California Code of Regulations › Title 10 - Investment › Chapter 3 - Commissioner of Financial Protection and Innovation › Subchapter 9 - Escrow Agents › Article 4 - Books, Records and Accounts › Section 1737.1 - Internet Escrow Agent Special Accounts

Current through Register 2024 Notice Reg. No. 28, July 12, 2024
(a) All money received by an Internet escrow
				  agent from a credit card or Automated Clearing House ("ACH") transfer as part
				  of an escrow transaction shall upon receipt be deposited in a bank, a savings
				  bank, or a savings and loan association in a separate account that is
				  designated "trust" or "escrow" account. No funds other than those received from
				  a credit card or ACH transfer as part of an escrow transaction shall be
				  deposited in such account or otherwise commingled with any other escrow
				  money.
(b) An Internet escrow agent
				  shall not withdraw, pay out or transfer monies from a particular escrow for
				  deposits received by credit card or ACH transfer prior to the deposit of the
				  funds into the trust or escrow bank account.
(c) An Internet escrow agent shall be
				  required to establish a reserve made up of general account funds for the
				  purpose of covering losses that result from the acceptance of credit cards and
				  ACH deposits, including, but not limited to, charge backs, disputed charges,
				  fraudulent transactions and any other debits. The reserve shall at least equal
				  10% of the average monthly credit card and ACH receipts. If actual losses
				  exceed 10% of the average monthly credit card and ACH receipts, the Internet
				  escrow agent shall immediately increase the reserve to at least equal the
				  percentage of actual losses to the average monthly credit card and ACH
				  receipts. An Internet escrow agent may request approval from the Commissioner
				  to reduce the reserves required under this section. The Commissioner may
				  approve the request to reduce the required reserve if, in the opinion of the
				  Commissioner, the Internet escrow agent submitted sufficient evidence to
				  demonstrate that the lower reserve will be sufficient to cover anticipated
				  losses. The reserve required for credit card and ACH losses is in addition to
				  the tangible net worth and liquid assets required by Section
				  17210 of
				  the Financial Code.
(d) The
				  Internet escrow agent shall deposit funds from the reserves required in
				  subsection (c) into the escrow trust account to cover any losses that result
				  from credit cards or ACH deposits on or before the close of the next full
				  working day after receiving notification of the debit. This subsection shall
				  not apply if the debit is against funds received from a credit card or ACH
				  deposit that remains in the escrow account.
1. New
					 section filed 3-3-52; effective thirtieth day thereafter (Register 27, No.
					 5).
2. Amendment filed 6-27-74; effective thirtieth day thereafter
					 (Register 74, No. 26).
3. Amendment filed 12-31-79 as an emergency;
					 effective upon filing. Certificate of Compliance included (Register 80, No.
					 1).
4. Editorial correction of NOTE filed 4-6-83 (Register 83, No.
					 15).
5. Redesignation of first paragraph as subsection (a),
					 renumbering of former subsections (a)-(g) as (a)(1)-(7) and new paragraph (b)
					 filed 12-16-97; operative 1-15-98 (Register 97, No. 51).
6.
					 Renumbering of former section
					 1737.1 to section
					 1737.3 and new section
					 1737.1 filed 7-21-2003; operative
					 7-21-2003 pursuant to Government Code section
					 11343.4
					 (Register 2003, No. 30).
Note: Authority cited: Section
						17400,
						Financial Code. Reference: Sections
						17409,
						17410 and
						17411,
						Financial Code.