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Financial Services Law Insights and Observations


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  • CSBS seeks comments on modernized NMLS

    On April 15, the Conference of State Bank Supervisors (CSBS) announced a request for public comments on proposed requirements for developing a new system to modernize and streamline the NMLS licensing application process and “[p]romote efficient operations and networked supervision among regulators.” Key components of the proposal include:

    • A three-part licensing framework that divides licensing requirements into three categories: core, business-specific, and license-specific, with the goal of providing a standard set of requirements for companies, individuals, and locations “regardless of the industry they are operating in or license types they hold.”
    • A listing and description of core requirements as applicable to companies and individual licensees.
    • An overview of the identity verification process all users will complete when creating a new user account in the modernized NMLS.

    CSBS emphasized that one of its Networked Supervision priorities is to establish a standardized licensing approach based on uniform requirements across all state nonbank financial regulatory agencies, and noted that the money services business industry will be the first industry to transition to the new system at some point in 2022. Comments on the proposal will be accepted through May 31.



    Licensing CSBS NMLS State Issues State Regulators Non-bank

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  • Maryland amends nondepository institution licensing provisions

    On April 13, the Maryland governor signed SB 251, which amends provisions related to licensing requirements for nondepository institutions. Among other things, the act (i) eliminates certain paper licenses for collection agencies, credit services, lenders, installment lenders, mortgage lenders, mortgage loan originators, sales finance companies, check cashing services, money transmission businesses, and debt management services; (ii) provides for the licensing of certain persons for certain activities through NMLS; (iii) outlines specific information to be included on NMLS-provided licenses; (iv) requires certain licensing information be conspicuously posted (with certain exceptions) at a licensee’s licensed location and on websites and software applications; (v) allows for the surrender of a license through NMLS in accordance with a process established by the state Commissioner of Financial Regulation; and (vi) requires notification to the Commissioner of certain licensee actions. The act takes effect October 1.

    Licensing State Legislation Mortgages Mortgage Servicing NMLS Non-Depository Institution

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  • Arkansas amends FMLA mortgage licensing provisions

    On April 1, the Arkansas governor signed SB 149, which amends provisions related to licensing requirements under the state’s Fair Mortgage Lending Act (FMLA). Among other things, the act (i) modifies certain definitions, including expanding the definition of a mortgage servicer to include a person that makes a payment to a borrower in the case of a home equity conversion mortgage or a reverse mortgage; (ii) clarifies the qualifications for licensure under the FMLA and outlines licensing renewal requirements; (iii) provides a process for the Arkansas Securities Commissioner to allow loan officers to work from a location that is not licensed as the principal place of business or branch office; (iv) modifies the process concerning notice of a change in name or address; and (v) requires licensees to establish and enforce written cybersecurity policies and procedures that comply with the FMLA and any regulations or orders promulgated thereunder. The act takes effect 90 days after adjournment of the legislature.

    Licensing State Legislation Mortgages Mortgages Servicing State Issues

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  • Mississippi reenacts licensing requirements

    On March 17, the Mississippi governor signed HB 1075, which will, among other things, reenact licensing provisions for lenders who provide “credit availability transactions” to customers through fully amortized loans paid over a term of four to 12 months. Under the act, transactions made by unlicensed lenders will be null and void. The act outlines licensing requirements, including those related to annual renewal fees, bond deposits, and expedited licensing requests. The provisions also allow the commissioner to “issue a temporary license authorizing the operation of a credit availability business on the receipt of an application for a license involving principals and owners that are substantially identical to those of an existing licensed credit availability licensee.” Temporary licenses will remain effective until a determination is made on the status of a permanent license. The act also outlines provisions for check cashing business, including licensing requirements and limits on other activities. The act takes effect July 1.

    Licensing State Issues State Legislation Consumer Lending Check Cashing

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  • Nebraska amends installment lender and money transmitter licensing requirements

    On March 17, the Nebraska governor signed LB 363, which amends certain licensing requirements for installment lenders and money transmitters. Among other things, LB 363 amends provisions of the Nebraska Installment Loan Act related to installment loan licenses and surety bonds to require “any person that holds or acquires any rights of ownership, servicing, or other forms of participation in a loan under the Nebraska Installment Loan Act or that engages with, or conducts loan activity with, an installment loan borrower in connection with a loan under the act” to obtain a license from the department. Additionally, licensees will be required to increase their surety bonds by $50,000 for each branch office licensed under the Nebraska Installment Sales Act. The act also provides that certain licensed persons that operate in the state as a collection agency, credit services organization, or that engage in debt management business are not required to be licensed under the Nebraska Money Transmitters Act. Additional amendments further address the expanded definition of a person engaged in money transmission, as well as investigation and examination authorities. The act takes effect immediately.

