Assembly Bill No. 211-Assemblymen Williams, Arberry, Herrera, Freeman, Ohrenschall, Bache, Carpenter, Amodei, Krenzer, Cegavske, Mortenson, Berman, Collins, Sandoval, Anderson, de Braga, Manendo, Tiffany, Ernaut, Goldwater, Perkins, Chowning, Buckley, Giunchigliani, Von Tobel, Hickey, Neighbors, Segerblom, Evans, Nolan, Price, Humke, Koivisto, Parks, Lambert, Lee, Dini and Braunlin
February 27, 1997
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Referred to Committee on Commerce
SUMMARY--Provides for regulation and licensure of check-cashing and deferred deposit services. (BDR 55-1322)
FISCAL NOTE: Effect on Local Government: No.
Effect on the State or on Industrial Insurance: Yes.
EXPLANATION - Matter in italics is new; matter in brackets [ ] is material to be omitted.
AN ACT relating to financial services; providing for the regulation and licensure of check-cashing and deferred deposit services; prohibiting certain acts relating to check-cashing and deferred deposit services; providing a penalty; and providing other matters properly relating thereto.
THE PEOPLE OF THE STATE OF NEVADA, REPRESENTED IN SENATE AND ASSEMBLY, DO ENACT AS FOLLOWS:
Section 1 Title 55 of NRS is hereby amended by adding thereto a new chapter to consist of the provisions set forth as sections 2 to 24, inclusive, of this act.
Sec. 2 As used in this chapter, unless the context otherwise requires, the words and terms defined in sections 3 to 8, inclusive, of this act, have the meanings ascribed to them in those sections.
Sec. 3 "Cashing" means providing currency or a negotiable instrument in exchange for a check.
Sec. 4 "Check" means a check, draft or money order, but does not include a travelers check or an instrument of payment drawn on a foreign account in foreign money.
Sec. 5 "Check-cashing service" means any person engaged in the business of cashing checks for a fee, service charge or other consideration.
Sec. 6 "Deferred deposit" means a transaction in which, pursuant to a written agreement:
1. A customer tenders to a person a personal check drawn upon the account of the customer; and
2. The person:
(a) Provides to the customer an amount of money that is equal to the face value of the check, less any fee charged for the transaction; and
(b) Agrees not to cash the check for a specified period.
Sec. 7 "Deferred deposit service" means any person engaged in the business of deferring deposits for a fee, service charge or other consideration.
Sec. 8 "Licensee" means a person licensed to operate a check-cashing or deferred deposit service pursuant to this chapter.
Sec. 9 1. Except as otherwise provided in subsection 2, it is unlawful to operate a check-cashing or deferred deposit service without a license issued pursuant to this chapter.
2. The provisions of this chapter do not apply to:
(a) A person doing business pursuant to the authority of any law of this state or of the United States relating to banks, savings banks, trust companies, savings and loan associations, credit unions, development corporations, mortgage companies, thrift companies, pawnbrokers or insurance companies.
(b) A person licensed to make installment loans pursuant to chapter 675 of NRS.
(c) A person who is primarily engaged in the retail sale of goods or services who:
(1) As an incident to or independently of a retail sale or service from time to time cashes checks for a fee or other consideration of not more than $2; and
(2) Does not hold himself out as a check-cashing service.
(d) A person while performing any act authorized by a license issued pursuant to chapter 671 of NRS.
(e) A person who holds a nonrestricted gaming license issued pursuant to chapter 463 of NRS while performing any act in the course of that licensed operation.
Sec. 10 1. An application for licensure pursuant to this chapter must be made in writing, under oath and on a form prescribed by the commissioner. The application must include:
(a) If the applicant is a natural person, the name and address of the applicant.
(b) If the applicant is a business entity, the name and address of each:
(1) Partner;
(2) Officer;
(3) Director;
(4) Manager or member who acts in a managerial capacity; and
(5) Registered agent,
of the business entity.
(c) Such other information concerning the financial responsibility, background, experience and activities of the applicant and its:
(1) Partners;
(2) Officers;
(3) Directors; and
(4) Managers or members who act in a managerial capacity,
as the commissioner determines is necessary.
(d) The address of each location at which the applicant proposes to operate.
(e) If the applicant intends to provide deferred deposit services in addition to check-cashing services, a statement of that intent.
2. To receive a license to operate a check-cashing or deferred deposit service, an applicant, its partners, officers, directors and managers or members who act in a managerial capacity must, in the determination of the commissioner, be:
(a) Financially responsible;
(b) Of good character and reputation;
(c) Experienced in business; and
(d) Generally fit to operate a check-cashing or deferred deposit service efficiently, fairly, in the public interest and in accordance with law.
