S.B. NO.














relating to check cashers.





SECTION 1. The legislature finds that for the millions of Americans who do not have a bank account or simply cannot qualify for one, check cashing businesses provide an opportunity for them to pay their bills, cash their checks quickly, or get a payday loan. Estimates from a survey conducted by the Federal Deposit Insurance Corporation, in partnership with the United States Census Bureau, indicate that seven per cent of households in the United States were unbanked in 2015, which represents approximately nine million households. This survey also indicates that an additional 19.9 per cent, or 24,500,000, of United States households were underbanked, meaning that the household had a checking or savings account but also obtained financial products and services outside of the banking system.

There are numerous reasons for unbanked and underbanked consumers to use check cashing businesses to handle their personal finances in lieu of traditional banks, including:

(1) The inability to open checking accounts at banks, usually because of blemishes on banking history;

(2) The convenience of check cashing businesses, such as business hours that begin earlier and extend later than banks;

(3) The variety of services offered, such as payday loans and other types of loans, money transfers, bill payments, money orders, post office boxes, mailing services, notary public, currency exchange, prepaid debit and credit cards, and automated teller machines; and

(4) The immediate access to the full amount of a check minus a service fee.

Check cashing businesses offering payday loans, also known as cash advance loans, check advance loans, deferred deposit loans, or post-dated check loans, are especially convenient and attractive options for consumers with no credit or bad credit.

The legislature further finds that although some may consider check cashing businesses as providing convenience to their customers, critics contend that check cashing businesses exploit the consumers they serve. The most common criticism against check cashing businesses is the high fees associated with obtaining financial products and services provided by these types of businesses. Checks cashed at these businesses can incur an average of three to five per cent of the check amount in fees, regardless of the nature of the check. On average, the annual costs of using a check cashing business are greater than the fees associated with using a checking account at a bank for similar needs.

Furthermore, there is controversy regarding payday loans. Although payday loans can be a good tool for quickly and easily borrowing cash during an emergency when there are no other financial options available, critics contend that payday lenders:

(1) Fail to adequately inform consumers about the true financial costs and potential consequences of borrowing;

(2) Target the military, elderly, and other vulnerable groups; and

(3) Charge exorbitant interest rates that result in chronic borrowing and contribute to unmanageable levels of personal consumer debt.

The legislature notes that check cashing businesses are subject to a regulation throughout most of the United States, including approximately thirty-four states with check cashing-specific laws, approximately thirty-eight states that regulate payday advance lending, and approximately forty-eight states and the District of Columbia, which have laws governing money transmission services. Furthermore, approximately thirty states and the District of Columbia require check cashers to obtain a license, permit, or registration to conduct check cashing services. In Hawaii, chapter 480F, Hawaii Revised Statutes, establishes check cashing, including payday loan, requirements, authorized fees, exceptions, and penalties. However, unlike in a number of other states, check cashers are not required to obtain a license, permit, or registration to perform check cashing services in Hawaii.

The legislature further notes that Auditor Report No. 05-11, Sunrise Analysis: Check Cashing and Deferred Deposit Agreements (Payday Loans), recommends that chapter 480F, Hawaii Revised Statutes, be strengthened, rather than be expanded. However, in light of the number of consumers who regularly depend on check cashing businesses for their financial needs, the potential for harm to consumers for using such services, and the fact that many of the recommendations made in the auditor's report were not adopted, the legislature believes that check cashing businesses should be regulated.

Accordingly, the purpose of this Act is to establish licensure requirements for certain persons or entities to engage in the business of cashing checks for a fee to persons in the State.

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

"480F-A License required. (a) No person or entity except those exempt from this chapter under section 480F-5, shall engage in the business of cashing checks for a fee without a license in accordance with section 480F-B.

(b) A person or entity is engaged in the business of cashing checks for a fee if the person or entity provides these services to persons in the State, regardless of whether the person or entity providing services has no physical presence in the State.

(c) If a check casher has a physical presence in the State, the check casher may conduct its business at one or more locations, directly or indirectly owned, or through one or more authorized delegates, pursuant to the single license granted to the check casher.

480F-B License; qualifications; application; fees; renewal. (a) The commissioner shall determine the qualifications necessary for an applicant to obtain a license; provided that the applicant shall provide written documentation that the applicant and its authorized delegates have satisfactorily completed financial literacy requirements as determined by the commissioner.

(b) An application for a license shall be filed with the commissioner, made in writing in a form prescribed by the commissioner, and signed by the applicant, if the applicant is an individual, or signed by a member or officer authorized to sign, if the applicant is an entity. Each application shall contain any information required by the commissioner, including but not limited to the name of the business, the type of business engaged in, and the business address. Each applicant shall be subject to a criminal history record check in accordance with section 846-2.7.

(c) Each applicant shall pay a fee, which shall not exceed the cost of processing the application, fingerprinting the applicant, and checking or obtaining the criminal record of the applicant, at the time of filing the application.

(d) Each applicant shall annually, beginning one year from the date of issuance of the license, file an application for renewal of the license with the commissioner, along with payment of a renewal fee, which shall not exceed the cost of processing the application for renewal and checking or obtaining the criminal record of the applicant.

(e) The commissioner shall deny an application for a license or renewal of a license, if the applicant has a felony conviction involving dishonesty, fraud, or deceit and the crime is substantially related to the qualifications, functions, or duties of a person engaged in the business of cashing checks for a fee.

(f) The commissioner, for good cause, may:

(1) Waive any requirement of this section relating to any license application or renewal; or

(2) Permit an applicant to submit substituted information in its license application or renewal in lieu of the information required by this section.

(g) The commissioner shall adopt rules in accordance with chapter 91 to implement this section and determine the amount of the application fees required by this section. The commissioner shall prescribe forms for the application and license required by this section, which shall be uniform throughout the State."

SECTION 3. Section 480F-1, Hawaii Revised Statutes, is amended as follows:

1. By adding four new definitions to be appropriately inserted and to read:

""Applicant" means a person or entity filing an application for a license pursuant to this chapter.

"Authorized delegate" means an entity designated by the check casher to engage in the business of cashing checks for a fee on behalf of the check casher.

"Commissioner" means the commissioner of financial institutions.

"License" means a license in accordance with this chapter."

2. By amending the definition of "check casher" to read:

""Check casher" means a person or entity that is licensed in accordance with this chapter and engages in the business of cashing checks for a fee."

SECTION 4. In codifying the new sections added by section 2 of this Act, the revisor of statutes shall substitute appropriate section numbers for the letters used in designating the new sections in this Act.

SECTION 5. New statutory material is underscored.

SECTION 6. This Act shall take effect upon its approval.








Report Title:

Check Cashers; Licensure; License Renewal; Fees; Commissioner of Financial Institutions



Establishes licensure and licensure renewal requirements for certain persons or entities to engage in the business of cashing checks for a fee to persons in the State.




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