01-1
01-1
February 8, 2001
Re: Opinion Request – ________
Dear M ________:
This is in response to your letter of October 24, 2000. Your letter requested our opinion as to whether ________ is required to be licensed under the California Financial Code if it sells in California vouchers (“Vouchers”) redeemable for merchandise at stores owned and operated in Mexico by its affiliate, ________.
For the reasons discussed below, it is our view that ________ is not required to be licensed under any law administered by this Department in order to sell the Vouchers in California.
BACKGROUND.
You described the proposed program involving sale of the Vouchers as follows:
“The Program “________ owns and operates a chain of supermarkets in California. ________ owns and operates stores at various locations in Mexico. Under the proposed Program, ________ will sell vouchers redeemable at ________ stores to customers in California (“Purchasers”). The vouchers will be redeemable only for goods and store items. Following is a description of a typical transaction contemplated by the Program. A Purchaser in California wishing to provide assistance to a friend or relative residing in Mexico (“Donee”) would purchase a ________ store voucher at a ________ store. The Purchaser would make the purchase either in person at the store or on the intemet by accessing a website maintained by ________. The Purchaser would pay for the voucher in cash or by using a major credit card. The Purchaser would receive a written or electronic receipt indicating the following information, at a minimum: (1) a voucher identification code number unique to that particular voucher; (2) the amount paid (in US dollars) by the Purchaser; (3) the redemption value of the voucher, which would be the Mexican currency equivalent of the US dollar amount paid by the Purchaser, plus, if the Purchaser pays cash or uses a credit card and agrees to pay a fee in connection with the credit card purchase (generally 3.8% of the amount paid), 10% of that amount; (4) credit card information (if the purchase is made on credit); and (5) the identity of the Donee.
“The Purchaser would contact the Donee to inform him or her that the voucher had been purchased and would provide the Donee with the identification code number and redemption value. The Donee then would be able to redeem the voucher at a ________ store by providing the identifying number and purchasing goods from the store, typically food or other household items. The value of the goods acquired with the voucher would be equal to the voucher’s redemption value (in Mexican currency).
“The Donee would be permitted to redeem the voucher for goods only; he or she would not receive cash or currency, except where the redemption value of the voucher exceeds the price of the goods acquired by a de minimis amount (e.g., US$1.00-$10.00, or less). In that case, the Donee would receive the equivalent of such excess in cash or currency, since it would be impractical and not cost effective to issue a voucher for such a nominal amount. If, on the other hand, the redemption value of the voucher exceeds the price of the goods by more than a de minimis amount, the Donee would receive a replacement voucher for the excess. This may be illustrated by the following example, in which it is assumed that a Donee will receive cash whenever the redemption value of a voucher exceeds the value of the store items purchased with the voucher by the Mexican currency equivalent of less than US$5.00. (For convenience, all amounts are expressed in US dollars, although the amounts involved actually would be the Mexican currency equivalent of US dollars.) A Donee receives a voucher having a redemption value of US$l00.00. The Donee redeems the voucher for goods having a value equivalent to US$95.00. The Donee would receive a voucher with a face amount equivalent to US$5.00 upon redemption of the original voucher. If, on the other hand, the goods acquired had an equivalent value of US$96.00, the Donee would receive Mexican currency in the equivalent amount of US$4.00. In no event would a Donee receive cash or currency having an equivalent value exceeding a de minimis amount determined by ________, which will exceed US$10.00.”
DISCUSSION.
As you discussed in your letter, there is some question as to whether sale of the Vouchers is an activity that would require licensing under Chapter 14 (commencing with Section 1800), Division 1 of the Financial Code (the “Transmitters Law”).
Section 1800.3 of the Transmitters Lawn1 provides, subject to certain exceptions not applicable here, as follows:
“1800.3 (a) No person shall engage in the business of receiving money for the purpose of transmitting the same or its equivalent to foreign countries without first obtaining a license from the Commissioner.”
– – – – – – – – – – – – – – – – – -Footnotes- – – – – – – – – – – – – – – – – – n1Unless otherwise indicated, “section” refers to a section of the Transmitters Law. – – – – – – – – – – – – – – – – -End Footnotes- – – – – – – – – – – – – – – – –
________ proposes to receive money in the United States. The question is whether, pursuant to the Voucher program, it will transmit the “equivalent” of that money to Mexico.
As discussed below, in our view, the term “equivalent” in Section 1800.3 refers to an equivalent amount of foreign money, not an equivalent but limited power to purchase goods, such as that represented by a Voucher.
