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Financial Services Law Insights and Observations


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  • FTC Advisory Opinion Supports Money Transmitters' Proposed Information Exchange


    On September 4, the FTC’s Bureau of Competition issued an advisory opinion responding to a national money transmitters’ trade association inquiry about its planned information exchange regarding terminated U.S. money transmitter agents. According to the opinion, (i) the database will contain information regarding former U.S. sending and receiving agents whose contractual relationships were terminated due to failure to comply with federal and/or state law, or money transmitter contract terms or policies, (ii) exchange membership will be open to all licensed non-bank money transmitters, and (iii) participation in the information exchange will be voluntary, and each member of the information exchange will retain the right to decide unilaterally whether to appoint an agent that has been terminated by another exchange member. The FTC staff determined that the program (i) appears unlikely to harm competition, (ii) will contain several safeguards to lessen the risk of harm to competition and consumers, such as the appointment of a third-party vendor to maintain and secure the information exchange database, and (iii) is likely to improve the money transmitters’ ability to comply with federal and state laws designed to prevent money laundering, terrorist financing, and other criminal behavior, and enhance consumer welfare by preventing the appointment of fraudulent or criminal money transmitter agents.

    FTC Money Service / Money Transmitters

  • CFPB Releases Consumer Reporting and Money Transfer Complaints, Expands Complaint Database Functionality

    Consumer Finance

    On May 31, the CFPB published for the first time consumer complaints about credit reporting, which the CFPB began accepting in October 2012, and money transfer complaints, which it began accepting in April 2013. The CFPB also announced that all complaints in its consumer complaint database now include a field for the state from which the complaint was filed. That field allows the CFPB to report, for example, that the top states for per capita mortgage complaints are (i) New Hampshire, (ii) Maryland, (iii) the District of Columbia, (iv) Georgia, and (v) Florida.

    CFPB Consumer Reporting Money Service / Money Transmitters Consumer Complaints

  • Indiana Revises Numerous Licensing, Consumer Credit, and Banking Provisions

    Consumer Finance

    On May 9, Indiana enacted HB 1081, which makes numerous changes to the state’s consumer lending, licensing, and banking laws. Among those changes, the bill increases the threshold loan amounts under various definitions in the Uniform Consumer Credit Code, including “consumer credit sale,” “consumer loan,” and “consumer related loan.” With regard to mortgage originator licensing, the bill (i) revises the surety bond requirements for creditors and entities exempt from licensing that employ a licensed mortgage loan originator, (ii) prohibits an unlicensed individual or an unlicensed organization to act as a closing agent in a first lien mortgage transaction, and (iii) empowers the Department of Financial Institutions (DFI) to investigate any licensee or person that the DFI suspects is operating without a license or in violation of the First Lien Mortgage Lending Act. The bill provides additional guidelines for filing an article of dissolution of a bank, trust company, or a building and loan association. It also makes changes to the certain powers of banks and trust companies. In addition, the bill make numerous amendments related to debt management companies, lead generators, and other consumer financial service providers, and revises requirements for money transmitter licensing by, for example, authorizing the DFI to designate the NMLS for licensing purposes.

    Mortgage Licensing Mortgage Origination Money Service / Money Transmitters

  • CFPB Issues Revised Remittance Transfer Rule


    On April 30, the CFPB issued a revised final rule to amend regulations applicable to consumer remittance transfers of over fifteen dollars originating in the United States and sent internationally. Generally, the rule requires remittance transfer providers to (i) provide written pre-payment disclosures of the exchange rates and fees associated with a transfer of funds, as well as the amount of funds the recipient will receive, and (ii) investigate consumer disputes and remedy errors. The revised rule makes optional the original requirement to disclose (i) recipient institution fees for transfers to an account, except where the recipient institution is acting as an agent of the provider and (ii) taxes imposed by a person other than the remittance transfer provider. Instead, the revised rule requires providers to include a disclaimer on disclosures that the recipient may receive less than the disclosed total value due to these two categories of fees and taxes. The revised rule exempts from certain error resolution requirements two additional errors: (i) providing an incorrect account number or (ii) providing an incorrect recipient institution identifier. For the exception to apply, a remittance transfer provider must (i) notify the sender prior to the transfer that the transfer amount could be lost, (ii) implement reasonable measures to verify the accuracy of a recipient institution identifier, and (iii) make reasonable efforts to retrieve misdirected funds. In addition, the revised rule provides institutions more time to comply with the new remittance transfer standards. The final regulations, as revised by this rule, take effect on October 28, 2013.

