Pending California Legislation in California Tweaks Money Transmitter Law

The California Legislature is currently considering legislation that would tweak the state’s Money Transmission Act.  Assembly Bill No. 2209, introduced by Assembly Member Dickinson, was introduced in February during the state legislature’s current legislative year.  The bill amends several sections of the California Financial Code that were passed under the MTA, and adds a new Section 2176.

The legislation institutes a new exemption from licensure.  Where the recipient of the transferred money or monetary value is an agent of the payee and the delivery of the money satisfies an obligation owed by the payor to the payee, the transaction is exempt from requiring licensure.  The bill would also modify current reporting and receipt requirements.

Reflecting the advancement and widespread use of money transmission technologies, the bill would amend the definition of “E-commerce” to mean “any transaction where the payment for goods or services is initiated via a mobile application or an Internet Web site.”

The proposed legislation amends section 2010, which lists exemptions from licensure; the bill adds a subsection L: “A transaction in which the recipient of the money, or other monetary value is an agent of the payee, and delivery of the money or other monetary value to the agent satisfies the payor’s obligation to the payee.”  Sections 2032, 2036 and others have proposed technical edits and reiterations of definitions.

The bill amends part of the report requirement in section 2039 to require the submission of:

(3) The total volume of activities, number of transactions conducted, and outstanding money transmission obligations in California under this division and in the United States in the calendar year quarter categorized by type of money transmission, and, if feasible whether the transmission was conducted via a mobile application or an Internet Web site.

The average daily outstanding transmission liabilities requirement remains the same; this proposed amendment simply adds the language concerning transmissions conducted via a mobile application or an Internet Web site.  Again, this reflects the expansion of money transmission technology.

The provisions containing receipt requirements and “RIGHT TO REFUND” language are moved to section 2103 in the proposed legislation.  The bill amends the current language to state that the right to refund statement is not required to be included on receipts involving e-commerce transactions where the customer sends a payment for goods or services.  The customer notice language requirement in section 2105 is amended in the bill to reflect the change of the jurisdiction over money transmitters from the Department of Financial Institutions to the Department of Business Oversight.   The bill also adds a provision that allows the commissioner to permit an alternative form of customer notice (with the DBO contact information) if a licensee or agent conducts money transmission through an Internet Web site or a mobile application.

The proposed legislation adds a new Section 2176 to the Financial Code, which reads:

2176. At any time, if the commissioner deems it necessary for the general welfare of the public, he or she may exercise any power set forth in this division with respect to a money transmission business, regardless of whether an application for a license has been filed with the commissioner, a license has been issued, or, if issued, the license has been surrendered, suspended, or revoked.

This section gives the commissioner broad power over money transmission businesses operating in the state, regardless of a business’s licensure status.  Finally, the proposed bill also includes language clarifying the applicability of certain provisions of the California Constitution to the Money Transmission Act.

This bill, Assembly Bill No. 2209, was last amended in the Senate on June 25.  It has been read a second time and referred back to the Senate Appropriations Committee.  There is a hearing date set for the bill on August 4, 2014.

This article was written by Langley Perry.

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