Washington State Department of Financial Institutions

Interpretive Letter

DIVISION OF CONSUMER SERVICES
STATE OF WASHINGTON
DEPARTMENT OF FINANCIAL INSTITUTIONS

P.O. Box 41200
Olympia, Washington 98504-1200
Telephone (360) 902-8703
TDD (360) 664-8126
FAX (360) 664-2258
http://www.dfi.wa.gov/cs

No. 98-01CS

TO: All Check Casher/Seller Licensees with Small Loan Endorsement
FROM: Mark Thomson, Assistant Director
DATE: October 12, 1998
SUBJECT: Renewal, Extension, Repayment, and Collection of Loans

Through investigations of licensees with small loan endorsements, the Department has discovered that several are not in compliance with WAC 208-630-085(2)(a). This rule prohibits a loan made under chapter 31.45 RCW, the Check Cashers and Sellers Act (the Act), from being repaid by the proceeds of another loan by the same lender or an affiliate.

WAC 208-630-085(2) states a licensee with a small loan endorsement is subject to the following restrictions:

RCW 31.45.073(3) requires the check held for repayment of a loan must be deposited as soon as practicable after the date of the check or draft has passed. The licensee must be able to provide an audit trail through daily cash sheets, bank deposit, or other records that this has occurred. Examiners have found licensees are collecting the interest due in cash and holding the check for an additional period of time. This is prohibited by WAC 209-630-085(2) above.

An existing loan can not be repaid by the proceeds of another loan. Again, the licensee must be able to provide documentation showing the existing loan has been paid before another loan can be made to the customer. The following are examples of what the Department has found:

WAC 208-630-085(1)(b) allows a licensee to charge or collect a fee equal to or less than twenty-five dollars for a check returned unpaid by the bank drawn upon. Only one fee may be collected with respect to a particular check even if it has been redeposited and returned more than once.

Licensees are reminded that in addition to required refunds to consumers for prohibited charges; the licensee is subject to RCW 31.45.170 Violation - Penalty, which reads:

"Every licensee violating or failing to comply with any provision of this chapter or any lawful direction or requirement of the director is subject, in addition to any penalty otherwise provided, to a penalty of not more than one hundred dollars for each offense, to be recovered by the attorney general in a civil action in the name of the state. Each day's continuance of the violation is a separate and distinct offense."

Examiners will be reviewing small loan transactions closely for compliance with RCW 31.45.073(3) and WAC 208-630-085(2). Collection charges will also be scrutinized for compliance. Licensees are reminded it is their responsibility to provide examiners with documentation supporting their compliance with the statute and supporting rules.