California Payday Loan Proposed Rulemaking by DOB

By | Mar 13, 2014

By: Admin at Trihouse Payday Loan Consulting: The STATE OF CALIFORNIA – DEPARTMENT OF BUSINESS OVERSIGHT is seeking consumer and industry comments on proposed rulemaking relevant to the California payday loan industry. The California DOB is accepting comments until May 6th. It’s critical that our industry provide insight regarding the impact and acceptance of these proposed rule changes. Our “haters” have been very active!

INVITATION FOR COMMENTS ON PROPOSED RULEMAKING UNDER THE CALIFORNIA DEFERRED DEPOSIT TRANSACTION LAW

[NOTE: This was brought to my attention by the law offices of San Francisco based Paul Soter. Paul specializes in providing legal counsel for lenders in Calif.]

BACKGROUND

The Department licenses and regulates deferred deposit originators, more commonly known as payday lenders, under the California Deferred Deposit Transaction Law (Financial Code section 23000 et seq.). The Department is considering various changes to the regulations under the California Deferred Deposit Transaction Law and prior to initiating formal rulemaking, recently sought comments on these changes from  interested parties [see Invitation for Comments on Proposed Rulemaking Under the California Deferred Deposit Transaction Law (PRO 04-08), dated May 29, 2013].

Among other things, the potential changes would authorize a licensee to use electronic fund transfers and prepaid debit cards offered by licensees to provide the funds from transactions to customers and to collect payments from them, but would not permit a licensee to use a customer’s debit card, prepaid debit card or credit card in conjunction with a deferred deposit transaction.

QUESTIONS UNDER CONSIDERATION

The Department received a number of written comments on the proposed changes. Some of the comments have offered insights that may suggest the need for further consideration and therefore the Department is requesting additional information. The Department is also seeking specific information on the potential economic and cost impact to businesses and consumersfrom the proposed changes, and whether there are other alternatives that would achieve the regulatory objectives in a less burdensome manner. The Department believes it is in the public interest to obtain the views from all interested parties before moving forward on the proposed changes. Accordingly, the Department is inviting interested parties to provide comments on the following matters.
Questions on Comments Received:

1. The Department received comments that requiring licensees to “ping” customer bank accounts prior to withdrawing funds would ensure that there are sufficient funds in the account and thereby reduce the harm to consumers caused by NSF fees. The Department’s proposed changes would define “pinging” as a bank service that permits a deferred deposit originator to confirm the availability of funds in a customer’s account and in which the customer does not incur a bank charge or fee and no funds are withdrawn from the customer’s account (Section 2030.45).

  • Should licensees be required to “ping” customer bank accounts before attempting to withdraw any funds? Is it operationally feasible and what hardships, if any, would this requirement pose to licensees and consumers?

2. Should licensees be required to “ping” customer bank accounts before attempting to withdraw any funds? Is it operationally feasible and what hardships, if any, would this requirement pose to licensees and consumers?

  • Would permitting electronic fund transfers, debit cards, prepaid debit cards, or remotely created checks to constitute a “personal check” eliminate the distinction between deferred deposit transactions under the California Deferred Deposit Transaction Law and small dollar short-term loans subject to the California Finance Lenders Law?
  • How does a paper check offer more protections, such as mandated disclosure requirements or other restrictions, to consumers than an electronic fund transfer, debit card, prepaid debit card or remotely created check?

Interested parties navigate here to read the entire piece and access the links for commentary and feedback. Time is of the essence! http://www.dbo.ca.gov/Licensees/Payday_Lenders/pdfs/PRO0408-CDDTL_2ndInviteComments.pdf

Do you need legal counsel for California related deferred deposit matters? Reach out to:
Law Offices of Paul Soter
149 San Felipe Avenue
San Francisco, CA 94127
Tel: (415) 333-3193
http://www.lawofficesofpaulsoter.com/
psoter@sonic.net

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2 Comments so far
  1. Fred R. March 14, 2014 12:46 pm

    Paul Soter is a very good legal mind in this industry. We use him for all our Calif. work.

  2. Payday Loan Industry March 15, 2014 9:25 am

    We do as well.

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