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On June 27, the Delaware Governor signed HB 199, which, among other provisions, authorizes the Delaware State Bank Commissioner to participate in a multi-state automated licensing system that will assist in the facilitation of the application and licensing process for mortgage loan brokers, licensed lenders, mortgage loan originators, money transmitters, check cashers, and motor vehicle sales finance companies. The new legislation also permits the State Bank Commissioner to share information collected and maintained with other participating states “for the purpose of licensing, regulating, or supervising that same applicant or licensee under a statute similar to this chapter, if that state could have obtained that same information directly from the applicant or licensee under its own law.” The amendments become effective immediately.
On June 28, the Alaska governor signed HB 104, which provides limited exemptions from the state’s licensing requirements for qualifying mortgage lenders, mortgage brokers, and mortgage loan originators. Specifically, the amended exemptions include (i) bona fide nonprofit organizations, as well as employees acting as mortgage loan originators for public or charitable purposes; (ii) individuals operating as registered mortgage loan originators on behalf of exempt depository institutions and their subsidiaries, or institutions regulated by the Farm Credit Administration; (iii) certain sellers who self-finance five or fewer sales and are in compliance with the Act’s requirements; and (iv) employees of exempt federal, state, or local government agencies. Section AS 06.60.015(b)(4) is retroactively effective July 1, 2008. Sections 2, 6, and 7 are effective immediately, with the remainder of HB 104 taking effect January 1, 2020.
On June 7, the Hawaii governor signed HB 988, which provides 120-day temporary authority for certain mortgage loan originators to originate loans in Hawaii without a state license. Pursuant to Section 106 of the Economic Growth, Regulatory Relief, and Consumer Protection Act, the bill allows a federally-registered mortgage loan originator (MLO) holding an MLO license in another state while employed by a Hawaii-licensed mortgage company, to have temporary authority to act as a state-licensed MLO for a period not to exceed 120 days while the MLO’s Hawaii license application is pending. MLOs with temporary authority are subject to the applicable laws of Hawaii to the same extent as persons licensed by Hawaii. The bill is effective on November 24.
On June 20, the Maine governor signed LD 995, which establishes a student loan bill of rights to license and regulate student loan servicers. Notably, supervised financial organizations, financial institution holding companies, mutual holding companies, and their wholly owned subsidiaries are exempt from the entire requirements of the bill; and licensed banks, credit unions, and their wholly owned subsidiaries, as well as certain Maine financial institutions, are exempt from the licensing requirements.
The bill requires that any student loan servicer who is not exempt from the provisions of the bill—defined as, “a person, wherever located, responsible for the servicing of a student education loan to a student loan borrower”—obtain a license from the Superintendent of Consumer Credit Protection within the Department of Professional and Financial Regulation. Licenses may be renewed for 24-month periods, and renewal applications must be filed on or before September 1 of the year in which the license expires (or will be subject to a late fee); if not renewed, a license will expire on September 30 of the odd-numbered year following its issuance. Student loan servicers under contract with the U.S. Department of Education will be automatically issued limited, irrevocable licenses.
The bill requires non-exempt student loan servicers, including licensed banks or credit unions and their wholly owned subsidiaries, to comply with certain requirements, including (i) responses to written inquires; (ii) application of payments; and (iii) repayment program evaluations. Additionally, the bill prohibits student loan servicers from, among other things, (i) engaging in unfair or deceptive practices; (ii) misapplying payments; (iii) failing to report payment histories to credit bureaus; and (iv) failing to respond within 15 days to borrower complaints submitted to the servicer by the student loan ombudsman. Violations of the bill are considered an unfair trade practice under the Maine Unfair Trade Practices Act. The bill gives the Superintendent the authority to conduct investigations and examinations and requires the Superintendent to adopt rules implementing the legislation. The law is effective January 1, 2020.
