In my last blog post[1] , I explained the requirements for applying for a money service business license in Florida, in particular those required when applying for a license as a payday lender. The requirements are found in Florida Statute Chapter 560 (the “Statute”). As a reminder, those who wish to provide short term payday and installment loans not exceeding $1,000.00, need to apply for a Money Transmitter License under Part II of the Statute, as well as a Deferred Presentment Transaction provider license under Part IV of the Statue.
If your application is approved, you must be sure to follow a host of rules to remain compliant and maintain your license. They are discussed below.
Loan Amounts and Limits
Florida imposes a $500 amount limit on single payment loans and a $1,000 limit on installment loans. The maximum allowable interest rate (APR) is 304%. Single payment loan terms can be between 7 and 31 days. Installment loan terms can be between 60 and 90 days. You can only have one outstanding loan per customer at a time. The maximum finance charge is 10% plus a verification fee ($5 maximum).
Loan Agreement and Check
Each transaction must be documented in a written agreement signed by the deferred presentment provider and the drawer (customer). The agreement must be executed on the day the provider furnishes the currency to the drawer. The drawer must receive a copy of the agreement. Each written agreement must contain the following information:
- The provider’s name, address, and telephone number, and the name and title of the person who signs the agreement on behalf of the company
- The date the transaction is made
- The amount of the client’s check
- The length of the deferment period
- The last day of the deferment period
- The address and telephone number of the office
- A description of the client’s payment obligations
- The transaction number assigned by the office’s database
Providers may not include any of the following provisions in a deferred provider agreement:
- A hold harmless clause
- A confession of judgment clause
- Any assignment of or order for payment of wages or other compensation for services
- A provision in which the drawer agrees not to assert any claim or defense arising out of the agreement.
Providers may not require a drawer to provide any additional security for the transaction or require the drawer to provide any additional guaranty from another person. The initial check must bear the same date, and the number of days of the deferment period must be calculated from that date. Providers must comply with the disclosure requirements of 12 C.F.R. part 1026, relating to the federal Truth-in-Lending Act, and Regulation Z of the Bureau of Consumer Financial Protection.
Providers may not accept or hold an undated check or a check dated on a date other than the date on which the provider agreed to hold the check and signed the agreement Fees may not be collected before the client’s check is presented or redeemed. For each transaction, providers must access the Office of Financial Regulation’s database and verify whether any other provider has an outstanding transaction with the client. Providers may not present the drawer’s check before the end of the deferment period.
If a check is returned to a provider from a payor financial institution due to lack of funds, a closed account, or a stop-payment order, the provider may seek collection and all legally available civil remedies to collect the check. The provider must provide the notice in Statute s. 560.404, in a prominent place on each agreement and obtain the signature of the client.
Management of Funds
Providers must place assets that are the property of a drawer in a segregated account in a federally insured financial institution. The provider must maintain separate accounts for operating capital and the clearing of customer funds. Immediately upon receipt of currency or payment instrument, the provider must provide a confirmation or sequence number to the customer verbally, by paper, or electronically. Each payment instrument sold or issued must bear the provider’s company name.
Grace Periods
If the client informs the provider in writing or in person that he/she cannot redeem or pay in full in cash the amount due, the provider must provide a grace period for an additional 60 days after the original termination date, without any additional charge. At the commencement of the grace period, the provider must provide the client verbal notice of the grace period, and the notice in Statute s. 560.404
Maintenance of Records
Providers must make, keep, and preserve the following books, accounts, records, and documents for 5 years:
- Daily record of payment instruments sold and money transmitted
- General ledger of all asset, liability, capital, income, and expense accounts, posted at least monthly
- Daily settlement records received from authorized vendors
- Monthly financial institution statements and reconciliation records
- Records of outstanding payment instruments and money transmitted
- Records of each payment instrument paid and money transmission delivered
- List of names and addresses of all authorized vendors
- Record of each financial transaction having a value greater than $10,000
These records must be made available to the Office within 3 business days after receipt of a written request.
Reporting Requirements
Providers must file annual financial audit reports with the Office, submitted within 120 days after the end of the licensee’s fiscal year. Providers must submit quarterly reports to the Office within 45 days after the end of each calendar quarter. Providers must provide the Office with a written notice sent by registered mail within 30 days after the occurrence or knowledge of:
- Bankruptcy
- Felony indictment, conviction, plea
- Suspected criminal act
- Any change in the partners, officers, member of the Company
