BILL ANALYSIS                                                                                                                                                                                                    



                                                                    AB 1113


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          Date of Hearing:  April 27, 2015


                      ASSEMBLY COMMITTEE ON BANKING AND FINANCE


                               Matthew Dababneh, Chair


          AB 1113  
          (Chau) - As Introduced February 27, 2015


          SUBJECT:  Check Sellers, Bill Payers and Proraters Law


          SUMMARY:  Requires that a person subject to a desist and refrain  
          order for violating the Check Sellers, Bill Payers and Proraters  
          Law (Proraters Law) has 30 days to request a hearing to  
          challenge the order.  


          EXISTING LAW:  


          1)Specifies under the Proraters Law the licensing of entities. A  
            check seller sells checks, money orders, or drafts to be used  
            by others for the payment of obligations and the transfer of  
            money. Most checks and money orders are sold by agents who  
            split the check fee with the licensee. The checks are sold  
            through a network of agents such as small markets and check  
            cashing businesses. A check or money order is usually  
            purchased to pay rent, utilities, or some other obligation  
            that must be sent through the mail. In addition, checks are  
            purchased to send money back to a foreign country.  A bill  
            payer receives money as an agent of an obligor to pay bills.  
            For this service, it receives a fee from the obligor.  A  
            general prorater contracts with delinquent debtors and  
            intercedes with creditors to settle debts on behalf of the  








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            debtor. A special prorater pays its customers' bills as part  
            of its management of its customers' affairs, and is generally  
            a business agent or a manager.

          2)Provides that if a request for a hearing is made and no  
            hearing occurs within 30 days then the desist and refrain  
            order shall be deemed to have been rescinded.  (Financial  
            Code, Section 12103)


          FISCAL EFFECT:  Unknown


          COMMENTS:  


          Under current law, the Department of Business Oversight (DBO) is  
          authorized to issue a desist and refrain order to require a  
          person to cease violations of the Proraters Law. The person may  
          request an administrative hearing to contest such an order;  
          however, the law does not specify the time frame by which the  
          request must be submitted to DBO. This open-ended period creates  
          uncertainty on whether and when an order has become final. If an  
          order is not considered final, the DBO cannot use other means to  
          enforce it, such as a civil action.  When a violation is  
          discovered, DBO sends a letter with a desist and refrain order  
          that informs the violator of their right to an administrative  
          hearing, if they opt to challenge the order. The letter notes  
          that any request for a hearing must be made within 15 days after  
          service of the order.





          There are four different types of businesses licensed under the  
          Proraters Law: (1) check sellers sell checks, money orders, or  
          drafts to be used by others for the payment of obligations and  
          the transfer of money; (2) bill payers receive money as an agent  








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          of an obligor to pay bills; (3) general proraters contract with  
          delinquent debtors and intercede with creditors to settle debts  
          on behalf of the debtors; and (4) special proraters pay  
          customers' bills as part of the management of their customers'  
          affairs.  Many of these entities operate as debt settlement  
          companies that for a fee negotiate with creditors on behalf of  
          consumers to lower their debt.  





          Non-profit credit counseling organizations are exempt from  
          licensing under the Proraters Law.  A nonprofit credit  
          counseling agency may rely on the licensing exemption under the  
          Proraters Law if the organization is in compliance with the  
          requirements of that section, and the organization files the  
          documents required under that section. 





          A nonprofit credit counseling agency must meet the following  
          requirements in order to receive the exemption:


          1)Incorporates in this state or any other state as a nonprofit  
            corporation and operates pursuant to either the Nonprofit  
            Public Benefit Corporation Law or the Nonprofit Mutual Benefit  
            Corporation Law.

          2)Its membership is limited to retailers, lenders in the  
            consumer credit field, educators, attorneys, social service  
            organizations, employer and employee organizations, and  
            related groups that serve educational, benevolent, fraternal,  
            religious, charitable, social, or reformatory purposes.










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          3)The organization has as its principal functions the following:



             a)   Consumer credit education;

             b)   Counseling on consumer credit problems and family  
               budgets;



             c)   Arranging or administering debt management plans. "debt  
               management plan" means a method of paying debtor's  
               obligations in installments on a monthly basis; and,



             d)   Arranging or administering debt settlement plans. "debt  
               settlement plans" means a method of paying debtor's  
               obligations in a negotiated amount to each creditor on a  
               one-time basis.


          Among other requirements, the exemption limits monthly fees that  
          may be charged to a debtor for a debt management plan to the  
          lesser of 8% of the amount paid to creditors monthly, or $35.  
          The fees for a debt settlement plan are limited to 15% of the  
          amount of debt forgiven. An education and counseling fee of $50  
          may also be charged for either type of plan.


          REGISTERED SUPPORT / OPPOSITION:












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          Support


          None on file.




          Opposition


          None on file.




          Analysis Prepared by:Mark Farouk / B. & F. / (916) 319-3081