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OCC updates licensing booklets
On February 28, the OCC issued Bulletin 2022-5 announcing the revision of the Articles of Association, Charter, and Bylaw Amendments, Fiduciary Powers, Subordinated Debt, and Subsidiaries and Equity Investments booklets of the Comptroller’s Licensing Manual. The updated booklets replace the booklets of the same title issued between June 2017 and January 2019. Among other clarifying changes, the updated booklets: (i) reflect recent updates to 12 CFR 5 and other regulations; (ii) remove references to outdated guidance and provide current references; and (iii) make other minor modifications and corrections.
Montana adopts NMLS forms and procedure amendments
Recently, the Montana Department of Administration adopted Nationwide Multistate Licensing System & Registry standardized forms and procedures that include, among other things, information and updates on: (i) escrow business licenses; (ii) definitions for mortgage licensees; (iii) revocation, suspension, or surrender of mortgage licenses; (iv) sales finance company licenses; and (v) consumer loan license surrender. The provisions became effective February 12.
DFPI reminds licensees of March 15 CFL annual report filing deadline
On February 17, the California Department of Financial Protection and Innovation (DFPI) issued a reminder to all licensees under the California Financial Law (CFL) that annual reports are due to the commissioner by March 15. Forms and instructions for submitting the 2021 annual report are available on DFPI’s CFL webpage. DFPI also warned licensees that the commissioner may suspend or revoke a licensee’s license if an annual report is not submitted by the deadline. Specifically, Financial Code section 22715(a) states that the “commissioner may by order summarily suspend or revoke the license of any licensee if that person fails to file the report required by Section 22159 within 10 days after notice by the commissioner that the report is due and not filed. If, after an order is made, a request for hearing is filed in writing within 30 days and the hearing is not held within 60 days thereafter, the order is deemed rescinded as of its effective date.” DFPI also provided a penalty matrix reflecting assessable penalties based on a late-filing date.
Pennsylvania amends certain mortgage licensing requirements
On February 3, the Pennsylvania governor signed HB 1588, which makes various amendments to the Pennsylvania Consolidated Statutes related to mortgage loan industry licensing requirements. Among other things, the amendments make several updates to the definition of remote location, installment sales contract, mortgage loan correspondent, mortgage originator, qualifying individual, and wholesale table funder. The bill also provides new licensed activity exceptions. Specifically, a mortgage lender may act as a mortgage broker or mortgage loan correspondent without obtaining separate mortgage broker/mortgage loan correspondent licenses. Additional amendments relate specifically to mortgage loan correspondents, including prelicensing and continuing education requirements; mortgage loan business prohibitions; licensing suspension, revocation, and refusal provisions; and licensing application guidelines related to, among other things, surety bonds, minimum net worth, and the designation of qualifying individuals for a mortgage loan correspondent’s principal place of business and branch locations. Certain provisions take effect immediately, while the remainder of the changes take effect in 60 days.
DFPI addresses several MTA licensing exemptions
Recently, the California Department of Financial Protection and Innovation (DFPI) released two new opinion letters covering aspects of the California Money Transmission Act (MTA) related to the purchase and sale of digital assets and agent of payee rules. Highlights from the redacted letters include:
- Purchase and Sale of Digital Assets; Payment Processing Services. The redacted opinion letter examines whether the inquiring company’s client is required to be licensed under the MTA. The letter describes two types of transactions proposed to be conducted on the client’s online trading platform: (i) transactions in which customers purchase and sell digital assets from the company in exchange for fiat currency (Direct Purchase Transactions); and (ii) transactions in which merchants use the platform as a payment processor to accept digital assets from customers in exchange for non-fungible tokens (Payment Processing Transactions). DFPI concluded that the Direct Purchase Transactions do not require an MTA license because they do not “involve the sale or issuance of a payment instrument, the sale or issuance of stored value, or receiving money for transmission.” DFPI similarly concluded that the Payment Processing Transactions do not require licensure at this time because DFPI has “not yet determined that payment processing transactions involving digital assets constitute receiving money for transmission[.]” Notwithstanding, DFPI added that it has been “studying the cryptocurrency industry closely” and that “[a]t any time, the Department may determine these activities are subject to regulatory supervision. The Department may also adopt regulations or issue interpretive opinions that significantly restrict [the contemplated] business operations.”
