Department of Business Oversight Proposes New Regulations to Implement the California Money Transmission Act Regarding the Agent Of Payee Exemption

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By James D. Colleran

On March 6, 2020, the Department of Business Oversight (DBO) published notice of its intent to adopt sections 80.126.10, 80.126.20, 80.126.30, 80.128, 80.128.10, and 80.130 of Title 10 of the California Code of Regulations (CCR) to establish rules that more clearly define the “agent of payee exemption” found under the state’s Money Transmission Act (MTA), which is set forth in the proposed text. According to the initial statement of reasons, the proposed regulations constitute an effort by DBO to clarify the scope of the agent of payee exemption to enhance confidence among members representing the money transmitter industry and to bolster governmental transparency and public participation in the rulemaking process. The initial statement of reasons further states that DBO’s proposed rulemaking is a response to the extensive confusion experienced by money transmitters in attempting to comply with the agent of payee exemption, which resulted in DBO receiving “numerous requests for interpretive opinions seeking guidance on how the exemption applies to business models where multiple entities facilitate the settlement of funds for payment.”

According to DBO’s notice, the legislature adopted the agent of payee exemption under the MTA with the enactment of AB 2209 (Dickinson) (Chapter 499, Statutes of 2014), creating an exception to money transmitter licensing requirements for “agents appointed by a payee to receive funds on behalf of the payee.” In order to obtain an exemption, an agent and a payee must enter into a written agreement guaranteeing that a payor’s payment to the agent for goods or services is in accordance with the payor’s payment obligation to the payee. As defined in AB 2209, a payor is a “person owing payment to a payee for a good or a service,” while a payee is “a person who is owed payment from the payor for providing a good or a service.”

According to DBO’s proposed rulemaking text, the Department proposes amending the definition of “payor” to mean “the direct or indirect recipient of goods or services,” and amending the definition of “payee”  to mean “the direct or indirect provider of goods or services, who is owed payment of money or other monetary value.” Furthermore, DBO’s initial statement of reasons states that the proposed regulation clarifies that “successive agents (can) facilitate the settlement of funds for payment,” and that the agent of payment exemption does not apply to stored-value transactions, which is “pre-funded monetary value that is available for later use.”

DBO has not scheduled a hearing at this writing but is accepting public comments on the proposed regulations until April 20, 2020. Comments may be submitted as follows:

Department of Business Oversight
Attn: Pamela Hernandez
One Sansome Street, Suite 600
San Francisco, CA 94104
Electronic Mail: regulations@dbo.ca.govFacsimile: (415) 288-8830

 

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