HB1233

SECTION 1. Chapter 412, Hawaii Revised Statutes, is amended by adding a new article to be appropriately designated and to read as follows:

"ARTICLE

SHORT-TERM LOAN LENDERS

PART I. GENERAL PROVISIONS

§412: -101 Definitions. As used in this article:

"Affiliate" means, in addition to the term's definition under section 412:1-109, any employee or agent of a licensee.

"Annual percentage rate" has the same meaning as in the federal Truth in Lending Act (15 U.S.C. § 1601 et seq.) and its implementing regulations, as amended.

"Check" means a draft drawn on the account of an individual at a depository institution.

"Interest" means all charges payable directly or indirectly by a borrower to a licensee as a condition to a loan, including fees, service charges, and renewal charges, and any ancillary product sold in connection with a loan. "Interest" does not include the monthly maintenance fees, deposit item return fees, or late charges authorized under section 412: -201.

"Licensee" means a person to whom a license has been issued under this article.

"Loan amount" means the principal amount of a loan, exclusive of fees or charges.

"Short-term loan" means a loan made pursuant to this article.

"Short-term loan company" means a company engaged in the business of short-term loans.

§412: -102 Short-term loan company license; required. Except as expressly permitted by federal law or this chapter, no person shall engage in any activity to operate as a short-term loan company, including without limitation, making loans and extensions of credit where the interest charged, contracted for, or received is in excess of rates permitted by law other than this article; use the term "short-term loan company"; or exercise powers or privileges restricted to short-term loan companies under applicable law unless the person is licensed under this article.

§412: -103 Applicability of this article. This article shall not apply to a depository institution that is otherwise subject to regulation elsewhere in this chapter. A depository institution that elects to be licensed under this article shall waive the benefits of any and all laws of this State or another State that are inconsistent with this article and any and all benefits under federal law that are inconsistent with, but not preemptive of the provisions of this article.

§412: -104 Application for license. (a) Any corporation or any person intending to form a corporation incorporated in this State may file an application with the commissioner for a license to engage in the business of a short-term loan company.

(b) The application shall contain the following information, unless waived by the commissioner:

(1) The proposed name of the short-term loan company, the location of its principal office, and any lease agreements for the principal office;

(2) Any intended or existing affiliates, subsidiaries, and holding company of the proposed short-term loan company and the extent and nature of the holding company's control over the operations of the proposed short-term loan company;

(3) A business plan that shall contain the following:

(A) A written description of the short-term loan company's proposed financial products;

(B) A written statement that explains how the scope of the proposed business complies with this article and why any existing lines of business do not conflict with this article;

(C) A written description of the short-term loan company's proposed plan of marketing its products, whether through affiliates, subsidiaries, service corporations, or holding company;

(D) Financial projections regarding the short-term loan company's profitability; and

(E) Any and all contractual arrangements that are intended to be executed between the short-term loan company and its holding company, affiliates, and subsidiaries;

(4) Financial statements, employment history, education, management experience, and other biographical information for the proposed executive officers and directors of the short-term loan company and its holding company, if any;

(5) Proposed policies regarding loans, investments, operations, accounting, recordkeeping, and compliance with applicable federal and state consumer laws;

(6) The name and address of each proposed subscriber of capital stock in the short-term loan company or the majority shareholders in any holding company;

(7) A copy of the short-term loan company's articles of incorporation and bylaws;

(8) Information necessary to conduct a criminal history record check in accordance with section 846-2.7 of the applicant and each of the proposed directors and executive officers of the short-term loan company, accompanied by payment of the applicable fee for each record check to be conducted; and

(9) Any other information that the commissioner may require.

(c) The application shall be submitted on a form prescribed by the commissioner and shall be accompanied by an application fee assessed pursuant to section 412:2-105.2.

(d) The identity of each applicant and organizer, and any information that is not confidential, shall be available to the public. The applicant may request in writing that information be kept confidential. The applicant shall designate and separate any matter which the applicant claims is confidential and shall submit a separate statement providing the reasons and authority for the request for confidential treatment. The failure by the applicant to request confidential treatment and designate and separate the confidential matter shall preclude any objection or claim for wrongful disclosure of the same. Information determined by the commissioner to be confidential, pursuant to an applicant's request or otherwise, shall not be available to the public.

§412: -105 Publication of notice. (a) Once the application for a license under this article is complete and has been accepted by the commissioner, the applicant shall publish a notice at least once in a newspaper of general circulation in each county in this State where the short-term loan company intends to establish a principal office, branch, or agency.

(b) The notice shall be in a form prescribed by the commissioner and shall state the fact that an application has been filed, the name of the applicant, the location of the short-term loan company's proposed place of business, and the amount of its proposed capital. The notice shall also state that within fifteen days after the last publication of the notice, any person may file with the commissioner written comments on the application or a request for an informational and comment proceeding to present information and comments to the commissioner. Any request for an informational and comment proceeding shall be accompanied by a brief statement of the person's interest in the application, the matters to be discussed at the informational and comment proceeding, and the reasons why written comments will not suffice in lieu of an informational and comment proceeding.

