April 26, 2007, Introduced by Senators OLSHOVE, JACOBS, ANDERSON, THOMAS, SCHAUER, GLEASON, JANSEN, PAPPAGEORGE, KAHN, BASHAM, HUNTER, GARCIA and SWITALSKI and referred to the Committee on Banking and Financial Institutions.
A bill to amend 2005 PA 244, entitled
"Deferred presentment service transactions act,"
by amending sections 2, 33, and 35 (MCL 487.2122, 487.2153, and
487.2155).
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 2. (1) As used in this act:
(a) "Applicant" means a person seeking a license to engage in
the business of providing deferred presentment service transactions
under this act.
(b) "Armed forces of the United States" means the armed forces
of the United States and their reserve components and the United
States coast guard.
(c) (b)
"Check" means a draft
payable on demand and drawn on a
bank, savings bank, savings and loan association, or credit union.
Check includes any negotiable instrument that represents evidence
of an obligation to pay even if it is described on its face by
another term.
(d) (c)
"Closed" in connection
with a deferred presentment
service transaction means that 1 of the following has occurred
concerning each of the customer's checks that is the basis of the
deferred presentment service transaction:
(i) The check is redeemed by the customer by payment to the
licensee of the face amount of the check in cash.
(ii) The check is exchanged by the licensee for a cashier's
check or cash from the customer's financial institution.
(iii) The check is deposited by the licensee and the licensee
has evidence that the person has satisfied the obligation.
(iv) The check is collected by the licensee or its agent
through any civil remedy available under the laws of this state.
(v) The check is collected by means of a repayment plan agreed
upon by the customer and the licensee or as the result of credit
counseling where the licensee is paid the amount agreed upon by the
licensee under that plan.
(e) (d)
"Commissioner" means the
commissioner of the office of
financial and insurance services or his or her authorized
representative.
(f) (e)
"Customer" means an
individual who inquires into the
availability of or applies for a deferred presentment service
transaction or a drawer who enters into a deferred presentment
service transaction.
(g) (f)
"Database provider" means
1 of the following:
(i) A third party provider selected by the commissioner under
section 22 to operate the statewide database described in that
section.
(ii) If the commissioner has not selected a third party
provider under section 22, the commissioner.
(h) (g)
Subject to subsection (2),
"deferred presentment
service transaction" means a transaction between a licensee and a
customer under which the licensee agrees to do all of the
following:
(i) Pay to the customer an agreed-upon amount in exchange for a
fee.
(ii) Hold a customer's check for a period of time before
negotiation, redemption, or presentment of the checks.
(i) (h)
"Drawee" means a bank,
savings bank, savings and loan
association, credit union, or other person upon which a check is
drawn.
(j) (i)
"Drawer" means a customer
who enters into a deferred
presentment service transaction with a licensee.
(k) (j)
"Executive officer" means
an officer or director of a
licensee or any other individual who has the authority to
participate in the direction, directly or indirectly, through 1 or
more persons, or the management or policies of a licensee.
(l) (k)
"Financial licensing act"
means this act, the consumer
financial services act, 1988 PA 161, MCL 487.2051 to 487.2072, or
any of the acts listed in section 2(d) of the consumer financial
services act, 1988 PA 161, MCL 487.2052.
(m) (l) "Licensee"
means a person licensed to engage in the
business of providing deferred presentment service transactions
under this act.
(n) (m)
"Maturity date" means the
date on which a drawer's
check is to be redeemed, presented for payment, or entered into the
check-clearing process in a deferred presentment service
transaction.
(o) (n)
"Office" means the office
of financial and insurance
services of the department of labor and economic growth.
(p) (o)
"Person" means an
individual, partnership,
association, corporation, limited liability company, or other legal
entity except a governmental entity.
(2) Deferred presentment service transaction does not include
a delay in presentment of a loan repayment check, at the request of
the borrower, by a person licensed or registered under the consumer
financial services act, 1988 PA 161, MCL 487.2051 to 487.2072, the
regulatory loan act, 1939 PA 21, MCL 493.1 to 493.24, the secondary
mortgage loan act, 1981 PA 125, MCL 493.51 to 493.81, the motor
vehicle sales finance act, 1950 (Ex Sess) PA 27, MCL 492.101 to
492.141, 1984 PA 379, MCL 493.101 to 493.114, the sale of checks
act, 1960 PA 136, MCL 487.901 to 487.916, or the mortgage brokers,
lenders, and servicers licensing act, 1987 PA 173, MCL 445.1651 to
445.1684.
