AN ACT relating to debts.

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AN ACT relating to debts. 1
Be it enacted by the General Assembly of the Commonwealth of Kentucky: 2
Section 1. KRS 286.9-100 is amended to read as follows: 3
(1) (a) Any fee charged by a licensee for cashing a check or entering into a deferred 4
deposit transaction shall be disclosed in writing to the bearer of the check 5
prior to cashing the check or entering into a deferred deposit transaction, and 6
the fee shall be deemed a service fee and not interest. 7
(b) A licensee shall not charge a service fee in excess of fifteen dollars ($15) per 8
one hundred dollars ($100) on the face amount of a deferred de posit check. A 9
licensee shall prorate any fee, based upon the maximum fee of fifteen dollars 10
($15) per one hundred dollars ($100). This service fee shall be for a period of 11
at least fourteen (14) days. 12
(2) Before a licensee shall deposit with any bank or o ther depository institution a check 13
cashed by the licensee, the check shall be endorsed with the actual name under 14
which the licensee is doing business. 15
(3) A licensee shall not cash a check payable to a payee other than a natural person 16
unless the licensee has previously obtained appropriate documentation from the 17
board of directors or similar governing body of the payee clearly indicating the 18
authority of the natural person or persons cashing the check, draft, or money order 19
on behalf of the payee. 20
(4) (a) A licensee shall: 21
1. Not indicate through advertising, signs, billhead, or otherwise that 22
checks may be cashed without identification of the bearer of the check; 23
and 24
2. Require any person seeking to cash a check to submit reasonable 25
identification as prescribed by the commissioner. 26
(b) The provisions of this subsection shall not prohibit a licensee from cashing a 27
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check simultaneously with the verification and establishment of the identity of 1
the presenter by means other than the presentation of identification. 2
(5) (a) Within two (2) business days after being advised by a financial institution that 3
a payment instrument has been altered, forged, stolen, obtaine d through 4
fraudulent or illegal means, negotiated without proper legal authority, or 5
otherwise represents the proceeds of illegal activity, the licensee shall notify 6
the commissioner and the prosecutor or law enforcement authority in the 7
county in which the check was received. 8
(b) If a payment instrument is returned to the licensee by a financial institution 9
for any of the reasons stated in paragraph (a) of this subsection, the licensee 10
shall not release the payment instrument without the written consent of the 11
prosecutor or law enforcement authority or a court order. 12
(6) A licensee shall not alter or delete the date on any payment instrument accepted by 13
the licensee. 14
(7) A licensee shall not engage in unfair or deceptive acts, practices, or advertising in 15
the conduct of the licensed business. 16
(8) A licensee shall not require a customer to provide security for a deferred deposit 17
transaction or require the customer to provide a guaranty from another person. 18
(9) (a) A licensee shall not have more than two (2) deferred deposit transactions from 19
any one (1) customer at any one time. 20
(b) 1. Except as provided in subparagraph 2. of this paragraph, the total 21
proceeds received by a[the] customer from all open[of the] deferred 22
deposit transactions shall not exceed six[five] hundred dollars 23
($600)[($500)]. 24
2. a. Subject to subdivision b. of this subparagraph, the commissioner 25
shall, on or before July 1 of each year, issue an order increasing, 26
or decreasing if the percent change is negative, the maximum 27
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amount of total pr oceeds permitted under subparagraph 1. of 1
this paragraph by the percent change in the nonseasonally 2
adjusted annual average Consumer Price Index for all Urban 3
Consumers (CPI -U), U.S. City Average, All Items, for the 4
previous calendar year as published by t he United States Bureau 5
of Labor Statistics, except the amount shall be rounded up to the 6
nearest ten dollar ($10) increment. 7
b. The commissioner shall not issue an order under subdivision a. 8
of this subparagraph that results in the amount of total proceed s 9
permitted under subparagraph 1. of this paragraph exceeding 10
eight hundred fifty dollars ($850). 11
(10) (a) If the database described in KRS 286.9 -140 is unavailable due to technical 12
difficulties with the database, as determined by the commissioner, a licen see 13
shall utilize the process established in this subsection to verify deferred 14
deposit transactions. 15
(b) A licensee shall inquire of any customer seeking to enter into a deferred 16
deposit transaction, whether the customer has any outstanding deferred 17
deposit transactions from any licensee. 18
(c) If the customer represents in writing that the customer has no more than one 19