§412: -106 Information and comment proceeding. (a) An informational and comment proceeding on the application shall not be mandatory and whether an informational and comment proceeding is held shall be within the commissioner's discretion, regardless of whether any person has requested one.

(b) If the commissioner determines that an informational and comment proceeding is warranted, the commissioner shall notify the applicant and every person who has requested an informational and comment proceeding of the time, date, and place of the proceeding at least ten days prior to the proceeding.

§412: -107 Grant of approval. (a) An application for a license shall be approved only if the commissioner finds that:

(1) The proposed short-term loan company and holding company, if any, will comply with the requirements of this article; and

(2) The qualifications, character, financial responsibility, experience, and general fitness of the proposed directors and executive officers of the short-term loan company are such as will warrant public confidence and a belief that the business of the short-term loan company will be honestly and efficiently conducted. For purposes of this section, the commissioner may presume that in the absence of credible evidence to the contrary, a director, officer, or controlling person is of good character and sound financial standing. Such presumption may be rebutted by evidence to the contrary, including without limitation a finding that such director, officer, or controlling person has:

(A) Been convicted of, or has pleaded nolo contendere to, any crime involving an act of fraud or dishonesty;

(B) Consented to or suffered a judgment in any civil action based upon conduct involving an act of fraud or dishonesty;

(C) Consented to or suffered the suspension or revocation of any professional, occupational, or vocational license based upon conduct involving an act of fraud or dishonesty;

(D) Wilfully made or caused to be made in any application or report filed with the commissioner, or in any proceeding before the commissioner, any statement, which was at the time and in the light of the circumstances under which it was made, false or misleading with respect to any material fact, or has wilfully omitted to state in any application or report any material fact which was required to be stated therein; or

(E) Wilfully committed any violation of, or has wilfully aided, abetted, counseled, commanded, induced, or procured the violation by any other person of, any provision of this article or of any rule or order issued under this article.

(b) If the commissioner is satisfied that the applicant has fulfilled all the requirements of law and is qualified to engage in the business of a short-term loan company, the commissioner shall issue a written decision and order approving the application. Upon the approval of the application and, if applicable, upon providing satisfactory evidence to the commissioner of compliance with the requirements of chapter 414 relating to foreign corporations, the commissioner shall issue to the applicant a license to engage in the business of a short-term loan company under this article.

(c) In granting approval, the commissioner may impose any conditions and restrictions that are in the public interest, including but not limited to requiring the applicant to fulfill representations contained in its application and agreements made with the commissioner during the application process.

§412: -108 Denial of license. If the commissioner is not satisfied that the applicant meets all the criteria set forth for approval, the commissioner shall issue a written decision denying the applicant's application. An applicant who is denied approval may request a hearing before the commissioner in accordance with chapter 91. Any final decision of the commissioner denying an applicant a license may be appealed to the circuit court as provided in chapter 91.

PART II. LOANS AND EXTENSIONS OF CREDIT

§412: -200 Loan terms and conditions. A licensee may engage in the business of making short-term loans; provided that each loan shall meet the following requirements:

(1) The total amount of the loan shall not exceed $2,500;

(2) The minimum duration of the loan shall be four months and the maximum duration of the loan shall be twenty-four months; provided that the minimum duration of the loan may be less than four months if the total monthly payment on the loan does not exceed the greater of:

(A) An amount that is five per cent of the borrower's verified gross monthly income; or

(B) Six per cent of the borrower's verified net monthly income.

(3) The short-term loan shall be made pursuant to a written loan contract that sets forth the terms and conditions of the loan, which shall be signed by the borrower and a person authorized by the licensee to sign such agreements and dated the same day the loan is made and disbursed. A copy of the signed loan contract shall be provided to the borrower. The loan contract shall disclose in a clear and concise manner the following information:

(A) The principal amount of the loan and the total amount of fees and charges the borrower will be required to pay in connection with the loan pursuant to the loan contract;

(B) The amount of each payment of principal and interest, when each payment is due, the total number of payments that the borrower will be required to make under the loan contract, and the loan's maturity date;

(C) If the licensee receives a check as security for the loan, evidence of receipt from the borrower of a check, stating the amount of the check and terms upon which the check may be presented for payment;

(D) A statement, printed in at least ten-point type, that informs the borrower that complaints regarding the loan or lender may be submitted to the division and includes the correct telephone number, website address, and mailing address for the short-term loan company;

(E) Any disclosures required under the federal Truth in Lending Act and its implementing regulations, as they may be amended from time to time;

