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CSBS seeks additional comments on money services businesses model law

State Issues CSBS Licensing Money Service / Money Transmitters NMLS Vision 2020

State Issues

On February 25, the Conference of State Bank Supervisors (CSBS) issued a second request for comments on its draft model law language for money services businesses (MSB Model Law)—a primary part of CSBS’s Vision 2020 initiatives, which are intended to modernize state regulation of non-banks and fintech firms. (Vision 2020 InfoBytes coverage is available here.) According to CSBS, the draft MSB Model Law is comprised of “an integrated, 50-state licensing and supervisory system that recognizes standards across state lines.” As previously covered by InfoBytes, last October CSBS requested comments on the draft MSB Model Law language focusing on issue areas identified by the Fintech Industry Advisory Panel—Control, Activity and Exemption Definitions, Safety & Soundness, and Supervision. To finalize the areas of control and supervision, CSBS is seeking a second round of comments by March 11 to address the following issues identified from comments received during the first round.

  • The industry expressed implementation concerns, with several parties noting, “that CSBS has no authority to implement the MSB Model Law in individual states and utilizing NMLS to drive consistency could compound differences between states.”
  • The proposed control language failed to address uncertainty over the identification of control persons. Moreover, “attempts to exclude passive investors [did] not achieve the intended results.”
  • The industry strongly suggested that parity language contained in the draft MSB Model Law—designed to facilitate state adoption—“was overly broad and would create uncertainty if used.”
  • Definitions and exemptions fell short on several critical issues.
  • The existence of proponents and detractors of both the safety and soundness proposals signaled a divergence within the industry as to the appropriate safeguards for customer funds.

CSBS notes that the MSB Model Law language will help harmonize operations between states. After the comment period ends, CSBS will prioritize the MSB Model Law for release, with control and coordination language expected to be released in the second quarter of 2020, followed by activities and exemption definitions in May. CSBS also plans to work with states and the industry on safety and soundness language, which may be released as early as August.

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