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Financial Services Law Insights and Observations


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  • CSBS releases Uniform Money Transmission Modernization Act

    On September 9, the Conference of State Bank Supervisors (CSBS) released the Uniform Money Transmission Modernization Act as part of states’ broader effort for modernizing the state financial regulatory system. The act, also referred to as the Money Transmitter Model Law, is intended to replace 50 sets of state-specific money transmitter laws and rules with a single set of nationwide standards and requirements designed by state and industry experts. According to CSBS, the law is a result of continuing discussion among state regulators and industry that began under CSBS’ “Vision 2020”, which convened a Fintech Industry Advisory Panel to determine pain points in the state system (previously covered by InfoBytes here). Among other things, the law: (i) “[p]rovides regulators with the tools needed to regulate money transmitters of all sizes, including those that operate globally or small businesses operating locally”; (ii) standardizes definitions, exemptions, the licensing process, the change in control process, and requirements regarding safety and soundness; (iii) enables multistate licensing and multi state supervision; and (iv) “[f]acilitates the development of technology and data analytics necessary to supervise at scale with local accountability.” CSBS also notes that the law will benefit customers of companies that offer digital wallets, prepaid cards, money orders and cash or virtual currency transmissions by establishing a common regulatory floor and standardized and risk-based requirements.  In addition to the law, CSBS released Money Transmitter Model Law FAQs and Fintech Industry Advisory Panel Recommendations.

    Licensing Money Service / Money Transmitters CSBS Fintech Vision 2020

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  • DFPI: Debt collection licensing applications due before January 1

    On September 1, the California Department of Financial Protection and Innovation (DFPI) announced that all debt collectors operating in California can apply to be licensed by the DFPI, which portrays the initial step in increased state oversight including an assessment of applications, formal examinations, and protections for California consumers. As previously covered by InfoBytes, as required under SB 908, all debt collectors must submit a license application prior to Jan. 1, 2022, to continue operating in California next year and authorizes the DFPI to take in borrowers’ complaints and enforce violations. Debt collectors, debt buyers, and debt collection attorneys operating in the state can submit their license applications here at the Nationwide Multistate Licensing System (NMLS), which requires financial and other information electronically, starting September 1. The announcement notes that, “[a]ny debt collector collecting debt in the state of California must submit an application on or before Friday, Dec.  31, 2021.”  When a debt collector has submitted an application, “they may continue operating as a debt collector in California while the application is pending,” according to the DFPI. However, the applicant will be required to wait for the issuance of a license prior to continuing operations in the state if an application is submitted after December 31.

    Licensing State Issues State Regulators DFPI NMLS Debt Collection

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  • DFPI issues second Debt Collection Licensing Act proposed rulemaking

    On August 19, the California Department of Financial Protection and Innovation (DFPI) issued an invitation for comments on a proposed second rulemaking (NPRM) under the Debt Collection Licensing Act (the Act). As previously covered by InfoBytes, in 2020, California enacted 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. Earlier in April, DFPI issued an NPRM to adopt new debt collector licensing requirements (covered by InfoBytes here). The most recent NPRM, among other things, seeks further input from stakeholders on topics related to:

    • The scope of the Act as related to several definitions, including “debt,” “debt collection,” “person,” “consumer credit transaction,” “debt collector,” and “debt buyer,” to determine if additional clarity is necessary and whether these definitions are the same as those in California’s Rosenthal Fair Debt Collection Practices Act (Rosenthal Act) and the Fair Debt Buying Practices Act (FDBPA).
    • Whether certain terms related to definition of a debt collector, such as “engage in the business of debt collection,” “in the ordinary course of business,” or “regularly,” require clarifying regulations.
    • Whether additional clarification is needed concerning entities or transactions exempt from the Act’s requirements.
    • Whether the term “due or owing” is clear with respect to the definition of a “debtor.”
    • Whether additional clarification is needed regarding DFPI’s authority to enforce the Rosenthal Act and the FDBPA. Under the Act, DFPI has the “authority to enforce the Rosenthal Act and the FDBPA against persons required to be licensed under the [Act] and persons expressly exempt from licensure, including certain federally regulated entities.”