(F) The annual percentage rate. All fees and charges payable directly or indirectly by a borrower to a licensee as a condition to a loan, including interest and the monthly maintenance fees authorized under section 412: -201, shall be included in the computation of the annual percentage rate;

(G) A statement, printed in at least ten-point type, as follows: "This loan is made pursuant to Article of Chapter 412 of the Hawaii Revised Statutes. You have the right to rescind or cancel this loan by returning the loan proceeds check or the originally contracted loan amount by 5 p.m. of the third business day immediately following the day you enter into this contract.";

(H) A statement, printed in at least ten-point type, as follows: "Electronic payment is optional. You have the right to revoke or remove your authorization for electronic payment at any time.";

(I) The borrower's mailing address; and

(J) Any other information relating to the loan as the division shall determine, by rule, is necessary to ensure that the borrower is provided adequate notice of the relevant provisions of the loan;

(4) The loan shall be a precomputed loan and shall be payable in substantially equal installments consisting of principal, fees, and interest combined. For purposes of this paragraph, "precomputed loan" means a loan in which the debt is a sum comprising the principal amount and the amount of fees and interest computed in advance on the assumption that all scheduled payments will be made when due; and

(5) The loan may be rescinded or canceled on or before 5 p.m. of the third business day immediately following the day of the loan transaction upon the borrower returning the original loan proceeds check or paying to the licensee, in the form of cash or other good funds instrument, the loan proceeds.

§412: -201 Authorized fees and charges. (a) A licensee may charge, collect, and receive only the following fees and charges in connection with a short-term loan, provided such fees and charges are set forth in the written loan contract described in section 412: -200:

(1) Interest at a simple annual rate not to exceed thirty-six per cent;

(2) Subject to section 412: -202, a monthly maintenance fee that shall not exceed the lesser of eight per cent of the originally contracted loan amount or $25; provided the fee shall not be added to the loan balance on which interest is charged;

(3) Any deposit item return fee incurred by the licensee, not to exceed $25, if a borrower's check or electronic draft is returned because the account on which it was drawn was closed by the borrower or contained insufficient funds, or the borrower stopped payment of the check or electronic draft; provided that the terms and conditions upon which this fee will be charged to the borrower shall be set forth in the written loan contract described in section 412: -200; and

(4) Damages and costs to which the licensee may become entitled to by law in connection with any civil action to collect a loan after default, except that the total amount of damages and costs shall not exceed the originally contracted loan amount.

(b) A licensee may impose a late charge for failure to make timely payment of any installment; provided that the late charge does not exceed five per cent of the amount of the installment payment and the charge is specified in the contract between the licensee and the borrower; provided further that the late charge shall not exceed $20.

§412: -202 Inflation adjustment; maximum monthly maintenance fee. The division may, from time to time, by rule, adjust the dollar amount of $25 specified in section 412: -201(a) to reflect the rate of inflation from the previous date that the dollar amount was established, as measured by the Consumer Price Index or other method of measuring the rate of inflation that the division determines is reliable and generally accepted.

§412: -203 Refinancing of short-term loans. Subject to section 412: -204(f), a licensee may refinance a short-term loan; provided that the refinanced loan is also a short-term loan.

§412: -204 Statement of balance due; repayment and refunds. (a) The licensee shall, upon the request of the borrower or the borrower's agent, provide a statement of balance due on a short-term loan.

(b) A borrower shall be permitted to make partial payments, in increments of not less than $5, on the loan at any time prior to maturity without charge. The licensee shall give the borrower dated receipts for each payment made, which shall state the updated balance due on the loan.

(c) When providing a statement of balance due on the loan, the licensee shall state the amount required to discharge the borrower's obligation in full as of the date the notice is provided and for each of the next three business days following that date. If the licensee cannot reasonably supply a firm statement of balance due when requested or required, the licensee may provide a good faith estimate of the balance due immediately and provide to the borrower or the borrower's agent a firm statement of balance due within two business days.

(d) The licensee shall provide any statement of balance due verbally and in writing, and shall not fail to provide the information by phone upon the request of the borrower or the borrower's agent.

(e) A licensee shall not fail to accept cash or other instruments from the borrower, or a third party when submitted on behalf of the borrower, for repayment of a short-term loan in full or in part. Payments shall be credited by the licensee on the date received.

(f) Notwithstanding any other provision of law, if a short-term loan is prepaid in full or refinanced prior to the loan's maturity date, the licensee shall refund to the borrower a prorated portion of fees and charges based on a ratio of the number of days the loan was outstanding and the number of days for which the loan was originally contracted. For purposes of this section, all charges made in connection with the loan shall be included when calculating the loan charges except for deposit item return fees and late charges authorized under section 412: -201.

