(H.B. 242) (No. 73) (Approved August 12, 1997) AN ACT To amend subsection (b) and add a new subsection (c) to Section 5; eliminate Section 8; renumber Section 9; amend subsections (a) and (b) of Section 9; renumber Sections 10 and 11; amend the title and clauses (1) and (2) of Section 11; renumber Sections 12 and 13; amend subsections (a), (b), (c), (d), (e) and (f) of Section 13; renumber Sections 14, 15, 16, 17, 18 and 19; amend Section 19 and renumber Section 20 of Act No. 119 of August 11, 1996, known as the "Check-Cashing Business Regulatory Act". STATEMENT OF MOTIVES The present Act provides for the regulation of check-cashing businesses. Even though approved less than a year ago, it is necessary to amend several of its Sections in order to secure the interests of the persons involved in this financial industry sector so that they may be duly protected. BE IT ENACTED BY THE LEGISLATURE OF PUERTO RICO: Section 1.- Subsection (b) is hereby amended and a new subsection (c) is added to Section 5; Section 8 is eliminated; and Section 9 is renumbered; subsections (a) and (b) of Section 9 are amended; Sections 10 and 11 are renumbered; the title and clauses (1) and (2) of Section 11 are amended; Sections 12 and 13 are renumbered; subsections (a), (b), (c), (d), (e) and (f) of Section 13 are amended; Sections 14, 15, 16, 17, 18 and 19 are renumbered; Section 19 is amended and Section 20 is
renumbered of Act No. 119 of August 11, 1996, known as the "Check-Cashing Business Regulatory Act", to read as follows: Section 1.- Short Title This Act shall be known as the "Check-Cashing Business Regulatory Act". Section 2.- Definitions a. "Liquid Assets" - means money in cash and bank deposits. b. "Service Charges" - means the amount of money or commission that a person engaged in the "Check-Cashing Business" charges his/her clients as payment for the services he/she renders in that capacity. c. "Check" - means a bill of exchange or order drawn against a bank, requiring payment at sight against deposited funds; a bank draft or any payment order or instrument for the transfer or payment of money. This term does not include traveler's checks, payment instruments in foreign currency, nor transfers of funds by electronic means, cable, telephone, or any other electronic medium. d. "Postdated Check" - means a check issued for collection at a future date. e. "Commissioner" - means the Commissioner of Financial Institutions of Puerto Rico. f. "Concessionaire" - means a person who holds a license issued by the Commissioner under this Act. g. "NAFTA" - means the North America Free Trade Agreement. h. "Check-Cashing Business" - means any person engaged in check-cashing business activities in exchange for the payment of a fee or commission, as compensation for the services rendered.
i. "Office" - means the physical location of the main office of the concessionaire and any other location or mobile unit in which he/she conducts check-cashing business activities. j. "Person" - means any individual, corporation, partnership, association, or any other juridical or unincorporated entity. k. "Mobile Unit" - means any vehicle or movable means of transportation in which check-cashing transactions are conducted. l. "Check Cashing" - means the delivery of money in cash in exchange for payment instruments and orders for the transfer or payment of money, pursuant to the definition established in subsection (c) of this Section. Section 3.- Applicability and Exclusions a) Applicability This Act shall apply to every person engaged in check-cashing business activities, as said term is defined in this Act. b) Persons excluded The following persons or entities may engage in check-cashing business activities without being subject to the provisions of this Act: 1. Banking institutions, savings banks, trust companies and savings and loan associations organized under the laws of the Commonwealth of Puerto Rico, the laws of the United States, the laws of any country that is member of NAFTA, or the laws of any state or territory of the United States of America, authorized to do business in Puerto Rico. 2. Savings and Credit Unions organized under the laws of the Commonwealth of Puerto Rico, the United States, or any NAFTA signatory country, authorized to do business in Puerto Rico.
