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Financial Services Law Insights and Observations


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  • Maryland eliminates separate licensing requirement for branches

    On May 8, the Maryland governor signed HB 686 to eliminate a requirement that collection agencies and certain non-depository financial institutions must maintain separate licenses for branch locations. The Act now allows such entities to conduct business at multiple licensed locations under a single license. The Act also amends and clarifies other provisions relating to application requirements, licensee information listed in the Nationwide Multi-State Licensing System and Registry, requirements when using trade names, examinations, Commissioner of Financial Regulation assessments, and surety bond requirements. The Act is effective July 1.

    Licensing State Issues State Legislation Maryland NMLS Debt Collection

  • Indiana enacts Money Transmission Modernization Act

    On May 4, the Indiana governor signed SB 458, which repeals current Indiana code governing the licensing and regulation of money transmitters by the Department of Financial Institutions. The bill adds a new chapter codifying the Money Transmission Modernization Act, and outlines provisions to be administered by the Department’s Division of Consumer Credit. Among other things, the Act is designed to eliminate unnecessary regulatory burden and ensure states are able to coordinate in all areas of regulation, licensing, and supervision. The Act will also enforce compliance with applicable state and federal laws, standardize activities subject to or exempt from licensing, and modernize safety and soundness requirements to protect customer funds, while also supporting innovation and competitive business practices. The Act defines terms, outlines exemptions, and establishes authorities for the director who many enter into agreements with other government officials or regulatory agencies/associations to improve efficiencies and reduce regulatory burden. The Department is also granted authority to interpret and enforce the chapter, promulgate rules and regulations, and recover administrative and enforcement costs.

    With respect to licensing provisions, the director is authorized to report complaints received concerning licensees, as well as significant or recurring violations, to the Nationwide Multi-State Licensing System and Registry (NMLS), and may use NMLS for all aspects of licensing, including applications, surety bonds, reporting, background checks, credit checks, fee processing, and examinations. Moreover, the director may also “participate in multistate supervisory processes established between states and coordinated through the Conference of State Bank Supervisors, the Money Transmitter Regulators Association, and the affiliates and successors of either organization, for all licensees that hold licenses in Indiana and other states,” including entering into agreements to coordinate and share information.

    The Act outlines licensing application procedures, as well as licensees’ rights, reporting and recordkeeping requirements, examination processes for outside vendors that provide services normally undertaken by the licensee, criminal penalties, surety bonds, permissible investments, authorized delegate provisions, and explains how the Act applies to licensees issued a license under the current statute, among other things. Additionally, licensees are required to pay all costs reasonably incurred in connection with an examination of the licensee or the licensee’s authorized delegate. The Act’s provisions take effect January 1, 2024.

    Licensing State Issues State Legislation Indiana Money Service / Money Transmitters NMLS

  • Tennessee enacts Money Transmission Modernization Act

    On April 4, the Tennessee governor signed HB 316 / SB 268 to enact the Money Transmission Modernization Act, the money transmitter model law created by industry and state experts. Provisions under the Act amend Tennessee Code Annotated, Title 45, and are intended to (i) reduce regulatory burden by promoting coordination among the states in areas of regulation, licensing, and supervision; (ii) protect the public from financial crime; (iii) standardize activities that are subject to, or otherwise exempt from, licensure; and (iv) modernize safety and soundness requirements to protect customer funds while supporting innovative and competitive business practices. Under the Act, persons may not engage in the business of money transmission, or advertise, solicit, or hold themselves out as providing money transmission without being licensed. In addition to exempting federal and state agencies and financial institutions organized under the laws of any state or the United States, the Act now exempts “authorized delegates”—persons designated by a licensee to engage in money transmission on behalf of the licensee, and persons that fall within an outlined exemption, including persons appointed as an agent of the payee.

    The Act also provides the commissioner of financial institutions with the authority to exercise various powers, including the use of the Nationwide Multistate Licensing System and Registry, and the ability to participate in multistate supervisory processes coordinated through the Conference of State Bank Supervisors, Money Transmitter Regulator Association, and others for all licensees that hold licenses in Tennessee and other states. While retaining the ability to conduct examinations of licensees, the commissioner may now examine or investigate an authorized delegate. The Act also updates licensee liability requirements related to net worth assets and surety bonds and make various other changes related to audit reports and disclosure permissions. The Act further provides that “[a] person shall not engage in the business of money transmission on behalf of a person not licensed under this chapter or not exempt pursuant to § 45-7-104,” and stipulates that “[a] person that engages in such activity provides money transmission to the same extent as if the person were a licensee, and is jointly and severally liable with the unlicensed or nonexempt person.” The Act takes effect January 1, 2024.

