2005 Regular Session
To: Business and Financial Institutions; Judiciary, Division A
By: Senator(s) Tollison
AN ACT TO CREATE THE MISSISSIPPI DEFERRED DEPOSIT LOAN ACT; TO DEFINE CERTAIN TERMS; TO PROVIDE FOR LICENSING AND EXAMINATION OF PERSONS ENGAGING IN THE BUSINESS OF MAKING DEFERRED DEPOSIT LOANS; TO REQUIRE CERTAIN DISCLOSURES TO CONSUMERS; TO REQUIRE CERTAIN ACTS; TO PROHIBIT CERTAIN ACTS; TO REQUIRE REPORTING TO THE COMMISSIONER OF BANKING AND CONSUMER FINANCE; TO PROVIDE PENALTIES FOR VIOLATIONS OF THE ACT; TO REPEAL SECTIONS 75-67-501 THROUGH 75-67-539, MISSISSIPPI CODE OF 1972, WHICH CREATE THE MISSISSIPPI CHECK CASHERS ACT; AND FOR RELATED PURPOSES.
BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MISSISSIPPI:
SECTION 1. Title and purpose. This act shall be known and may be cited as the "Mississippi Deferred Deposit Loan Act." This act shall be liberally construed to effectuate its purpose and is to be construed as a consumer protection statute for all purposes. The purpose of the act is to protect Mississippi consumers who enter into short-term, high interest rate "deferred deposit" or "payday" loans from the abuses that occur in the credit marketplace.
SECTION 2. Definitions. The following words and phrases used in this act shall have the following meanings unless the context clearly indicates otherwise:
(a) "Appropriate law enforcement agency" means the sheriff of each county in which the licensee maintains an office, or the police chief of the municipality in which the licensee maintains an office, or law enforcement officers of the Department of Public Safety.
(b) "Attorney General" means the Attorney General of the State of Mississippi.
(c) "Check" means any check, draft, money order, personal money order, pre-authorized customer draft, or other instrument for the transmission or payment of money as determined by the Commissioner of Banking and Consumer Finance, but shall not include travelers checks or foreign drawn payment instruments.
(d) A "check casher" means any individual, partnership, association, joint stock association, trust or corporation, excluding the United States government and the government of this state, who exchanges cash or other value for any check, draft, money order, personal money order, or other instrument for the transmission or payment of money, except travelers checks and foreign drawn payment instruments and who charges a fee therefor.
(e) "Commissioner" means the Mississippi Commissioner of Banking and Consumer Finance, or his designee, as the designated official for the purpose of enforcing this act.
(f) "Department" means the Department of Banking and Consumer Finance.
(g) "Lender" means any person or entity that offers or makes a deferred deposit transaction, arranges a deferred deposit transaction for a third party, or acts as an agent for a third party, regardless of whether the third party is exempt from licensing under this act or whether approval, acceptance or ratification by the third party is necessary to create a legal obligation for the third party. Notwithstanding that a bank, savings institution, credit union or farm credit system may be exempted by federal law from this act's provisions related to interest rate, finance charges and licensure, all other applicable provisions of this act apply to these entities. Any lender that is not a bank, savings institution, credit union or farm credit system must comply with all the provisions of act, whether acting on its own account or as an agent or broker of the third party, to the extent federal law does not preempt the application of this act to agents or brokers.
(h) "Licensee" means any individual, partnership, association or corporation duly licensed by the Department of Banking and Consumer Finance to engage in the business of cashing checks under this act.
(i) "Person" means an individual, partnership, corporation, joint venture, trust, association or any legal entity however organized.
(j) "Personal money order" means any instrument for the transmission or payment of money in relation to which the purchaser or remitter appoints or purports to appoint the seller thereof as his agent for the receipt, transmission or handling of money, whether such instrument is signed by the seller or by the purchaser or remitter or some other person.
SECTION 3. Licensing and examination. (1) No person shall engage in or offer to engage in the business regulated by this act unless and until a license has been issued by the commissioner. A separate license is required for each place of business regulated by this act and each business must be independent of, and not a part of, any other business operation. The commissioner shall not issue or renew any such license unless and until the following findings are made:
(a) That authorizing the applicant to engage in such business will promote the convenience and advantage of the community in which the applicant proposes to engage in business;
(b) That the financial responsibility, experience, character and general fitness of the applicant are such as to command the confidence of the public and to warrant the belief that the business will be operated lawfully and fairly, and within the provisions and purposes of this act;
(c) That neither the applicant, nor any principals of the applicant, which includes any persons owning at least five percent (5%) of the applicant, have been convicted of any crimes;
(d) That the applicant shall have a minimum net worth of at least Twenty-five Thousand Dollars ($25,000.00) available for the operation of each location, with such net worth to be determined in accordance with generally accepted accounting practices;
(e) That the applicant has provided a sworn statement that the applicant has not used in the past, nor will in the future directly or indirectly use the criminal process of this State or any other State to collect the payment of deferred deposit loans not generally available to creditors to collect loans in default; and
(f) Any other information as the commissioner may deem necessary.