    Licensing State Issues State Legislation Money Service / Money Transmitters Installment Loans

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  • DFPI addresses several MTA licensing exemptions

    Recently, California’s Department of Financial Protection and Innovation (DFPI) released several new opinion letters covering aspects of the California Money Transmission Act (MTA) related to virtual currency, agent of payee rules, and transactions in which recipients are paid before a company is reimbursed. Highlights from the redacted letters include:

    • Agent of Payee Exemption Online Gaming/Sports Betting. The redacted opinion letter reviewed whether a company’s payment processing services—which allow customers to use bank accounts to purchase stored value redeemable for goods and services, including “e-commerce, digital goods, financial services, travel, and online gaming/sports betting”—require licensure under the MTA. DFPI concluded that the company’s “pay-in” transactions qualify for the agent-of-payee exemption where the merchant is the payee, the customer is the payor, and the company is the agent of the payee, because the pay-in transactions are ultimately for goods and services since the customer is purchasing stored value redeemable in a closed loop of issuing merchant, and the company’s master agreement with the merchant states that payment to the company satisfies the customer’s obligation to pay the merchant. However, DFPI noted that the agent-of-payee exemption does not apply to transactions involving refunds and the pay-out of winnings. Pay-out transactions, DFPI explained, “constitute ‘receiving money for transmission’ because the [company] receives money from the [m]erchants for transfer to the [c]ustomers” and the customer does not provide goods or services to the merchant for which payment is owed.
    • Agent of Payee Exemption – Payments to Daily Fantasy Sports Providers. The redacted opinion letter, which supersedes an interpretive opinion issued last August (covered by InfoBytes here), reviewed whether MTA licensure is required for a company that plans to offer U.S.-based merchant clients (primarily daily fantasy sports providers) an ACH payment platform to allow customers to use bank accounts to purchase credits for their accounts with the merchants. According to DFPI, pay-in transactions for stored monetary value “constitute ‘receiving money for transmission’”; however, DFPI noted that based on provided information, the pay-in activities qualify for the agent-of-payee exemption because the merchant is the payee, the customer is the payor, and the company is the agent of the merchant. Additionally, the company’s “receipt of funds from the [c]ustomer satisfies the [c]ustomer’s payment obligation to the [m]erchant for the goods or services.” Here, DFPI also explained that the pay-in transactions are closed loop since the customer’s stored value can only be redeemed for goods or services provided by the issuing merchant or its affiliate. DFPI further explained that “selling or issuing” closed loop stored value is excluded from the definition of money transmission. In both the first and second opinion letters, DFPI reiterated that MTA licenses cannot be issued to companies engaged in the transmission of money to facilitate unlawful activities, such as sports betting.
    • Purchase and Sale of Cryptocurrency. The redacted opinion letter concluded that a company’s activities, which are limited to buying and selling virtual currency directly from and to consumers via ACH or wire transfer, do not trigger the licensing requirements of the MTA because the activities do “not involve the sale or issuance of a payment instrument, the sale or issuance of stored value, or receiving money for transmission.”
    • Paying Recipients Before a Company is Reimbursed. The redacted opinion letter examined whether a company’s payment reimbursement model requires licensure under the MTA. The company offers transactions that result in beneficiaries being paid before the company receives money from the sender. The company “obtains a payment authorization on the customer’s debit card for the transaction,” and the debit card authorization then “puts a hold on the cardholder’s funds for the purchase and guarantees that [the company] will be paid.” Once the customer authorizes the transaction, the funds are instantly moved to the recipient’s wallet or bank account for immediate use. To be reimbursed, however, the company must initiate a second step, which actually processes the payment and converts the hold status to payment/post status. According to DFPI, the company’s payment reimbursement model does not involve transactions that constitute money transmission because the company “never ‘receives money for transmission. . ., does not actually or constructively receive, take possession of, or hold money or monetary value for transmission. . ., incurs no transmission liability,” or puts consumer funds at risk.