    Licensing State Issues Tennessee Money Service / Money Transmitters NMLS CSBS

  • Virginia amends remote work requirements for mortgage companies

    On March 26, the Virginia governor signed HB 2389, which permits mortgage lenders and mortgage brokers to allow employees and exclusive agents to work remotely provided certain conditions are met. Requirements to conduct business out of a remote location include: (i) the establishment of written policies and procedures for remote work supervision; (ii) ensuring access to platforms and customer information adheres to the licensee’s comprehensive written information security plan; (iii) the employment of appropriate risk-based monitoring and oversight processes, as well as the agreement from employees or exclusive agents who will work remotely to comply with these established practices; (iv) banning in-person customer interaction at an employee’s or exclusive agent’s residence unless the residence is an approved office; (v) the proper maintenance of physical records; (vi) compliance with federal and state security requirements when engaging in customer interactions and conversations; (vii) access to the licensee’s secure systems via a virtual private network or comparable system with password protection; (viii) the installation and maintenance of security updates, patches, or other alterations; (ix) “the ability to remotely lock or erase company-related contents of any device or otherwise remotely limit access to a licensee’s secure systems"; and (x) the designation of the principal place of business as the mortgage loan originator’s registered location for the purposes of the Nationwide Mortgage Licensing System and Registry record, “unless such mortgage loan originator elects an office as a registered location.” The amendments also add definitions for “office” and “remote location.” The Act is effective July 1.

    Licensing State Issues State Legislation Virginia Mortgages Mortgage Origination NMLS

  • North Dakota amends mortgage licensing requirements

    On March 13, the North Dakota governor signed SB 2090, which, among other things, revises licensing requirements for residential mortgage lenders. The act provides that “a person other than a residential mortgage lender licensed and authorized under this chapter may not engage in residential mortgage lending in the state without a residential mortgage lender license issued by the commissioner. A person engages in residential mortgage lending if the borrower resides in North Dakota.” The act outlines provisions related to application for licensure; licensing fees; surety bond and minimum net worth requirements; license renewal, expiration, revocation, suspension, and surrender; recordkeeping requirements; prohibited acts and practices; prohibitions on advance fees; and permitted maximum charges for loans and installment payments. Provisions relating to orders, injunctions, investigations, subpoenas, examinations, and penalties are also discussed. The act also provides a comprehensive list of exemptions.

    The act stipulates that lenders in possession of a valid state money broker’s license as of August 1, are not required to obtain a residential mortgage lenders license until December 31. All other provisions of this chapter are applicable to residential mortgage lenders as of August 1.

    Licensing State Issues State Legislation North Dakota Mortgages NMLS

  • CSBS seeks comments on uniform mortgage licensing standards

    On March 16, the Conference of State Bank Supervisors (CSBS), on behalf of the NMLS Policy Committee, issued a request for public comments on proposed uniform state licensing standards for mortgage companies. The Proposal: Mortgage Business-Specific Requirements would create a national standard for mortgage industry licensing to help improve uniformity within the state system and streamline the licensing process for mortgagees seeking licensure in multiple states.

    The proposal is broken down into eight components:

    • Contacts. All licensees will be required to provide contacts within the company for accounting, legal, licensing, data breach/cybersecurity, exam billing, exam delivery, and mortgage call reports, in addition to a primary company contact and a primary consumer complaint contact. If a licensee chooses to list a third-party contact, “the company will be deemed to have expressly authorized a state agency to contact the third party without further approval from the company” and “the company is ultimately responsible for the area of responsibility.”
    • Periodic reporting. All licensees will be required to complete periodic reports covering mortgage call reports, audited financial statements, and reportable incidents.
    • Data requirements. All licensees will be required to “provide numbers for any approvals or designations the company holds[,]” as well as business bank account information for accounts held in the name of the applicant and used for mortgage activities.
    • Document requirements. Required documentation includes financial statements; policies and certifications; current Bank Secrecy Act/anti-money laundering and Gramm-Leach Bliley Privacy Act policies; current disaster recovery or business continuity plans; a current consumer grievance/complaint policy (as well as the required certification); and documents used in the regular course of business such as operating agreements, consumer complaint notices, customer agreements, and third-party contracts.
    • Required functionality. All licensees must abide by a three-party electronic surety bond agreement in order to guarantee “the surety’s performance or monetary compensation to the obligee should there be a failure by the principal to perform specified acts within a stated time period.” The surety bond will be electronically managed by NMLS.
    • Location reporting. All licenses will be required to provide locations where licensed activity will be performed, where records will be stored, or where support staff for licensed activities will be located. Licensees must also provide the primary location for accounting services, regardless of whether they are provided in house or by a third-party accounting firm, cloud storage services (including services used to collect data from customers), and the primary location for legal services, regardless of whether they are provided in house or by a third-party law firm.
    • Company operated work locations’ information. The proposal outlines information required for each company operated work location, including business activities, licensing authorities, addresses, books and records information, and “doing business as” names.
    • Key individual requirements. Licensees will be required to identify key individuals in the areas of management, ownership, functional risk areas, and industry specific roles. The proposal explains that the key individual inquiry focuses on key risk and functional areas (operations, finance, compliance, and information security), rather than titles. Key individuals for mortgages must also submit credit reports and complete an FBI criminal background check. Key individuals who have lived outside the United States at any time in the past 10 years must also provide an investigative background report.