Section 1800.3 defines the activity that is subject to regulation as the transmission to foreign countries of money or its equivalent. In other words, to be subject to the Transmitters Law, a person must be in the business of delivering the equivalent of money in foreign countries.
The term “money” is not defined in the Transmitters Law, but is a term of well established meaning. Black’s Law Dictionary, 5th Edition, defines “money,” in pertinent part, as “. . . coins and paper currency used as circulating medium of exchange . . . .” “Money” is defined in Section 1201(24) of the California Uniform Commercial Code as ” . . . a medium of exchange authorized or adopted by a domestic or foreign government. . . .” In other words, money means a currency generally recognized by a government as a medium of payment for any transaction. Clearly, the proposed Vouchers, which are redeemable only for merchandise from a single business, do not constitute money.
In our view, the term “equivalent” as used in Section 1800.3 means an amount of foreign currency that is the equivalent of the amount of dollars received for transmission, after application of an agreed upon rate of exchange.
This conclusion is evident from several other sections of the Transmitters Law. For example, Section 1800.5(b) provides:
“(b) ‘Transmission money’ means money received in this state by a licensee for transmission to a foreign country, or any equivalent into which the money is converted, from the time the money is received for transmission to a foreign country until the time the transmission of the money in accordance with the agreement of the licensee with the customer is completed, or, if the transmission is not completed, until such time as the money is repaid to the customer.” (Emphasis added.)
Section 1800.5(b) refers to the time transmission of the “money” is completed. Thus, by its terms, Section 1800.5(b) contemplates no transaction other than one in which money is received and money is delivered. The concept of conversion of money into an equivalent before delivery can, therefore, mean nothing other than conversion into an equivalent amount of foreign money.
Section 1810(a) of the Transmitters Law addresses the issue even more directly. It provides:
“1810. (a) Every licensee or its agent shall forward all moneys received for transmission to a foreign country or give instructions committing equivalent funds to the person designated by the customer within 10 days after receiving that money, unless otherwise ordered by his or her customer. . . .” (Emphasis added.)
In other words, the licensee must either transmit the money received or make equivalent funds available to the recipient designated by the customer. Websters New World Dictionary defines funds (the plural of “fund”), as ” . . . money available for use . . . ”
Any lingering uncertainty as to the transactions subject to regulation is resolved by Section 1810.5(b), which sets forth the consequence of a licensee’s failure to transmit funds in accordance with Section 1810. Section 1810.5(b) requires the following to be printed on a receipt issued in connection with each transmission transaction:
“You, the customer, are entitled to a refund of the money to be transmitted as the result of this agreement if ________ (name of licensee or its agent) does not forward the money received from you within 10 days of the date of its receipt, or does not give instructions committing an equivalent amount of money to the person designated by you within 10 days of the date of the receipt of the funds from you unless otherwise instructed by you . . . .” (Emphasis added.)
It is clear from these sections that transactions subject to the Transmitters Law are those which involve the delivery of money, and nothing else.
The fact that a portion of a Voucher not exceeding $10 may be redeemable in cash in the form of change on a retail purchase at a ________ store does not make the sale of the Voucher a transaction subject to the Transmitters Law. As indicated above, under Section 1800.3 the activity regulated by the Transmitters Law is the receipt of money for the purpose of transmitting the money to a foreign country. The receipt of change is merely incidental to the unregulated transaction of redeeming a Voucher for goods. The receipt of change in the form of currency is not the purpose of the transaction and, therefore, does not make sale of the Voucher subject to regulation.
Finally, it is readily apparent that the sale of Vouchers is not subject to regulation under the Travelers Check Act or the Payment Instruments Law, and these topics do not require further discussion. This Department does not administer Division 3 (commencing with Section 12000) of the Financial Code. Accordingly, we offer no opinion as to the applicability of that law.
CONCLUSION.
For the reasons stated above, we conclude that the sale by ________ of Vouchers in California is not subject to regulation under the Transmitters Law or any other law administered by this Department.
This Department administers, among other laws, the Transmitters Law, the Travelers Checks Law, and the Payment Instruments Law. We express no opinion as to any law, state or federal, other than those laws. Furthermore, this response is limited to the facts and circumstances set forth above. Should any of the facts or circumstances change, our answers might be different.
Very truly yours,
DONALD R. MEYER
Commissioner of Financial Institutions
By
THOMAS M. LOUGHRAN
Senior Counsel
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