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Iowa enacts new money transmission provisions
On April 10, Iowa’s governor signed into law HF 2262 (the “Act”) relating to money transmission services. The Act will exempt a person appointed as an agent of a payor for purposes of providing payroll processing services from licensure, provided that their agreement and services meet certain conditions. The Act will also allow the superintendent to suspend or revoke a licensee’s license, should they, among other things: (i) violate the Act; (ii) fail to cooperate with an examination or investigation conducted by the superintendent; (iii) engage in willful misconduct or blindness and, which leads to a conviction of an authorized delegate for violating a state or federal anti-money laundering statute, or violates the Act, a rule adopted under the Act, or an order issued under the Act; or (iv) engage in an unsafe or unsound practice. Further, the Act will detail different scenarios in which the superintendent may pursue an enforcement action. For instance, if the superintendent determined any violations were “likely to cause immediate and irreparable harm to the licensee, the licensee’s customers, or the public, or cause insolvency” the superintendent may issue a cease and desist order. Finally, the Act will provide guidelines for investigations, civil penalties, criminal penalties, and administrative proceedings. The Act became effective upon enactment and will apply retroactively to July 1, 2023.
Wisconsin updates licensing and regulation of financial services providers
On April 4, Wisconsin enacted SB 668 (the “Act”) which will amend many provisions to the Wisconsin Department of Financial Institution’s (DFI) regulation of non-banks. According to an analysis by the state’s Legislative Reference Bureau, the Act will change how multiple financial practices are regulated and rely on the Nationwide Multistate Licensing System and Registry (NMLS). The Act will allow Wisconsin to use NMLS to administer licensing needs concerning consumer lenders, payday lenders, collection agencies, sales finance companies, money transmitters, mortgage bankers and brokers, adjustment service companies, community currency exchanges, and insurance premium finance companies. The amendments were modeled after the Model Money Transmission Modernization Act approved by the CSBS.
The Act will require licensees to provide information directly to NMLS. For collection agencies, the Act will eliminate the requirement that a collector hold a separate license from the one held by his employer, update the definition of collection agency to add the exception for mortgage bankers, and require separate collection agency licenses for each place of business, among others – including repeals. As to consumer lenders, the Act will better define consumer loans, specify provisions governing licensed lenders, and specify which activities require licensure. With respect to sellers of checks and money transmitters, the Reference Bureau noted three provisions governing licensing and regulation of money transmitters will be replaced by the MTMA. This will include registering a license through the NMLS; granting the power to suspend, revoke, or refuse renewal of a license to the DFI; and allowing a licensed money transmitter to conduct business through an authorized delegate; among others. The Act also updated NMLSR requirements and DFI powers concerning payday lenders, sales finance companies, adjustment service companies, community currency exchanges, and insurance premium finance companies.
Arizona enacts new money transmission requirements
On April 8, the Governor of Arizona signed into law SB 1034 which will amend money transmission requirements for licensees. The new law will require a licensee, before transmitting any money (either in person or electronically), to provide consumer fraud warnings on the associated risks and dangers, instructions on how to stop a money transmission (if that option is available), and a statement that the money not be returned after the transmission is completed. The law will not apply to (i) an electronic funds transfer to another person that is not available for immediate use, (ii) electronic funds transfers made with a gift certificate, and (iii) a licensee that can provide proof of presenting its employees an annual fraud prevention training that covers “the indicia of fraud associated” with electronic money transfers. The law will go into effect on July 7 (90 days after enactment).
West Virginia updates licensing of mortgage brokers and lenders
On March 26, the Governor of West Virginia signed into law SB 613, a bill that amended certain statutes regarding mortgage broker, lender, and loan originator licensing requirements. The bill updated definitions relating to the licensure and regulation of mortgage brokers, lenders, and loan originators, permitted the Commissioner of Financial Institutions to participate in the multistate licensing and examination process, and updated net worth requirements to use generally accepted accounting principles. The bill also established new information requirements for applicants and individuals involved in a change of control, requiring fingerprints, credit reports, and judicial findings to be provided to the NMLS and Registry.
This bill also amended the West Virginia Mortgage Licensing Act to permit employees of a mortgage broker, lender, or servicer to perform remote work, subject to appropriate data security requirements, monitoring, and others. SB 613 will go into effect on June 3.
South Dakota enacts new money transmission law, aligning the law to the Money Transmission Modernization Act
Recently, the Governor of South Dakota, Kristi Noem, signed into law SB 58, which amended and repealed many parts of the state’s money transmission law enacted in 2023 to bring the law more into alignment with a model Money Transmitter Model Law. South Dakota was one of several states that have enacted the model law since 2022 (covered by InfoBytes here, here, here, and here), to harmonize the licensing and regulation of money transmitters between states.
Among many other new provisions, the Act defined “money” to mean a “medium of exchange that is authorized or adopted by the United States or a foreign government” but excluded any central bank digital currency. Additionally, the Act provided for several exemptions, such as the “agent of a payee” exemption, which exempted an agent who collects and processes payment from a payor to a payee for goods and services other than money transmission itself from the Act’s coverage, under certain specified circumstances.
The Act also imposed a licensing regime on persons engaged in the business of money transmission and authorizes and encourages the South Dakota Director of the Division of Banking (Director) to coordinate the licensing provisions with other states and utilize the Nationwide Multistate Licensing System for the license applications, maintenance, and renewals. SB 58 amended the required surety bond amount from $100,000 to $500,000, to the greater of $100,000 or an amount equal to the licensee’s average daily money transmission liability in South Dakota for the most recent three-month period, up to a maximum of $500,000, or if the licensee’s tangible net worth exceeds 10% of total assets, $100,000.