    The NPRM also addresses certain provisions related to annual reports and bond amounts. Comments on the most recent proposed rulemaking are due October 5, and may be sent electronically to

    Licensing State Issues DFPI State Regulators Debt Collection

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  • Illinois amends Real Estate Appraisal Licensing Act

    On August 25, the Illinois governor signed into law HB 0806, which amends the Illinois Real Estate Appraiser Licensing Act (the Act), among other things, to include provisions regarding that all applicants and licensees under the Act shall provide a valid address and email address to the Department of Financial and Professional Regulation and creates provisions regarding: (i) inactive licenses; (ii) citations; and (iii) illegal discrimination. Specifically, the bill changes provisions concerning license necessity, use of title, and exemptions stating that, “[i]t is unlawful for any person, including any entity, to act or assume to act as a home inspector, to engage in the business of home inspection, to develop a home inspection report, to practice as a home inspector, or to advertise or hold oneself out to be a home inspector without a home inspector license issued under this Act.” The bill also changes provisions regarding applications for a(n) (i) state certified general real estate appraiser, (ii) state certified residential real estate appraiser, and (iii) associate real estate trainee appraiser, in addition to the duration of application and renewal of license, among other things. This bill is effective January 1, 2022, except for the provisions amending the Regulatory Sunset Act.

    Licensing State Issues State Legislation Illinois Real Estate Appraisal

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  • DFPI addresses MTA licensing exemptions

    Recently, the California 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 and agent of payee rules. Highlights from the redacted letters include:

    • Agent of Payee – Fund Transfers in Connection with Real Estate Closing Transactions. The redacted opinion letter reviewed whether a company—licensed as a money transmitter in several states, including California, and registered with FinCEN as a money services business—is eligible for the agent-of-payee exemption under the MTA. The company proposes to “facilitate fund transfers in connection with real estate closing transactions” during which it “will be authorized to receive real estate closing funds on behalf of its customer (the seller of real estate).” The payment funds will first flow from the buyer of real estate to the company via the buyer’s lawyer or title company, and then from the company to the seller after the company converts the funds from U.S. dollars to another currency. By providing these services, the company, as the seller’s agent, will receive money from the buyer pursuant to a preexisting written contract between the company and the seller. DFPI concluded that “[t]o the extent these fund transfers take place in California or are with, to, or from persons located in California, [the company’s] services constitute “receiving money for transmission” because [the company] receives money from the buyer for transfer to the seller.” However, DFPI noted that a provision in the written contract, which appoints the company as the agent of the seller when the seller is located in California, allows the company’s services to satisfy the requirements of the agent-of-payee exemption in Financial Code section 2010, subdivision (l). The agent-of-payee exemption, DFPI stressed though, does not apply to sellers outside of California. 
    • Bitcoin ATM Kiosk. Two redacted opinion letters (see here and here) examined whether the sale and purchase of bitcoin through ATMs/kiosks described by the companies is subject to licensure under the MTA. In each instance, the transaction will only be between the consumer using the ATM/kiosk and the company, the transaction will be completed instantly without involving third parties, and any bitcoin sold will be provided from the company’s own inventory. Moreover, the letters state that the companies do not hold virtual currency on behalf of customers nor do they act in a fiduciary capacity. Because the companies’ activities are limited to selling bitcoin, DFPI determined that an MTA license is not required 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.” DFPI reminded the companies that its determination is limited to the activities specified in the letters and does not relieve them from any FinCEN, federal, or state regulatory obligations.

