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2009 SESSION

090129654
HOUSE BILL NO. 2114
Offered January 14, 2009
Prefiled January 13, 2009
A BILL to amend and reenact § 59.1-200 of the Code of Virginia and to amend the Code of Virginia by adding in Title 59.1 a chapter numbered 50, consisting of sections numbered 59.1-550 through 59.1-559, relating to the regulation of persons providing payroll processing services; penalty.
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Patron-- Nichols
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Referred to Committee on Commerce and Labor
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Be it enacted by the General Assembly of Virginia:

1.  That § 59.1-200 of the Code of Virginia is amended and reenacted and that the Code of Virginia is amended by adding in Title 59.1 a chapter numbered 50, consisting of sections numbered 59.1-550 through 59.1-559 as follows:

§ 59.1-200. Prohibited practices.

A. The following fraudulent acts or practices committed by a supplier in connection with a consumer transaction are hereby declared unlawful:

1. Misrepresenting goods or services as those of another;

2. Misrepresenting the source, sponsorship, approval, or certification of goods or services;

3. Misrepresenting the affiliation, connection, or association of the supplier, or of the goods or services, with another;

4. Misrepresenting geographic origin in connection with goods or services;

5. Misrepresenting that goods or services have certain quantities, characteristics, ingredients, uses, or benefits;

6. Misrepresenting that goods or services are of a particular standard, quality, grade, style, or model;

7. Advertising or offering for sale goods that are used, secondhand, repossessed, defective, blemished, deteriorated, or reconditioned, or that are "seconds," irregulars, imperfects, or "not first class," without clearly and unequivocally indicating in the advertisement or offer for sale that the goods are used, secondhand, repossessed, defective, blemished, deteriorated, reconditioned, or are "seconds," irregulars, imperfects or "not first class";

8. Advertising goods or services with intent not to sell them as advertised, or with intent not to sell at the price or upon the terms advertised.

In any action brought under this subdivision, the refusal by any person, or any employee, agent, or servant thereof, to sell any goods or services advertised or offered for sale at the price or upon the terms advertised or offered, shall be prima facie evidence of a violation of this subdivision. This paragraph shall not apply when it is clearly and conspicuously stated in the advertisement or offer by which such goods or services are advertised or offered for sale, that the supplier or offeror has a limited quantity or amount of such goods or services for sale, and the supplier or offeror at the time of such advertisement or offer did in fact have or reasonably expected to have at least such quantity or amount for sale;

9. Making false or misleading statements of fact concerning the reasons for, existence of, or amounts of price reductions;

10. Misrepresenting that repairs, alterations, modifications, or services have been performed or parts installed;

11. Misrepresenting by the use of any written or documentary material that appears to be an invoice or bill for merchandise or services previously ordered;

12. Notwithstanding any other provision of law, using in any manner the words "wholesale," "wholesaler," "factory," or "manufacturer" in the supplier's name, or to describe the nature of the supplier's business, unless the supplier is actually engaged primarily in selling at wholesale or in manufacturing the goods or services advertised or offered for sale;

13. Using in any contract or lease any liquidated damage clause, penalty clause, or waiver of defense, or attempting to collect any liquidated damages or penalties under any clause, waiver, damages, or penalties that are void or unenforceable under any otherwise applicable laws of the Commonwealth, or under federal statutes or regulations;

14. Using any other deception, fraud, false pretense, false promise, or misrepresentation in connection with a consumer transaction;

15. Violating any provision of § 3.1-796.78, 3.1-796.79, or 3.1-796.82, relating to the sale of certain animals by pet dealers which is described in such sections, is a violation of this chapter;

16. Failing to disclose all conditions, charges, or fees relating to:

a. The return of goods for refund, exchange, or credit. Such disclosure shall be by means of a sign attached to the goods, or placed in a conspicuous public area of the premises of the supplier, so as to be readily noticeable and readable by the person obtaining the goods from the supplier. If the supplier does not permit a refund, exchange, or credit for return, he shall so state on a similar sign. The provisions of this subdivision shall not apply to any retail merchant who has a policy of providing, for a period of not less than 20 days after date of purchase, a cash refund or credit to the purchaser's credit card account for the return of defective, unused, or undamaged merchandise upon presentation of proof of purchase. In the case of merchandise paid for by check, the purchase shall be treated as a cash purchase and any refund may be delayed for a period of 10 banking days to allow for the check to clear. This subdivision does not apply to sale merchandise that is obviously distressed, out of date, post season, or otherwise reduced for clearance; nor does this subdivision apply to special order purchases where the purchaser has requested the supplier to order merchandise of a specific or unusual size, color, or brand not ordinarily carried in the store or the store's catalog; nor shall this subdivision apply in connection with a transaction for the sale or lease of motor vehicles, farm tractors, or motorcycles as defined in § 46.2-100;

