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On June 17, the Hawaii governor signed two bills into law. HB 2113 permits money transmitter license applicants to submit to either a state or federal criminal history record check, rather than both, upon application. SB 1105 establishes that, in addition to application fees, and any fees required by NMLS, a mortgage loan originator licensee must pay a mortgage loan recovery fund fee of $200, and upon application for renewal of a license, a mortgage loan originator licensee must pay $100. The bill also permits a person aggrieved by the fraud, misrepresentation, or deceit of a mortgage loan originator company licensee to receive restitution payment upon a final court order. The bills are effective July 1.
On May 27, the Illinois governor signed HB 5220, which makes various amendments to provisions related to the state’s Collection Agency Act. Among other things, the amendments strike language repealing specified provisions and add, amend, and strike certain definitions, including amending “financial institution” to include “consumer installment lenders, payday lenders, sales finance agencies, and any other industry or business that offers services or products that are regulated under any Act administered by the [Director of the Division of Financial Institutions].” The amendments further provide that an adjudicated finding by the FTC or other federal or state agency that shows a licensee violated the FDCPA or its rules is grounds for disciplinary action. Also, at the discretion of the Secretary (after having first received the recommendation of the Collection Agency Licensing and Disciplinary Board), an “accused person’s license may be suspended or revoked, if the evidence constitutes sufficient grounds for such action.” Moreover, the amendments restore language providing that the Department of Financial and Professional Regulation may obtain written recommendations from the Collection Agency Licensing and Disciplinary Board “regarding standards of professional conduct, formal disciplinary actions, and the formulation of rules affecting these matters.” The Act takes effect January 1, 2023.
Recently, the Massachusetts Office of Consumer Affairs and Business Regulation, Division of Banks announced final amendments effective May 27 to certain provisions of Regulation 209 CMR 42.00, which establishes procedures and requirements for the licensing and supervision of mortgage lenders under M.G.L. c. 255E. (See also redlined version of the final amendments here.) Specifically, the amendments:
- Add and amend certain definitions. The amendments add new terms such as “Bona Fide Nonprofit Affordable Homeownership Organization” and “Instrumentality Created by the United States or Any State,” and amend “Mortgage Broker” to also include a “person who collects and transmits information regarding a prospective mortgage loan borrower to a third party” that conducts any one or more of the following activities: (i) collects a prospective borrower’s Social Security number; (ii) views a prospective borrower’s credit report; (iii) obtains a prospective borrower’s authorization to access or view the borrower’s credit report or credit score; (iv) accepts an application; or (v) issues a prequalification letter.
- Add licensing exemptions. The amendments provide a list of persons that are not required to be licensed in the state as a mortgage broker or mortgage lender. These include: (i) lenders making less than five mortgage loans and persons acting as mortgage brokers fewer than five times within a 12 consecutive-month period; (ii) banks, national banking associations, federally chartered credit unions, federal savings banks, or any subsidiary or affiliate of the above; (iii) banks, trust companies, savings banks, and credit unions “organized under the laws of any other state; provided, however, that such provisions shall apply to any subsidiary or affiliate, as described in 209 CMR 42.0”; (iv) nonprofit, public, or independent post-secondary institutions; (v) charitable organizations; (vi) certain real estate brokers or salesmen; and (vii) persons whose activities are “exclusively limited to collecting and transmitting” certain quantities of specified information regarding a prospective borrower to a third party.
The amendments also specifically provide that “a person who collects and transmits any information regarding a prospective mortgage loan borrower to a third party and who receives compensation or gain, or expects to receive compensation or gain, that is contingent upon whether the prospective mortgage loan borrower in fact obtains a mortgage loan from the third party or any subsequent transferee of such information, is required to be licensed as a mortgage broker.”
On May 26, the Florida governor signed HB 389, which amends provisions related to money service businesses and related licensing requirements. The bill, among other things, replaces the term “officers” with “control person” and expands the definition of “control person” to designate the type of individuals that may be considered to control a licensee. As a result of this amendment, the bill sets forth and clarifies various requirements related to the vetting and reporting of control persons, as opposed to officers generally, going forward. The law is effective October 1.
On May 20, the Arizona governor signed SB 1580, which revises provisions related to money transmitters. The bill, among other things, provides that “a person may not engage in the business of money transmission or advertise, solicit or hold itself out as providing money transmission unless the person is licensed." The provision does not apply to “a person that is an authorized delegate of a person licensed under this article that is acting within the scope of authority conferred by a written contract with the licensee,” and to exempt persons provided the person “does not engage in money transmission outside the scope of the exemption.” The bill also creates provisions related to consistent licensure, application for licensure, and information requirements for certain individuals.