Sec. 33. (1) A licensee may enter into 1 deferred presentment
service transaction with a customer for any amount up to $600.00. A
licensee may charge the customer a service fee for each deferred
presentment service transaction. A service fee is earned by the
licensee
on the date of the transaction and is not interest. A
Subject to subsection (7), a licensee may charge both of the
following as part of the service fee, as applicable:
(a) An amount that does not exceed the aggregate of the
following, as applicable:
(i) Fifteen percent of the first $100.00 of the deferred
presentment service transaction.
(ii) Fourteen percent of the second $100.00 of the deferred
presentment service transaction.
(iii) Thirteen percent of the third $100.00 of the deferred
presentment service transaction.
(iv) Twelve percent of the fourth $100.00 of the deferred
presentment service transaction.
(v) Eleven percent of the fifth $100.00 of the deferred
presentment service transaction.
(vi) Eleven percent of the sixth $100.00 of the deferred
presentment service transaction.
(b) The amount of any database verification fee allowed under
section 34(5).
(2) A licensee shall not enter into a deferred presentment
service transaction with a customer if the customer has an open
deferred presentment service transaction with the licensee or has
more than 1 open deferred presentment service transaction with any
other licensee, and shall verify whether the customer has an open
deferred presentment service transaction with the licensee or has
more than 1 open deferred presentment service transaction with any
other licensee by complying with section 34.
(3) At the time of entering into a deferred presentment
service transaction, a licensee shall do all of the following:
(a) Before the drawer signs the agreement, provide the
following notice to the drawer, in a document separate from the
agreement and in at least 12-point type:
"1. After signing this agreement, if you believe that we have
violated the law, you may do 1 of the following:
a. Before the close of business on the day you sign the
agreement, notify us in person of the violation. You must provide
supporting documents or other evidence of the violation.
b. At any time before signing a new deferred presentment
service agreement with us, notify us in writing of the violation.
Your written notice must state the violation and provide supporting
documents or other evidence of the violation.
2. We have 3 business days to determine if we agree that we
have violated the law and let you know of that determination.
3. If we agree that we have violated the law, we must return
your check and you must return the cash received under the
agreement. Additionally, for each violation, we must pay you
restitution equal to 5 times the amount of the fee we charged you
under the agreement but not less than $15.00 or more than the face
amount of your check. You may also pursue an action for your actual
damages against us.
4. If we do not agree that we have violated the law, we may
present your check for payment or enter your check into the check-
clearing process on or after the maturity date. If your check is
returned to us unpaid, we may take other legal steps to collect our
money.
5. If you still believe we violated the law, you may file a
written complaint including supporting documents or other evidence
with the Office of Financial and Insurance Services. The Office is
required to investigate your complaint and has the authority to
order us to pay you restitution if they agree that we violated the
law. In addition, the Office can order us to pay civil fines or
take away our right to do business. To do so, contact the Office of
Financial and Insurance Services toll-free at 1-877-999-6442.".
(b) Provide a copy of the signed agreement to the drawer.
(c) Pay the proceeds under the agreement to the drawer by
delivering a business check of the licensee, a money order, or
cash, as requested by the drawer.
(4) At the time of entering into a deferred presentment
service transaction, a licensee shall not do any of the following:
(a) Charge interest under the agreement.
(b) Include a maturity date that is more than 31 days after
the date of the transaction.
(c) Charge an additional fee for cashing the licensee's
business check or money order if the licensee pays the proceeds to
the drawer by business check or money order.
(d) Include a confession of judgment in the agreement.
(e) Except as provided in this act, charge or collect any
other fees for a deferred presentment service transaction.
(5) A licensee shall not refuse to provide a deferred
presentment service transaction to a customer solely because the
customer has exercised his or her rights under this act.
(6) Each licensee shall post a sign, printed in bold faced,
36-point type, in a conspicuous location at each customer service
window, station, or desk at each place of business, that states the
following:
"Under Michigan law, you are entitled to receive the proceeds
of this transaction in cash. If you request the proceeds in a check
or money order, you may be charged additional check cashing or
other processing fees by others for cashing the check or money
order.".
(7) If a customer is serving on active duty in any branch of
the armed forces of the United States at the time he or she enters
into a deferred presentment service transaction with a licensee, or
if the customer is the spouse or dependent child of an individual
who is serving on active duty in any branch of the armed forces of
the United States at the time that spouse or child enters into the
deferred presentment service transaction, the licensee shall not
charge that customer a service fee that exceeds 50% of the service
fee amount otherwise determined under subsection (1).