(g) If a licensee presents a check held as security for a loan, the licensee shall refund any amount received that is in excess of the payment due on the loan as of the day the licensee presents the check. For purposes of this subsection, the payment due on the loan shall be no more than the amount of unpaid payments and fees that have already come due according to the loan contract or, if applicable, the amount due according to a valid contractual acceleration clause or demand feature as described in section 412: -300(23).

(h) The licensee shall provide any refund due to a borrower in the form of cash or business check as soon as reasonably possible and no later than two business days after receiving payment from the borrower.

(i) Upon repayment of the loan in full, the licensee shall mark the original loan agreement with the word "paid" or "canceled", return it to the borrower, and retain a copy in the licensee's records.

§412: -205 Restriction on certain fees and charges. (a) Notwithstanding any provision of this article to the contrary, a licensee shall not contract for, charge, collect, or receive in connection with a short-term loan a total amount of fees and charges that exceeds either:

(1) Fifty per cent of the originally contracted loan amount, if the originally contracted loan amount was $1,500 or less; or

(2) Sixty per cent of the originally contracted loan amount, if the originally contracted loan amount was greater than $1,500.

(b) For purposes of this section, all charges made in connection with the loan shall be included when calculating the total loan charges except for deposit item return fees and late charges authorized under section 412: -201.

§412: -206 Verification of borrower's income. Prior to initiating a short-term loan transaction with a borrower, a licensee shall make a reasonable attempt to verify the borrower's income. At a minimum, the licensee shall obtain from the borrower one or more recent pay stubs or other written evidence of recurring income, such as a bank statement. The written evidence shall include at least one document that, when presented to the licensee, is dated not earlier than forty-five days prior to the borrower's initiation of the short-term loan transaction.

PART III. BUSINESS PRACTICES

§412: -300 Required and prohibited business practices. Each licensee shall comply with the following requirements and prohibitions:

(1) A licensee shall not make a loan that does not comply with section 412: -200;

(2) A licensee shall not charge, collect, or receive, directly or indirectly, credit insurance premiums, charges for any ancillary product sold, charges for disbursing loan proceeds or refunds, including check-cashing charges and any other charges for negotiating forms of payment other than cash, charges for brokering or obtaining a loan, or any fees, interest, or charges in connection with a loan, other than fees and charges permitted by section 412: -201;

(3) A licensee shall not obtain any agreement from the borrower that:

(A) Gives the licensee or any third person power of attorney or authority to confess judgment for the borrower;

(B) Authorizes the licensee or any third party to bring suit against the borrower in a court outside the State; or

(C) Waives the borrower's right to legal recourse or any other right the borrower has under any otherwise applicable provision of state or federal law;

(4) A licensee shall not cause any person to be obligated to the licensee in any capacity at any time in the principal amount of more than $2,500;

(5) Except as provided in section 412: -204, a licensee shall not refinance, renew, or extend any short-term loan or make a loan to a person if the loan would cause the person to have more than one short-term loan from any licensee outstanding at the same time;

(6) A licensee shall not cause a borrower to be obligated upon more than one loan at any time;

(7) A licensee shall not contract with a borrower who completed a short-term loan within the last fifteen days;

(8) A check accepted by a licensee as security for any loan shall be dated no earlier than the date of the first required loan payment shown in the loan agreement;

(9) A licensee shall not threaten, or cause to be instigated, criminal proceedings against a borrower if a check given as security for a loan is dishonored or for any reason related to the borrower's failure to pay any sum due under a loan agreement;

(10) A licensee shall not:

(A) Accept the title or registration of a vehicle, real or personal property, or any interest in any property other than a check payable to the licensee as security for a loan;

(B) Create or accept any remotely created check, as defined in title 12 Code of Federal Regulations section 229.2(fff), in connection with a loan;

(D) Fail to stop attempts to draft funds electronically from a borrower's account upon request from the borrower or his agent.

Nothing in this paragraph shall prohibit the conversion of a negotiable instrument into an electronic form for processing through the automated clearing house system;

(11) A licensee shall not present a check, negotiable order of withdrawal, share draft, or other negotiable instrument that has been previously presented by the licensee and subsequently returned dishonored for any reason, unless the licensee obtains new written authorization from the borrower to present the previously returned item;

(12) A licensee shall not attempt to draft funds electronically from a borrower's account after two consecutive attempts have failed, unless the licensee obtains new written authorization from the borrower to transfer or withdraw funds electronically from the borrower's account;

(13) A licensee shall not make a loan to a borrower to enable the borrower to:

(A) Pay for any other product or service sold at the licensee's office location; or

(B) Repay any amount owed to the licensee or an affiliate of the licensee in connection with another credit transaction;

(14) Loan proceeds shall be disbursed in cash or by the licensee's business check. No fee shall be charged by the licensee or an affiliate for cashing a loan proceeds check;

(15) A check given as security for a loan shall not be negotiated to a third party;

