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Minnesota enacts student loan servicer, debt buyer provisions
On June 26, the Minnesota governor signed omnibus bill HF 6, which, among other things, creates a Student Loan Bill of Rights and outlines new provisions for student loan servicers. The act provides new definitions and, subject to exemptions, requires entities servicing student loans in the state to be licensed. The act outlines servicer duties and responsibilities, including those related to responding to borrower communications, applying overpayments and partial payments, handling student loan transfers, providing income-driven repayment program options, and maintaining records. Additionally, servicers are prohibited from (i) misleading borrowers; (ii) engaging in any unfair or deceptive practices or misrepresenting or omitting information related to a borrower’s student loan obligations; (iii) misapplying payments; (iv) knowingly or negligently providing inaccurate information; (v) failing to provide both favorable and unfavorable payment history to consumer reporting agencies; (vi) refusing to communicate with a borrower’s authorized representative; (vii) making false statements or omitting material facts connected “with any application, information, or reports filed with the commissioner or any other federal, state, or local government agency”; (viii) violating any federal, state, or local law; (ix) providing incorrect information regarding the availability of student loan forgiveness; and (x) failing to comply with outlined duties and obligations. Furthermore, the state commissioner has authority to conduct examinations; deny, suspend, or revoke licenses; censure servicers; and impose civil penalties.
Additionally, as part of the omnibus bill, the definition of “collection agency” now includes a “debt buyer,” which is defined as a “business engaged in the purchase of any charged-off account, bill, or other indebtedness for collection purposes, whether the business collects the account, bill, or other indebtedness, hires a third party for collection, or hires an attorney for litigation related to the collection.” The act also defines an “affiliated company” as “a company that: (1) directly or indirectly controls, is controlled by, or is under common control with another company or companies; (2) has the same executive management team or owner that exerts control over the business operations of the company; (3) maintains a uniform network of corporate and compliance policies and procedures; and (4) does not engage in active collection of debts.” The commissioner is also required to allow affiliated companies to operate under a single license and be subject to a single examination provided all of the affiliated company names are listed on the license. Under the act, debt buyers are required to submit license applications no later than January 1, 2022; however, a debt buyer who has filed an application with the commissioner for a collection agency license before January 1, 2022, and has a pending application thereafter, “may continue to operate without a license until the commissioner approves or denies the application.”
The provisions take effect August 1.
Montana adopts mortgage licensing requirements
On June 1, the Department of Administration of the State of Montana certified to the Secretary of State a new rule covering provisions related to, among other things, the revocation and suspension of mortgage licenses, the reinstatement of expired or suspended licenses, and applications for initial licenses near year end. Specifically, the rule provides that (i) the department may “suspend or revoke a license for a violation of the Montana Mortgage Act, this subchapter, or for any other violation of state or federal law pertaining to licensees or residential mortgage loans”; (ii) a military member or reservist whose license expired or was suspended when the licensee was on active duty at the time of renewal may have a license reinstated provided the department receives (within 30 days of the licensee’s discharge from active duty) an acceptable sponsorship request through the Nationwide Multistate Licensing System & Registry (NMLS) from the licensee’s employing mortgage broker or mortgage lender, as well as a completed mortgage loan originator license renewal or reinstatement form submitted separate from the NMLS renewal process during the same timeframe; and (iii) applicants who are approved for licensure during the renewal period of November 1 through December 31, and who are requesting the issuance of a license immediately, must submit certain application materials within a specified timeframe or their application will be deemed abandoned.
The rule also amends provisions related to mortgage licensing examination fees, the submission of consumer complaints, information-sharing arrangements, mortgage loan origination disclosure forms, and the certification process for bona fide not-for-profit entities.
Nevada passes licensing provision act
On June 3, the Nevada governor signed into law SB 453, a bill that revises provisions relating to certain persons licensed or certified by the Division of Financial Institutions of the Department of Business and Industry or the Commissioner of Financial Institutions (DFI). The amendments allow DFI to accept licensing applications through the Nationwide Multistate Licensing System & Registry (NMLS) for the following license types: (i) money transmitters; (ii) installment loans; (iii) uniform-debt-management; (iv) deferred deposit, high-interest, title loans, and check-cashing; (v) consumer litigation funding; (vi) private professional guardians; (vii) exchange facilitators; and (viii) collection agencies. Among other things, SB 453 authorizes the NMLS to accept license applications, fees, and renewals, conduct criminal background checks, and accept credit reports on behalf of DFI. SB 453 became effective upon passage and approval.
New Hampshire clarifies licensing requirements
On May 27, the New Hampshire governor signed HB 312, which clarifies certain deadlines and provisions in consumer credit applications and licensing requirements for mortgage loan originators. Among other things, HB 312 states that company licensees or persons must “deliver to the commissioner a list of all New Hampshire consumers who have contracted with the licensee or with whom the licensee is otherwise engaged in business regulated under this chapter, and other requested lists summarizing the business of the licensee, within 7 days of receipt of the request” or be subject to a $50 fine per day for each day. The bill further stipulates that a “license shall not be issued and effective unless the applicant or licensee is licensed or registered in the state where its principal office is located.” This provision modifies the previous requirements, in that it is now only applicable to nondepository mortgage bankers, brokers, and servicers, but no longer applies to mortgage loan originators. Additional provisions address, among other things, “examinations of family trust companies, delegation by credit union boards to committees, qualifications of the banking commissioner, and authorizing depository banks to elect benefit corporation status.” The act takes effect 60 days after its passage.