- Agent of Payee. The redacted opinion letter addresses whether the inquiring company’s proposed payment processing activities are exempt from the MTA’s licensing requirements. The letter explains that the company proposes to process payments related to purchases of apps through a virtual marketplace that operates on the company’s point of sale terminals. Through the virtual marketplace, customers (generally small businesses or merchants) may purchase apps that are developed and licensed to customers by third-party developers. Pursuant to a developer agreement, the company is appointed by such third-party developers to act as an “agent” of the developers “to collect and hold all Gross Revenue on [the developers’] behalf and to remit the Remittance Amount to [the developers’] Payment Account.” DFPI concluded that receiving funds from a customer for the purposes of transmitting payments to the developer “constitutes ‘receiving money for transmission.’” However, DFPI noted that these activities also satisfy the “agent of payee” exemption requirements because, pursuant to the developer agreement, the company acts as an agent of the developer, and the company’s receipt of payment satisfies “the customer’s (payor’s) obligation to the Developer for goods or services.” Accordingly, DFPI concluded that while the activities described constitute “money transmission” the company is exempt from the MTA’s licensure requirement.
DFPI reminded the companies that its determinations are limited to the presented facts and circumstances and that any change could lead to different conclusions.
DFPI reminds licensees about submitting annual reports
On January 5, the California Department of Financial Protection and Innovation (DFPI) announced that, pursuant to Financial Code section 22159(a), all DFPI California Financing Law licensees are required to submit their annual reports by March 15, even if the licensee had no business activity during the 2021 calendar year. According to DFPI, pursuant to Financial Code section 22715(b), failing to submit the annual report by March 15 will result in penalties. Among other things, DFPI also noted that the form and instructions for submitting the Annual Report are available on DFPI’s website, and that the annual report must be submitted electronically through the DFPI portal.
Collection agency must pay $100,000
On January 10, the Connecticut Department of Banking (Department) issued an order against a California-based collection agency (respondent) for failing to request a hearing within the prescribed time period after a notice regarding submission of certain information was sent by the Department. According to the order, the Department sent the respondent an information request and after requesting additional time to supply the information, the respondent notified the Department that it was voluntarily surrendering its license to collect in Connecticut. However, the respondent still failed to submit the requested information, which the state said is mandatory before it would consider the surrender of the respondent’s license. The Department ordered the respondent to cease and desist from violating Section 36a-17(e) of the Connecticut General Statutes and to pay a $100,000 civil money penalty. The Department also revoked the respondent’s license to act as a consumer collection agency in Connecticut.
DFPI adopts debt collector license application and requirements
On December 22, the California Department of Financial Protection and Innovation (DFPI) adopted regulations, beginning at section 1850, title 10 of the California Code of Regulations, under the Debt Collection Licensing Act. As previously covered by InfoBytes, in July, DFPI issued a notice of proposed rulemaking to incorporate changes to its debt collection licensing requirements and application. Among other things, the regulations set forth the: (i) application form and procedures for filing a license application through the Nationwide Multistate Licensing System & Registry (NMLS); (ii) requirements for a licensee to maintain information filed through the NMLS current; and (iii) procedures for surrendering a license as a debt collector.
DFPI acknowledges challenges in obtaining a NMLS account
On December 23, the California Department of Financial Protection and Innovation (DFPI) released a notice on its website regarding DFPI’s awareness of a “temporary slowdown in obtaining a new Nationwide Multistate Licensing System or NMLS account.” DFPI noted that it is “working cooperatively with the NMLS team to be able to verify those that have attempted to apply.” DFPI observed that “[w]ith various DFPI year-end deadlines, the NMLS team is experiencing an unprecedented volume of account requests.” DFPI further acknowledged the “predicament this puts entities in who are trying to comply with the new debt collector licensing requirement to apply for a license by Dec. 31, 2021,” and stated it “will not take any action against a debt collector solely on the basis of the temporary slowdown with NMLS.”
DFPI extends NMLS transition for CFL licensees to March 15, 2022
On December 16, the California Department of Financial Protection and Innovation (DFPI) extended the deadline for California Financing Law (CFL) licensees to transition their licenses to the Nationwide Multistate Licensing System & Registry (NMLS) from December 31 to March 15, 2022. All licensees not yet on NMLS must establish an account in NMLS and submit their information on or before the new March deadline. Licensees may access state-specific checklists on the NMLS transition here in addition to DFPI FAQs for additional guidance. Find continuing InfoBytes coverage on the CFL here.