(16) Upon receipt of a check given as security for a loan, the licensee shall stamp the check with an endorsement stating: "This check is being negotiated as part of a short-term loan pursuant to Article of Chapter 412 of the Hawaii Revised Statues, and any holder of this check takes it subject to all claims and defenses of the maker.";

(17) Before entering into a short-term loan, the licensee shall provide each borrower with a pamphlet, in form consistent with regulations adopted by the Commission, explaining in plain language the rights and responsibilities of the borrower and providing a toll-free number for the division for assistance with complaints;

(18) Each licensee shall conspicuously post in each approved office:

(A) A schedule of fees and interest charges, which shall include examples using a $300 loan repaid in three months, a $500 loan repaid in five months, and a $1,000 loan repaid in 10 months; and

(B) A notice containing the following statement: "If you wish to file a complaint against us, you may contact the Division of Financial Institutions at [insert contact information]." The division shall furnish licensees with the appropriate contact information;

(19) A licensee shall not knowingly make a short-term loan to a person who is a member of the military service of the United States or the spouse or other dependent of a member of the military service of the United States. Prior to making a short-term loan, every licensee shall inquire of every prospective borrower if the prospective borrower is a member of the military service of the United States or the spouse or other dependent of a member of the military service of the United States. The loan documents shall include verification that the borrower is not a member of the military service of the United States or the spouse or other dependent of a member of the military service of the United States;

(20) In collecting or attempting to collect a short-term loan, a licensee shall comply with the restrictions and prohibitions applicable to debt collectors contained in the Fair Debt Collection Practices Act (15 U.S.C. § 1692 et seq.) regarding harassment or abuse, false or misleading misrepresentations, and unfair practices in collections;

(21) A licensee shall not contact a borrower for any reason other than:

(A) For the borrower's benefit regarding upcoming payments, options for obtaining loans, payment options, payment due dates, the effect of default, or, after default, receiving payments or other actions permitted by the licensee;

(B) To advise the borrower of missed payments or dishonored checks; or

(22) A short-term loan agreement shall not be sold or otherwise assigned to any other person who is not also a licensee, and if a loan agreement or its servicing is sold or assigned to another licensee, the buyer or assignee of the loan agreement shall be subject to the same obligations under this article that apply to the selling or assigning licensee. If a licensee sells or assigns a short-term loan or its servicing, the licensee shall provide to the borrower written notice and the information needed to make future payments no later than ten days before the borrower's next payment due date;

(23) A licensee shall not make a loan to a borrower that includes an acceleration clause or demand feature that permits the licensee, in the event the borrower fails to meet the repayment terms for any outstanding balance, to terminate the loan in advance of the original maturity date and to demand repayment of the entire outstanding balance, unless the following conditions are met:

(A) Not earlier than ten days after the borrower's payment was due, the licensee provides written notice to the borrower of the termination of the loan; and

(B) In addition to the outstanding balance, the licensee collects only prorated interest and the fees earned up to termination of the loan. For purposes of this subparagraph, the outstanding balance and prorated interest and fees shall be calculated as if the borrower had voluntarily prepaid the loan in full on the date of termination;

(24) A licensee shall not file or initiate a legal proceeding of any kind against a borrower until sixty days after the date of default on a short-term loan, during which period the licensee and borrower may voluntarily enter into a repayment arrangement and the licensee shall recommend a credit counseling program approved by the division;

(25) A licensee shall not recommend to a borrower that the borrower obtain a loan for a dollar amount that is higher than the borrower has requested; and

(26) A licensee may not engage in any unfair or deceptive acts or practices in the conduct of its business."

SECTION 2. Section 412:1-104, Hawaii Revised Statutes, is amended by amending subsection (a) to read as follows:

"(a) Unless authorized to engage in business as a financial institution in this State of the type indicated by the name or as otherwise approved by the commissioner, no person may use any of the terms "financial institution", "bank", "savings bank", "savings and loan", "savings association", "financial services loan company", "credit union", "trust company", "intra-Pacific bank", "international banking corporation", "short-term loan company", words of similar import, or translations of such words, in a manner that might suggest or tend to lead others into believing that the person is a financial institution of the character indicated by the name."

SECTION 3. Section 412:1-109, Hawaii Revised Statutes, is amended by amending the definition of "Hawaii financial institution" to read as follows:

""Hawaii financial institution" means:

(1) A corporation or credit union that holds a charter or license under this chapter or under prior Hawaii law, authorizing it to accept deposits, to make loans in excess of the rates permitted in chapter 478, or to engage in the business of a trust company; or

(2) A resulting bank as defined in article 12,

and includes a corporation or credit union existing and chartered as a Hawaii financial institution or licensed to transact business in this State on July 1, 1993. A Hawaii financial institution may be a bank, resulting bank as defined in article 12, savings bank, savings and loan association, depository financial services loan company, nondepository financial services loan company, trust company, credit union, [or] intra-Pacific bank[.], or short-term loan company."

