Report Title:

Check Cashing; Payday Lending Businesses

 

Description:

Requires check cashing (deferred deposit) businesses to post and provide consumers with rate, fee, and other information, provides for payment plans; eliminates exemption from law of retailers who occasionally cash checks. Effective 01/01/2020. (HB447 HD1)

 


HOUSE OF REPRESENTATIVES

H.B. NO.

447

TWENTY-FIFTH LEGISLATURE, 2009

H.D. 1

STATE OF HAWAII

 

 

 

 

 

 

A BILL FOR AN ACT


 

 

RELATING TO PAYDAY LENDING.

 

 

BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF HAWAII:

 


SECTION 1. The legislature agrees with the finding by the state auditor in its Report No. 05-11, entitled "Sunrise Analysis: Check Cashing and Deferred Deposit Agreements (Payday Loans)," that the payday lending industry, also known as the check-cashing industry or deferred deposit industry, poses the possibility of harm to Hawaii's consumers.

The state auditor made the following three recommendations in its sunrise analysis:

(1) Require check cashers or payday lenders who enter into deferred deposit agreements (payday loans) to post in a conspicuous place any and all fees that they charge for such an agreement, including the annual percentage rate for the loan;

(2) Reduce the maximum fee for a deferred deposit agreement; and

(3) Institute a mandatory registration program for all payday lenders to register their businesses with the department of commerce and consumer affairs.

The legislature agrees with the state auditor's recommendations. At this time, the legislature finds that it would be reasonable, and in the consumer's interest, to require check cashing, payday lending, and deferred deposit businesses to conspicuously post all rates and fees.

SECTION 2. Chapter 480F, Hawaii Revised Statutes, is amended by adding two new sections to be appropriately designated and to read as follows:

"480F-    Payment plans.  (a)  A check casher may enter into a payment plan for a period of up to ninety days with a customer who is not in default, under which plan no interest may be charged. No deferred deposit agreement with a customer shall commence within thirty days after the completion of any other payment plan with the same customer.

     (b)  A check casher shall offer an interest-free payment plan with a minimum term of sixty days to any customer who is in default.  Any collection letter written to a customer in default shall inform the customer of the option of an interest-free payment plan.

     (c)  A check casher shall offer an extended repayment plan option to any customer who has entered into an interest-free payment plan; provided that the extended repayment plan shall become available only if the customer requests the option before the close of business on the last payment plan due date.

     480F-    Rules.  The director, pursuant to chapter 91, shall adopt rules necessary to implement this chapter."

SECTION 3.  Section 480F-1, Hawaii Revised Statutes, is amended by adding a new definition to be appropriately inserted and to read as follows:

     ""Director" means the director of commerce and consumer affairs."

     SECTION 4.  Section 480F-2, Hawaii Revised Statutes, is amended to read as follows:

     "[[]480F-2[]]  Posting and notice of fees charged.  Any person who cashes one or more checks for a fee shall:

(1) Post in a conspicuous place in every location at which the person does business a notice that sets forth[:] in thirty-eight point type:

(A) The fees charged for cashing a check, for selling or issuing a money order, and for the initial issuance of any membership or identification cards[;], and the fees and annual percentage rate for deferred deposits;

(B) That consumer complaints about the check cashing business may be filed with the department of commerce and consumer affairs, and includes and identifies the telephone number and address of the consumer information service of the department of commerce and consumer affairs;

         (C) That deferred deposit transactions are not suitable for long-term borrowing;

         (D) That only one deferred deposit transaction can be opened from all sources at any one time; and

         (E) Information on where to obtain financial education and credit counseling;

(2) Provide written notice [to each customer of the fees charged for cashing checks] in twelve-point type to each customer, that is separate from and in addition to any posted notice[;], containing the following information:

(A) The fees and annual percentage rate to be charged for a deferred deposit;

(B) That consumer complaints about the check cashing business may be filed with the department of commerce and consumer affairs, and the telephone number and address of the consumer information service of the department of commerce and consumer affairs;

(C) That deferred deposit transactions are not suitable for long-term borrowing;

(D) That only one deferred deposit transaction can be opened from all sources at any one time;

(E) That payment plan and extended repayment plan options are available;

(F) That the customer has the right to rescind a deferred deposit agreement by the close of business on the next business day after the transaction; and

(G) Where to obtain financial education and credit counseling;

     (3) Obtain a written acknowledgment from the customer that written notice of [the fees charged for cashing checks] all information under paragraph (2) was provided[;] to the customer; and

     (4) Provide each customer a receipt documenting any and all fees charged."

     SECTION 5.  Section 480F-4, Hawaii Revised Statutes, is amended by amending subsection (d) to read as follows:

     "(d)  A check casher shall not knowingly enter into an agreement for deferred deposit with a customer during the period of time that an earlier agreement for a deferred deposit from any source for the same customer is in effect.  A deferred deposit transaction shall not be repaid, refinanced, or consolidated by or with the proceeds of another deferred deposit transaction."

     SECTION 6.  Section 480F-5, Hawaii Revised Statutes, is amended to read as follows:

     "[[]480F-5[]]  Exemptions.  This chapter shall not apply to[:

     (1)  Any person who is principally engaged in the bona fide retail sale of goods or services, and who, either as incident to or independent of the retail sale or service, from time to time cashes items for a fee or other consideration, where not more than $2, or two per cent of the amount of the check, whichever is greater, is charged for the service; or

     (2)  Any] any person authorized to engage in business as a bank, trust company, savings bank, savings and loan association, financial services loan company, or credit union under the laws of the United States, any state or territory of the United States, or the District of Columbia."

     SECTION 7.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

     SECTION 8.  This Act shall take effect on January 1, 2020.