On October 4, 2013, California Governor Jerry Brown signed into law Assembly Bill No. 786, which eases the burdens on payments companies by overhauling the State's controversial money transmission law ("MTL").

Key among the changes is the reduction in a licensee's statutory minimum net worth requirement from $500K to $250K. Although the California Department of Business Oversight ("DBO") retains the discretion to adjust the minimum based on enumerated statutory factors, the amended MTL places new limits upon on the discretion and addresses open questions under the existing statute. These changes are welcome because the DBO had regularly required payments startups to maintain $1 million in equity, and sometimes as much as $2 million, to qualify for a license under the previous statute.

Summary of Key Reforms

Reduction of minimum equity requirement from $500K to $250K;

  • Defined criteria for increasing the minimum equity requirement, including the volume of projected transactions, history of operations, quality of management, and other qualitative factors;
  • New procedures for obtaining a written decision or opinion letter from the Commissioner of the DBO regarding the applicability or interpretation of the MTL;
  • New procedures for obtaining formal guidance from the DBO about license conditions and equity requirements, including an explanation of factors upon which the DBO relied to impose conditions;
  • New authority for the Commissioner of the DBO to exempt, by regulation or order, a company, transaction, or class of transactions from all or part of the MTL; and
  • Excluded payroll firms from the MTL licensing requirements and modified time limit and refund requirements for payments for goods and services.


The new legislation represents a victory for startups and payroll firms, but it does not provide the more sweeping relief sought by many in the payments startup landscape. Importantly, however, the bill signals that California's regulatory oversight of money transmitters should reflect a balance between protecting consumers and enabling innovation and competition in the payments landscape. The amended MTL potentially has national implications because it could encourage other states to reconsider their money transfer laws.