AN ACT relating to deferred deposit transaction fees imposed by the commissioner.

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AN ACT relating to deferred deposit transaction fees imposed by the commissioner. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
Section 1. KRS 286.9-140 is amended to read as follows: 3
(1) (a) A common database with real -time access through an internet connection for 4
deferred deposit service business licensees implemented in accordance with 5
this subtitle s hall be accessible to the department and a deferred deposit 6
service business licensee to verify whether any deferred deposit transactions 7
are outstanding for a particular person. 8
(b) A deferred deposit service business licensee shall accurately and promptl y 9
submit such data into the database as may be required by the commissioner 10
before entering into each deferred deposit transaction in such format as the 11
commissioner may require by administrative regulation or order, including the 12
customer's name, Social S ecurity number or employment authorization alien 13
number, address, driver's license number, amount of the transaction, date of 14
transaction, date that the completed transaction is closed, and any additional 15
information required by the commissioner. 16
(c) The commissioner may promulgate administrative regulations in accordance 17
with KRS Chapter 13A to administer and enforce the provisions of this 18
subtitle and to assure that the database is used by deferred deposit service 19
business licensees in accordance with this subtitle. 20
(2) The commissioner shall impose a fee of[not to exceed] three dollars ($3) per 21
transaction for data required to be submitted by a deferred deposit service business 22
licensee, which fee may be charged to the customer. 23
(3) (a) The commissioner may operate the database or may select and contract with a 24
third-party provider to operate the database. 25
(b) If the commissioner contracts with a third -party provider for the operation of 26
the database, all of the following apply: 27
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1. The commissioner shall ensure that the third -party provider selected as 1
the database provider operates the database pursuant to the provisions of 2
this subtitle; 3
2. The commissioner shall consider cost of service and ability to meet all 4
the requirements of this subtitle in selecting a third -party provider as the 5
database provider; 6
3. In selecting a third-party provider to act as the database provider, the 7
commissioner shall give strong consideration to the third -party 8
provider's ability to prevent fraud, abuse, and other unlawful activities 9
associated with deferred deposit transactions and provide a dditional 10
tools for the administration and enforcement of this subtitle; 11
4. The third-party provider shall use the data collected under this subtitle 12
only as prescribed in this subtitle and the contract with the department 13
and for no other purpose; 14
5. If the third-party provider violates this subtitle, the commissioner may 15
terminate the contract and the third -party provider may be barred from 16
becoming a party to any other state contracts; 17
6. A person injured by the third -party provider's violation of this s ubtitle 18
may maintain a civil cause of action against the third -party provider and 19
may recover actual damages plus reasonable attorney's fees and court 20
costs; and 21
7. The commissioner may require that the third -party provider collect the 22
fee assessed in subs ection (2) of this section from the licensee. The 23
third-party provider shall remit the fee collected from the licensee to the 24
commissioner no later than the first day of each month. The third -party 25
provider shall deposit any fee collected in a separate escrow account in a 26
federally insured financial institution and shall hold the fee deposited in 27
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trust for the Commonwealth of Kentucky. 1
(4) The database shall allow a deferred deposit service business licensee accessing the 2
database to do all of the following: 3
(a) Verify whether a customer has any open deferred deposit transactions with 4
any deferred deposit business service licensee that have not been closed; 5
(b) Provide information necessary to ensure deferred deposit service business 6
licensee compliance with any requirements imposed by the United States 7
Treasury Office of Foreign Assets Control and United States Treasury Office 8
of Financial Crimes Enforcement Network; and 9
(c) Track and monitor the number of customers who notify a deferred deposit 10
service business licensee of violations of this subtitle, the number of times a 11
deferred deposit service business licensee agreed that a violation occurred, the 12
number of times that a deferred deposit service business licensee did not agree 13
that a violation occurred, the amount of restitution paid, and any other 14
information the commissioner requires by administrative regulation or order. 15
(5) While operating the database, the database provider shall do all of the following: 16
(a) Establish and maintain a process for respo nding to transaction verification 17
requests due to technical difficulties occurring with the database that prevent 18
the licensee from accessing the database through the internet; 19
(b) Comply with any applicable federal and state provisions to prevent identity 20
theft; 21
(c) Provide accurate and secure receipt, transmission, and storage of customer 22
data; and 23
(d) Meet the requirements of this subtitle. 24
(6) When the database provider receives notification that a deferred deposit transaction 25
has been closed, the datab ase provider shall designate the transaction as closed in 26
the database immediately, but in no event after 11:59 p.m. on the day the 27
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commissioner or database provider receives notification. 1
(7) (a) The database provider shall automatically designate a defer red deposit 2
transaction as closed in the database five (5) days after the transaction 3
maturity date unless a deferred deposit service business licensee reports to the 4
database provider before that time that the transaction remains open because: 5
1. Of the customer's failure to make payment; 6
2. The customer's payment instrument or an electronic redeposit is in the 7
process of clearing the banking system; 8
3. The customer's payment instrument is being returned to the deferred 9
deposit service business licensee for insufficient funds, a closed account, 10