On June 24, the Conference of State Bank Supervisors (CSBS) announced that financial regulators from 23 states have now agreed to a multi-state compact that will offer a streamlined licensing process for money services businesses (MSB), including fintech firms. As previously covered by InfoBytes, in February 2018, the original agreement included seven states. According to the announcement, 15 companies are currently involved in the initiative, and as of June 20, they have received 72 licenses. The 23 states participating in the MSB licensing agreement are: California, Connecticut, Georgia, Iowa, Idaho, Illinois, Kansas, Kentucky, Louisiana, Massachusetts, Mississippi. North Carolina, North Dakota, Nebraska, Ohio, Rhode Island, South Dakota, Texas, Tennessee, Utah, Vermont, Washington, and Wyoming.
On June 10, the Texas governor signed SB 2330, which provides, among other things, for a federally-registered mortgage loan originator (MLO) who does not hold a state license to have temporary authority to act as a state-licensed MLO for a period not to exceed 120 days while their state MLO license application is pending. Subject to certain conditions, a federally-registered MLO who becomes employed by an entity that is licensed or registered in Texas for mortgage loan origination may temporarily act as a state-licensed MLO in the state before their license is issued for up to 120 days if (i) the individual was registered in the Nationwide Mortgage Licensing System and Registry as a loan originator within one year of the state application; or (ii) is licensed by another state or governmental jurisdiction to engage in mortgage loan origination. The bill is effective on November 24.
On May 30, the Commonwealth Court of Pennsylvania reversed an order by the Pennsylvania Department of Banking and Securities Commission (Commission) issued against a mobile giving app and two of its executives (petitioner), holding that the petitioner was not required to be licensed by the Commission because it was not transmitting money under the court’s interpretation of the Pennsylvania Money Transmitter Act (Act). In 2016 the Compliance Office of the Department of Banking and Securities (Department) issued an order to cease and desist against the petitioner for transmitting money in the state without a license as required under the Act. At issue was whether petitioner’s activities constituted “transmitting money” under the Act, or merely involved collecting and supplying information. The Department claimed the petitioner’s app was “an indispensable part of a chain of events through which money was transferred from the donors to the recipients of the donations.” However, the petitioner argued that the app simply connected donors to the recipients, and that the actual transmission of money was outsourced to a payment processor who conducted the actual transactions.
The six-judge majority stated that the Commission’s interpretation of the Act was too broad, holding that “[o]n a basic and critical level, the Commission erroneously interpreted the terminology ‘engage in the business’ in an overly expansive manner and essentially read it as prohibiting any conduct that contributes toward—or has a tangential involvement with—the concrete and real act of ‘transmitting money.’” Moreover, “the key term in ascertaining the defining characteristic of the conduct that is proscribed by the statute is ‘transmitting,’” and while the petitioner’s “software application can be deemed to have acquired and ‘transmitted’ information vital to the donative transactions to [the payment processor], by no means was [the petitioner] ‘transmitting money’ itself, or transmitting some other ‘method for the payment’ of the donation, ‘from one person or place to another.’”
On May 22, the Minnesota governor signed HF 990, which exempts manufactured home dealers and salespersons from the state’s licensing requirements for residential mortgage originators. Under the bill, manufactured home dealers or salespersons qualify for the exemption if they (i) perform only clerical or support duties in connection with assisting a consumer in filling out a loan application; (ii) do not receive any direct or indirect compensation from any individual or company, in excess of the customary salary or commission, for assisting consumers with loan applications; and (iii) provide specified disclosures. The bill takes effect on August 1.
On May 10, the Office of the Illinois Secretary of State published in the Illinois Register a notice by the Department of Financial and Professional Regulation of adopted amendments to certain parts of its Residential Mortgage License Act. In general, the amendments impact independent loan processor licensing as well as residential mortgage loan bond and advertising requirements. Specifically, an independent loan processing entity must employ one or more licensed mortgage loan originators (MLO) to be in compliance with the Act’s supervision and instruction requirements. In addition, any advertisement appearing in the state by a licensee concerning residential mortgage loans must clearly and conspicuously include the following: (i) the Nationwide Multistate Licensing System and Registry (NMLS) Consumer Access homepage; and (ii) a licensee’s unique NMLS identifier. If a MLO is advertised, licensees are also required to include the MLO employee’s individual NMLS unique identifier, in addition to listing the licensee’s NMLS unique identifier. Furthermore, licensees are prohibited from including a NMLS unique identifier in any advertisement related to “activities other than residential mortgage lending or brokering” unless certain criteria are met. The amendments became effective immediately.
