THE SENATE	S.B. NO.	737
TWENTY-EIGHTH LEGISLATURE, 2015		S.D. 1
STATE OF HAWAII		H.D. 1

A BILL FOR AN ACT

RELATING TO CHECK CASHING.

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

     SECTION 1.  The legislature finds that in 2005, the state auditor prepared a sunrise analysis in anticipation of the regulation of check cashers regarding the issuance of deferred deposit agreements.  Deferred deposit agreements are commonly referred to as payday loans and are small, short term, unsecured loans that borrowers commit to repay from their next paycheck or a regular income payment.

     Chapter 480F, Hawaii Revised Statutes, permits a check casher to charge a fee of fifteen per cent of the face amount of the check for a deferred deposit agreement.  The maximum amount of the check is capped at $600.  According to the auditor, under this scenario, the interest charged to a borrower can amount to four hundred fifty-nine per cent annualized interest rate on a fourteen day loan.

     The legislature further finds that it is in the interest of the public to limit the interest rate a check casher is allowed to charge by way of a deferred deposit agreement.  This would help to limit the problem of borrowers being led into a debt trap from which they cannot escape.

     The purpose of this Act is to protect consumers by:

     (1)  Limiting the total amount of fees charged for the deferred deposit of a personal check to an annual percentage rate of     per cent;

     (2)  Requiring licensed businesses in the State to notify the department of commerce and consumer affairs at the end of each fiscal year if they conducted any deferred deposit transaction;

     (3)  Prohibiting a check casher from entering into an agreement for deferred deposit with a customer within five days immediately following the end of the customer's earlier agreement for a deferred deposit; and

     (4)  Raising the fine for a wilful violation of chapter 480F, Hawaii Revised Statutes, up to a maximum of $5,000.

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

     "§480F-   Records; licensed businesses. Beginning July 1, 2015, each licensed business in this State that conducts a deferred deposit transaction shall notify the department of commerce and consumer affairs by June 30 of each year.  The department of commerce and consumer affairs shall keep a record of all licensed businesses that conduct deferred deposit transactions in each fiscal year beginning July 1, 2015."

     SECTION 3.  Section 480F-4, Hawaii Revised Statutes, is amended by amending subsections (c) and (d) to read as follows:

     "(c)  The face amount of the check shall not exceed $600 and the deposit of a personal check written by a customer pursuant to a deferred deposit transaction may be deferred for no more than thirty-two days.  [A check casher may charge a fee for deferred deposit of a personal check in an amount not to exceed fifteen per cent of the face amount of the check.] The total amount of fees for the deferred deposit of a personal check shall not exceed an annual percentage rate of     per cent.  Any fees charged for deferred deposit of a personal check in compliance with this section shall be exempt from chapter 478.

     (d)  A check casher shall not enter into an agreement for deferred deposit with a customer during the period of time that an earlier agreement for a deferred deposit for the same customer is in effect[.] or within five days immediately following the end of an earlier agreement for a deferred deposit.  A deferred deposit transaction shall not be repaid, refinanced, or consolidated by or with the proceeds of another deferred deposit transaction."

     SECTION 4.  Section 480F-6, Hawaii Revised Statutes, is amended by amending subsection (c) to read as follows:

     "(c)  A wilful violation of this chapter shall be punishable by a fine of up to [$500] $5,000 and up to thirty days imprisonment."

     SECTION 5.  Statutory material to be repealed is bracketed and stricken.  New statutory material is underscored.

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

Report Title:

Check Cashing; Deferred Deposit Agreements; Fees; Annual Percentage Rate

Description:

Caps the total amount of fees charged for the deferred deposit of a personal check to an unspecified annual percentage rate. Beginning July 1, 2015, requires licensed businesses in the State to notify the Department of Commerce and Consumer Affairs at the end of each fiscal year if they conducted any deferred deposit transaction.  Prohibits a check casher from entering into an agreement for deferred deposit with a customer within five days immediately following the end of the customer's earlier agreement for a deferred deposit.  Increases the fine for a wilful violation of chapter 480F, Hawaii Revised Statutes.  (SB737 HD1)

The summary description of legislation appearing on this page is for informational purposes only and is not legislation or evidence of legislative intent.