or a stop payment order; or 11
4. Of any other factors determined by the commissioner. 12
(b) If a deferred deposit service business licensee reports the status of a 13
transaction as open in a timely manner, the transaction remains an open 14
transaction until it is closed and the database provider is notified that the 15
transaction is closed. 16
(8) (a) If a deferred deposit service business licensee stops providing deferred deposit 17
transactions, the database provider shall designate all open transactions with 18
that licensee as closed in the database sixty (60) days after the date the 19
deferred deposit serv ice business licensee stops offering deferred deposit 20
transactions, unless the deferred deposit service business licensee reports to 21
the database provider before the expiration of the sixty (60) day period which 22
of its transactions remain open and the spec ific reason each transaction 23
remains open. 24
(b) The deferred deposit service business licensee shall also provide to the 25
commissioner a reasonably acceptable plan that outlines how the deferred 26
deposit service business licensee will continue to update the d atabase after it 27
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stops offering deferred deposit transactions. 1
(c) The commissioner shall promptly approve or disapprove the plan and 2
immediately notify the deferred deposit service business licensee of the 3
commissioner's decision. 4
(d) If the plan is disap proved, the deferred deposit service business licensee may 5
submit a new plan or may submit a modified plan for the deferred deposit 6
service business licensee to follow. 7
(e) If at any time the commissioner reasonably determines that a deferred deposit 8
service business licensee that has stopped offering deferred deposit 9
transactions is not updating the database in accordance with its approved plan, 10
the commissioner shall immediately close or instruct the database provider to 11
immediately close all remaining op en transactions of that deferred deposit 12
service business licensee. 13
(9) (a) The response to an inquiry to the database provider by a deferred deposit 14
service business licensee shall state only that a person is eligible or ineligible 15
for a new deferred depo sit transaction and describe the reason for that 16
determination. 17
(b) Only the person seeking the transaction may make a direct inquiry to the 18
database provider to request a more detailed explanation of a particular 19
transaction that was the basis for the ineligibility determination. 20
(c) Any information regarding any person's transaction history is confidential; is 21
not subject to public inspection; is not a public record subject to the disclosure 22
requirements of the Kentucky Open Records Act, KRS 61.870 to 61. 884; is 23
not subject to discovery, subpoena, or other compulsory process, except in an 24
administrative or legal action arising under this subtitle; and shall not be 25
disclosed to any person other than the commissioner. 26
(10) The commissioner may access the database only for purposes of an investigation of, 27
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examination of, or enforcement action concerning an individual database provider, 1
licensee, customer, or other person. 2
(11) (a) The commissioner shall investigate violations of and enforce this subtitle. 3
(b) The commissioner shall not delegate his or her responsibilities under this 4
subsection to any third-party provider. 5
(12) The commissioner may, by administrative regulation or order, do all of the 6
following: 7
(a) Require that data be retained in the database only as required to ensure 8
deferred deposit service business licensee compliance with this subtitle; 9
(b) Require that customer transaction data in the database are archived within 10
three hundred sixty -five (365) days after the customer transaction is closed 11
unless needed for a pending enforcement or legal action; 12
(c) Require that any identifying customer information is deleted from the 13
database when data are archived; and 14
(d) Require that data in the database concerning a customer transaction are 15
deleted fro m the database three (3) years after the customer transaction is 16
closed or, if any administrative, legal, or law enforcement action is pending, 17
three (3) years after the administrative, legal, or law enforcement action is 18
completed, whichever is later. 19
(13) The commissioner may maintain access to data archived under subsection (12) of 20
this section for examination, investigation, or legislative or policy review. 21
(14) A deferred deposit service business licensee may rely on the information contained 22
in the database as accurate and is not subject to any administrative penalty or civil 23
liability as a result of relying on inaccurate information contained in the database, 24
provided the deferred deposit licensee accurately and promptly submits such data as 25
required before entering into a deferred deposit transaction with a customer. 26
(15) The commissioner may use the database to administer and enforce this subtitle. 27
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(16) The commissioner may require a database provider to file a report by March 1 of 1
each year containing the following information: 2
(a) The total number and dollar amount of deferred deposit transactions entered 3
into in the calendar year ending December 31 of the previous year; 4
(b) The total number and dollar amount of deferred deposit transactions 5
outstanding as of December 31 of the previous year; 6
(c) The total dollar amount of fees collected for deferred deposit transactions as 7
of December 31 of the previous year; 8
(d) The minimum, maximum, and average dollar amount of deferred deposit 9
transactions entere d into, the total dollar amount of the net charge -offs and 10
write-offs, and the net recoveries of licensees as of December 31 of the 11
previous year; 12
(e) The average deferred deposit transaction amount, the average number of 13
transactions, and the average aggr egate deferred deposit transaction amount 14
entered into per customer as of December 31 of the previous year; 15
(f) The average number of days a customer was engaged in a deferred deposit 16
transaction for the previous year; and 17
(g) An estimate of the average to tal fees paid per customer for deferred deposit 18
transactions for the previous year. 19
Section 2. This Act applies to deferred deposit transactions entered on or after 20
the effective date of this Act. 21