b. A layaway agreement. Such disclosure shall be furnished to the consumer (i) in writing at the time of the layaway agreement, or (ii) by means of a sign placed in a conspicuous public area of the premises of the supplier, so as to be readily noticeable and readable by the consumer, or (iii) on the bill of sale. Disclosure shall include the conditions, charges, or fees in the event that a consumer breaches the agreement;

16a. Failing to provide written notice to a consumer of an existing open-end credit balance in excess of $5 (i) on an account maintained by the supplier and (ii) resulting from such consumer's overpayment on such account. Suppliers shall give consumers written notice of such credit balances within 60 days of receiving overpayments. If the credit balance information is incorporated into statements of account furnished consumers by suppliers within such 60-day period, no separate or additional notice is required;

17. If a supplier enters into a written agreement with a consumer to resolve a dispute that arises in connection with a consumer transaction, failing to adhere to the terms and conditions of such an agreement;

18. Violating any provision of the Virginia Health Spa Act, Chapter 24 (§ 59.1-294 et seq.) of this title;

19. Violating any provision of the Virginia Home Solicitation Sales Act, Chapter 2.1 (§ 59.1-21.1 et seq.) of this title;

20. Violating any provision of the Automobile Repair Facilities Act, Chapter 17.1 (§ 59.1-207.1 et seq.) of this title;

21. Violating any provision of the Virginia Lease-Purchase Agreement Act, Chapter 17.4 (§ 59.1-207.17 et seq.) of this title;

22. Violating any provision of the Prizes and Gifts Act, Chapter 31 (§ 59.1-415 et seq.) of this title;

23. Violating any provision of the Virginia Public Telephone Information Act, Chapter 32 (§ 59.1-424 et seq.) of this title;

24. Violating any provision of § 54.1-1505;

25. Violating any provision of the Motor Vehicle Manufacturers' Warranty Adjustment Act, Chapter 17.6 (§ 59.1-207.34 et seq.) of this title;

26. Violating any provision of § 3.1-949.1, relating to the pricing of merchandise;

27. Violating any provision of the Pay-Per-Call Services Act, Chapter 33 (§ 59.1-429 et seq.) of this title;

28. Violating any provision of the Extended Service Contract Act, Chapter 34 (§ 59.1-435 et seq.) of this title;

29. Violating any provision of the Virginia Membership Camping Act, Chapter 25 (§ 59.1-311 et seq.) of this title;

30. Violating any provision of the Comparison Price Advertising Act, Chapter 17.7 (§ 59.1-207.40 et seq.) of this title;

31. Violating any provision of the Virginia Travel Club Act, Chapter 36 (§ 59.1-445 et seq.) of this title;

32. Violating any provision of §§ 46.2-1231 and 46.2-1233.1;

33. Violating any provision of Chapter 40 (§ 54.1-4000 et seq.) of Title 54.1;

34. Violating any provision of Chapter 10.1 (§ 58.1-1031 et seq.) of Title 58.1;

35. Using the consumer's social security number as the consumer's account number with the supplier, if the consumer has requested in writing that the supplier use an alternate number not associated with the consumer's social security number;

36. Violating any provision of Chapter 18 (§ 6.1-444 et seq.) of Title 6.1;

37. Violating any provision of § 8.01-40.2;

38. Violating any provision of Article 7 (§ 32.1-212 et seq.) of Chapter 6 of Title 32.1;

39. Violating any provision of Chapter 34.1 (§ 59.1-441.1 et seq.) of this title;

40. Violating any provision of Chapter 10.2 (§ 6.1-363.2 et seq.) of Title 6.1;

41. Violating any provision of the Virginia Post-Disaster Anti-Price Gouging Act, Chapter 46 (§ 59.1-525 et seq.) of this title;

42. Violating any provision of Chapter 47 (§ 59.1-530 et seq.) of this title;

43. Violating any provision of § 59.1-443.2;

44. Violating any provision of Chapter 48 (§ 59.1-533 et seq.) of this title;

45. Violating any provision of Chapter 20 (§ 6.1-474 et seq.) of Title 6.1;

46. Violating the provisions of clause (i) of subsection B of § 54.1-1115; and

47. Violating any provision of § 18.2-239; and

48. Violating any provision of Chapter 50 (§ 59.1-550 et seq.) of this title.

B. Nothing in this section shall be construed to invalidate or make unenforceable any contract or lease solely by reason of the failure of such contract or lease to comply with any other law of the Commonwealth or any federal statute or regulation, to the extent such other law, statute, or regulation provides that a violation of such law, statute, or regulation shall not invalidate or make unenforceable such contract or lease.