SECTION 4. Section 412:9-101, Hawaii Revised Statutes, is amended to read as follows:

"§412:9-101 Necessity for financial services loan company license. Except as expressly permitted by federal law or this chapter, no person shall engage in any activity for which a license to operate as a financial services loan company is required by this chapter, including without limitation, making loans and extensions of credit where the interest charged, contracted for, or received is in excess of rates permitted by law other than this article[,] and not in accordance with article the use of the term "financial services loan company", or the exercise of such other powers or privileges restricted to financial services loan companies under applicable law unless it is a corporation incorporated in this State and has such a license; provided that a nondepository financial services loan company shall not be required to be incorporated in this State."

SECTION 5. Section 478-4, Hawaii Revised Statutes, is amended by amending subsection (d) to read as follows:

"(d) The rate limitations contained in subsections (a) and (b) of this section and section 478-11.5 shall not apply to any credit transaction authorized by, and entered into in accordance with the provisions of, articles 9 [~~and~~], 10, and of chapter 412 or chapter 476."

SECTION 6. Section 478-5, Hawaii Revised Statutes, is amended to read as follows:

"§478-5 Usury not recoverable. If a greater rate of interest than that permitted by law is contracted for with respect to any consumer credit transaction, any home business loan or any credit card agreement, the contract shall not, by reason thereof, be void. But if in any action on the contract proof is made that a greater rate of interest than that permitted by law has been directly or indirectly contracted for, the creditor shall only recover the principal and the debtor shall recover costs. If interest has been paid, judgment shall be for the principal less the amount of interest paid. This section shall not be held to apply, to loans made by financial services loan companies [~~and~~], credit unions, and small-term loan lenders at the rates authorized under and pursuant to articles 9 [~~and~~], 10, and of chapter 412."

SECTION 7. Section 480F-1, Hawaii Revised Statutes, is amended by deleting the definition of "deferred deposit".

["~~"Deferred deposit" means a transaction in which a check casher refrains from depositing a personal check written by a customer until a date after the transaction date, pursuant to a written agreement.~~"]

SECTION 8. Section 480F-3, Hawaii Revised Statutes, is amended to read as follows:

"[[]§480F-3[]] Authorized fees. [~~Except as provided in section 480F-4, no~~] No check casher shall charge fees in excess of the following amounts:

(1) Five per cent of the face amount of the check or $5, whichever is greater;

(2) Three per cent of the face amount of the check or $5, whichever is greater, if the check is the payment of any kind of state public assistance or federal social security benefit payable to the bearer of the check;

(3) Ten per cent of the face amount of a personal check or money order, or $5, whichever is greater; or

(4) No more than $10 to set up an initial account and issue an optional membership or identification card, and no more than $5 for a replacement optional identification card.

The fees allowed in this section shall not be assessed in any transaction or agreement in which the check casher defers deposit of the check."

SECTION 9. Section 480F-6, Hawaii Revised Statutes, is amended to read as follows:

"§480F-6 Penalties. (a) Any person who violates this chapter shall be deemed to have engaged in an unfair or deceptive act or practice in the conduct of any trade or commerce within the meaning of section 480-2(a). Aggrieved consumers may seek those remedies set forth in section 480-13(b).

(b) Any person who is not a consumer and is injured by a wilful violation of this chapter may bring an action for the recovery of damages, a proceeding to restrain and enjoin those violations, or both. If judgment is for the plaintiff, the plaintiff shall be awarded a sum not less than $1,000 or threefold damages, whichever sum is greater, and reasonable attorneys' fees together with the costs of suit.

[(d) A customer who enters into a written deferred deposit agreement and offers a personal check to a check casher pursuant to that agreement shall not be subject to any criminal penalty for failure to comply with the terms of that agreement unless the check is dishonored because the customer closed the account or stopped payment on the check.]"

SECTION 10. Section 846-2.7, Hawaii Revised Statutes, is amended by amending subsection (b) to read as follows:

"(b) Criminal history record checks may be conducted by:

(1) The department of health or its designee on operators of adult foster homes for individuals with developmental disabilities or developmental disabilities domiciliary homes and their employees, as provided by section 321-15.2;

(2) The department of health or its designee on prospective employees, persons seeking to serve as providers, or subcontractors in positions that place them in direct contact with clients when providing non-witnessed direct mental health or health care services as provided by section 321-171.5;

(3) The department of health or its designee on all applicants for licensure or certification for, operators for, prospective employees, adult volunteers, and all adults, except adults in care, at healthcare facilities as defined in section 321-15.2;

(4) The department of education on employees, prospective employees, and teacher trainees in any public school in positions that necessitate close proximity to children as provided by section 302A-601.5;

