Senate Bill No. 560
(By Senators McCabe and Hunter)
[Introduced March 16, 2005; referred to the Committee
on Banking and Insurance.]
A BILL to amend the Code of West Virginia, 1931, as amended, by
adding thereto a new section, designated §46-9-410, relating
to the use of checks, bank account debit authorizations or
share drafts as security for loans or cash advances made for
personal, family or household purposes.
Be it enacted by the Legislature of West Virginia:
That the Code of West Virginia, 1931, as amended, be amended
by adding thereto a new section, designated §46-9-410, to read as
ARTICLE 9. SECURED TRANSACTIONS.
§46-9-41O. No use of checks or share drafts or electronic or
other authorizations as security for cash advances,
payday loans or other loans.
(a) No person may make, arrange or act as a middleman, broker
or agent for a cash advance or loan in this state for a personal, family or household purpose pursuant to an agreement as a part of
which: (1) A check or share draft or an electronic or other
authorization for debit of an account is executed by the borrower;
(2) the check, share draft or authorization is capable of being
presented or drawn on the date made or at some future date on a
federally insured financial institution; (3) the check, share draft
or authorization is used as security, collateral, guarantee or as
any direct or indirect part of the transaction for an advance, loan
or extension of credit; and (4) the presentment or payment of the
check, share draft or debit is deferred.
(b) The provisions of this section do not apply to:
(1) A federally insured financial institution using accounts
or funds on deposit in the financial institution as security or
collateral for a loan made by the same institution holding the
account or funds;
(2) The use of a postdated check as purchase money in a
transaction which has as its primary purpose the bona fide purchase
of bona fide goods or services;
(3) Banks acting, as collecting banks under article four of
this chapter; or
(4) Tax refund anticipation loans.
(c) For purposes of this section, engaging in this state in
the business described in subparagraph (a) of this section occurs
if a signed writing or other authorized record evidencing the obligation or application of the consumer is made by the consumer
while the consumer is present in this state, whether in a
face-to-face transaction, a transaction over the telephone or an
internet or other electronic transaction.
(d) The provisions of this section apply notwithstanding the
provisions of sections four hundred six and four hundred eight of
(e) Acting in violation of this section is unconscionable
conduct for the purposes of section one hundred twenty-one, article
two, chapter forty-six-a, of this code and is an unfair or
deceptive act or practice for the purposes of section one hundred
four, article six, chapter forty-six-a of this code. Any agreement
in violation of this section is void and unenforceable.
NOTE: The purpose of this bill is to prevent the taking of
either checks, similar instruments or authorizations for electronic
account debits in order to guarantee loans or cash advances by
payday lenders or others.
This section is new; therefore, strike-throughs and
underscoring have been omitted.