CHAPTER 50.
PAYROLL PROCESSORS.

§ 59.1-550. Definitions.

As used in this chapter, unless the context requires otherwise:

"Board" means the Board of Agriculture and Consumer Services.

"Client" means an employer for whom a payroll processor provides payroll processing services.

"Commissioner" means:

1. If the payroll processor is a financial institution subject to supervision by the State Corporation Commission pursuant to Title 6.1 or a wholly owned subsidiary of such a supervised financial institution, the Commissioner of Financial Institutions within the State Corporation Commission; and

2. If the payroll processor is not a financial institution subject to supervision by the State Corporation Commission pursuant to Title 6.1 or a wholly owned subsidiary of such a supervised financial institution, the Commissioner of Agriculture and Consumer Services.

"Employer" means a person that maintains an office or otherwise transacts business in the Commonwealth and makes payment of wages taxable under Chapter 3 (§ 58.1-300 et seq.) of Title 58.1 to an individual.

"Payroll processing services" means (i) preparing and issuing payroll checks; (ii) preparing and filing information required to be filed with an agency of the Commonwealth pursuant to Title 58.1 or Title 60.2; or (iii) collecting, holding, and turning over income withholding taxes or unemployment insurance taxes.

"Payroll processor" means a person that provides payroll processing services for one or more employers.

§ 59.1-551. Registration; fees.

A. It shall be unlawful for any payroll processor to offer or provide in the Commonwealth any payroll processing services, on or after the expiration of the phase-in period applicable to the payroll processor as prescribed in § 59.1-558, unless such payroll processor at the time of such offering or provision has been properly registered with the Commissioner. Registration shall be renewed annually. An application for registration, including any renewal thereof, shall (i) disclose the address, ownership, and nature of business of the payroll processor, (ii) include proof of the surety bond required pursuant to § 59.1-552, and (iii) include proof of coverage, at the applicant's option, in an amount two times the highest weekly payroll processed by the applicant in the preceding year or in the amount of $5 million, whichever is less, of a fidelity bond, employee dishonesty bond, third-party fidelity coverage, or liability insurance that includes crime coverage. An application for registration, including any renewal thereof, shall be accompanied by a fee of $200 if the payroll processor has fewer than 25 clients, $500 if the payroll processor has from 25 to 500 clients, and $800 if the payroll processor has more than 500 clients. The registration shall be in a form prescribed by the Commissioner. The Commissioner may refuse to accept a registration form that contains erroneous or incomplete information.

B. All registration and annual renewal fees shall be remitted to the State Treasurer and shall be placed to the credit and special fund of the Department of Agriculture and Consumer Services, or of the Bureau of Financial Institutions of the State Corporation Commission if the fees are remitted with respect to a payroll processor that is a financial institution subject to supervision by the State Corporation Commission pursuant to Title 6.1 or a wholly owned subsidiary of such a supervised financial institution, which fees shall be used in either instance in the administration of this chapter.

§ 59.1-552. Bond required; exemption.

A. Commencing upon the expiration of the phase-in period for the payroll processor as prescribed in § 59.1-558, every payroll processor before providing, or entering into an agreement to provide, payroll processing services to a client, shall file and maintain with the Commissioner, in a form and substance approved by the Commissioner, a bond with corporate surety from a company authorized to transact business in the Commonwealth, in an amount equal to the total of all state and federal income tax and unemployment insurance tax payments expected to be processed by the payroll processor on behalf of clients during the 12 months following the initial registration or renewal thereof. In determining the amount of tax payments expected to be processed during the ensuing 12 months, the Commissioner in his discretion may rely on the amounts processed during such preceding period as the Commissioner deems appropriate or such other method as is adopted by regulation pursuant to § 59.1-554.