(1) deferred deposit transaction outstanding to any licensee and that the total 20
proceeds received by the customer from the outstanding defer red deposit 21
transaction does not equal or exceed the amount permitted under subsection 22
(9)(b) of this section [five hundred dollars ($500)] , a licensee may accept a 23
deferred deposit transaction in an amount that, when combined with the 24
customer's other outstanding deferred deposit transaction, does not exceed the 25
amount permitted under subsection (9)(b) of this section [five hundred 26
dollars ($500) of total proceeds received by the customer]. 27
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(d) If the customer represents in writing that the customer has more than one (1) 1
deferred deposit transaction outstanding to licensees or if the total proceeds 2
received by the customer from the deferred deposit transactions equal or 3
exceed the amount permitted under subsection (9)(b) of this section [five 4
hundred dollars ( $500)], a licensee shall not enter into another deferred 5
deposit transaction with that customer until the customer represents to the 6
licensee in writing that the customer qualifies to enter into a new deferred 7
deposit transaction under the requirements set forth in this subtitle. 8
(11) A licensee shall not use any device or agreement, including agreements with an 9
affiliate of a licensee, with the intent to obtain greater charges than are authorized in 10
this subtitle. 11
(12) A licensee shall not agree to hold a deferred deposit transaction for more than sixty 12
(60) days. 13
(13) (a) Each deferred deposit transaction shall be made according to a written or 14
electronic agreement that is: 15
1. Dated and signed by the customer and the licensee or an authorized 16
agent of the licensee; and 17
2. Made available to the commissioner upon request. 18
(b) The customer shall receive a copy of the agreement referenced in paragraph 19
(a) of this subsection. 20
(c) A customer may enter into an agreement referenced in paragraph (a) of this 21
subsection: 22
1. In person at the licensed location; or 23
2. If the customer is a citize n of this state, by telephone or other electronic 24
means. 25
(14) A licensee or its affiliate shall not for a fee renew, roll over, or otherwise 26
consolidate a deferred deposit transaction for a customer. 27
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(15) An individual who enters into a deferred deposit tr ansaction with a licensee shall 1
not be convicted under the provisions of KRS 514.040. 2
(16) A licensee who enters into a deferred deposit transaction with an individual shall 3
not prosecute or threaten to prosecute the individual under the provisions of KRS 4
514.040. 5
(17) Each licensee shall conspicuously display in each of its deferred deposit business 6
locations a sign supplied by the commissioner that gives the following notice: "No 7
person who enters into a post -dated or deferred deposit transaction with thi s 8
business establishment will be prosecuted for or convicted of writing cold checks or 9
of theft by deception under the provisions of KRS 514.040." 10
(18) A licensee shall not enter into a deferred deposit transaction with a customer who 11
has two (2) open deferred deposit transactions. 12
(19) A licensee shall verify a customer's eligibility to enter into a deferred deposit 13
transaction by doing one (1) of the following, as applicable: 14
(a) If the database is not fully operational, as determined by the commissioner, 15
the licensee shall verify that the customer meets the eligibility requirements 16
for a deferred deposit transaction under this subtitle. The licensee shall 17
maintain a database of all of the licensee's transactions at all of its locations 18
and search that database to meet its obligation under this subtitle; or 19
(b) If the database is fully operational, as determined by the commissioner, the 20
licensee shall promptly and accurately access the database through an internet 21
real-time connection, and verify that the c ustomer meets the eligibility 22
requirements for a deferred deposit transaction under this subtitle. 23
Section 2. KRS 286.9-140 is amended to read as follows: 24
(1) (a) A common database with real -time access through an intern et connection for 25
deferred deposit service business licensees implemented in accordance with 26
this subtitle shall be accessible to the department and a deferred deposit 27
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service business licensee to verify whether any deferred deposit transactions 1
are outstanding for a particular person. 2
(b) A deferred deposit service business licensee shall accurately and promptly 3
submit such data into the database as may be required by the commissioner 4
before entering into each deferred deposit transaction in such format as the 5
commissioner may require by administrative regulation or order, including the 6
customer's name, Social Security number or employment authorization alien 7
number, address, driver's license number, amount of the transaction, date of 8
