Connecticut Seal

Substitute House Bill No. 5409

Public Act No. 04-14

AN ACT CONCERNING CHECK CASHING SERVICES AND MONEY TRANSMISSION.

Be it enacted by the Senate and House of Representatives in General Assembly convened:

Section 1. Section 36a-581 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2004):

(a) Except as provided for in section 36a-580, no person shall engage in the business of cashing checks, drafts or money orders for consideration without obtaining a license to operate a general facility or a license to operate a limited facility for each location where such business is to be conducted.

(b) Each licensee of a limited facility shall continuously maintain at least one operating general facility. A licensee of a limited facility shall not pay any compensation or consideration to any employer.

(c) An application for a check cashing license or renewal of such license shall be in writing, under oath and on a form provided by the commissioner. The application shall set forth: (1) The name and address of the applicant; (2) if the applicant is a firm or partnership, the names and addresses of each member of the firm or partnership; (3) if the applicant is a corporation, the names and addresses of each officer, director, authorized agent and each shareholder owning ten per cent or more of the outstanding stock of such corporation; (4) if the applicant is a limited liability company, the names and addresses of each manager and authorized agent of such limited liability company; (5) each location where the check cashing business is to be conducted and the type of facility that will be operated at that location; [(5)] (6) the business plan, which shall include the proposed days and hours of operation; [(6)] (7) the amount of liquid assets available for each location which shall not be less than the amount specified in subdivision (6) of subsection (e) of this section; [(7)] (8) for each limited facility, a copy of the executed contract evidencing the proposed arrangement between the applicant and the employer; and [(8)] (9) any other information the commissioner may require.

(d) [No change shall be made in] A licensee shall not change the location specified [in the application without filing] on its license unless, prior to such change in location, the licensee files an application with the commissioner for change in location accompanied by the [applicable] location transfer fee and receives the approval of the commissioner. [No change shall be made in the type of facility without filing a new application for licensure of the changed facility accompanied by the applicable application fee. No change shall be made to the] A licensee of a limited facility shall not change its approved days and hours of operation [specified in any application without the prior written approval of the commissioner] unless, prior to any such change, the licensee files an application with and receives the approval of the commissioner.

(e) Upon the filing of the required application and the applicable application and license fees, the commissioner shall investigate the facts and may issue a license if the commissioner finds that (1) the applicant is in all respects properly qualified and of good character, (2) if the applicant is a firm or partnership, each member of the firm or partnership is in all respects properly qualified and of good character, (3) if the applicant is a corporation, each officer, director, authorized agent and each shareholder owning ten per cent or more of the outstanding stock of such corporation is in all respects properly qualified and of good character, (4) if the applicant is a limited liability company, each manager and authorized agent is in all respects properly qualified and of good character, (5) granting such license would not be against the public interest, [(5)] (6) the applicant has a feasible plan for conducting business, and [(6)] (7) the applicant has available and shall continuously maintain liquid assets of at least ten thousand dollars for each general facility location and at least two thousand five hundred dollars for each limited facility location specified in the application.

(f) An applicant or licensee shall promptly notify the commissioner, in writing, of any change in the information provided in its initial or renewal application for licensure or most recent renewal of such license.

Sec. 2. Section 36a-582 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2004):

(a) Each applicant for a check cashing license shall pay to the commissioner, a nonrefundable initial application fee of one thousand dollars and a nonrefundable license fee of one hundred dollars for each location. Each licensee shall pay to the commissioner a nonrefundable location transfer fee of one hundred dollars for each application to transfer a location. Each license issued pursuant to section 36a-581, as amended by this act, shall expire at the close of business on June thirtieth of each year unless such license is renewed. Each licensee shall, on or before June twentieth of each year, pay to the commissioner a renewal application fee of seven hundred fifty dollars and a renewal license fee for each location of fifty dollars for the succeeding year, commencing July first.

(b) If the commissioner determines that a check filed with the commissioner to pay an application or license fee has been dishonored, the commissioner shall automatically suspend the license or approval or a renewal license that has been issued but is not yet effective. The commissioner shall give the licensee notice of the automatic suspension pending proceedings for revocation or refusal to renew such license and an opportunity for a hearing on such actions in accordance with section 36a-51. If the commissioner determines that a check filed with the commissioner to pay a location transfer fee has been dishonored, the commissioner shall automatically suspend the location transfer approval pending revocation of such approval by the commissioner and an opportunity for a hearing on such actions in accordance with section 36a-51.