3. The Postal Service of the Government of the United States of America, federal or state agencies or dependencies of the Government of Puerto Rico or of any NAFTA signatory country. 4. Persons who cash checks free of charge. 5. Persons for whom the cashing of checks is an activity which is inherent or related to a legitimate main business or commercial activity. 6. Persons authorized to engage in the money transfer business by the Office of the Commissioner of Financial Institutions. Section 4.- Obtention of License; Exceptions No person, except those excluded under Section 3, subsection (b) of this Act, may engage in check-cashing business activities in the Commonwealth of Puerto Rico, as a service rendered in exchange for payment of compensation, without having previously obtained a license issued by the Commissioner as provided below. Any person who on the date of approval of this Act, is operating a checkcashing business, may continue operating the same, but he/she must comply with all of the provisions of this Act within thirty (30) days from its effective date. Section 5.- License Application and Fees a) Contents of the Application The application for a license to engage in the "check-cashing business" shall be completed under oath and be filed at the Office of the Commissioner. The same shall state the full name of the applicant and the address of the main business office in Puerto Rico in which its accounting books and all documents concerning its operations shall be kept. It shall also contain any information required by the Commissioner, on the forms prescribed for such purposes, including the identity and address of each of the directors and officials if the applicant is a corporation,
and of the partners, if the applicant is a partnership, in order to conduct the inspections provided in Section 6 of this Act. b) License and Inspection Fees Upon submitting the license application, the applicant shall pay two hundred and fifty (250) dollars for the first office, and an equal amount for each additional office. This fee shall be the same regardless of the date on which it is applied for in its calendar year. (c) Municipal license fees For the purposes of this Act, to determine the amount of the municipal license fee, the check-cashing business is deemed to be a rendering of services, and therefore, not financial. Section 6.- Processing of Application a) Issuing of License After the application has been filed and the fees have been paid, the Commissioner shall conduct the investigations he/she deems necessary and, if he should find that the reputation, moral soundness, financial accountability, experience, character, and general aptitude of the applicant are such that they justify the belief that the business will be managed legally and fairly, within the purposes of this Act, and that the issuing of the license shall be necessary and convenient for the community within which the business will be operated, he/she shall approve said application and shall issue a license to the applicant that shall constitute the authorization to operate said business according to the provisions of this Act.
b) Denial of License Should the Commissioner deny the application, the amount paid for inspection expenses shall be retained by the Commissioner, and the amount paid for license fees shall be returned to the applicant. Section 7.- Annual Licenses a) Contents Each license shall bear the name of the concessionaire and the address of the office in Puerto Rico where the business shall be conducted. The license shall be untransferable and shall be posted in a conspicuous place within the business establishment. b) Renewal Each license shall remain in effect until it expires at the close of each calendar year, or until it has been suspended, revoked, or relinquished. Every license renewal application shall be filed not later than the 1st of December of every year. Upon the renewal of the license, each concessionaire shall pay the amount of two hundred fifty (250) dollars, for the annual license fee, for each office, by certified check, or postal or bank money order, drawn to the order of the Secretary of the Treasury. The Commissioner shall impose an administrative fine of not less than one hundred and fifty (150) dollars, nor more than one thousand five hundred (1,500) dollars, on any concessionaire who files an application and pays the license renewal fee after December 31. c) Offices A license shall be required for each office. The payment of annual license fees stipulated in Sections 5 and 7 of this Act, shall be required for each office that is established.
When the concessionaire wishes to move his/her office within the municipality in which he/she does the business, he/she shall remit a written notice to the Commissioner who shall make the corresponding amendments to the license. d) Resident Agent All concessionaires with juridical status shall file with the Commissioner, a written appointment of a resident in Puerto Rico, stating the name, and the mailing and residential addresses, and designating said resident as his/her agent for service of process, or any other legal process or notice, unless the concessionaire has appointed another agent for these purposes under another law of Puerto Rico, in which case the concessionaire shall submit the name and mailing and residential addresses of said agent to the Commissioner. Section 8.- Duties of the Concessionaire a) Inspections Every concessionaire under the provisions of this Act shall have the obligation of making available to the Commissioner for his/her inspection, the accounting books, records, documents, and any other data that he/she deems necessary to perform his/her supervisory function, and allow the Commissioner or his/her representatives free access to his/her properties, facilities, and operating sites. Any concessionaire who fails to make such accounts, books, and other documents available to the Commissioner or his/her agents within the term established by the Commissioner, or who does not comply with any order issued by the Commissioner without just cause, may be sanctioned with an administrative fine of not less than one hundred (100) dollars for each day the concessionaire fails to comply with the requirement and order issued by the Commissioner.