transaction, date that the completed transaction is closed, and any additional 9
information required by the commissioner. 10
(c) The commissioner may promulgate administrative regulations in accordance 11
with KRS Chapter 13A to administer and enforce the provisions of this 12
subtitle a nd to assure that the database is used by deferred deposit service 13
business licensees in accordance with this subtitle. 14
(2) The commissioner shall impose a fee of[not to exceed] three dollars ($3) per 15
transaction for data required to be submitted by a defe rred deposit service business 16
licensee, which fee may be charged to the customer. 17
(3) (a) The commissioner may operate the database or may select and contract with a 18
third-party provider to operate the database. 19
(b) If the commissioner contracts with a thi rd-party provider for the operation of 20
the database, all of the following apply: 21
1. The commissioner shall ensure that the third -party provider selected as 22
the database provider operates the database pursuant to the provisions of 23
this subtitle; 24
2. The commissioner shall consider cost of service and ability to meet all 25
the requirements of this subtitle in selecting a third -party provider as the 26
database provider; 27
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3. In selecting a third -party provider to act as the database provider, the 1
commissioner shall g ive strong consideration to the third -party 2
provider's ability to prevent fraud, abuse, and other unlawful activities 3
associated with deferred deposit transactions and provide additional 4
tools for the administration and enforcement of this subtitle; 5
4. The third-party provider shall use the data collected under this subtitle 6
only as prescribed in this subtitle and the contract with the department 7
and for no other purpose; 8
5. If the third -party provider violates this subtitle, the commissioner may 9
terminate the contract and the third -party provider may be barred from 10
becoming a party to any other state contracts; 11
6. A person injured by the third -party provider's violation of this subtitle 12
may maintain a civil cause of action against the third -party provider and 13
may recover actual damages plus reasonable attorney's fees and court 14
costs; and 15
7. The commissioner may require that the third -party provider collect the 16
fee assessed in subsection (2) of this section from the licensee. The 17
third-party provider shall remit the fee collected from the licensee to the 18
commissioner no later than the first da y of each month. The third -party 19
provider shall deposit any fee collected in a separate escrow account in a 20
federally insured financial institution and shall hold the fee deposited in 21
trust for the Commonwealth of Kentucky. 22
(4) The database shall allow a d eferred deposit service business licensee accessing the 23
database to do all of the following: 24
(a) Verify whether a customer has any open deferred deposit transactions with 25
any deferred deposit business service licensee that have not been closed; 26
(b) Provide information necessary to ensure deferred deposit service business 27
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licensee compliance with any requirements imposed by the United States 1
Treasury Office of Foreign Assets Control and United States Treasury Office 2
of Financial Crimes Enforcement Network; and 3
(c) Track and monitor the number of customers who notify a deferred deposit 4
service business licensee of violations of this subtitle, the number of times a 5
deferred deposit service business licensee agreed that a violation occurred, the 6
number of times that a deferred deposit service business licensee did not agree 7
that a violation occurred, the amount of restitution paid, and any other 8
information the commissioner requires by administrative regulation or order. 9
(5) While operating the database, the database provider shall do all of the following: 10
(a) Establish and maintain a process for responding to transaction verification 11
requests due to technical difficulties occurring with the database that prevent 12
the licensee from accessing the database through the internet; 13
(b) Comply with any applicable federal and state provisions to prevent identity 14
theft; 15
(c) Provide accurate and secure receipt, transmission, and storage of customer 16
data; and 17
(d) Meet the requirements of this subtitle. 18
(6) When the database provider receives notification that a deferred deposit transaction 19
has been closed, the database provider shall designate the transaction as closed in 20
the database immediately, but in no event after 11:59 p.m. on the day the 21
commissioner or database provider receives notification. 22
(7) (a) The database provider shall automatically designate a deferred deposit 23
transaction as closed in the database five (5) days after the transaction 24
maturity date unless a deferred deposit service business licensee reports to th e 25
database provider before that time that the transaction remains open because: 26
1. Of the customer's failure to make payment; 27