[(b)] (c) Each applicant or licensee shall pay the expenses of any examination or other investigation under sections 36a-580 to 36a-589, inclusive.

[(c)] (d) No abatement of the application, license or location transfer fee shall be made if the license is surrendered, cancelled, revoked or suspended prior to the expiration of the period for which it was issued.

Sec. 3. Section 36a-596 of the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):

As used in sections 36a-595 to 36a-610, inclusive:

(1) "Electronic payment instrument" means a card or other tangible object for the transmission or payment of money which contains a microprocessor chip, magnetic stripe, or other means for the storage of information, that is prefunded and for which the value is decremented upon each use, but does not include a card or other tangible object that is redeemable by the issuer in the issuer's goods or services.

(2) "Holder" means a person, other than a purchaser, who is either in possession of a Connecticut payment instrument and is the named payee thereon or in possession of a Connecticut payment instrument issued or endorsed to such person or bearer or in blank. "Holder" does not include any person who is in possession of a lost, stolen or forged Connecticut payment instrument.

(3) "Licensee" means any person licensed pursuant to sections 36a-595 to 36a-610, inclusive.

(4) "Material litigation" means any litigation that, according to generally accepted accounting principles, is deemed significant to a person's financial health and would be required to be referenced in a person's annual audited financial statements, report to shareholders or similar documents.

(5) "Monetary value" means a medium of exchange, whether or not redeemable in money.

[(5)] (6) "Money order" means any check, draft, money order or other payment instrument. "Money order" does not include a travelers check or electronic payment instrument.

[(6)] (7) "Money transmission" means engaging in the business of receiving money or monetary value for current or future transmission or the business of transmitting money or monetary value within the United States or to locations outside the United States by any and all means including, but not limited to, payment instrument, wire, facsimile or electronic transfer or issuing stored value.

[(7)] (8) "Net worth" means the excess of assets over liabilities as determined by generally accepted accounting principles.

[(8)] (9) "Outstanding" means, in the case of a money order, travelers check, [or] electronic payment instrument or stored value, that: (A) It is sold or issued in the United States; (B) a report of it has been received by a licensee from its agents or subagents; and (C) it has not yet been paid by the issuer.

[(9)] (10) "Payment instrument" means a money order, travelers check or electronic payment instrument that evidences either an obligation for the transmission or payment of money, or the purchase or the deposit of funds for the purchase of such money order, travelers check or electronic payment instrument. A payment instrument is a "Connecticut payment instrument" if it is sold in this state.

[(10)] (11) "Permissible investment" means: (A) Cash in United States currency; (B) time deposits, as defined in [subdivision (65) of] section 36a-2, as amended, or other debt instruments of a bank; (C) bills of exchange or bankers acceptances which are eligible for purchase by member banks of the Federal Reserve System; (D) commercial paper of prime quality; (E) interest-bearing bills, notes, bonds, debentures or other obligations issued or guaranteed by: (i) The United States or any of its agencies or instrumentalities, or (ii) any state, or any agency, instrumentality, political subdivision, school district or legally constituted authority of any state if such investment is of prime quality; (F) interest-bearing bills or notes, or bonds, debentures or preferred stocks, traded on any national securities exchange or on a national over-the-counter market, if such debt or equity investments are of prime quality; (G) receivables due from selling agents consisting of the proceeds of the sale of payment instruments which are not past due or doubtful of collection; (H) gold; and (I) any other investments approved by the commissioner. Notwithstanding the provisions of this subdivision, if the commissioner at any time finds that an investment of a licensee is unsatisfactory for investment purposes, the investment shall not qualify as a permissible investment.

[(11)] (12) "Prime quality" of an investment means that it is within the top four rating categories in any rating service recognized by the commissioner unless the commissioner determines for any licensee that only those investments in the top three rating categories qualify as "prime quality".

[(12)] (13) "Purchaser" means a person who buys or has bought a Connecticut payment instrument.

(14) "Stored value" means monetary value that is evidenced by an electronic record. For the purposes of this subdivision, "electronic record" means information that is stored in an electronic medium and is retrievable in perceivable form.

[(13)] (15) "Travelers check" means a payment instrument for the payment of money that contains a provision for a specimen signature of the purchaser to be completed at the time of a purchase of the instrument and a provision for a countersignature of the purchaser to be completed at the time of negotiation.