(2) Application for a license. Each application for a license shall be in writing and under oath to the commissioner, in a form prescribed by the commissioner, and shall include the following:
(a) The legal name, residence and business address of the applicant and, if the applicant is a partnership, association or corporation, of every member, officer, managing employee and director thereof.
(b) The location in Mississippi at which the registered office of the applicant shall be located; and
(c) Other data and information the commissioner may require with respect to the applicant, its directors, trustees, officers, members and managing employees or agents.
(3) Fee and bond. A nonrefundable fee of One Thousand Dollars ($1,000.00) shall be paid by each applicant for each place of business for which a license is sought under this act. Each applicant must post a bond in the amount of Twenty-five Thousand Dollars ($25,000.00) per location which must continue in effect for five (5) years after the licensee ceases operation in Mississippi. Such bond shall be available to pay damages and penalties to consumers harmed by any violation of this act.
(4) Issuance and Posting of License. Upon the filing of an application in a form prescribed by the commissioner, accompanied by the fee, bond and documents required by this act, the commissioner shall investigate to ascertain whether the qualifications prescribed by this act have been satisfied. If the commissioner finds that the qualifications have been satisfied, and approves the documents, the commissioner shall issue to the applicant a license to engage in the deferred deposit services business in Mississippi. The license shall be kept conspicuously posted in the place of business of the licensee.
(5) Effectiveness and nontransferability of license. (a) A license issued pursuant to this act shall remain in force and effective through the July 1 after its date of issuance unless earlier surrendered, suspended or revoked pursuant to this act. (b) Licenses issued pursuant to this act shall expire on July 1 of each year. Each license may be renewed for the ensuing twelve-month period upon application by the licensee showing continued compliance with the requirements of this act and the payment to the commissioner annually, on or before May 1 of each year, a license renewal fee of Seven Hundred Fifty Dollars ($750.00) per location.
(c) A license issued pursuant to this act is not transferable or assignable. The prior written approval of the commissioner is required for the continued operation of a deferred deposit service business whenever a change of control or ownership of a license is proposed.
(6) Regulations and examinations. (a) The commissioner may promulgate reasonable regulations, not inconsistent with law, for the enforcement of this act.
(b) To assure compliance with the provisions of this act, the commissioner may examine the relevant business, books and records of any licensee. The commissioner may charge and collect an examination fee of Four Hundred Dollars ($400.00) per day per examiner for any compliance examination conducted by the commissioner, with such fee not exceeding Two Thousand Dollars ($,2000.00) per year. All examination fees collected by the commissioner pursuant to this provision shall be deposited into the Department of Banking and Consumer Finance Special Fund.
(7) Revocation of license. If the commissioner shall find, after due notice and hearing, or opportunity for hearing that any licensee, or an officer, agent, employee or representative thereof, has violated any of the provisions of this act, or has failed to comply with the rules, regulations, instructions or orders promulgated by the commissioner, or has failed or refused to make its reports to the commissioner, or has furnished false information to the commissioner, the commissioner may issue an order revoking or suspending the right of such licensee and such officer, agent, employee or representative to do business in this state as a licensee. No revocation, suspension or surrender of any license shall relieve the licensee from civil or criminal liability for acts committed prior thereto.
SECTION 4. Required disclosures. (1) Information pamphlet provided to all consumers. Before entering into a deferred deposit loan, the licensee shall deliver to the consumer a pamphlet prepared by or at the direction of the commissioner which explains, in simple English and Spanish, all of the consumer's rights and responsibilities in a deferred deposit loan transaction.
(2) Toll-free phone number. The pamphlet shall include a toll free number to the commissioner's office to handle concerns or complaints by consumers, and informs consumers that the commissioner's office can provide information about whether a lender is licensed, whether complaints have been filed with the commissioner, and the resolution of such complaints. The toll-free number (along with an explanation that the number is to the commissioner's office and can handle concerns or complaints by consumer, provide information about whether a lender is licensed, whether complaints have been filed with the commissioner, and the resolution of such complaints) shall be posted in a conspicuous place in the licensee's place of business in at least twenty-four (24) bold Times New Roman font.