B. The bond required by subsection A shall be in favor of the Commonwealth of Virginia for the benefit of any client who is damaged by any violation of this chapter by a payroll processor. The aggregate liability of the bond to all persons for all breaches of the conditions of the bond shall in no event exceed the amount of the bond. The terms of the bond shall run continuously until cancelled and the aggregate amount of the bond shall be maintained at all times during the registration period. The bond shall not be canceled or terminated except with the consent of the Commissioner.

C. A payroll processor that does not have the authority to access, control, direct, transfer, or disburse a client's funds is not subject to this section. A payroll processor that arranges for the transfer of funds from an employer's account directly to taxing authorities for payment of the employer's taxes is not subject to this section, if the payroll processor is not authorized to arrange for the transfer of funds for any other uses or to any other accounts.

§ 59.1-553. Reports by payroll processors to clients; disclosures; exemption.

A. Commencing upon the expiration of the phase-in period for the payroll processor as prescribed in § 59.1-558, on a regular basis not less frequently than quarterly, a payroll processor shall:

1. Provide to each client an accounting of:

a. Funds received from that employer; and

b. The aggregate amounts disbursed for (i) payroll; (ii) each category of income taxes; and (iii) state and federal unemployment compensation taxes; and

2. Clearly and conspicuously and in easily understood language disclose to each client the specific method or methods whereby the client can contact state and federal tax and unemployment insurance authorities, including but not limited to Internet address and toll-free telephone number information, to verify that payments have been made and properly credited on behalf of the client.

B. Commencing upon the expiration of the phase-in period for the payroll processor as prescribed in § 59.1-558, whenever a payroll processor promotes, markets, or advertises itself or its services and uses the phrase "bonded with the State" or "fully bonded" or other language that in the opinion of the Commissioner would lead a client to believe that the bond coverage provides full compensation for potential losses should the payroll processor fail to make required payments or become insolvent, the payroll processor shall also include a clear and conspicuous disclaimer stating that use of the language referencing bonding does not signify or ensure that the bond will cover all potential claims if the payroll processor fails to comply with its responsibilities under this chapter. A payroll processor also shall provide this disclaimer to an employer before contracting for payroll processing services to that employer.

C. Commencing upon the expiration of the phase-in period for the payroll processor as prescribed in § 59.1-558, a payroll processor may not designate itself as the sole recipient of notices from state or federal authorities for nonpayment of taxes or unemployment insurance payments. A payroll processor shall ensure that such notices are provided directly to the affected clients.

D. A payroll processor that does not have the authority to access, control, direct, transfer, or disburse a client's funds is not subject to this section.

§ 59.1-554. Regulations.

The Board and State Corporation Commission shall adopt reasonable regulations in order to implement the provisions of this chapter. These regulations shall be adopted, amended, or repealed in accordance with the Administrative Process Act (§ 2.2-4000 et seq.) or the Rules of Practice and Procedure of the State Corporation Commission, as applicable.

§ 59.1-555. Investigations.

A. The Commissioner is authorized to:

1. Make necessary public and private investigations within or without the Commonwealth to determine whether any person has violated, or is about to violate, the provisions of this chapter or any rule, regulation, or order issued pursuant to this chapter;

2. Require or permit any person to file a statement in writing, under oath or otherwise as the Commissioner determines, as to all facts and circumstances concerning the matter under investigation; and

3. Administer oaths or affirmations and, upon motion or upon request of any party, subpoena witnesses, compel their attendance, take evidence, and require the production of any matter that is relevant to the investigation, including the existence, description, nature, custody, condition, and location of any books, documents, or other tangible things; the identity and location of persons having knowledge of relevant facts; or any other matter reasonably calculated to lead to the discovery of material evidence.

B. Any proceeding or hearing of the Commissioner pursuant to this chapter, in which witnesses are subpoenaed and their attendance required for evidence to be taken, or any matter produced to ascertain material evidence shall take place within the City of Richmond.

C. If any person fails to obey the subpoena or to answer questions propounded by the Commissioner and upon reasonable notice to all persons affected thereby, the Commissioner may apply to the Circuit Court of the City of Richmond for an order compelling compliance.

§ 59.1-556. Cessation of business; insolvency and liquidation; appointment of receiver.