Sec. 4. Section 36a-598 of the general statutes, as amended by section 84 of public act 03-19, is repealed and the following is substituted in lieu thereof (Effective October 1, 2004):

(a) Each application for an original or renewal license required under sections 36a-595 to 36a-610, inclusive, shall be made in writing and under oath to the commissioner in such form as the commissioner may prescribe. The application shall include:

(1) The exact name of the applicant and, if incorporated, the date of incorporation and the state where incorporated;

(2) The complete address of the principal office from which the business is to be conducted, and of the office where the books and records of the applicant are maintained and to be maintained, including the street and number, if any, and the municipality and county of such offices;

(3) The complete name and address of each of the applicant's branches, subsidiaries, affiliates and agents and subagents, if any, engaging in this state in the business of selling or issuing Connecticut payment instruments, or engaging in the business of money transmission;

(4) The name, title, address and telephone number of the person to whom notice of the commissioner's approval or disapproval of the application shall be sent and to whom any inquiries by the commissioner concerning the application shall be directed;

(5) The name and residence address of (A) the individual, if the applicant is an individual; (B) the partners, if the applicant is a partnership; [or] (C) the directors, trustees, principal officers, and any shareholder owning ten per cent or more of each class of its securities, if the applicant is a corporation or association; or (D) the managers, if the applicant is a limited liability company, and sufficient information pertaining to the name and address, in a form acceptable to the commissioner, on such partners, directors, trustees, principal officers, managers, and any shareholder owning ten per cent or more of each class of its securities, as the commissioner deems necessary to make the findings under section 36a-600, as amended by this act;

(6) The most recently audited unconsolidated financial statement of the applicant, including its balance sheet and receipts and disbursements for the preceding year, prepared by an independent certified public accountant acceptable to the commissioner;

(7) A list of the applicant's permissible investments, the book and market values of such investments, and the dollar amount of the applicant's aggregate outstanding payment instruments (A) as of the date of the financial statement filed in accordance with subdivision (6) of this [section] subsection; and (B) as of a date no earlier than thirty business days prior to the filing of the application;

(8) The history of material litigation and criminal convictions for the five-year period prior to the date of the application of (A) the individual, if the applicant is an individual; (B) the partners, if the applicant is a partnership; [or] (C) the directors, trustees, principal officers and any shareholder owning ten per cent or more of each class of its securities, if the applicant is a corporation or association; or (D) the managers, if the applicant is a limited liability company, and sufficient information pertaining to the history of material litigation and criminal convictions, in a form acceptable to the commissioner, on such partners, directors, trustees, principal officers and any shareholder owning ten per cent or more of each class of its securities;

(9) (A) The surety bond required by subsection (a) of section 36a-602, as amended by this act, if applicable;

(B) A list of the investments maintained in accordance with subsection [(b)] (c) of section 36a-602, as amended by this act, if applicable, and the book and market values of any such investments (i) as of the date of the financial statement filed in accordance with subdivision (6) of this [section] subsection; and (ii) as of a date no earlier than thirty business days prior to the filing of the application;

(C) The commissioner may defer compliance with the provisions of this subdivision until after the commissioner rules on the application, but the commissioner shall not issue a license until an applicant complies with the provisions of this subdivision;

(10) A statement of whether the applicant will engage in the business of issuing money orders, travelers checks or electronic payment instruments or engage in the business of money transmission in this state;

(11) Any other information the commissioner may require.

(b) An applicant or licensee shall promptly notify the commissioner, in writing, of any change in the information provided in the application for license or most recent renewal of such license.

Sec. 5. Subsection (b) of section 36a-600 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2004):

(b) If the commissioner conditionally approves an application, the applicant shall have thirty days, which the commissioner may extend for cause, to comply with the requirements of section 36a-602, as amended by this act. Upon such compliance, the commissioner's conditional approval shall become final, and the commissioner shall issue a license to the applicant. The commissioner shall not issue a license to any applicant unless the applicant is in compliance with all the requirements of subsection (a) of this section and section 36a-602, as amended by this act, and has paid the investigation and license fee required under section 36a-599.

Sec. 6. Section 36a-601 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2004):

(a) A license may be renewed for the ensuing twelve-month period upon the filing of an application containing all information required by section 36a-598, as amended by this act, including the information required by subdivisions (6), (7), (8) and (9) of subsection (a) of said section if not previously filed with the commissioner. Such renewal application shall be filed no later than a date specified each year by the commissioner in writing to the licensee. If an application for a renewal license has been filed with the commissioner on or before the date the commissioner has specified, the license sought to be renewed shall continue in full force and effect until the issuance by the commissioner of the renewal license applied for or until the commissioner has notified the licensee in writing of the commissioner's refusal to issue such renewal license together with the grounds upon which such refusal is based. The commissioner may refuse to issue a renewal license on any ground on which the commissioner might refuse to issue an original license.