(3) Loan documents. Licensees shall provide consumers with a written agreement on a form specified or approved by the commissioner that can be kept by the consumer, and must include the following information in English and in the language in which the loan was negotiated:
(a) The name, address, phone number of the licensee making the deferred deposit loan, and the name and title of the individual employee who signs the agreement on behalf of the licensee;
(b) An itemization of the fees and interest charges to be paid by the consumer;
(c) Disclosures required by the federal Truth in Lending Act, regardless of whether the Truth in Lending Act applies to the particular deferred deposit loan;
(d) Disclosures required under any other state law;
(e) A clear description of the consumer's payment obligations under the loan;
(f) In a manner which is more conspicuous than the other information provided in the loan document and is in at least fourteen (14) point bold typeface, a statement that "you cannot be prosecuted in criminal court to collect this loan and the licensee can not take civil action beyond that allowed for other financial institutions." Such notice shall be located immediately preceding the signature of the consumer;
(3) Posting requirements. The following notices in English, Spanish, as well as other languages, in which a significant amount of deferred deposit loan business is conducted, must be conspicuously posted by all licensees in each location of a business providing deferred deposit loans in at least fourteen (14) point bold typeface:
(a) That informs consumers that the licensee cannot use the criminal process against a consumer to collect any deferred deposit loan.
(b) The schedule of all interest and fees to be charged on such loans with an example of the amounts that would be charged on a Four Hundred Dollar ($400.00) loan payable in fourteen (14) days and thirty (30) days, giving the corresponding annual percentage rate.
(c) "WARNING: The fees and interest charged on deferred deposit loans made at this institution are higher than those charged at other financial institutions."
SECTION 5. Required acts. (1) Each deferred deposit loan must have a minimum term of no less than thirty-one (31) days.
(2) The maximum amount of the deferred deposit loan shall not exceed Four Hundred Dollars ($400.00), excluding charges discussed in subsection (3).
(3) The licensee may charge a maximum annual percentage rate (APR) of interest equal to sixty percent (60%) of the deferred deposit loan. For example, a deferred deposit loan with a term of thirty-one (31) days made in the amount of Four Hundred Dollars ($400.00) allows additional interest fees of Twenty Dollars and Thirty-eight cents ($20.38) based on a 365-day year.
(4) A consumer shall be permitted to make partial payments, in amounts equal to no less than Five Dollar ($5.00) increments, on the loan at any time, without charge, prior to presentment of the check for collection. However, partial payments made by the consumer may not be in the form of a personal check.
(5) After each payment made, in full or in part, on any loan, the licensee shall give to the person making such payment a signed, dated receipt showing the amount paid and the balance due on the loan.
(6) The check written by the consumer in a deferred deposit loan must be made payable to the licensee.
(7) Upon receipt of the check from the customer for a deferred deposit loan, the licensee must immediately stamp the back of the check with an endorsement that states: "This check is being negotiated as part of a deferred deposit loan pursuant to [include the code citation to this act] and any holder of this check takes it subject to all claims and defenses of the maker."
(8) The licensee must provide the consumer, or each consumer if there are more than one, with a copy of all loan documents prior to consummation of the deferred deposit loan agreement.
(9) The holder or assignee of any check written by a consumer in connection with a deferred deposit loan takes the instrument subject to all claims and defenses of the consumer.
SECTION 6. Prohibited acts. The following are prohibited practices regarding deferred deposit transactions:
(a) Taking or attempting to take any security other than the borrower's instrument.
(b) Taking or attempting to take more than a single check or other instrument from the borrower in connection with a single transaction.
(c) Selling, offering or soliciting any application for credit insurance in connection with a transaction.
(d) Tying the transaction to any other transaction, offer or obligation of the borrower.
(e) Failing to comply with the commissioner's request for assistance in resolving a complaint.
(f) Using or threatening to use criminal process to collect a dishonored check, unless fraud is involved.
(g) Assigning or selling to another lender an instrument taken in connection with a deferred deposit transaction unless the instrument bears the following endorsement: THIS INSTRUMENT WAS GIVEN BY ITS MAKER TO SECURE A DEFERRED DEPOSIT TRANSACTION UNDER G.S. 53-281.1 AND THE ASSIGNEE IS DEEMED TO HAVE KNOWLEDGE OF AND SHALL BE BOUND BY THE TERMS AND CONDITIONS OF THE LOAN AGREEMENT BETWEEN THE BORROWER AND THE ORIGINAL LENDER.
(h) Engaging in any device or subterfuge to evade the requirements of this act including making loans disguised as personal property sales and leaseback transactions or disguising loan proceeds as cash "rebates" for the pretextual installment sale of goods or services.
(i) Failing to collect and provide information regarding the number, total and average transaction amounts and any other information the commissioner may request.
(j) Offering, arranging, acting as an agent for, or assisting a lender in the making of a deferred deposit transaction unless the lender complies with the provisions of this act.
SECTION 7. Reporting requirements. (1) Supervision by commissioner. Each licensee shall keep and use books, accounts and records which will enable the commissioner to determine if the licensee is complying with the provisions of the act and maintain any other records as required by the commissioner. The commissioner, or his designee, is authorized to examine such records at any reasonable time. All such records must be kept for four (4) years following the last entry on a loan and according to generally accepted accounting procedures which means that an examiner must be able to review the recordkeeping and reconcile each consumer loan with documentation maintained in the consumer's loan file records.