(5) The counties on employees and prospective employees who may be in positions that place them in close proximity to children in recreation or child care programs and services;

(6) The county liquor commissions on applicants for liquor licenses as provided by section 281-53.5;

(7) The county liquor commissions on employees and prospective employees involved in liquor administration, law enforcement, and liquor control investigations;

(8) The department of human services on operators and employees of child caring institutions, child placing organizations, and foster boarding homes as provided by section 346-17;

(9) The department of human services on prospective adoptive parents as established under section 346‑19.7;

(10) The department of human services or its designee on applicants to operate child care facilities, household members of the applicant, prospective employees of the applicant, and new employees and household members of the provider after registration or licensure as provided by section 346-154, and persons subject to section 346-152.5;

(11) The department of human services on persons exempt pursuant to section 346-152 to be eligible to provide child care and receive child care subsidies as provided by section 346-152.5;

(12) The department of health on operators and employees of home and community-based case management agencies and operators and other adults, except for adults in care, residing in community care foster family homes as provided by section 321-15.2;

(13) The department of human services on staff members of the Hawaii youth correctional facility as provided by section 352-5.5;

(14) The department of human services on employees, prospective employees, and volunteers of contracted providers and subcontractors in positions that place them in close proximity to youth when providing services on behalf of the office or the Hawaii youth correctional facility as provided by section 352D-4.3;

(15) The judiciary on employees and applicants at detention and shelter facilities as provided by section 571-34;

(16) The department of public safety on employees and prospective employees who are directly involved with the treatment and care of persons committed to a correctional facility or who possess police powers including the power of arrest as provided by section 353C-5;

(17) The board of private detectives and guards on applicants for private detective or private guard licensure as provided by section 463-9;

(18) Private schools and designated organizations on employees and prospective employees who may be in positions that necessitate close proximity to children; provided that private schools and designated organizations receive only indications of the states from which the national criminal history record information was provided pursuant to section 302C-1;

(19) The public library system on employees and prospective employees whose positions place them in close proximity to children as provided by section 302A‑601.5;

(20) The State or any of its branches, political subdivisions, or agencies on applicants and employees holding a position that has the same type of contact with children, vulnerable adults, or persons committed to a correctional facility as other public employees who hold positions that are authorized by law to require criminal history record checks as a condition of employment as provided by section 78-2.7;

(21) The department of health on licensed adult day care center operators, employees, new employees, subcontracted service providers and their employees, and adult volunteers as provided by section 321-15.2;

(22) The department of human services on purchase of service contracted and subcontracted service providers and their employees serving clients of the adult protective and community services branch, as provided by section 346-97;

(23) The department of human services on foster grandparent program, senior companion program, and respite companion program participants as provided by section 346-97;

(24) The department of human services on contracted and subcontracted service providers and their current and prospective employees that provide home and community-based services under section 1915(c) of the Social Security Act, title 42 United States Code section 1396n(c), or under any other applicable section or sections of the Social Security Act for the purposes of providing home and community-based services, as provided by section 346-97;

(25) The department of commerce and consumer affairs on proposed directors and executive officers of a bank, savings bank, savings and loan association, trust company, and depository financial services loan company as provided by section 412:3-201;

(26) The department of commerce and consumer affairs on proposed directors and executive officers of a nondepository financial services loan company as provided by section 412:3-301;

(27) The department of commerce and consumer affairs on the original chartering applicants and proposed executive officers of a credit union as provided by section 412:10-103;

(28) The department of commerce and consumer affairs on:

(A) Each principal of every non-corporate applicant for a money transmitter license;

(B) Each person who upon approval of an application by a corporate applicant for a money transmitter license will be a principal of the licensee; and

(C) Each person who upon approval of an application requesting approval of a proposed change in control of licensee will be a principal of the licensee,

as provided by sections 489D-9 and 489D‑15;

(29) The department of commerce and consumer affairs on applicants for licensure and persons licensed under title 24;

(30) The Hawaii health systems corporation on:

(A) Employees;

(B) Applicants seeking employment;

(D) Current or prospective volunteers, providers, or contractors,

in any of the corporation's health facilities as provided by section 323F-5.5;

(31) The department of commerce and consumer affairs on:

(A) An applicant for a mortgage loan originator license, or license renewal; and

(B) Each control person, executive officer, director, general partner, and managing member of an applicant for a mortgage loan originator company license or license renewal,

as provided by chapter 454F;

(32) The state public charter school commission or public charter schools on employees, teacher trainees, prospective employees, and prospective teacher trainees in any public charter school for any position that places them in close proximity to children, as provided in section 302D-33;

(33) The counties on prospective employees who work with children, vulnerable adults, or senior citizens in community-based programs;

(34) The counties on prospective employees for fire department positions which involve contact with children or vulnerable adults;

(35) The counties on prospective employees for emergency medical services positions which involve contact with children or vulnerable adults;