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2. The customer's payment instrument or an electronic redeposit is in the 1
process of clearing the banking system; 2
3. The customer' s payment instrument is being returned to the deferred 3
deposit service business licensee for insufficient funds, a closed account, 4
or a stop payment order; or 5
4. Of any other factors determined by the commissioner. 6
(b) If a deferred deposit service busines s licensee reports the status of a 7
transaction as open in a timely manner, the transaction remains an open 8
transaction until it is closed and the database provider is notified that the 9
transaction is closed. 10
(c) 1. Notwithstanding any other law, a licensee may accept, collect, or seek 11
payment on a deferred deposit transaction that is designated as closed 12
in the database if the transaction remains unpaid due to a returned or 13
dishonored payment instrument. 14
2. A licensee may exercise all rights and remedies ot herwise available 15
under law to enforce payment of a deferred deposit transaction 16
referenced in subparagraph 1. of this paragraph if the licensee 17
complies with applicable state and federal collection laws. 18
3. This paragraph shall apply whether the returned or dishonored 19
payment instrument is within or after the time periods prescribed 20
under: 21
a. The Uniform Commercial Code, KRS Chapter 355; or 22
b. Federal clearinghouse rules. 23
4. Any collection activity permitted under this paragraph shall not: 24
a. Constitute a renewal, rollover, or consolidation of a deferred 25
deposit transaction; or 26
b. Trigger any additional reporting obligations within the database. 27
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(8) (a) If a deferred deposit service business licensee stops providing deferred deposit 1
transactions, the database provider shall designate all open transactions with 2
that licensee as closed in the database sixty (60) days after the date the 3
deferred deposit service business licensee stops offering deferred deposi t 4
transactions, unless the deferred deposit service business licensee reports to 5
the database provider before the expiration of the sixty (60) day period which 6
of its transactions remain open and the specific reason each transaction 7
remains open. 8
(b) The d eferred deposit service business licensee shall also provide to the 9
commissioner a reasonably acceptable plan that outlines how the deferred 10
deposit service business licensee will continue to update the database after it 11
stops offering deferred deposit transactions. 12
(c) The commissioner shall promptly approve or disapprove the plan and 13
immediately notify the deferred deposit service business licensee of the 14
commissioner's decision. 15
(d) If the plan is disapproved, the deferred deposit service business licens ee may 16
submit a new plan or may submit a modified plan for the deferred deposit 17
service business licensee to follow. 18
(e) If at any time the commissioner reasonably determines that a deferred deposit 19
service business licensee that has stopped offering defer red deposit 20
transactions is not updating the database in accordance with its approved plan, 21
the commissioner shall immediately close or instruct the database provider to 22
immediately close all remaining open transactions of that deferred deposit 23
service business licensee. 24
(9) (a) The response to an inquiry to the database provider by a deferred deposit 25
service business licensee shall state only that a person is eligible or ineligible 26
for a new deferred deposit transaction and describe the reason for that 27
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determination. 1
(b) Only the person seeking the transaction may make a direct inquiry to the 2
database provider to request a more detailed explanation of a particular 3
transaction that was the basis for the ineligibility determination. 4
(c) Any information regard ing any person's transaction history is confidential; is 5
not subject to public inspection; is not a public record subject to the disclosure 6
requirements of the Kentucky Open Records Act, KRS 61.870 to 61.884; is 7
not subject to discovery, subpoena, or other compulsory process, except in an 8
administrative or legal action arising under this subtitle; and shall not be 9
disclosed to any person other than the commissioner. 10
(10) The commissioner may access the database only for purposes of an investigation of, 11
examination of, or enforcement action concerning an individual database provider, 12
licensee, customer, or other person. 13
(11) (a) The commissioner shall investigate violations of and enforce this subtitle. 14
(b) The commissioner shall not delegate his or her respo nsibilities under this 15
subsection to any third-party provider. 16
(12) The commissioner may, by administrative regulation or order, do all of the 17
following: 18
(a) Require that data be retained in the database only as required to ensure 19
deferred deposit service business licensee compliance with this subtitle; 20