Texas amends wrap mortgage loan provisions and various licensing requirements
On May 24, the Texas governor signed SB 43, which amends various provisions related to residential mortgage loans, including those related to the financing of residential real estate purchases through the use of wrap mortgage loans, as well as various licensing and registration requirements. The act adds a new section related to wrap mortgage loan financing that will subject wrap loans to regulation like other mortgage loan products in order to provide certain protections for buyers and sellers, including written disclosures, tolling of limitations, closing requirements, and fiduciary duties. Among other things, the act defines certain terms, outlines exemptions, and will (i) prohibit a person from originating or making a wrap mortgage loan unless the person is licensed or registered to originate or make residential mortgage loans under certain statutory provisions, unless exempt; (ii) mandate specific disclosures related to wrap mortgages; (iii) authorize the savings and mortgage lending commissioner (commissioner) to conduct an inspection or investigation of a registered wrap lender; and (iv) authorize the commissioner to issue subpoenas and cease-and-desist orders to wrap lenders or wrap mortgage loan originators reasonably believed to have violated these provisions, and, if a violation is determined to have occurred, permits the commissioner to impose an administrative penalty of no more than $1,000 for each day of the violation. The commissioner may also seek injunctive relief. The act takes effect January 1, 2022.
CSBS seeks feedback on proposed MSB national licensing requirements
On May 24, the Conference of State Bank Supervisors (CSBS) announced a request for feedback on proposed national licensing requirements for money service businesses (MSBs). According to CSBS President and CEO John W. Ryan, the purpose of the proposal is to set “a national standard that allows the state system to operate as a single network while retaining local accountability and local control.” The proposal is based on a set of nationwide requirements reviewed by a lead state agency. According to the CSBS, the remaining state-specific requirements would be limited to items not covered by the national standards. Key aspects of the proposal include an overview of MSB-specific requirements and how they apply to companies, key individuals (the new name for what was previously referred to as “control persons”), and business location, in addition to proposed changes to the license application process for the MSB industry. The national standards for MSBs include core requirements for all applicants in all industries and MSB industry-specific requirements. The new requirements are expected to notably streamline the licensing process as part of efforts by state regulators to expand uniformity in state regulation through a strategy called Networked Supervision, which incorporates technology, data, and uniform practices to strengthen regulation.
Comments on the proposal must be submitted by July 23.
Vermont amends licensing provisions
On May 12, the Vermont governor signed SB 88, which amends various provisions related to insurance, banking, and securities, including those related to licensing applications and the annual renewal process. Among other things, the act (i) repeals certain licensing fees related to mortgage broker applications and loan servicer license renewals; (ii) increases the fee that licensees who do not timely file annual reports will be charged from $100 to $1,000 for each month or part of a month that the report is past due; (iii) specifies that mortgage loan originators and a licensee’s employees may work remotely provided they are assigned to a licensed location, are “adequately supervised by the licensee,” and meet any addition required conditions; and (iv) repeals certain provisions related to the surrender of a license in the event it is suspended, revoked, or terminated. The licensing amendments take effect immediately.
DFPI: Bitcoin ATM kiosk not subject to MTA licensure
Recently, California’s Department of Financial Protection and Innovation (DFPI) released three new opinion letters (see here, here, and here) covering aspects of the California Money Transmission Act (MTA) related to bitcoin automated teller machines (ATMs) and kiosks. The letters explain that the sale and purchase of bitcoin through an ATM kiosk as described by the inquiring companies is not subject to licensure under the MTA because it does not meet California’s definition of “money transmission.” In each instance, the transaction would only be between the consumer/bitcoin purchaser using the ATM kiosk and the respective company. DFPI reminded the companies, however, that its determination is limited to the activities specified in the letters and does not extend to any other activities that the companies may engage in. Moreover, the letters do not relieve the companies from any FinCEN, federal, or state regulatory obligations.
DFPI issues proposal on debt collector licensing applications
Recently, the California Department of Financial Protection and Innovation (DFPI) issued a notice of proposed rulemaking (NPRM) to adopt new requirements for debt collectors seeking to obtain a license to operate in the state. As previously covered by InfoBytes last September, California enacted the “Debt Collection Licensing Act” (the Act), which requires a person engaging in the business of debt collecting in the state, as defined by the Act, to be licensed and provides for the regulation and oversight of debt collectors by DFPI. Under the Act, debt collection licenses will be required starting January 1, 2022; however, debt collectors who submit applications before January 1, 2022 will be allowed to operate while their applications are pending.
Among other things, the NPRM seeks to:
- Include new sections for definitions of key terms, such as affiliate, debt buyer and debt collector.
- Adopt several licensing application forms and require applicants to apply for a license through the Nationwide Multistate Licensing System & Registry (NMLS).
- Provide requirements for obtaining a debt collector license, including for affiliates applying for a single license.
- Add other licensure requirements, including requiring applications to (i) identify all direct owners, executive officers, and indirect owners; (ii) include the principal place of business, in addition to all branch locations; (iii) submit background checks and fingerprints; (iv) submit to a credit report check; and (v) post surety bonds of at least $25,000.
- Specify the information required to enable the Commissioner of Financial Protection and Innovation to investigate applicants to determine whether they meet the standards for licensure.
- Outline the process for challenging information entered in NMLS, as well as the grounds for which the Commissioner may deny an application.
According to DFPI’s notice, if adopted, the final rule would take effect on or about November 19, 2021 and permit debt collectors to apply for a license prior to January 1, 2022. Additionally, DFPI announced its intention to adopt additional regulations later in 2022 to specify the requirements for maintaining books and records and set forth the amounts required for a surety bond based on a licensee’s volume of debt collection activity.
Comments on the NPRM are due by June 8.
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.