Laws regarding post dating checks
Cash Connection has inquired about an expansion of its personal check cashing operation to a service known as the "Payday Advance." The Payday Advance transaction, as described by Cash Connection, differs from the normal check cashing transaction in that there would be an oral agreement to hold a present-dated check for a period of up to 14 days.
The check is held because the drawer has insufficient funds in his or her account on the day the check is exchanged for cash, but promises to have funds in his or her account on the agreed upon date, the customer's next payday, that the check will be presented for payment. (f)' Regulatory loan ceiling' means ,000.00." MCL 493.1; MSA 23.667(1).
Instead, the court found that a sale had occurred because title and possession had been transferred to the pawn broker, and although there was an option to repurchase there was no absolute obligation to repay. Unlike the pawn transaction there is an absolute obligation to repay and thus a "loan" as the Lee court has defined that term in the context of usury, clearly exists in a Payday Advance transaction. See, supra., MCL 438.1; MSA 19.15(1) and MCL 438.41; MSA 19.15(51), both statutes require that interest be computed on a "per annum" basis for purposes of determining usury compliance.
One must attempt to give effect to the intent of the Legislature as expressed in the statute. The Alabama Attorney General opined as much in an informal opinion to the State Banking Department (July 7, 1 994); see also, Commonwealth of Virginia v. 3.104-9201, State of Colorado, Department of Law (1992). In Lee, supra., the court held that a pawn transaction in which a watch was exchanged for cash and option to repurchase it at a later date was not a loan. In addition, the court recognized that the absence of a promissory note was evidence that there was no obligation to repay.l. The Bureau recognizes that in the present case there is no promissory note (indeed by design), but that unlike the pawn transaction there is an absolute obligation to repay evidenced not by a promissory note, but by a personal check and the parties' agreement that the check will be presented for repayment, plus interest and fees, for the amount of money advanced. B obtains an advance against his paycheck from XYZ Check Cashers. B writes a 0.00 personal check to XYZ which orally agrees to hold the check for later deposit on Mr. The effective annual rate of interest charged by XYZ can be computed easily.
Cash Connection has requested a ruling on a service that is a variation on its check cashing business.
In its normal check cashing business Cash Connection will cash payroll, government, and personal checks for a charge of 10% of the amount of the check.
Thus, to answer the question posed by Cash Connection it is a word that demands interpretation. As such, engaging in this type of transaction without a license and full compliance with all of the provisions of the Act, would constitute a violation of the Act, as well as the general usury laws, and the Criminal Usury Act. Mc Queen, Commissioner Financial Institutions Bureau, Department of Commerce DATE: April 25, 1995 1.
Before making a Payday Advance, each customer would be required to complete an employment verification form, bank authorization form (customer authorizes his or her bank to disclose checking account information), and a file card containing certain personal information.
On Thursday, January 26, 1995, a letter from Cash Connection's counsel was received by the Commissioner of the Financial Institutions Bureau ("Bureau") requesting a declaratory ruling on the applicability of the Regulatory Loan Act of 1 963, as amended, MCL 493.1 et. seq., (hereinafter "Regulatory Loan Act") to the above-described Payday Advance transaction.
(1) A person and the several members, officers, directors, agents, and employees thereof, who violate or participate in the violation of section 1, 12, 13, 14, or 18 are guilty of a misdemeanor, punishable by a fine of not more than 0.00, or imprisonment for not more than 6 months, or both." MCL 493.19; MSA 23.667(19). [See footnote 1 at the end of this document.] When previous interpretations of similar transactions are noted, the reasons why present-dated checks are received and the agreement to hold the check is not memorialized in a writing become more clear.
seq., must be addressed to fully answer the issue raised in Cash Connection's request for a declaratory ruling. The interest of money shall be at the rate of .00 upon 0.00 for a year, and at the same rate for a greater or less sum, and for a longer or shorter time, except in all cases it shall be lawful for parties to stipulate in writing for the payment of any rate of interest, not exceeding 7% per annum. The transaction, it seems, has been constructed as a response to the interpretations made in this and other states, and the Michigan version of the Uniform Commercial Code, MCL 440.1101 et. seq., so as to take advantage of the loopholes created by precedent and the Legislature.