(b) Require that customer transaction data in the database are archived within 21
three hundred sixty -five (365) days after the customer transaction is closed 22
unless needed for a pending enforcement or legal action; 23
(c) Require that any identifying customer information is deleted from the 24
database when data are archived; and 25
(d) Require that data in the database concerning a customer transaction are 26
deleted from the database three (3) years after the customer tr ansaction is 27
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closed or, if any administrative, legal, or law enforcement action is pending, 1
three (3) years after the administrative, legal, or law enforcement action is 2
completed, whichever is later. 3
(13) The commissioner may maintain access to data archi ved under subsection (12) of 4
this section for examination, investigation, or legislative or policy review. 5
(14) A deferred deposit service business licensee may rely on the information contained 6
in the database as accurate and is not subject to any adminis trative penalty or civil 7
liability as a result of relying on inaccurate information contained in the database, 8
provided the deferred deposit licensee accurately and promptly submits such data as 9
required before entering into a deferred deposit transaction with a customer. 10
(15) The commissioner may use the database to administer and enforce this subtitle. 11
(16) The commissioner may require a database provider to file a report by March 1 of 12
each year containing the following information: 13
(a) The total number a nd dollar amount of deferred deposit transactions entered 14
into in the calendar year ending December 31 of the previous year; 15
(b) The total number and dollar amount of deferred deposit transactions 16
outstanding as of December 31 of the previous year; 17
(c) The total dollar amount of fees collected for deferred deposit transactions as 18
of December 31 of the previous year; 19
(d) The minimum, maximum, and average dollar amount of deferred deposit 20
transactions entered into, the total dollar amount of the net charge -offs and 21
write-offs, and the net recoveries of licensees as of December 31 of the 22
previous year; 23
(e) The average deferred deposit transaction amount, the average number of 24
transactions, and the average aggregate deferred deposit transaction amount 25
entered into per customer as of December 31 of the previous year; 26
(f) The average number of days a customer was engaged in a deferred deposit 27
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transaction for the previous year; and 1
(g) An estimate of the average total fees paid per customer for deferred deposit 2
transactions for the previous year. 3
SECTION 3. A NEW SECTION OF KRS CHAPTER 425 IS CREATED TO 4
READ AS FOLLOWS: 5
(1) An order of attachment or garnishment of earnings on a judgment -debtor 6
employee provided to a garnishee -employer shall, at a minimum, contain the 7
following information clearly placed on a single page: 8
(a) The debtor's name; 9
(b) One (1) of the following: 10
1. The debtor's last known physical address; or 11
2. A statement that the debtor's last known physical address is unknown; 12
(c) One (1) of the following: 13
1. The debtor's last known mailing address; 14
2. A statement that the debtor's last known mailing address is the same 15
as the debtor's last known physical address; or 16
3. A statement that the debtor's last known mailing address is unknown; 17
(d) The amount of the debt that is owed; 18
(e) Information sufficient to identify the judgment on which the garnishment 19
or attachment is based; 20
(f) The name and contact information of the creditor's agent; 21
(g) Where the employer is required to submit remittances; and 22
(h) Any optional alternative remittance method. 23
(2) (a) To properly match the judgment -debtor employee, a separate addendum 24
may be used to provide sensitive identifying information to the garnishee -25
employer in a manner that protects the employee's information from public 26
inspection. 27
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(b) A separate addendum used under paragraph (a) of this subsection may 1
include: 2
1. The debtor's date of birth; 3
2. One (1) of the following: 4
a. The debtor's Social Security number; or 5
b. A statement that the debtor's Social Security number is 6
unknown; and 7
3. If the debtor's full Social Security number is unknown, any additional 8
identifying information. 9
Section 4. Sections 1 and 2 of this Act apply to deferred deposit transactions 10
entered on or after the effective date of this Act. 11
Section 5. (1) Any provision of an administrati ve regulation, including 808 12
KAR 9:010, that conflicts with Section 1 or 2 of this Act shall be null, void, and 13
unenforceable. 14
(2) Within 90 days of the effective date of this Act, the Kentucky Department of 15
Financial Institutions and any other administrat ive body shall amend, as necessary, any 16
administrative regulations, including 808 KAR 9:010, that conflict with Section 1 or 2 of 17
this Act to eliminate the conflict. 18