(2) Licensee information. Each licensee shall file an annual report with the commissioner on forms prescribed by the commissioner. Such reports shall be verified by the oath or affirmation of the owner, manager or president of the licensee.
Such reports shall disclose in detail and under appropriate headings:
(a) The resources, assets and liabilities of such licensee at the beginning and the end of the period.
(b) The income, expense, gain, loss and a reconciliation of surplus or net worth with the balance sheets, and the ratios of the profits to the assets reported.
(c) The total number of deferred deposit loans made in the calendar year ending as of December 31 of the previous year.
(d) The total number of such loans outstanding as of December 31 of the previous year.
(e) The minimum, maximum and average dollar amount of checks whose deposits were deferred in the calendar year ending as of December 31 of the previous year.
(f) The average annual percentage rate, the average number of days a deposit of a check is deferred during the calendar year ending as of December 31 of the previous year.
(g) The total number and dollar amount of returned checks, the total number and dollar amount of checks recovered, the total number and dollar amount of checks charged off during the calendar year ending as of December 31 of the previous year.
(h) Verification that the licensee has not used the criminal process or caused the criminal process to be used in the collection of any deferred deposit loans or used any civil process to collect the payment of deferred payment loans not generally available to creditors to collect on loans in default during the calendar year ending as of December 31 of the previous year.
(3) Other business. If a licensee conducts another business or is affiliated with other licensees under this act, or if any other situation exists under which allocations of expense are necessary, the licensee shall make such allocation according to appropriate and reasonable accounting principles as approved by the commissioner. Information about other business conducted on the same premises as that of deferred deposit loans shall be provided as required by the commissioner.
(4) Annual reports. The commissioner shall compile annual reports of deferred deposit lending in this state from the information provided under this section and provide a copy to the Governor and the Legislature. Annual reports shall be available to interested parties and to the general public.
(5) Copy of contract and fee schedule. Each licensee shall file a copy of the contract and the fee schedule with the commissioner prior to the date of commencement of business at each location, at the time any changes are made to the documents or schedule, and annually thereafter upon renewal of the license. These documents shall be available to interested parties and to the general public.
SECTION 8. Violations. (1) Criminal penalties. In addition to any penalty which may be applicable, any licensee or employee who willfully violates any provision of this act, or who willfully makes a false entry in any record specifically required by this act shall be guilty of a misdemeanor and upon conviction thereof, shall be punishable by a fine not in excess of One Thousand Dollars ($1,000.00) per violation or false entry. Compliance with the criminal provisions of this act shall be enforced by the appropriate law enforcement agency, which may exercise for that purpose any authority conferred upon that agency by law.
(2) Cease and desist orders. When the commissioner has reasonable cause to believe that a person is violating any provision of this act, the commissioner, in addition to and without prejudice to the authority provided elsewhere in this act, may do one or more of the following:
(a) Order the person to cease and desist from violating this act;
(b) Order the person to pay the commissioner a civil penalty of not more than One Thousand Dollars ($1,000.00) for each transaction in violation of this act;
(c) Require the refund of any fees collected by such person in violation of this act.
(3) Civil penalties. (a) Any person found to have violated this act shall be liable to the consumer for actual, consequential and punitive damages, plus statutory damages of One Thousand Dollars ($1,000.00) for each violation (to be increased by the commissioner to reflect inflation), plus costs and attorney's fees.
(b) A civil action may be brought by the Attorney General or any district attorney. Where a successful civil action is brought by a district attorney, one-half (1/2) of the damages recovered on behalf of the state shall be distributed to the office of the district attorney of the judicial circuit of such district attorney to be used by the district attorney in order to fund the budget of that office.
(4) Void agreement. Any deferred deposit loan agreement, and the accompanying payment device, the making or collecting of which violates any provision of this act or rule adopted
thereunder shall be void, and the lender or any other party
acting by or through the lender shall have no right to collect,
receive or retain any principal or charges whatsoever with
respect to the loan.
SECTION 9. The provisions of Sections 75-67-501, 75-67-503, 75-67-505, 75-67-507, 75-67-509, 75-67-511, 75-67-513, 75-67-515, 75-67-516, 75-67-517, 75-67-519, 75-67-521, 75-67-523, 75-67-525, 75-67-527, 75-67-529, 75-67-531, 75-67-533, 75-67-535, 75-67-537 and 75-67-539, Mississippi Code of 1972, which create the Mississippi Check Cashers Act, are hereby repealed on July 1, 2005.
SECTION 10. This act shall take effect and be in force from and after July 1, 2005.