ARIZONA
HOUSE OF REPRESENTATIVES
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HB 2434: financial products; regulatory exemption program |
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PRIME SPONSOR: Representative Weninger, LD 17 BILL STATUS: Chaptered
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Relating to
innovative financial products and services for the Regulatory Sandbox
Program
Provisions
Regulatory Sandbox Program (Sec. 2)
1. Adds chapter 55 to Title 41 (State Government) titled Regulatory Sandbox Program.
2. Authorizes the Arizona Attorney General (AG) to establish a Program in consultation with state agencies, that permits a person limited access to the Arizona market to test innovative financial products or services without first getting a license or other authorization to operate.
Program Application Process (Sec. 2)
4. Subjects applicants to the AG's accessibility and jurisdiction as outlined and requires a physical or virtual location to develop and test the innovative product or service, demonstrating proper record-keeping of all documents and data.
5. Mandates that applicants have an adequate knowledge and sufficient plan to test, monitor and assess the innovation to protect consumers against the test's failure.
6. Outlines the information applicants must submit to the AG on a detailed form as follows:
a. Contact information as outlined.
b. Criminal convictions, if any.
c. Description of the innovation, including the required statements regarding the innovation, how it benefits and protects consumers, potential risks, testing and winding down the project.
d. Permits the AG to pursue additional information as necessary.
7. Authorizes the AG to set and collect an application fee, which is deposited into the Consumer Protection-Consumer Fraud Revolving Fund.
8. Specifies 90 days after initial application for the AG to determine whether the applicant is admitted into the Program. Extends the timeframe when both parties agree.
9. Provides discretion to the AG to deny an application, which is not an appealable agency action.
Consulting with State Agencies and Scope of the Program (Sec. 2)
10. Requires the AG to consult with state agencies to gather applicant information as outlined.
11. Deems the AG the sole and final decision maker to admit applicants to the Program.
12. Asserts the approved applicants are Program Participants with 24 months to test the innovative financial product or service and instructs the AG to issue a registration number to each.
13. Restricts the innovative financial products or services that are provided as follows:
a. Consumers must be Arizona residents.
b. Limits participants to 10,000 people.
c. For consumer lenders – limits individual transactions to $15,000 per consumer, and aggregate transactions to a maximum $50,000, with loans subject to statutory consumer lender finance charges.
d. For money transmitters – limits individual transactions to a maximum $2,500 per consumer and a maximum $25,000 aggregate transactions.
e. For sales finance companies – subjects the Participants to noted current laws.
f. For investment management – outlines record-keeping and filing requirements consistent with federal law and the ACC's current statutes and rules.
14. Authorizes the AG to allow Participants demonstrating financial capitalization, risk and management oversight to utilize up to 17,500 consumers to use the innovation; and/or increase the transaction totals for money transmitters up to $15,000 per consumer and $50,000 aggregate transactions per consumer.
15. Declares that Participants are subject to the provisions in the bill and the AG may require additional disclosures, which will be given to applicants upon approval and entry to the program.
Consumer Protection (Sec. 2)
16. Details the information Participants must disclose to consumers before ever providing an innovative financial product or service.
17. Requires information in a clear and conspicuous form in English and Spanish, for Internet or application-based, with consumers acknowledging receipt.
18. States the AG may require additional disclosures to consumers and must notify the Participant.
Exit Requirements and Requests for Extension (Sec. 2)
19. Requires a Participant, at least 30 days before the end of the test period, to either:
a. Notify the AG that the Participant will exit the Program, wind-down operations and cease offering products or services within 60 days after the 24-month testing period ends; or
b. Seek an extension to get a license or other lawful authorization.
20. Considers the testing period final at the end of the 24-month period and the Participant must cease operations.
21. Provides details for a test that requires ongoing duties.
22. Permits a Participant to obtain an extension for one year, which requires quarterly reports detailing efforts to obtain a license or other necessary authorization to operate.
Record-Keeping and Reporting Requirements (Sec. 2)
23. Directs Participants to retain records, documents and data as detailed in the bill.
24. Requires Participants to notify the AG and report the actions taken to ensure no consumers are harmed if an innovation fails before the end of the test period.
25. Makes Participants subject to reporting requirements when there is a security breach.
26. Asserts that records submitted to or obtained by the AG are not considered public records and may not be disclosed as such, except as outlined.
27. Authorizes the disclosure of information admissible in a civil or criminal case brought by federal or state officials.
28. Permits the AG to adopt periodic reporting requirements for Participants and to request records, documents and data.
29. Authorizes the AG to remove Participants from the Program if the AG believes they may violate the Consumer Fraud Act or any federal or state criminal law; specifies removal is not an appealable agency action.
30. Allows the AG to enter into agreements with federal, state and foreign regulators to allow Participants and entities operating in other jurisdictions to be recognized as Arizona Participants.
31. Sunsets the Program on July 1, 2028.
Miscellaneous
32. Requires the AG to include the results of the Program in the statutorily required annual report that recommends legislative or other action pertaining to Fair Housing. (Sec. 1)
33. Deposits Program application fees into the Consumer Protection-Consumer Fraud Revolving Fund and outlines its uses. (Sec. 3)
34. Makes technical and conforming changes. (Sec. 3)
35. Defines pertinent terms. (Sec. 2)
Current Law
The Consumer Protection-Consumer Fraud Revolving Fund is administered by the AG, is exempt from lapsing, and consists of: investigative court costs; attorney fees or civil penalties from the enforcement of either federal or state statutes pertaining to consumer protection or fraud. Statute directs the AG to utilize the monies for operating expenses, including the expenses related to the master tobacco settlement, consumer fraud education, investigative and enforcement operations. (A.R.S. § 44-1531.01)
Consumer lender means a person who makes or procures consumer lender loans in Arizona. (A.R.S. § 44-601) A licensed consumer lender may contract and receive finance charges that do not exceed:
1. For an original principal amount of $3,000 or less – 36% loan rate.
2. For more than 3,000 dollars, either: a) a rate of 36% on the initial $3,000 of the original principal amount and 24% on the remainder of the principal. b) a single blended consumer loan rate as outlined.
Statute allows a consumer lender to collect finance charges on nonrefundable prepaid finance charges or fees commonly known as points as follows: a) 4% of the original principal amount of the loan of at least $5,000 secured by the consumer's principal residence. b) 4% of the agreed upon credit limit of a home equity revolving loan. (A.R.S. § 44-632)
Money transmitter means a person located or doing business in Arizona, including a check casher and a foreign money exchanger and who does any of the following: sells or issues payment instruments; engages in the business of receiving money for transmission; engages in the business of exchanging payment instruments or money into any form of money or payment instrument; engages in the business of receiving money for obligors for the purpose of paying that obligor's bills, invoices or accounts; meets the definition of a bank, financial agency or financial institution as defined by federal law. (A.R.S. § 6-1201)
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Fifty-third Legislature HB 2434
Second Regular Session Version 4: Chaptered
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