    Licensing State Issues DFPI California Money Transmission Act State Regulators

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  • CSBS announces new nonbank cybersecurity exam tool

    On February 24, during the Nationwide Multistate Licensing System Annual Conference, the Conference of State Bank Supervisors (CSBS) released an updated cybersecurity examination tool designed for nonbank financial company supervision. The tool is intended for state regulators to use during examinations, and CSBS encourages companies to use it monitor cybersecurity health between examinations. The tool is the newest addition to state regulators’ ongoing efforts to help nonbank companies—including fintech and payment companies, money transmitters, and mortgage companies—protect, mitigate, and respond to cyber threats. While the current tool is “considered a baseline assessment for less complex and lower risk institutions,” CSBS notes that an additional tool is currently under development for release in Q2 2021 for more complex institutions.

    Licensing State Issues CSBS Nonbank Privacy/Cyber Risk & Data Security State Regulators Fintech

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  • DFPI: Certain bitcoin ATMs/kiosks not subject to MTA licensure

    Recently, California’s Department of Financial Protection and Innovation (DFPI) released a new opinion letter covering aspects of the Money Transmission Act (MTA) related to bitcoin automated teller machines (ATMs) and kiosks. The letter explains that the sale and purchase of bitcoin through ATMs/kiosks in third-party retail locations described by the applicant company are not subject to licensure under the MTA because the sale and purchase of bitcoin from the company’s own inventory through a kiosk does not meet California’s definition of “money transmission.” In each instance, the transaction would only be between the consumer using the ATM/kiosk and the company, the bitcoin would be sent directly to the customer’s virtual currency wallet, and any bitcoin sold would be provided exclusively from the company’s own inventory. DFPI reminded the company that its determination is limited to the activities specified in the letter and does not extend to any other activities that the company may engage in. Moreover, the letter does not relieve the company from any FinCEN, federal, or state regulatory obligations.

    Licensing State Issues DFPI Virtual Currency State Regulators California Money Transmission Act

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  • Massachusetts establishes student loan servicer licensing provisions

    On January 14, the Massachusetts governor signed H. 5250, which provides new requirements for student loan servicers. Among other things, these provisions stipulate that servicers are not required to (i) be licensed as a debt collector, or (ii) be registered as a third-party loan servicer provided the servicer does not act, represent, operate, or hold itself out as a third-party loan servicer or a debt collector outside the scope of specified provisions. The bill also requires entities servicing student loans in the Commonwealth to be licensed, but exempts from the licensing requirement banks, credit unions, wholly-owned subsidiaries of banks and credit unions, and nonprofit or public institutions of higher education. H. 5250 also establishes a student loan ombudsman within the office of the attorney general who will be tasked with resolving complaints from student loan borrowers, and assisting student loan borrowers with repayment options, applying for loan discharges and forgiveness, and resolving billing disputes, among other things. Additionally, H. 5250 states that non-exempt student loan servicers must comply with all applicable state and federal regulations, and stipulates that the commissioner may conduct investigations and examinations and suspend licensure should a servicer be found to be in violation of the outlined provisions. In addition, should the commissioner determine that a servicer has committed fraud or engaged in unfair, deceptive, or dishonest actions, the commissioner may take action, including notifying the state attorney general or the student loan ombudsman, suspending or revoking the servicer’s license, and/or imposing an administrative penalty of no more than $50,000 per incident.

    Licensing State Issues Student Lending Student Loan Servicer State Legislation

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  • Florida amends licensing application procedures

    On December 29, the Florida Department of Financial Services, Office of Financial Regulation (the “Office”) amended rules related to the application procedures for prospective loan originator, mortgage broker , and mortgage lender licensees to provide an additional 45 days for submission of additional application information and to provide for the disposition of incomplete applications. Specifically, the amended rules allow the Office to grant an extension request of up to an additional 45 days to submit any requested information during the application process, so long as the request is made within the initial 45-day deadline. Should a license applicant fail to provide the additional requested information within the approved timeframe, the application will be removed from further consideration by the Office and closed. The amended rules are effective January 18.

    Licensing State Issues State Regulators Mortgage Origination Mortgage Broker

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