Once a license application is completed, the Director will have 120 days to approve or deny the application. In addition to the license application process, the Act also outlined the criteria for renewing, maintaining, and changing control of the license, as well as the licensee’s responsibility to keep records and maintain permissible investments. Notably, if a licensee is transmitting virtual currencies, then the licensee must “hold like-kind virtual currencies of the same volume as that held by the licensee but that is obligated to consumers” instead of the permissible investments otherwise listed under the Act. The Act will go into effect on July 1.
Oregon amends money transmission law with respect to a required security device
On January 9, the State of Oregon enacted a new bill on money transmission licensing, specifically stating that “each license application shall be accompanied by a security device in the amount of $25,000.” A security device is defined by Oregon law as a surety bond or an irrevocable letter of credit. If an applicant engages in business at more than one location, the security device will increase by $5,000 per location, with a maximum of $150,000. The bill further states that in place of security devices, an applicant could deposit securities such as interest-bearing stocks, bonds, notes, etc., and be held under the same obligations as the security device. The bill concludes that the security device will remain in effect until its cancellation and remain in place no longer than five years following a licensee ceasing its money transmission operations in Oregon. In the event of the bankruptcy of the licensee, the security device will be held in trust for the benefit of purchasers and holders of the licensee’s outstanding payment instruments.
Idaho Department of Finance publishes proposed rule changes on its Mortgage Practices Act
On January 3, the Idaho Department of Finance published a bulletin on proposed rule changes to Vol. 23-10 of the Idaho Administrative Bulletin, specifically to section 12.01.10 – Rules Pursuant to The Idaho Residential Mortgage Practices Act; a redline of the bill’s section changes is here. According to the bill, the rule changes aim to “reduce regulatory burden by removing outdated requirements,” and the rulemaking changes were made pursuant to Executive Order 2020-01.
There were several changes to the bill. First, the section on “Deceptive Advertising” was struck from the bill. Second, and under “Written Disclosures,” the portion on “Receipt of an Application” was struck from the bill. Third, and under “Prohibited Practices” and further under “Engage in Deceptive Advertising,” the proposed changes include the addition of two subsections: one on engaging in bait and switch advertising; and another on misleading someone to believe a solicitation is from a person’s current mortgage holder, or government agency, among others. Fourth, the section on “Borrowers Unable to Obtain Loans” was struck entirely.
DFPI opens comment period for the Digital Financial Assets Law
On November 20, DFPI announced it is seeking public comment before it begins its formal rulemaking process on its Digital Financial Assets Law (DFAL), which was enacted on October 13. As previously covered by InfoBytes, DFAL created a licensing requirement for businesses engaging in digital financial asset business activity and is effective on July 1, 2025.
For comments that recommend rules, DFPI encourages comments that “propose specific rule language and provide an estimate, with justification, of the potential economic impact on business and individuals that would be affected by the language.” Additionally, DFPI requests metrics, applicable information about economic impacts, or quantitative analysis to support comments. Among other topics, DFPI especially asks for comments related to (i) application fees and potential fee adjustments based on application complexity; (ii) surety bond or trust account factors; (iii) if capital minimums should vary by the type of activity requiring licensure; and (iv) its stablecoin approval process.
Comments must be received by January 12, 2024. On January 8, 2024, DFPI will host a Virtual Informal Listening Session with stakeholders to discuss feedback on this informal invitation for comments.
Utah Court of Appeals affirms ruling for debt buyer engaged in unlicensed collection efforts
The Utah Court of Appeals affirmed a lower court’s ruling against a debt buyer that acquired a portfolio of bad debts from borrowers all over the country, including residents of Utah. The debt buyer collected on the portfolio of debts by retaining third-party debt collectors or, in some instances, attorneys to recover such debts by filing lawsuits. The debt buyer was not licensed under the Utah Collection Agency Act (UCAA). As such, the plaintiffs argued that the debt buyer’s collection efforts were “deceptive” and “unconscionable” under the Utah Consumer Sales Practices Act.
The lower court ruled for the debt buyer on the grounds that failure to obtain a license, without more, did not rise to the level of “deceptive” or “unconscionable” conduct. Further, the UCAA does not have a private right of action.
Utah recently repealed the collection agency’s license, effective May 3, 2023 (covered by InfoBytes here).
CSBS offers guidance for licensees to prepare for NMLS renewal
On October 24, CSBS released tips for licensees to prepare for NMLS renewal. As previously covered by InfoBytes, NMLS announced it will be rolling out a new version of its mortgage call report which will include new requirements for many licensees. Kelly O'Sullivan, the chair of the NMLS Policy Committee and deputy commissioner of the Montana Division of Banking and Financial Institutions, advises licensees to proactively update their information in NMLS and make use of available training and resources to address their queries before the renewal period begins. This is particularly crucial for those individuals who typically only engage with NMLS during the license renewal phase.
CSBS recommended five essential tips for licensees:
- Licensees should log into NMLS and thoroughly review and update their profile record to ensure accuracy;
- Licensees should reset their NMLS password in advance to have a current password ready for accessing NMLS when needed;
- Licensees should provide and maintain a current email address to receive essential updates from NMLS during the renewal process;
- Licensees should review state-specific renewal requirements, as state agencies typically begin publishing details, including deadlines and fees, in September;
- Licensees are encouraged to take advantage of the free, on-demand renewal training resources provided by CSBS to become familiar with the renewal process.