3. Each licensee and applicant shall, for each license, deliver to the commissioner a financial statement prepared from his books and records by an independent public accountant who holds a permit to engage in the practice of public accounting in this state which has not been revoked or suspended. The financial statement must be dated not earlier than the close of the latest fiscal year of the licensee and must be submitted within 60 days thereafter. The commissioner may grant a reasonable extension for the submission of the financial statement if requested before the statement is due.
4. The commissioner may make such investigations as he determines are necessary concerning the qualifications of an applicant.
5. Each application must be accompanied by a nonrefundable application fee of $250 and a nonrefundable investigation fee of $500. If a license is issued to an applicant, the payment of the application fee satisfies the required fee for the first year of licensure. All money received by the commissioner pursuant to this subsection must be placed in the investigative account for financial institutions created pursuant to NRS 232.545.
Sec. 11 1. Except as otherwise provided in section 12 of this act, each licensee shall have in force a surety bond payable to the State of Nevada in the amount of $50,000 for the use and benefit of any customer receiving his check-cashing or deferred deposit service.
2. The bond must be in a form satisfactory to the commissioner, issued by a bonding company authorized to do business in this state and must secure the faithful performance of the obligations of the licensee respecting the provision of the check-cashing or deferred deposit service.
3. A licensee shall, within 10 days after the commencement of any action or notice of entry of any judgment against him by any creditor or claimant arising out of business regulated by this chapter, give notice thereof to the commissioner by certified mail with details sufficient to identify the action or judgment. The surety shall, within 10 days after it pays any claim or judgment to a creditor or claimant, give notice thereof to the commissioner by certified mail with details sufficient to identify the creditor or claimant and the claim or judgment so paid.
4. Whenever the principal sum of the bond is reduced by recoveries or payments thereon, the licensee shall furnish:
(a) A new or additional bond so that the total or aggregate principal sum of the bonds equals the sum required pursuant to subsection 1; or
(b) An endorsement, duly executed by the surety, reinstating the bond to the required principal sum.
5. The liability of the surety on the bond to a creditor or claimant is not affected by any misrepresentation, breach of warranty, failure to pay a premium or other act or omission of the licensee, or by any insolvency or bankruptcy of the licensee.
6. The liability of the surety continues as to all transactions entered into in good faith by the creditors and claimants with the licensee's agents within 30 days after:
(a) The licensee's death or the dissolution or liquidation of his business; or
(b) The termination of the bond,
whichever event occurs first.
7. Whenever the commissioner determines that the protection of the public so requires, he may order that an increase be made in the principal sum of the bond of any licensee, except that the commissioner may not order an increase of more than $10,000 if the licensee has submitted a current financial statement, or more than $15,000 otherwise.
8. Neither a licensee nor his surety may cancel or alter a bond except after notice to the commissioner by certified mail. The cancellation or alteration is not effective until 10 days after receipt of the notice by the commissioner. A cancellation or alteration does not affect any liability incurred or accrued on the bond before the expiration of the 30-day period designated in subsection 6.
Sec. 12 1. In lieu of any surety bond, or any portion of the principal sum thereof as required by this chapter, a licensee may deposit with the state treasurer or with any bank or trust company authorized to do business in this state as the licensee may select, with the approval of the commissioner:
(a) Interest-bearing stocks;
(b) Bills, bonds, notes, debentures or other obligations of the United States or any agency or instrumentality thereof, or guaranteed by the United States; or
(c) Any obligation of this state or any city, county, town, township, school district or other instrumentality of this state or guaranteed by this state,
in an aggregate amount of, based upon principal amount or market value, whichever is lower, of not less than the amount of the required surety bond or portion thereof.
2. The securities must be held to secure the same obligation as would the surety bond, but the depositor may receive any interest or dividends and, with the approval of the commissioner, substitute other suitable securities for those deposited.
Sec. 13 1. The commissioner shall not grant a license to an applicant unless the commissioner has determined that the applicant has satisfied the requirements of section 10 of this act.
2. If an applicant is denied a license, the commissioner shall, by mail, notify the applicant in writing of the denial and the reasons therefor.
3. The applicant is entitled to a hearing before the commissioner on the denial if the applicant requests the hearing in writing within 30 days after the commissioner mails the notification required by subsection 2.
4. The commissioner shall reconsider the application at the hearing and issue a written order granting or denying the application. The decision of the commissioner is a final decision for the purpose of judicial review.
Sec. 14 Licenses expire annually and may be renewed upon the payment of a renewal fee of $250 and an additional fee of $50 for each branch location at which the licensee is authorized to operate under the license.
Sec. 15 1. As used in this section, "change of control" means:
(a) A transfer of voting stock, partnership or member interests which results in giving a person, directly or indirectly, the power to direct the management and policy of a licensee; or
(b) A transfer of at least 25 percent of the outstanding voting stock, partnership or member interests of the licensee.