(36) The counties on prospective employees for emergency management positions and community volunteers whose responsibilities involve planning and executing homeland security measures including viewing, handling, and engaging in law enforcement or classified meetings and assisting vulnerable citizens during emergencies or crises;

(37) The State and counties on employees, prospective employees, volunteers, and contractors whose position responsibilities require unescorted access to secured areas and equipment related to a traffic management center;

(38) The State and counties on employees and prospective employees whose positions involve the handling or use of firearms for other than law enforcement purposes;

(39) The State and counties on current and prospective systems analysts and others involved in an agency's information technology operation whose position responsibilities provide them with access to proprietary, confidential, or sensitive information;

(40) The department of commerce and consumer affairs on:

(A) Applicants for real estate appraiser licensure or certification as provided by chapter 466K;

(B) Each person who owns more than ten per cent of an appraisal management company who is applying for registration as an appraisal management company, as provided by section 466L-7; and

(C) Each of the controlling persons of an applicant for registration as an appraisal management company, as provided by section 466L-7;

(41) The department of health or its designee on all license applicants, licensees, employees, contractors, and prospective employees of medical cannabis dispensaries, and individuals permitted to enter and remain in medical cannabis dispensary facilities as provided under sections 329D-15(a)(4) and 329D‑16(a)(3);

(42) The department of commerce and consumer affairs on applicants for nurse licensure or license renewal, reactivation, or restoration as provided by sections 457-7, 457-8, 457-8.5, and 457-9;

(43) The county police departments on applicants for permits to acquire firearms pursuant to section 134-2 and on individuals registering their firearms pursuant to section 134-3;

(44) The department of commerce and consumer affairs on:

(A) Each of the controlling persons of the applicant for licensure as an escrow depository, and each of the officers, directors, and principals who will be in charge of the escrow depository's activities upon licensure; and

(B) Each of the controlling persons of an applicant for proposed change in control of an escrow depository licensee, and each of the officers, directors, and principals who will be in charge of the licensee's activities upon approval of such application,

as provided by chapter 449;

(45) The department of taxation on current or prospective employees or contractors who have access to federal tax information in order to comply with requirements of federal law, regulation, or procedure, as provided by section 231-1.6;

(46) The department of labor and industrial relations on current or prospective employees or contractors who have access to federal tax information in order to comply with requirements of federal law, regulation, or procedure, as provided by section 383-110;

(47) The department of human services on current or prospective employees or contractors who have access to federal tax information in order to comply with requirements of federal law, regulation, or procedure, as provided by section 346-2.5;

(48) The child support enforcement agency on current or prospective employees, or contractors who have access to federal tax information in order to comply with federal law, regulation, or procedure, as provided by section 576D-11.5; [~~and~~]

(49) The department of commerce and consumer affairs on each director and executive officer of a short-term loan company licensee or an applicant for a small dollar loan license as provided by article of chapter 412; and

[~~(49)~~] (50) Any other organization, entity, or the State, its branches, political subdivisions, or agencies as may be authorized by state law."

SECTION 11. Section 480F-4, Hawaii Revised Statutes, is repealed.

["~~§480F-4 Deferred deposits, when allowed.~~ ~~(a) No check casher may defer the deposit of a check except as provided in this section.~~

(b) Each deferred deposit shall be made pursuant to a written agreement that has been signed by the customer and the check casher or an authorized representative of the check casher. The written agreement shall contain a statement of the total amount of any fees charged for the deferred deposit, expressed both in United States currency and as an annual percentage rate. The written agreement shall authorize the check casher to defer deposit of the personal check until a specific date not later than thirty-two days from the date the written agreement was signed. The written agreement shall not permit the check casher to accept collateral.

(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. 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. A deferred deposit transaction shall not be repaid, refinanced, or consolidated by or with the proceeds of another deferred deposit transaction.

(e) A check casher who enters into a deferred deposit agreement and accepts a check passed on insufficient funds, or any assignee of that check casher, shall not be entitled to recover damages in any action brought pursuant to or governed by chapter 490. Instead, the check casher may charge and recover a fee for the return of a dishonored check in an amount not greater than $20.

(f) No amount in excess of the amounts authorized by this section and no collateral products such as insurance shall be directly or indirectly charged by a check casher pursuant or incident to a deferred deposit agreement."]

SECTION 12. This Act does not affect rights and duties that matured, penalties that were incurred, and proceedings that were begun before its effective date.

SECTION 13. Statutory material to be repealed is bracketed and stricken. New statutory material is underscored.

SECTION 14. This Act shall take effect on January 1, 2022.

INTRODUCED BY:	_____________________________

HOUSE OF REPRESENTATIVES	H.B. NO.	1233
THIRTY-FIRST LEGISLATURE, 2021
STATE OF HAWAII