Sec. 35. (1) A licensee shall not renew a deferred presentment
service agreement. A licensee may extend a deferred presentment
service agreement only if the licensee does not charge a fee in
connection with the extended transaction. A licensee who extends an
agreement under this subsection shall not create a balance owed
above the amount owed on the original agreement.
(2) If a drawer enters into 8 deferred presentment service
transactions with any licensee in any 12-month period, the licensee
shall provide the drawer an option to repay that eighth transaction
and each additional transaction in that 12-month period pursuant to
a written repayment plan subject to the following terms:
(a) The drawer shall request the repayment plan, either orally
or in writing, within 30 days after the maturity date of the
deferred presentment service transaction.
(b) The drawer shall repay the transaction in 3 equal
installments with 1 installment due on each of the next 3 dates on
which the drawer receives regular wages or compensation from an
employer or other regular source of income, pursuant to a written
repayment plan agreement.
(c)
The Subject to subsection
(7), the drawer shall pay a fee
to the licensee for administration of the repayment plan. The
initial amount of the fee is $15.00. Beginning March 1, 2011, and
by March 1 of every fifth year after March 1, 2011, the licensee
may adjust the fee by an amount determined by the commissioner to
reflect the cumulative percentage change in the Detroit consumer
price index over the preceding 5 calendar years. As used in this
subsection, "Detroit consumer price index" means the most
comprehensive index of consumer prices available for the Detroit
area from the bureau of labor statistics of the United States
department of labor.
(d) The drawer shall agree not to enter into any additional
deferred presentment transactions during the repayment plan term.
(3) A licensee shall advise a customer of the repayment option
described in subsection (2) at the time he or she is eligible. If a
customer believes he or she has been illegally denied the repayment
option under this section, he or she is entitled to contact the
office of financial and insurance services toll-free at 1-877-999-
6442. If a customer has entered into 8 deferred presentment service
transactions in any 12-month period, the database provider shall
notify the licensee when the licensee submits the required customer
information to the database for that customer that the customer is
entitled to a repayment plan under this section. The database
provider shall instruct the licensee to provide the customer with
the following notice, in a document separate from the deferred
presentment transaction agreement and in at least 12-point type:
"If you are unable to pay your deferred presentment service
transaction and have entered into 8 deferred presentment
transactions in any 12-month period, state law entitles you to
request a repayment of that transaction in installments. We are
required to advise you of this option at the time it is available.
If you elect this option, you must notify us, either orally or in
writing, within 30 days after the maturity date of the eighth
deferred presentment transaction in the 12-month period. The notice
must be provided to us at our place of business. You may be charged
an additional fee when the transaction is rescheduled in
installments. You will be ineligible to enter into a deferred
presentment service transaction with any licensee during the term
of the repayment plan. If we refuse to provide this option under
the stipulations above, you should contact the Office of Financial
and Insurance Services toll-free at 1-877-999-6442.".
(4) During the term of a repayment plan by a drawer under this
section, the database provider shall notify the licensee at the
time the licensee submits the required customer information to the
database for that customer that the customer is presently in a
repayment plan under this section with 1 or more other licensees
and the licensee shall not enter into a deferred presentment
transaction with that individual.
(5) A licensee shall not present a check for payment before
the maturity date or during the term of the repayment plan. In
addition to the remedies and penalties under this act, a licensee
that presents a check for payment before the maturity date or
during the term of the repayment plan is liable for all expenses
and damages caused to the drawer and the drawee as a result of the
violation. If a drawer has not requested a repayment plan on or
before the maturity date, the licensee may redeem, present for
payment, or enter the check into the check-clearing process under
the terms of the original deferred presentment service transaction
agreement.
(6) A drawer satisfies his or her obligation under a deferred
presentment service agreement when the check the licensee is
holding is paid by the drawee or is redeemed by the drawer by
paying to the licensee an amount equal to the full amount of the
check.
(7) If a drawer is serving on active duty in any branch of the
armed forces of the United States at the time he or she enters into
a repayment plan with a licensee, or if the drawer is the spouse or
dependent child of an individual who is serving on active duty in
any branch of the armed forces of the United States at the time
that spouse or child enters into the repayment plan, the licensee
shall not charge that drawer a fee for administration of the
repayment plan that exceeds 50% of the fee amount otherwise
determined under subsection (2)(c).