2. The commissioner must be notified of a transfer of 5 percent or more of the outstanding voting stock, partnership or member interests of a licensee and must approve a transfer that constitutes a change of control.
3. A person who acquires stock, partnership or member interests resulting in a change of control of the licensee shall apply to the commissioner for approval of the transfer. The application must contain information which shows that the requirements of this chapter for obtaining a license will be satisfied after the change of control. Except as otherwise provided in subsection 4, the commissioner shall conduct an investigation to determine whether those requirements will be satisfied. If, after the investigation, the commissioner denies the application, he may forbid the applicant from participating in the business of the licensee.
4. A licensee may submit a written request to the commissioner to waive an investigation pursuant to subsection 3. The commissioner may grant a waiver if the application has undergone a similar investigation by a state or federal agency in connection with the licensing of or his employment with a financial institution.
Sec. 16 It is unlawful for a licensee to:
1. Charge or collect a fee or other consideration for check-cashing in excess of:
(a) Three percent of the face amount of the check or $5, whichever is greater, for:
(1) A check issued by the Federal Government, this state or a political subdivision of this state; or
(2) A payroll check issued by any person.
(b) Eight percent of the face amount of the check or $5, whichever is greater, for a check drawn on an institution located within this state.
(c) Fifteen percent of the face amount of the check or $5, whichever is greater, for a check drawn on an institution located outside of this state.
2. Charge or collect a fee or other consideration for a deferred deposit transaction in excess of 10 percent of the face value of the check of which the deposit is deferred.
3. Fail to:
(a) Post in a conspicuous place in every location at which he operates under a license issued pursuant to this chapter a notice that states the fees charged for cashing checks or entering into a deferred deposit transaction.
(b) Comply with section 18 of this act.
4. Fail to file with the commissioner a schedule of all fees charged at each location at which he operates under a license issued pursuant to this chapter.
5. Fail to deposit a check or present it for payment within 7 days after cashing it for a customer and endorse it in the name of the licensee, or, for deferred deposit transactions, fail to deposit a check or present it for payment within 30 days after the date on which the written agreement evidencing the deferred deposit transaction is executed.
6. Fail to provide to each customer cashing a check a receipt that includes the:
(a) Name or trade name of the licensee;
(b) Date of the transaction;
(c) Amount of the check that was cashed; and
(d) Fee charged for the transaction.
7. Engage in the business of:
(a) Making loans of money, credit, goods or other tangible items;
(b) Discounting notes, bills of exchange or other evidences of indebtedness; or
(c) Accepting deposits or bailments of money or other tangible items.
8. Use or cause to be published or disseminated any advertising that contains any false, misleading or deceptive statement of material fact.
9. Operate a check-cashing or deferred deposit service at a location other than a location for which the service is licensed.
10. Cash a check made payable to a payee other than a natural person unless the licensee has appropriate documentation from the payee clearly indicating the authority of the natural person to cash the check on behalf of the payee.
Sec. 17 1. A licensee may defer the deposit of a personal check written by a customer if:
(a) The deferral is evidenced by a written agreement that:
(1) Is signed by:
(I) The customer; and
(II) The licensee or an authorized representative of the licensee; and
(2) Complies with the requirements set forth in subsection 2;
(b) The period for which the deposit is deferred does not exceed 30 days after the date on which the written agreement required pursuant to paragraph (a) is executed;
(c) The licensee is not holding for deferred deposit another check from the same customer pursuant to a previous written agreement;
(d) The fee charged for the deferral does not exceed, directly or indirectly, the applicable fee authorized by subsection 2 of section 16 of this act; and
(e) The face amount of the check of which the deposit is deferred does not exceed $300.
2. A written agreement that evidences a deferred deposit:
(a) Must not authorize a licensee to accept collateral.
(b) Must set forth:
(1) The date to which payment is deferred; and
(2) In United States dollars and in annual percentage rate, the total amount of the fees, if any, charged for the deferred deposit.
3. If a check written to a licensee by a customer pursuant to a written agreement to defer deposit is returned for insufficient funds, the licensee:
(a) May charge the customer a fee not to exceed $25.
(b) Is not entitled to recover damages pursuant to NRS 41.620.
4. Except as otherwise provided in NRS 205.130, a customer who:
(a) Enters into a written agreement to defer the deposit of a check pursuant to paragraph (a) of subsection 1; and
(b) Tenders to a licensee a check in accordance with that agreement,
is not subject to any criminal penalty for failure to comply with the terms of the agreement.