    Licensing State Issues DFPI State Regulators California Money Transmission Act Virtual Currency Money Service / Money Transmitters

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  • DFPI’s CFL final regulations take effect October 1

    Recently, the California Department of Financial Protection and Innovation (DFPI) reminded licensees and Property Assessed Clean Energy (PACE) program administrators that new final regulations under the California Financing Law (CFL) will take effect October 1. According to DFPI’s final statement of reasons, the regulations, among other things, amend existing licensing rules to transition all licensees under the CFL to registration through the Nationwide Multistate Licensing System (NMLS). New CFL license applications must be submitted through the NMLS on or after October 1, while existing licensees not yet on the NMLS must transition to the system by December 31. Additionally, the final regulations implement AB 1284, which was signed into law in 2017 and, among other things, requires a private entity that administers a PACE program on behalf of a public agency to be licensed under the CFL (covered by InfoBytes here). These private PACE program administrators must also comply with several new regulatory provisions, including those related to advertising standards and disclosures. Additional information for licensees transitioning to NMLS can be accessed through DFPI’s FAQs.

    Licensing State Issues DFPI PACE Programs NMLS State Regulators California Financing Law

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  • DFPI proposes small-dollar lending pilot

    On August 6, the California Department of Financial Protection and Innovation (DFPI) issued a notice of proposed rulemaking (NPRM) to amend certain codes under the California Code of Regulations and to implement the Pilot Program for Increased Access to Responsible Small Dollar Loans (Pilot Program). The Pilot Program is administered by DFPI and established under the California Financing Law (covered by a Buckley Special Alert here). According to DFPI, the proposed regulations implement SB 235, “which authorizes a finder, defined as an entity that brings together a licensed lender and prospective borrower to negotiate a contract, to perform additional services on behalf of a lender,” and AB 237 “which, among other things, increases the upper dollar limit for a permissible Pilot Program loan from $2,500 to $7,500 and requires participating lenders to conduct reasonable background checks on finders.” The proposal would amend regulations of DFPI’s Pilot Program by, among other things: (i) revising general information and instructions to forms; (ii) increasing the upper limit from $2,500 to $7,500 on the amount of a permissible loan; (iii) “requir[ing] Pilot Program applicants to submit the policies and procedures they must maintain to address customer complaints and respond to questions raised by loan applicants and borrowers, including questions about finders”; (iv) permitting finders to disburse funds on behalf of lenders, collecting loan payments from borrowers, and issuing notices and disclosures to borrowers or perspective borrowers; and (v) removing a provision that prohibits finders from discussing marketing materials or loan documents with a borrower or prospective borrower.

    Licensing State Issues State Legislation Small Dollar Lending DFPI

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  • DFPI grants license to ISA servicer

    On August 5, the California Department of Financial Protection and Innovation (DFPI) announced an agreement to issue a license to a New York-based company that partners with educational institutions to offer Income Share Agreements (ISAs) to students to finance their post-secondary education and training. The agreement reflects DFPI’s decision to “treat these private financing products as student loans” for purposes of the California Student Loan Servicing Act (SLSA)” and represents “a significant first step toward providing greater oversight of the ISA industry.” As previously covered by InfoBytes, in 2018, the California governor approved AB 38 to amend the state’s Student Loan Servicing Act, which provides for the licensure, regulation, and oversight of student loan servicers by the California Department of Business Oversight (now DFPI). The agreement is the first of its kind to subject an ISA servicer to state licensing and regulation. In the agreement, DFPI explains that the SLSA defines a “student loan” “by the purposes for which financing is used,” and includes an “extension of credit” that is “solely for use to finance post-secondary education.” The SLSA expressly excludes certain types of credit, but does not exclude contingent debt or ISAs. Therefore, the agreement concludes, “the Commissioner finds that ISAs made solely for use to finance a postsecondary education are ‘student loans’ for the purposes of the SLSA.”

