(a) As used in this section, “instant loan check” or “live check” means any loan or extension of credit that is made available in the form of a check, draft, or any other negotiable instrument that can be deposited in a bank or used for third-party payments. “Instant loan check” or “live check” does not include a check, draft, or any other negotiable instrument provided in response to an application for credit or as a means of access to an existing loan or extension of credit, including a home equity or personal line of credit.

(b) No person shall produce, advertise, offer, sell, distribute, or otherwise transfer for use in this state any live check unless the document bears the following phrase printed in 12-point type on the front of the document: “THIS IS A LOAN OR AN EXTENSION OF CREDIT. YOU WILL PAY CHARGES.”

(c) Live checks shall only be negotiable for a period of 30 days after the date printed on the live check. Printed material accompanying the live check shall advise the consumer to void and destroy the live check if it is not going to be negotiated.

(d) Loan solicitations shall be mailed in envelopes with no indication that a negotiable instrument is contained in the mailing. Envelopes shall be marked with “do not forward” instructions to the postal service in the event that the intended addressee is no longer at the location.

(e) Any loan solicitation made through a live check shall be honored in the full amount by the issuer unless the account on which the solicitation is made is closed by the consumer prior to the date the check is cashed.

(f) In the event that a live check is stolen or incorrectly received by someone other than the intended payee, and the live check is cashed or otherwise negotiated based upon fraud or misrepresentation by someone other than the intended payee, the following safeguards for the consumer shall apply:

(1) The creditor, upon receipt of notification that the consumer did not negotiate the live check and is a victim of identity theft as defined in Section 1798.92 of the Civil Code, shall provide, and the consumer may complete, a statement confirming that the consumer did not deposit, cash, or otherwise negotiate the live check.

(2) Upon completion of the confirmation statement by the consumer, the consumer who was the intended payee shall have no liability for the loan obligation, absent any fraud by that consumer.

(3) Upon receipt of notification that the consumer did not negotiate the live check and is a victim of identity theft as defined in Section 1798.92 of the Civil Code, the creditor shall take appropriate actions set forth in Sections 1785.25 and 1785.26 of the Civil Code.

(g) The commissioner may, after appropriate notice and opportunity for hearing, by order levy administrative penalties against a licensee who violates this section, and the licensee shall be liable for administrative penalties of no more than two thousand five hundred dollars ($2,500) for each willful violation. Any hearing shall be held in accordance with the Administrative Procedure Act (Chapter 5 (commencing with Section 11500) of Part 1 of Division 3 of Title 2 of the Government Code), and the commissioner shall have all the powers granted under the act. The remedy available under this subdivision is in addition to any other remedies available to the commissioner under this division that may be employed to enforce the provisions of this section.

(h) Nothing in this section shall preclude the application of any section or rule under this division.

(Added by Stats. 2002, Ch. 772, Sec. 16. Effective January 1, 2003.)