Sec. 18 A licensee who advertises his services, in whole or in part, through the use of a foreign language shall clearly disclose in that foreign language the fees, penalties and terms applicable to the services that he provides. The disclosures must be made by:
1. Posting the information on a conspicuous sign or chart within his place of business; and
2. Providing to customers who speak that foreign language materials that include the required disclosures.
Sec. 19 1. The commissioner shall adopt regulations that require a licensee to maintain in its offices such books, accounts and records as the commissioner requires. The books, accounts and records must be maintained separately from any other business in which the licensee is engaged and must be retained for a period prescribed by the commissioner.
2. The commissioner may examine the books, accounts and records at any time to determine whether the licensee is complying with the provisions of this chapter and any regulations adopted pursuant thereto.
3. The commissioner may, in conducting an examination, investigation or hearing:
(a) Compel the attendance of any person by subpoena.
(b) Administer oaths.
(c) Examine, under oath, any person subject to the provisions of this chapter concerning his business and the conduct of his affairs.
4. A person subpoenaed pursuant to the provisions of this section who:
(a) Willfully refuses or neglects to:
(1) Appear at the time and place named in the subpoena; or
(2) Produce books, records or papers required by the commissioner; or
(b) Refuses to be sworn or answer as a witness,
is guilty of a misdemeanor.
5. The commissioner may assess and collect the cost of an examination, periodic or special audit, investigation or hearing conducted pursuant to this chapter from a licensee whom the commissioner has ordered to undergo such an investigatory procedure in an amount established by the commissioner pursuant to NRS 658.101.
Sec. 20 1. The following acts constitute grounds for disciplinary action pursuant to this chapter:
(a) Violating a provision of this chapter or a regulation adopted pursuant to this chapter.
(b) Making a false statement of material fact on an application for a license.
(c) Refusing to:
(1) Cooperate in an investigation conducted by the commissioner; or
(2) Pay an assessment levied by the commissioner pursuant to NRS 658.055.
(d) Failing to comply with an order of the commissioner.
(e) Engaging in conduct that demonstrates a lack of the competency or trustworthiness which, in the determination of the commissioner, is necessary to operate a check-cashing or deferred deposit service.
(f) Conviction of a felony or a misdemeanor involving fraud, misrepresentation or deceit.
2. If, after a hearing, the commissioner determines that a licensee has committed one or more of the acts set forth in subsection 1, the commissioner may:
(a) For each act, impose upon the licensee an administrative fine in an amount not to exceed $1,000; or
(b) Restrict, suspend or revoke the license of the licensee.
Sec. 21 1. If the commissioner determines that a person required to be licensed pursuant to this chapter has violated any provision of this chapter or any regulation adopted pursuant thereto, the commissioner may order the person to cease and desist from the violation and comply with such provisions.
2. The commissioner may order any person required to be licensed pursuant to this chapter to refund to a customer any unlawful or excessive fee charged by the person for cashing a check for or entering into a deferred deposit transaction with the customer.
3. Service of an order issued by the commissioner pursuant to subsection 1 or 2 is effective when delivered in person to the recipient or upon mailing by certified mail, return receipt requested, to the last known address of the recipient. A person who receives an order issued by the commissioner pursuant to subsection 1 or 2 is entitled to a hearing if the request is made in writing to the commissioner within 30 days after service of the order. The order becomes final if:
(a) No hearing is requested; or
(b) At the conclusion of the hearing, the commissioner does not rescind the order.
4. The commissioner may impose an administrative fine, not to exceed $1,000 per violation, on any person required to be licensed pursuant to this chapter who violates a final order issued pursuant to this section.
5. All money collected pursuant to this section must be deposited in the state general fund.
Sec. 22 1. Any person threatened with injury or damage by reason of a violation of any provision of this chapter may, in a court of competent jurisdiction:
(a) Institute an action or proceeding for injunctive relief.
(b) Sue therefor and shall recover an amount not less than his actual damages nor more than treble damages, together with reasonable attorney's fees and costs.
2. If a court determines by clear and convincing evidence that a violation of this chapter was willful, the court, in its discretion, may award punitive damages in addition to the damages authorized by paragraph (b) of subsection 1.
3. A person commencing an action for any violation of the provisions of this chapter shall, simultaneously with the filing of the complaint with the court, mail a copy of the complaint to the attorney general.
Sec. 23 The commissioner may adopt such regulations as are necessary to carry out the provisions of this chapter.
Sec. 24 A violation of section 9, 16 or 17 of this act is a category D felony and shall be punished as provided in NRS 193.130. Each transaction or act that constitutes such a violation is a separate offense.
Sec. 25 The provisions of this act do not apply to offenses that are committed before July 1, 1998.
Sec. 26 1. This section and sections 16 and 17 of this act become effective on October 1, 1997.
2. Sections 1 to 15, inclusive, and 18 to 25, inclusive, of this act become effective on July 1, 1998.