before extending a deferred deposit loan, a deferred
             319      deposit lender shall query the deferred deposit database to determine if the person seeking the
             320      deferred deposit loan is ineligible for a deferred deposit loan under Section 7-23-601 .
             321          (2) The deferred deposit database provider may collect a fee from a deferred deposit
             322      lender that is established by the department and that does not exceed $1 for a query to the
             323      deferred deposit database that results in the making of a deferred deposit loan.
             324          (3) In response to a query by a deferred deposit lender under Subsection (1), the
             325      deferred deposit database shall state:
             326          (a) whether the person seeking the deferred deposit loan is ineligible to have a deferred
             327      deposit loan under Subsection 7-23-601 (1)(a) or (c); and
             328          (b) the amount borrowed in aggregate for all outstanding deferred deposit loans at the
             329      time of the query.
             330          (4) If a deferred deposit lender accurately and promptly submits data to the deferred
             331      deposit database as required under Section 7-23-602 , a deferred deposit lender may rely on the
             332      deferred deposit database, and may not be held liable if the information in the deferred deposit
             333      database is inaccurate.
             334          (5) If, in response to a query by a deferred deposit lender, the deferred deposit database
             335      states that the person is ineligible or if by extending a deferred deposit loan the aggregate
             336      amount of the deferred deposit loans, including the deferred deposit loan being applied for,
             337      would be more than 25% of the person's net monthly income for all outstanding deferred


             338      deposit loans at the same time, the deferred deposit lender shall:
             339          (a) not extend the deferred deposit loan;
             340          (b) inform the person that the person is ineligible; and
             341          (c) explain that the person may contact the deferred deposit database provider
             342      regarding the specific details of why the person is ineligible.




Legislative Review Note
    as of 1-7-14 11:05 AM


Office of Legislative Research and General Counsel


[Bill Documents][Bills Directory]