On May 20, the Florida governor signed SB 546, which amends certain provisions related to the making of consumer finance loans. The provisions allow persons applying for a license to make and collect loans under the Florida Consumer Finance Act (FCFA) “to provide certain documents in lieu of evidence of liquid assets,” including a surety bond, certificate of deposit, or irrevocable letter of credit. The bill also prohibits licensees from charging borrowers a prepayment penalty for paying all or part of a loan’s principle before the payment due date. Additionally, provisions related to the grounds for denying a license or taking disciplinary action for certain violations for the FCFA are modified to include “[f]ailure to maintain liquid assets of at least $25,000 or a surety bond, certificate of deposit, or letter of credit in the amount required by s. 516.05(10) at all times for the operation of business at a licensed location or proposed location.” SB 546 takes effect October 1.
On May 23, the California Department of Financial Protection and Innovation (DFPI) sent a notice to applicants and prospective applicants announcing unforeseen delays in the issuance of licenses under the Debt Collection Licensing Act. The FBI informed DFPI that new changes are needed to state agency protocols for requesting federal background checks. Prospective licensees are encouraged to continue submitting applications through the Nationwide Multistate Licensing System. DFPI stated that during this delay (which “is necessary to enable the Department to effectuate the licensing background check required under the Debt Collection Licensing Act”), “applicants may continue to engage in business, and the Department will not take action for unlicensed activity against applicants who filed their applications after December 31, 2021.” DFPI will reach out to applicants with instructions for submitting fingerprints for background checks when the process becomes available, and advised licensees that “[f]or purposes of including California debt collector license numbers when contacting or communicating with debtors as required under Civil Code section 1788.11, an applicant who has filed its application through NMLS may indicate “license number pending” or similar verbiage until a license is issued.” DFPI will notify applicants when it begins issuing licenses and encourages applicants to check the Department’s website for updates.
On May 17, the Connecticut governor signed S.B. 268, which makes various revisions to state banking statutes. Among other things, the bill establishes that a money transmission license is not transferable or assignable, but a licensee may be acquired under certain circumstances. The bill also establishes that the commissioner cannot approve a state-bank’s loan production office to be established unless the commissioner has considered the out-of-state bank's record of compliance. Additionally, the bill establishes certain definitions, including the meaning of “control”, “control person,” “key individual,” and “passive investor.” The bill is effective October 1.
On May 12, the Florida governor signed HB 273, which amends provisions related to money services business activities. The bill, among other things, revises provisions related to prohibited activities without a license and other requirements for written contracts between a money transmitter or payment instrument seller and an authorized vendor, and provides requirements for a money transmitter that receives virtual currency, among other things. The bill also establishes that “each money transmitter that receives virtual currency, either directly or through an authorized vendor, for the purpose of transmitting such virtual currency from one person to another location or person must at all times, until the transmission obligation is completed, hold virtual currency of the same type and amount owed or obligated to the other location or person.” The bill is effective January 1, 2023.
On May 2, the Georgia governor signed HB 891, which updates provisions related to licensing exemptions. The bill establishes that, starting on July 1, in addition to all other fees, license fees, fines, or other charges now or hereafter levied or assessed on the licensee, there is a fee of 0.125 percent of the gross loan amount. Further, such per loan fee becomes due on the making of any such loan, including, but not limited to, the closing of a loan, the renewal or refinancing of a loan, or a modification of a loan which results in the execution of a new or amended loan agreement. Additionally, the bill clarifies that the Department of Banking and Finance can issue cease and desist orders to persons that are not licensed. The bill also establishes that an individual cannot engage in the business of making installment loans or acting as an installment lender in Georgia unless that person is licensed. Among other things, the bill also makes conforming changes, provides definitions, and repeals conflicting laws.
- Buckley Webcast: State supervision, enforcement, and multistate coordination
- Benjamin W. Hutten to discuss “Latest on AML regulations and impact of economic sanctions” at a Mortgage Bankers Association webinar
- Hank Asbill to discuss “Ethical issues at sentencing” at the 31st Annual National Seminar on Federal Sentencing
- Benjamin W. Hutten to discuss “Fundamentals of financial crime compliance” at the Practicing Law Institute
- Benjamin W. Hutten to discuss “Ongoing CDD: Operational considerations” at NAFCU’s Regulatory Compliance & BSA Seminar