(b) If the commissioner determines that a check filed with the commissioner to pay an investigation or license fee has been dishonored, the commissioner shall automatically suspend a renewal license that has been issued but is not yet effective. The commissioner shall give the licensee notice of the automatic suspension pending proceedings for refusal to renew such license and an opportunity for a hearing on such actions in accordance with section 36a-51.

Sec. 7. Section 36a-602 of the general statutes, as amended by section 4 of public act 03-61, is repealed and the following is substituted in lieu thereof (Effective from passage):

(a) As a condition for the issuance and retention of the license, applicants for a license and licensees shall file with the commissioner a surety bond, the form of which shall be approved by the Attorney General, issued by a bonding company or insurance company authorized to do business in this state. The bond shall be in favor of the commissioner, cover claims that arise during the period the license remains in full force and effect and the succeeding two years after such license has been surrendered, revoked or suspended or has expired, in accordance with the provisions of sections 36a-595 to 36a-610, inclusive, and be in the principal sum of (1) three hundred thousand dollars for any applicant and any licensee that engages in the business of issuing Connecticut payment instruments with an average daily balance of outstanding Connecticut payment instruments during the two previous reporting quarters of three hundred thousand dollars or less or any licensee that engages in the business of money transmission with an average weekly amount of money or [equivalent thereof] monetary value received or transmitted, whichever amount is greater, during the two previous reporting quarters of one hundred fifty thousand dollars or less; (2) five hundred thousand dollars for any licensee that engages in the business of issuing Connecticut payment instruments with an average daily balance of outstanding Connecticut payment instruments during the two previous reporting quarters of greater than three hundred thousand dollars but less than five hundred thousand dollars or any licensee that engages in the business of money transmission with an average weekly amount of money [equivalent thereof] or monetary value received or transmitted, whichever amount is greater, during the two previous reporting quarters of greater than one hundred fifty thousand dollars but less than two hundred fifty thousand dollars; and (3) one million dollars for any licensee that engages in the business of issuing Connecticut payment instruments with an average daily balance of outstanding Connecticut payment instruments during the two previous reporting quarters equal to or greater than five hundred thousand dollars or any licensee that engages in the business of money transmission with an average weekly amount of money or [equivalent thereof] monetary value received or transmitted, whichever amount is greater, during the two previous reporting quarters of two hundred fifty thousand dollars or greater. The proceeds of the bond, even if commingled with other assets of the licensee, shall be deemed by operation of law to be held in trust for the benefit of any claimants against the licensee to serve the faithful performance of the obligations of the licensee with respect to the receipt, handling, transmission or payment of money or monetary value in connection with the sale and issuance of payment instruments or transmission of money in the event of the bankruptcy of the licensee, and shall be immune from attachment by creditors or judgment creditors. The commissioner may proceed on such bond against the principal or surety thereon, or both, to collect any civil penalty imposed upon the licensee pursuant to subsection (a) of section 36a-50, as amended. In the event a license has been surrendered, revoked or suspended or has expired, in accordance with the provisions of sections 36a-595 to 36a-610, inclusive, the commissioner, in the commissioner's discretion, may lower the required principal sum of the bond based on the licensee's level of business and outstanding Connecticut payment instruments.

(b) The surety company may cancel the bond at any time by a written notice to the licensee, stating the date cancellation shall take effect. Such notice shall be sent by certified mail to the licensee at least thirty days prior to the date of cancellation. A surety bond shall not be cancelled unless the surety company notifies the commissioner in writing not less than thirty days prior to the effective date of cancellation. The commissioner shall automatically suspend the license on the date the cancellation takes effect, unless the surety bond has been replaced or renewed, all of the principal sum of such surety bond has been invested as provided in subsection (c) of this section, or the surety bond has been replaced in part and the remaining part of the principal sum of such surety bond has been invested as provided in subsection (c) of this section or unless the licensee has ceased business and has voluntarily surrendered the license. The commissioner shall give the licensee notice of the automatic suspension pending proceedings for revocation or refusal to renew such license and an opportunity for a hearing on such actions in accordance with section 36a-51.

