General Provisions - - CA Financial

Section § 2000

This section indicates that the division of laws is officially called the Money Transmission Act. This act relates to the regulation of companies that transmit money within California and internationally.

This division shall be known and may be cited as the Money Transmission Act.

Money Transmission Act money transfer regulation financial regulation money transmission licensing remittance providers payment processing money service businesses international money transfer state financial oversight consumer protection California financial services money transmitter compliance financial transactions regulated financial activity

(Amended by Stats. 2012, Ch. 356, Sec. 2. (SB 979) Effective January 1, 2013.)

Section § 2001

The law emphasizes how money transmission businesses, which include modern services like mobile apps and alternative payment systems, play an essential role in California's economy. People use these services for everyday needs and sending money to family. If these businesses fail to meet their obligations, it can harm consumers and undermine trust in financial institutions. Therefore, regulating these businesses is crucial to protect consumers and support public confidence and well-being.

The Legislature finds and declares all of the following:

(a) Money transmission businesses conduct a significant amount of business in this state and technological advances are occurring in the provision of money transmission services, which have expanded money transmission to include the use of mobile applications, alternative point of sale systems, and other consumer payment systems.

(b) Persons who use money transmission businesses in this state use those businesses for, among other purposes, paying for the necessities of life and transmitting money to family members.

(c) The failure of money transmission businesses to fulfill their obligations would cause loss to consumers, disrupt the payments mechanism in this state, undermine public confidence in financial institutions doing business in this state, and adversely affect the health, safety, and general welfare of persons in this state.

(d) To protect the interests of consumers of money transmission businesses in this state, to maintain public confidence in financial institutions doing business in this state, and to preserve the health, safety, and general welfare of the people of this state, it is necessary to regulate money transmission businesses in this state.

money transmission businesses mobile payment apps alternative payment systems consumer protection financial institutions public confidence regulation necessity consumer payments transmitting money economic impact business obligations disruption prevention technological advances public welfare mobile applications

(Amended by Stats. 2014, Ch. 499, Sec. 1. (AB 2209) Effective January 1, 2015.)

Section § 2002

This law aims to protect people using money transmission services in California by ensuring the businesses providing these services operate safely and soundly. It strives to build public trust in these businesses and help states work together to streamline regulation and licensing processes. The law also seeks to clarify which activities need licensing and which are exempt, and supports the use of a nationwide system for licensing.

It is the intent of the Legislature that the provisions of this act accomplish all of the following:

(a) Protect the interests of persons in this state who use money transmission services.

(b) Provide for the safe and sound conduct of the business of licensees.

(d) Ensure states can coordinate in all areas of regulation, licensing, and supervision to eliminate unnecessary regulatory burden and more effectively utilize regulator resources.

(e) Standardize the types of activities that are subject to licensing or exempt from licensing.

(f) Authorize the utilization of Nationwide Multistate Licensing System and Registry forms, processes, and functionalities in accordance with this act.

money transmission services safe conduct public confidence licensees regulatory coordination licensing standardization Nationwide Multistate Licensing System regulatory burden reduction supervision exemption from licensing interstate regulatory cooperation financial service regulation

(Amended by Stats. 2023, Ch. 463, Sec. 1. (AB 1116) Effective January 1, 2024.)

Section § 2003

This section provides definitions for terms used in financial regulations related to money transmission in California. It explains what is meant by an 'affiliate', which is any entity controlling or controlled by another. An 'agent' is someone who transmits money but is not licensed independently; the licensee bears responsibility for any transaction initiated by the agent. The 'applicant' refers to anyone applying for relevant licenses or authority. 'Branch office' denotes any onsite location in California handling money transmission for the licensee.

Other terms like 'control', 'licensee', and 'stored value' have been clarified along with procedures for multistate licensing, outstanding transactions, and what constitutes payment instruments. The definitions also include specifics on transactions that involve a money order, check, or digital transactions such as e-commerce. It also explains what is meant by the 'Commissioner', 'key individual', and the meaning of being 'in California'.

For purposes of this division:

(a) “Affiliate,” when used with respect to a specified person, means any person controlling, controlled by, or under common control with, that specified person, directly or indirectly through one or more intermediaries. For purposes of subdivisions (s) and (x), a specified person is affiliated with another person if that person controls, is controlled by, or under common control through the ownership directly or indirectly of shares or equity securities possessing more than 50 percent of the voting power of that specified person.

(b) “Agent” means a person that is not itself licensed as a money transmitter in California and provides money transmission in California on behalf of the licensee, provided that the licensee becomes liable for the money transmission from the time money or monetary value is received by that person. However, “agent” does not include any officer or employee of the licensee when acting as such at an office of a licensee.

(c) “Applicant” means a person that files an application for a license or for acquisition of control of a licensee under this division.

(d) “Average daily outstanding” means the amount of outstanding money transmission obligations in California at the end of each day in a given period of time, added together, and divided by the total number of days in that period of time.

(e) “Branch office” means any office in this state of a licensee or agent at which the licensee receives money or monetary value to provide money transmission, either directly or through an agent.

(f) “Business day” means one of the following:

(1) When used with respect to any act to be performed in this state, any day other than Saturday, Sunday, or any other day that is provided for as a holiday in the Government Code.

(2) When used with respect to any act to be performed in any jurisdiction other than this state, any day other than a day that is a legal holiday under the laws of that jurisdiction.

(g) “Commissioner” means the Commissioner of Financial Protection and Innovation.