The Commissioner may, at his/her discretion, extend the term granted to comply with an order or requirement, at the request of the concessionaire within the term granted, should the latter prove to have just cause for doing so to the satisfaction of the Commissioner. b) Annual Reports No later than April 15 of each year, each concessionaire shall submit a financial report, under oath of its operations, for the preceding calendar year. Should a concessionaire have more than one authorized office in Puerto Rico, he/she may submit a consolidated report in lieu of a separate report for each authorized office. c) Destruction of Books and Records Any concessionaire may destroy his/her books or records after a term of not less than five (5) years from the date of the last entry on said books or records, or from the date on which any obligation has ceased to be exigible according to the documents in his/her power, with the authorization of the Commissioner. Section 9.- Additional Duties and Obligations All concessionaires under the provisions of this Act shall comply with the following duties and obligations: 1. Their relationship with their clients shall be deemed to be of a fiduciary nature, and they will be required to carry out their functions with the highest degree of diligence, care, loyalty, and pecuniary benefit for their clients. 2. Keep an office or establishment that is adequate to attend to their clients, where they can be reached during business hours. 3. Keep and maintain in the main office all reports, books, records, registries, documents, papers and other evidence related to their check-cashing
business, in separate accounts from those of other businesses they may conduct. 4. Prepare and submit to the Office of the Commissioner any report on their business and operations that he/she may require. 5. Endorse the checks cashed at their establishment with the name and license number as it appears on the license issued by the Commissioner. 6. Furnish a copy of the license that authorizes them to engage in the "checkcashing business" to any financial institution with which they do business. 7. Advertise in such a manner that the nature of the services they offer and/or the activity in which they are engaged with regard to the check-cashing business are clearly identifiable. 8. Conspicuously post and display in each office, in view of the public, a list of the rates they currently charge for their check-cashing services. 9. Observe the applicable laws and regulations that impose record keeping requirements and render report of current transaction reports to the Federal Treasury Department (31 USC 5311 et seq. and 31 CFR 103 et seq.) and to the Secretary of the Treasury of Puerto Rico (Puerto Rico Internal Revenue Code of 1994, 1153), and provide a true and exact copy of said reports (CTRs) to the Commissioner when he/she requires it. 10. Comply with any order or resolution of the Commissioner. 11. Provide all persons for whom a check is cashed or with whom a transaction is conducted with a receipt evincing such a transaction. Section 10.- Service Fee 1. The service fee a concessionaire may charge or collect for cashing checks shall be determined according to open market conditions. Section 11.- Prohibited Practices
No concessionaire subject to the provisions of this Act shall: 1. Grant loans or credit, deduct negotiable instruments or other debt instruments, or engage in any activity allowed solely to banks under Act No. 55 of May 12, 1933, as amended. 2. Engage in his/her cash-checking business in an establishment where small personal loans are granted. 3. Cash or advance cash provide in exchange for post-dated checks. This prohibition notwithstanding, any concessionaire may cash or pay a check that is payable on the next working day following the date the same was cashed or paid when the check is drawn by the Commonwealth of Puerto Rico, the Government of the United States, or any NAFTA member country, or by a political subdivision, agency, dependency, department, or authority thereof; or, if the check is a paycheck drawn by an employer to the order of its employees for services rendered. 4. Request, receive or collect the total or partial payment of any commission or fee in advance for services yet to be rendered. 5. Use falsehood in order to induce or persuade a person to conduct a transaction. 6. Unduly retain any sum of money or document concerning a transaction, or failing to advise a client as to his/her rights, or to any amount of money and/or document that is part of a transaction. 7. Embezzle or misappropriate funds in his/her custody. 8. Falsify documents that are part of a transaction. 9. Render, publish or prepare false reports or entries in order to deceive or defraud any person or agent authorized by the Commissioner to inspect his/her business affairs.