A. Commencing upon the expiration of the phase-in period for the payroll processor as prescribed in § 59.1-558, a payroll processor that voluntarily ceases to do business in the Commonwealth is subject to the following provisions:

1. Prior to voluntarily ceasing business as a payroll processor, a payroll processor shall:

a. Notify the Commissioner of the proposed termination at least 30 days prior to its effective date;

b. Notify all clients in writing of the proposed termination at least 30 days prior to its effective date;

c. Provide all clients with detailed final accountings of all accounts;

d. Remit all money held by the payroll processor to each respective client or the appropriate taxing authority; and

e. Return its registration to the Commissioner for cancellation; and

2. When terminating a business, a payroll processor whose contract with a client does not authorize the processor to assign the account to another processor may not transfer the account to another processor without first securing the written permission of the client.

B. Commencing upon the expiration of the phase-in period for the payroll processor as prescribed in § 59.1-558, a payroll processor that is no longer eligible to do business in the Commonwealth shall be subject to the following provisions:

1. If, upon examination of a payroll processor, the Commissioner is of the opinion that the payroll processor is insolvent or can no longer obtain a surety bond or when the license of a payroll processor has expired or been terminated for any reason, the Commissioner may appoint a receiver who shall proceed to close the payroll processor. The person appointed by the Commissioner as a receiver may be the Commissioner, a deputy, or such other person as the Commissioner may choose, and a certified copy of the order making such appointment is evidence of the appointment. A receiver has the power and authority provided in this chapter and such other powers and authority as may be expressed in the order of the Commissioner. If the Commissioner or a deputy is appointed receiver, no additional compensation need be paid, but any reasonable and necessary expenses as a receiver must be paid by the processor. If another person is appointed, then the compensation of the receiver must be paid from the assets of that processor;

2. Upon taking possession of the property and business of a payroll processor under this section, the receiver:

a. May collect money due to the Commissioner and perform all acts necessary to conserve the payroll processor's assets and business and shall proceed to liquidate the payroll processor's affairs;

b. Shall collect all debts due and claims belonging to the payroll processor and may sell or compound all bad or doubtful debts;

c. May sell, for cash or other consideration or as provided by law, all or any part of the real and personal property of the payroll processor; and

d. May borrow money and issue evidence of indebtedness therefor, and to secure the repayment of this money, may mortgage, pledge, or transfer in trust any of the property of the payroll processor, whether real, personal, or mixed, superior to any charge for expenses of liquidation; and

3. The assets of the payroll processor in liquidation, exclusive of any bond proceeds, must be disbursed in the following order:

a. First, the payment of the costs and expenses of liquidation;

b. Second, payment of payroll, tax, and unemployment insurance funds held by the payroll processor;

c. Third, payment of all debts, claims, and obligations owed by the payroll processor;

d. Fourth, the payment of claims otherwise proper that were not filed within the prescribed time; and

e. Fifth, the payment of any obligation expressly subordinated to claims entitled to the priority established by subdivisions a through c.

C. A payroll processor closed by action of the Commissioner pursuant to this chapter may bring an action challenging the Commissioner's appointment of receiver in the Circuit Court of the City of Richmond or of the locality in which the processor transacts business within 10 days after the Commissioner appoints a receiver. The court shall uphold the Commissioner's finding that a payroll processor is insolvent or that its condition is such as to render its further proceedings hazardous to the public or to those having funds in its custody and shall uphold the appointment of a receiver unless the court finds that the Commissioner's action was arbitrary and capricious.

§ 59.1-557. Production of records.

Commencing upon the expiration of the phase-in period for the payroll processor as prescribed in § 59.1-558, every payroll processor, upon written request of the Commissioner, shall make available to the Commissioner its payroll processing records for inspection and copying to enable the Commissioner to reasonably determine compliance with this chapter. Every payroll processor shall maintain a true copy of each agreement with its clients for the term of the agreement plus two years.

§ 59.1-558. Phase-in period.

A. The requirements imposed under this chapter on any person that is providing payroll processing services on July 1, 2009, shall become effective with respect to such person on July 1, 2013.

B. The requirements imposed under this chapter on any person that commences providing payroll processing services after July 1, 2009, shall become effective with respect to such person on the fourth anniversary of the date that the person commenced providing payroll processing services.

§ 59.1-559. Violations of chapter; penalty.

Any violation of the provisions of this chapter or any payroll processing services agreement executed therewith shall constitute a prohibited practice pursuant to the provisions of § 59.1-200 and shall be subject to any and all of the enforcement provisions of the Virginia Consumer Protection Act (§ 59.1-196 et seq.).