    As part of the agreement, the company, among other things: (i) must submit all audited financial statements; (ii) must report any ISAs it services as “student loans” for purposes of the SLSA; and (iii) “shall not service any ISAs or other forms of credit extended to California consumers that have been determined or declared unenforceable or void by the DFPI or any regulatory agency that licenses, charters, registers, or otherwise approves the issuer of the ISA.” In addition, DFPI will issue the company a regular, unconditional California SLSA license “within 5 business days of the Commissioner’s approval of [the company’s] Audited Financials.” According to DFPI, “some ISA issuers have contended that state and federal lending laws are inapplicable to ISAs, and students who finance education under ISAs did not enjoy the same regulatory protections as other borrowers,” and DFPI “expects to clarify requirements for ISA providers and servicers through future rulemaking.”

    Licensing State Issues DFPI Income Share Agreements Student Lending Student Loan Servicer

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  • Oregon enacts student loan servicer provisions

    On July 27, the Oregon governor signed SB 485, which outlines licensing provisions for student loan servicers and implements consumer protections for borrowers. Among other things, the act requires, subject to certain exemptions, persons servicing student loans to obtain a license from the Oregon Department of Consumer and Business Services (DCBS). Should the director reasonably believe that a person subject to the act’s provisions is “engaging in or is about to engage in an act or practice that constitutes servicing a student loan in this state without first obtaining a license” the director may order the person to cease and desist, affirmatively perform the act, or may apply to an Oregon circuit court to enjoin the person from engaging in such act or practice. Additionally, the act outlines requirements related to, among other things, (i) licensing applications, including that the director may require applicants to submit applications to the Nationwide Multistate Licensing System instead of, or in addition to, submitting the application to the director; (ii) licensing renewals, reinstatements, and surrenders; (iii) a licensee’s principal place of business; (iv) liquidity standards; and (v) branch closures, relocations, or the opening of new locations. Under the act, the director is also granted general supervisory authority over each licensee in the state, examination authority, and the ability to participate in multistate examinations scheduled and conducted by the Conference of State Bank Supervisors or the CFPB. The director may also investigate borrower complaints and servicers’ policies and procedures, may impose civil penalties for violations of the act’s provisions, and may promulgate rules and take any other actions necessary to undertake and exercise the duties and powers conferred on the position. The act also outlines provisions related to servicing obligations, prohibits student loan servicers from engaging in fraudulent, deceptive, and dishonest activities, and creates a student loan ombudsperson at DCBS to handle complaints against student loan servicers and educate borrowers about loan repayment options. The act took effect on its passage.

    Licensing State Issues State Legislation Student Loan Servicer NMLS CSBS CFPB

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  • Massachusetts Division of Banks issues guidance to debt collectors and student loan servicers

    Recently, the Massachusetts Division of Banks published guidance related to the conduct of debt collectors, student loan servicers, and third-party loan servicers. 209 CMR 18.00 defines unfair or deceptive acts or practices for entities servicing loans or collecting debts within the commonwealth, and provides licensing, registration, and supervision procedures. Those provisions of the regulation that govern fair debt collection and third party loan servicing practices apply both to licensed entities, and entities exempt from licensure. Additionally, the regulation specifies that licensed debt collectors are not required to register as third party loan servicers but must still comply with all relevant state and federal laws and regulations that govern third party loan servicers when acting in that capacity. Student loan servicers engaged in third party loan servicing activities or debt collection activities within the scope of student loan servicing activities described within Massachusetts’ law are also required to comply with all applicable state and federal laws and regulations governing third party loan servicers and debt collectors when acting in such capacity. Additionally, 209 CMR 18.00 outlines, among other things, (i) licensing application requirements; (ii) licensing standards; (iii) registration procedures and standards; (iv) notice, reporting, and recordkeeping requirements; (v) collection practices and consumer communication restrictions; (vi) prohibitions related to harassment or abuse, false or misleading representations, and unfair, deceptive, or unconscionable practices; (vii) debt validation requirements; (viii) mortgage loan servicing practices; (ix) student loan servicing practices; and (x) confidentiality provisions. The regulation took effect July 1.

    Licensing State Issues State Regulators Massachusetts Debt Collection Student Lending Student Loan Servicer Third-Party Compliance

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