Section 12.- Transfer or Control of Capital a) Any transaction whose outcome is a change in the person who operates the business shall be subject to authorization by the Commissioner after an evaluation of the application to that effect, which shall be considered as if it were a new application for a license. In such case the new applicant shall comply with the requirements established by Law. The concessionaire shall give notice to the Commissioner within the term of thirty (30) days, of any transaction whose outcome is a change in the control of twenty (20) percent or more of any class of stock, interest or share in the capital of the concessionaire. Section 13.- Relinquishment, Revocation or Suspension of License a) Any concessionaire may relinquish his/her license through a written notice to the Commissioner, who may order and conduct an inspection of the business before accepting the relinquishment of the license. If after the inspection, it is found that the concessionaire has incurred any violation of law, the Commissioner may impose the corresponding penalty as provided in Section 19 of this Act, as well as revoke or suspend his/her license. b) The Commissioner may revoke or suspend the license of any concessionaire on any grounds empowering him/her to deny the same pursuant to this Act, and if he/she should find that: 1. A fact exists which, if it had existed or been known at the time the license was issued, it would have been sufficient grounds to deny the same; or 2. The concessionaire has violated any provision of this Act. c) Every case of revocation or suspension of a license issued by the Commissioner shall be handled according to the powers and duties
conferred by his/her Organic Act, according to any of the adjudicative procedures established in Regulation 3920, adopted under Act No. 170 of August 12, 1988, as amended, known as the "Commonwealth of Puerto Rico Uniform Administrative Procedures Act" and Act No. 4 of October 11, 1985, as amended, known as "Office of the Commissioner of Financial Institutions Act." Section 14.- Powers of the Commissioner In addition to the powers and faculties conferred to the Commissioner by the Organic Act, he/she shall have the power to: 1. Conduct investigations on alleged violations of this Act at the request of an interested party or motu proprio, as well as any other investigations needed for the sound enforcement thereof. 2. Issue summons and orders for the appearance of witnesses and the production of the information he/she deems necessary for the enforcement of this Act. 3. The Commissioner or his/her duly authorized agents may take oaths and receive testimony, data or information. If a summons issued by the Commissioner is not duly observed, he/she may appear before the Court of First Instance of Puerto Rico and request the Court to order compliance with the summons. The Court of First Instance shall be empowered to punish as contempt of court the disobedience of its orders and to compel the appearance of witnesses or the production of any data or information that the Commissioner has previously required. No natural or juridical person may refuse to obey a summons of the Commissioner or a court order thus issued, by claiming that the testimony, data or information required could incriminate him/her or lead to the imposition of a
sanction; but, said person shall not be prosecuted criminally with respect to any transaction, issue, or matter on which he/she has testified or produced data or information. Section 15.- Cease and Desist Orders After it has been determined that a concessionaire has incurred a violation of this Act, or an administrative order or resolution, or regulations approved thereunder, the Commissioner may issue an order to cease and desist against the defendant and prescribe the corrective terms and conditions which he/she determines from the evidence in his/her power, will best serve the public interest. The orders issued shall be served on the defendant concerned at his/her place of business or sent to his/her last known address by certified mail with acknowledgment of receipt. Section 16.- Regulations The Commissioner shall issue the regulations he/she deems are necessary for compliance of the provisions of this Act. Section 17.- Reconsiderations and Review All matters concerning the administrative hearings, adjudicative procedures, reconsiderations and review of orders and resolutions issued by the Commissioner shall be governed as provided in Act No. 170 of August 12, 1988, as amended, known as the "Commonwealth of Puerto Rico Uniform Administrative Procedures Act," and the regulations adopted thereunder. Section 18.- Penalties The Commissioner is hereby authorized to impose and collect administrative fines of not less than one hundred (100) dollars nor more than one thousand (1,000) dollars for any violation of the provisions of this Act or of the provisions contained in the rules and regulations promulgated by virtue thereof.
When the nature of the infraction of this Act or of the rules, regulations or orders and resolutions issued by the Commissioner justify it, the Commissioner, besides imposing the authorized administrative fine, shall refer the matter to the Department of Justice for it to file criminal charges against the violator. Each violation of the provisions of this Act, or of the provisions contained in the rules or regulations promulgated hereunder, or of the orders and resolutions issued by the Commissioner, shall constitute a misdemeanor punishable by a fine of not more than five hundred (500) dollars. Section 19.- Effectiveness Section 2.- This Act shall take effect thirty (30) days after its approval.
August 28, 1998 José A. Figueroa-Lugo, Director of the Office of Legislative Services of the Legislature of Puerto Rico, hereby certifies to the Secretary of State that he has duly compared the English and Spanish texts of Act No. 73 (H.B. 242) of the 1st Session of the 13th Legislature of Puerto Rico, entitled: AN ACT to amend subsection (b) and add a new subsection (c) to Section 5; eliminate Section 8; renumber Section 9; amend subsections (a) and (b) of Section 9; renumber Sections 10 and 11; amend the title and clauses (1) and (2) of Section 11; renumber Sections 12 and 13; amend subsections (a), (b), (c), (d), (e) and (f) of Section 13; renumber Sections 14, 15, 16, 17, 18 and 19; amend Section 19 and renumber Section 20 of Act No. 119 of August 11, 1996, known as the "Check-Cashing Business Regulatory Act", and finds the same are complete, true and correct versions of each other. José A. Figueroa-Lugo