(h) “Control” has the meaning set forth in Section 1250.

(i) “Day” means calendar day.

(j) “E-commerce” means any transaction where the payment for goods or services is initiated via a mobile application or an internet website.

(k)

(1) “In California” or “in this state” means physically located in California.

(2) For a transaction requested electronically or by phone, the provider of money transmission may determine if the person requesting the transaction is in this state by relying on other information provided by the person regarding the location of the individual’s residential address or a business entity’s principal place of business or other physical address location and any records associated with the person that the provider of money transmission may have that indicate that location, including, but not limited to, an address associated with an account.

(l) “Issue” and “issuer” mean, with regard to a payment instrument, the entity that is the maker or drawer of the instrument in accordance with the California Commercial Code and is liable for payment. With regard to stored value, “issue” and “issuer” mean the entity that is liable to the holder of stored value and has undertaken or is obligated to pay the stored value. Only a licensee may issue stored value or payment instruments.

(m) “Key individual” means a natural person ultimately responsible for establishing or directing policies and procedures of the licensee, including an executive officer, manager, director, or trustee.

(n) “Licensee” means a corporation or limited liability company licensed under this division.

(o) “Material litigation” means litigation that according to United States generally accepted accounting principles is significant to an applicant’s or a licensee’s financial health and would be required to be disclosed in the applicant’s or licensee’s annual audited financial statements, report to shareholders, or similar records.

(p) “Monetary value” means a medium of exchange, whether or not redeemable in money.

(q) “Money” means a medium of exchange that is authorized or adopted by the United States or a foreign government. The term includes a monetary unit of account established by an intergovernmental organization or by agreement between two or more governments.

(r) “Money transmission” means any of the following:

(1) Selling or issuing payment instruments to a person located in this state.

(2) Selling or issuing stored value to a person located in this state.

(3) Receiving money for transmission from a person located in this state.

(s) “Multistate licensing process” means an agreement entered into by and among state regulators relating to coordinated processing of applications for money transmission licenses, applications for the acquisition of control of a licensee, control determinations, or notice and information requirements for a change of key individuals.

(t) “NMLS” means the Nationwide Multistate Licensing System and Registry developed by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators and owned and operated by the State Regulatory Registry, LLC, or any successor or affiliated entity, for the licensing and registration of persons in financial services industries.

(u) “Outstanding,” with respect to payment instruments and stored value, means issued or sold by the licensee in the United States and not yet paid or refunded by the licensee, or issued or sold on behalf of the licensee in the United States by its agent and reported as sold, but not yet paid or refunded by the licensee. “Outstanding,” with respect to receiving money for transmission means all money or monetary value received in the United States for transmission by the licensee or its agents but not yet paid to the beneficiaries or refunded to the person from whom the money or monetary value was received. All outstanding money transmission of a licensee is and shall remain a liability of the licensee until it is no longer outstanding.

(v)

(1) “Payment instrument” means a check, draft, money order, traveler’s check, or other instrument for the transmission or payment of money or monetary value, whether or not negotiable.

(2) “Payment instrument” does not include any of the following:

(A) A credit card voucher or letter of credit.

(B) An instrument that is redeemable by the issuer for goods or services provided by the issuer, an affiliate of the issuer, or a franchisee of the issuer.

(C) An instrument that is not sold to the public but issued and distributed as part of a loyalty, rewards, or promotional program.

(w) “Person” means an individual, corporation, business trust, estate, trust, partnership, proprietorship, syndicate, limited liability company, association, joint venture, government, governmental subdivision, agency or instrumentality, public corporation or joint stock company, or any other organization or legal or commercial entity, provided, however, that “person,” when used with respect to acquiring control of or controlling a specified person, includes any combination of two or more persons acting in concert.

(x) “Receiving money for transmission” or “money received for transmission” means receiving money or monetary value in the United States for transmission within or outside the United States by electronic or other means. The term does not include sale or issuance of payment instruments and stored value.

(y) “Record” means information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.

(z) “State” means a state of the United States, the District of Columbia, Puerto Rico, the United States Virgin Islands, or any territory or insular possession subject to the jurisdiction of the United States.

(aa)

(1) “Stored value” means monetary value representing a claim against the issuer that is stored on an electronic or digital medium and evidenced by an electronic or digital record, and that is intended and accepted for use as a means of redemption for money or monetary value or payment for goods or services.

(2) “Stored value” does not include either of the following:

(A) A credit card voucher, letter of credit, or any stored value that is redeemable only by the issuer for goods or services provided by the issuer, an affiliate of the issuer, or a franchisee of the issuer, except to the extent required by applicable law to be redeemable for cash for its cash value.

(B) Stored value not sold to the public but issued and distributed as part of a loyalty, rewards, or promotional program.

(bb) “Traveler’s check” means an instrument that meets all of the following:

(1) Is designated on its face by the term “traveler’s check” or by any substantially similar term or is commonly known and marketed as a traveler’s check.

(2) Contains a provision for a specimen signature of the purchaser to be completed at the time of purchase.

(3) Contains a provision for a countersignature of the purchaser to be completed at the time of negotiation.

affiliate definition money transmitter agent applicant for license branch office money transmission control definition stored value explanation money transmission process payment instrument details multistate licensing process e-commerce transactions transaction location definition outstanding obligations key individual responsibilities traveler's check requirements NMLS system

(Amended by Stats. 2023, Ch. 463, Sec. 2. (AB 1116) Effective January 1, 2024.)