    Comments on the proposal are due May 15.

    Licensing State Issues CSBS NMLS Mortgages

  • Montana amends mortgage servicing laws

    On February 16, the Montana governor signed HB 30, which amends certain provisions of the state’s mortgage laws. Among other things, the act outlines provisions related to financial condition requirements, model state regulatory prudential standards for nonbank mortgage servicers, risk assessments, and licensee reporting requirements. The act also permits remote work provided certain conditions are met, including that a licensee’s employees and independent contractors do not meet with the public in an unlicensed personal residence, business records are not stored at the remote locations, appropriate security measures are put in place to ensure the confidentiality of customer information, and the NMLS record reflects the designation of a properly licensed location as the mortgage loan originator’s official workstation. In addition, the act amends provisions related to the denial of a licensee’s application or renewal, and updates designated manager and branch office licensing requirements to account for the remote location allowance. The act further provides the Department of Administration (acting through the Division of Banking and Financial Institutions) with rulemaking authority for addressing the revocation or suspension of licenses for cause, investigations into alleged violations, and fees, among other things. Additional amendments address the sharing of confidential supervisory information with state and federal financial regulators. Exempt from the act’s requirements are not-for-profit servicers and housing financing agencies, while servicers solely involved in reverse mortgage servicing are exempt from certain portions of the act. Similarly, servicers with 25 or fewer loans, or servicers wholly owned and controlled by one or more state- or federally-regulated depository institutions are also exempt from certain portions of the act. A servicer that is also licensed as an escrow business may apply to waive or adjust certain financial condition requirements. The act is effective July 1.

    Licensing State Issues Mortgages State Legislation Montana Nonbank Mortgage Servicing NMLS

  • DFPI issues reminder to debt collection licensing applicants

    Recently, the California Department of Financial Protection and Innovation (DFPI) issued a reminder that starting January 1, 2023, the agency will begin approving applications under the Debt Collection Licensing Act. As previously covered by InfoBytes, the California governor signed AB 156 in September to allow any debt collector that submits an application to the DFPI commissioner by January 1, 2023, to operate pending the approval or denial of the application. DFPI reminded applicants that background checks will be performed at a later date. The period for individuals to provide fingerprints upon request from DFPI is extended from 60 to 90 days. Written notification will be sent to applicants through the Nationwide Multi-State Licensing System 90 days prior to fingerprinting being due. Additionally, DFPI stated that due to the delay in the application process, final approvals may be delayed. Further announcements will be issued in the coming weeks concerning conditional approvals, DFPI said, noting that it will provide at least 30 days' notice before implementing any changes to existing processes.

    Licensing State Issues State Regulators DFPI California Debt Collection NMLS Debt Collection Licensing Act

  • CSBS provides tips on NMLS annual renewal

    On October 20, the Conference of State Bank Supervisors (CSBS) announced that individuals and businesses in the mortgage, money transmission, debt collection, and consumer financial services industry are encouraged by state regulators to prepare for November 1, which is the beginning of the Nationwide Multistate Licensing System (NMLS) annual license renewal. The announcement noted the number of individual state licenses eligible for renewal is 13 percent higher than the same time last year, while the number of company licenses eligible for renewal is up 16 percent compared to this time last year. CSBS provided five tips for licensees to prepare for NMLS renewal, which include, among other things, resetting NMLS passwords to conform with new requirements that went into effect this past March and to review state-specific renewal requirements. CSBS also noted that the renewal period in most states runs from November 1 to December 31.

    Licensing State Issues NMLS CSBS

  • Connecticut issues money transmitter advisory

    Recently, the Connecticut Department of Banking (Department) issued an advisory on money transmission, providing general guidance on what types of activities and entities must be licensed. According to the advisory, transmission can occur whenever “a person takes possession or control of monetary value belonging to another person” and holds it for a period of time, or transmits it to a third party. The Department noted that “[t]he increased use of technology to enable immediate payment mechanisms, as well as the explosion of virtual currency, has caused significant disruption to traditional money transmission systems.” The Department also acknowledged that many consumers do “not realize or understand the regulatory landscape that applies” to using money transmitters. Among other things, the advisory listed entities that traditionally provide transmission services like bill payers, payroll processors, and issuers and sellers of prepaid cards and money orders. The advisory also discussed Connecticut’s license application and penalties for unlicensed transmission, explaining that licensure goes through the Nationwide Multistate Licensing System and involves disclosing pertinent information concerning all “control persons.” 

    Licensing State Issues Connecticut State Regulators NMLS Money Service / Money Transmitters