On May 15, the New Hampshire governor signed HB 649 to, among other things, amend the state licensing requirements for nondepository mortgage bankers, brokers, and servicers, as well as pawnbrokers and moneylenders. Specifically, licensing applicants must file with the banking commissioner a written verified application through the Nationwide Multistate Licensing System and Registry (NMLS) using the NMLS form, or by providing all the same information required on the application using the NMLS. Applicants must also file a statement of net worth. Finally, HB 649 defines what constitutes a “significant event” pertaining to a licensee’s practices with respect to consumer credit, small loans, debt adjustments, and money lending. The act became effective immediately.
- Amanda R. Lawrence to discuss "Navigating the challenges of the latest data protection regulations and proven protocols for breach prevention and response" at the ACI National Forum on Consumer Finance Class Actions and Government Enforcement
- Tim Lange to discuss "Ease your pain at the state level: Recommendations for navigating the licensing issues in the states" at the Online Lenders Alliance Compliance University
- Amanda R. Lawrence, Aaron C. Mahler, and Jonice Gray Tucker to discuss "Expanded role for the FTC ahead: Implications for bank and nonbank financial institutions" at an American Bar Association Banking Law Committee Webinar
- Buckley Webcast: Flirting with alternatives — Opportunities and challenges created by alternative data, modeling, and technology
- Daniel P. Stipano to discuss "Reporting requirements for credit unions: CTRs and SARs" at the National Association of Federally-Insured Credit Unions BSA Seminar
- Daniel P. Stipano and Moorari K. Shah to discuss "Vendor management: What is the NCUA looking for?" at the National Association of Federally-Insured Credit Unions BSA Seminar
- Sasha Leonhardt and John B. Williams to discuss "Privacy" at the National Association of Federally-Insured Credit Unions Summer Regulatory Compliance School
- Warren W. Traiger to discuss "CRA modernization" at the National Association of Industrial Bankers and the Utah Association of Financial Services Annual Convention
- Benjamin W. Hutten to discuss "Requirements for banking inherently high-risk relationships" at the Georgia Bankers Association BSA Experience Program
- Hank Asbill to discuss "Ethical guidance in conducting internal investigations – The intersection of Yates and Upjohn" at the American Bar Association Southeastern White Collar Crime Institute
- Brandy A. Hood to discuss "RESPA Section 8/referrals: How do you stay compliant?" at the New England Mortgage Bankers Conference
- Daniel P. Stipano to discuss "Risk management in enforcement actions: Managing risk or micromanaging it" at the American Bar Association Business Law Section Annual Meeting
- Daniel P. Stipano to discuss "Navigating the conflicting federal and state laws for doing business with cannabis companies" at the American Bar Association Business Law Section Annual Meeting
- Tim Lange to discuss "Services and value" at the North American Collection Agency Regulatory Association Annual Conference
- Amanda R. Lawrence to discuss "Data privacy litigation" at the Mortgage Bankers Association Regulatory Compliance Conference
- Jonice Gray Tucker to discuss "HMDA data is out, now what?" at the Mortgage Bankers Association Regulatory Compliance Conference
- Daniel P. Stipano to discuss "Assessing the CDD final rule: A year of transitions" at the ACAMS AML & Financial Crime Conference
- Daniel P. Stipano to discuss "Lessons learned from recent enforcement actions and CMPs" at the ACAMS AML & Financial Crime Conference
- Amanda R. Lawrence to discuss "How to balance a successful (and stressful) career with greater personal well-being" at the American Bar Association Women in Litigation Joint CLE Conference