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Financial Services Law Insights and Observations

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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’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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  • 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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  • DFPI to start accepting debt collector licensing applications on September 1

    On July 12, the Nationwide Multistate Licensing System & Registry (NMLS) published an announcement reminding debt collectors that all persons must apply for a license through the California Department of Financial Protection and Innovation (DFPI) by December 31, 2021. 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. However, a debt collector that submits an application after December 31 must wait for DFPI to issue a license before it can operate in the state. All required application materials must be submitted through NMLS, and NMLS reminded applicants that fingerprints must also be submitted to the California Department of Justice. The application will be available on NMLS beginning September 1.

    Find continuing InfoBytes coverage on DFPI’s debt collector licensing requirements here.

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  • Vermont rescinds combination license option

    On July 6, the Nationwide Multistate Licensing System & Registry (NMLS) published a notice announcing the rescission of the Vermont Department of Financial Regulation’s “Combination of License Types” option. Between July 1 and September 30, companies that hold a combination license must transition back to the following appropriate licenses in order to conduct business in the state: lender license, mortgage broker license, loan solicitation license, and/or loan servicer license. Companies will need to file a company form application (MU1) and an individual form (MU2) for each of their control persons, and electronic surety bonds will need to be obtained for each new license to pass NMLS’s completeness check. However, companies will only need to update their MU1 and MU2s, and not need to re-enter information that has already been provided. Additionally, companies are required to complete the transition process for each branch that holds a combination license. NMLS reminds companies that this transition is not optional.

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  • DFPI issues NPRM on debt collector licensing requirements

    On June 23, the California Department of Financial Protection and Innovation (DFPI) issued a notice of proposed rulemaking (NPRM) to incorporate changes to its debt collection license requirements and application. As previously covered by InfoBytes, in 2020, 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. In April, DFPI issued a NPRM to adopt new requirements for debt collectors seeking to obtain a license to operate in the state (covered by InfoBytes here). 

    Among other things, the most recent NPRM seeks to:

    • Revise the definition of “applicant” to clarify that an affiliate who is not applying for a license is not an applicant.
    • Include language requirements for documents filed with DFPI.
    • Clarify the requirements and appointment process of DFPI as the agent for service of process.
    • Eliminate the requirement that an applicant must file a copy of the California Department of Justice Request for Live Scan Service form for each individual with the Nationwide Multistate Licensing System & Registry (NMLS) instead of DFPI.
    • Remove requirements regarding the submission of the management chart being submitted to DFPI, the extent to which an applicant intends to utilize third parties to perform debt collection functions, and the filing with NMLS of policies and procedures.
    • Refine requirements for maintaining media records.
    • Refine the process of filing a change in control amendment for new officers, directors, partners, and other control people.
    • Establish new branch office registration procedures.
    • Eliminate requiring the submission of the total dollar amount of debt collected from consumers to determine whether a higher surety bond is required.
    • Remove provisions that would permit DFPI to set a higher surety bond amount.

    DFPI’s notice specifies that comments on the most recent proposed modifications are due July 12.

    Licensing State Legislation State Regulators DFPI Debt Collection NMLS

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  • 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.

    Licensing State Issues Mortgages State Legislation NMLS

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  • 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.

    Licensing State Issues State Regulators DFPI Debt Collection NMLS

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  • 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.

     

     

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  • Maryland amends nondepository institution licensing provisions

    On April 13, the Maryland governor signed SB 251, which amends provisions related to licensing requirements for nondepository institutions. Among other things, the act (i) eliminates certain paper licenses for collection agencies, credit services, lenders, installment lenders, mortgage lenders, mortgage loan originators, sales finance companies, check cashing services, money transmission businesses, and debt management services; (ii) provides for the licensing of certain persons for certain activities through NMLS; (iii) outlines specific information to be included on NMLS-provided licenses; (iv) requires certain licensing information be conspicuously posted (with certain exceptions) at a licensee’s licensed location and on websites and software applications; (v) allows for the surrender of a license through NMLS in accordance with a process established by the state Commissioner of Financial Regulation; and (vi) requires notification to the Commissioner of certain licensee actions. The act takes effect October 1.

    Licensing State Legislation Mortgages Mortgage Servicing NMLS Non-Depository Institution

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