[(b)] (c) In lieu of all or part of the principal sum of such surety bonds, applicants for a license and licensees may invest such sum as provided in this subsection. The book or market value, whichever is lower, of such investments shall be equal to the amount of the bond required by subsection (a) of this section less the amount of the bond filed with the commissioner by the applicant or licensee. Such investments may be:

(1) Deposits with such banks as such applicants or licensees may designate and the commissioner may approve, and in accordance with such regulations as the commissioner may adopt; or

(2) Interest-bearing bills, notes, bonds, debentures or other obligations issued or guaranteed by (A) the United States or any of its agencies or instrumentalities, or (B) any state, or any agency, instrumentality, political subdivision, school district or legally constituted authority of any state if such investment is of prime quality.

[(c)] (d) The investments provided for in subsection [(b)] (c) of this section shall secure the same obligation as would a surety bond filed under this section. As long as a licensee continues business in the ordinary course, it shall be permitted to collect interest on such investments and at any time to exchange, examine, and compare such investments. The investments made pursuant to this section, even if commingled with other assets of the licensee, shall be deemed by operation of law to be held in trust for the benefit of any claimants against the licensee to serve the faithful performance of the obligations of the licensee with respect to the receipt, handling, transmission or payment of money in connection with the sale and issuance of Connecticut payment instruments or transmission of money in the event of the bankruptcy of the licensee, and shall be immune from attachment by creditors or judgment creditors.

Sec. 8. Section 36a-603 of the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):

(a) Each licensee shall at all times maintain permissible investments having a value, computed in accordance with generally accepted accounting principles, at least equal to the aggregate amount of its outstanding payment instruments and stored value.

(b) As used in subsection (a) of this section, "value" means the lower of book or market value, except that with regard to debt obligations which the licensee as a matter of policy retains until maturity, "value" means the greater of book or market value unless the commissioner orders that for some or all investments of a particular licensee, "value" means the lower of book or market value.

(c) Permissible investments, even if commingled with other assets of the licensee, shall be deemed by operation of law to be held in trust for the benefit of any claimants against the licensee to serve the faithful performance of the obligations of the licensee with respect to the receipt, handling, transmission or payment of money or monetary value in connection with the sale and issuance of payment instruments or transmission of money or monetary value in the event of the bankruptcy of the licensee, and shall be immune from attachment by creditors or judgment creditors.

Sec. 9. Subsection (c) of section 36a-604 of the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):

(c) Each licensee that engages in the business of money transmission, except by issuing stored value shall at all times have a net worth of at least five hundred thousand dollars. Each licensee that engages in the business of money transmission by issuing stored value shall at all times have a net worth of at least five hundred thousand dollars or a higher amount as determined by the commissioner, in accordance with generally accepting accounting principles.

Sec. 10. Subsection (b) of section 36a-605 of the general statutes is repealed and the following is substituted in lieu thereof (Effective October 1, 2004):

(b) The commissioner may enter into cooperative, coordinating and information-sharing agreements with any other state or federal supervisory agency or any organization affiliated with or representing such supervisory agency with respect to the examination, examination fees or other supervision of any person subject to the provisions of sections 36a-595 to 36a-610, inclusive. Any such agreement may include provisions concerning the assessment or sharing of fees for such examination or supervision.

Sec. 11. Subsection (a) of section 36a-606 of the general statutes is repealed and the following is substituted in lieu thereof (Effective from passage):

(a) On or before the thirtieth day of April each year, each licensee shall file with the commissioner:

(1) Its most recently audited unconsolidated financial statement, including its balance sheet and receipts and disbursements for the preceding year, prepared by an independent certified public accountant acceptable to the commissioner;

(2) A list of permissible investments, the book and market value of such investments, and the dollar amount of the licensee's aggregate outstanding payment instruments; and

(3) A list of investments maintained in accordance with subsection [(b)] (c) of section 36a-602, as amended by this act, if applicable, the book and market values of such investments and the dollar amount of the licensee's aggregate outstanding Connecticut payment instruments and stored value.

Sec. 12. Section 36a-609 of the general statutes, as amended by section 6 of public act 03-61, is repealed and the following is substituted in lieu thereof (Effective from passage):

The provisions of sections 36a-597 to 36a-606a, inclusive, as amended, shall not apply to:

(1) Any federally insured federal bank, out-of-state bank, federal credit union or out-of-state credit union, provided such institution does not issue or sell Connecticut payment instruments or transmit money or monetary value through an agent or subagent which is not a federally insured bank, out-of-state bank, Connecticut credit union, federal credit union or out-of-state credit union;

(2) Any Connecticut bank or Connecticut credit union;

(3) The United States Postal Service; and

(4) A person whose activity is limited to the electronic funds transfer of governmental benefits for or on behalf of a federal, state or other governmental agency, quasi-governmental agency or government sponsored enterprise.

Approved April 16, 2004