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Can I accept payments online without violating payment processing laws in Kentucky? What are the requirements?

Requirements for Accepting Online Payments in Kentucky

To accept payments online in Kentucky, you must comply with the Kentucky Money Transmitters Act of 2006 [2.6]. This act requires that all licensees and agents comply with all applicable federal and state laws [2.2].

License Requirement

No person shall engage in the business of cashing checks or accepting deferred deposit transactions for a fee or other consideration without having first obtained a license [1.2]. To accept payments online, you must obtain a license from the Kentucky Department of Financial Institutions [2.6].

Compliance Requirements

To comply with the Kentucky Money Transmitters Act of 2006, you must:

  • Provide customers with written disclosures required by the Consumer Credit Protection Act [1.1].
  • Conspicuously display a schedule of all fees and charges for all services provided by the licensee that are authorized by this subtitle [1.1].
  • Comply with the requirements for acceptance, payment, and deposit of checks, including charging, collecting, and receiving check collection charges made by a financial institution for each check returned or dishonored for any reason [1.1].
  • Maintain records of all payment instruments sold, a general ledger containing all assets, liability, capital, income, and expense accounts, bank statements and bank reconciliation records, records of outstanding payment instruments, records of each payment instrument paid within the five-year period, a list of the names, addresses, and telephone numbers of all of the licensee’s agents, copies of all currency transaction reports and suspicious activity reports filed in compliance with KRS 286.11-031, and any other record the commissioner may reasonably require by order or regulation [2.7].

Bond or Other Security Devices

Each application shall be accompanied by a surety bond or other similar security acceptable to the commissioner, in the amount of at least five hundred thousand dollars ($500,000) [2.4].

Conclusion

To accept payments online in Kentucky, you must obtain a license from the Kentucky Department of Financial Institutions and comply with the Kentucky Money Transmitters Act of 2006. This includes providing customers with written disclosures, displaying a schedule of all fees and charges, complying with the requirements for acceptance, payment, and deposit of checks, and maintaining records of all payment instruments sold. Additionally, you must provide a surety bond or other similar security acceptable to the commissioner.

Source(s):
Jurisdiction

Kentucky