    CFPB EFTA Remittance Money Service / Money Transmitters

  • CFPB Announces Collection of Money Transfer Complaints


    On April 4, the CFPB announced that it is collecting money transfer complaints. Although the CFPB previously was accepting some complaints about money transfers under the “bank account” topic in its complaint system, it now has a complaint portal dedicated to money transfer complaints. The system categorizes complaints as relating to: (i) money was not available when promised; (ii) wrong amount charged or received (transfer amounts, fees, exchange rates, taxes, etc.); (iii) incorrect/missing disclosures or information; (iv) other transaction issues (unauthorized transaction, cancellation, refund, etc.); (v) other service issues (advertising or marketing, pricing, privacy, etc.); or (vi) fraud or scam. The announcement does not indicate whether the money transfer complaints will be published in the recently expanded public database at this time.

    CFPB Money Service / Money Transmitters

  • NMLS Proposes Uniformed Authorized Agent Reporting Processing Fee

    Consumer Finance

    On March 20, the NMLS proposed a processing fee to support a uniform and automated method for state-licensed money transmitters to report information concerning authorized agents/delegates to NMLS participating state agencies. The proposal notes that as of March 2013, 10 state agencies manage their money transmitter licenses through NMLS and an additional 20 agencies intend to do so by the end of 2014. The NMLS proposes to support that functionality through a fee of no more than fifty cents ($.50) per active agent/delegate location, assessed once per year, based on the number of all active agent/delegate locations as of a certain date. Money transmitter licensees with less than 100 active agent/delegate locations reported through NMLS will not be assessed a fee. The fee, which is distinct from and independent of fees or assessments required by state agencies, would be charged starting in 2014. The NMLS seeks comments on the proposal by April 19, 2013.

    NMLS Money Service / Money Transmitters

  • Special Alert: Report on 2013 NMLS Annual Conference

    Consumer Finance

    The Nationwide Mortgage Licensing System and Registry (NMLS) held its fifth annual NMLS User Conference and Training in San Antonio, Texas from February 26 through March 1, 2013. The Conference brought together state and federal mortgage regulators, industry professionals, compliance companies, top law firms, and education providers to learn about the latest developments in mortgage supervision and to discuss pressing issues confronting the industry.

    The first day of the Conference included the bi-annual NMLS Ombudsman Meeting, which provided an opportunity for NMLS users to raise issues concerning the NMLS, state and/or federal regulation. NMLS Ombudsman Timothy Siwy, Deputy Secretary of Non-Depository Institutions with the Pennsylvania Department of Banking, presided over the meeting, in which specific questions submitted by industry representatives were addressed. Several of the submitted questions focused on the new Uniform State Mortgage Loan Originator (MLO) Exam or Uniform State Test (the UST) of which 24 agencies have already adopted. Concerns were raised by the regulators as some state statutes require that a state’s specific laws be tested as a pre-requisite of MLO licensure. Others, such as regulators from California and Utah, had concerns that MLOs would not adequately learn state specific laws and regulations prior to licensure.  In light of these concerns, industry representatives indicated that the UST is only the first step in licensure, and continuing education requirements, monitoring, and examinations would also serve as opportunities to ensure MLOs are well-versed in applicable state specific licensing laws and regulations.

    Other areas of focus included NMLS’s expansion to include non-mortgage licenses, such as payday lender and pawn broker licenses. Some industry representatives voiced concern that approval of a license via the NMLS now carries with it an image of legitimacy with the public and expanding licensure to non-mortgage, less regulated industries could undermine that image. Regulators responded that the NMLS is a tracking mechanism—a way for regulators to track licensees state-to-state and industry-to-industry—not an independent licensing credential.

    Full details regarding the specific issues submitted for comment, as well as accompanying exhibits, will be available on the NMLS Website, Ombudsman Page.  A recording of the Ombudsman Meeting should be posted to the NMLS Resource Center in the near future.

    The remaining days of the Conference covered various federal and state regulatory rule implementation, updates for industry, and a look ahead at new initiatives and changes to the NMLS (please refer to the NMLS Conference Agenda, which also includes copies of presentations). Specifically, various sessions covered the following topics, among others:

    • The collaboration of the CFPB and state regulators to level the playing field between banks and non-banks with respect to enforcing regulations and conducting examinations. David Liken, the Deputy Director of Supervision and Enforcement with the CFPB, explained that Dodd Frank contemplated a partnership between state regulators and the CFPB, which includes information sharing and joint examinations. The CFPB plans to provide state regulators with training conducted by CFPB personnel at no cost to state regulators.
    • The future of the NMLS which includes a goal to initiate three system releases/ enhancements per year. 2013-2014 will include launching an advance change notice function, electronic surety bond management, and a requirement for annual volume reports for non-mortgage entities.
    • The state of financial supervision, in particular, concerns about industry diversity and cooperation between state and federal agencies to leverage their resources to address emerging issues and trends in the financial market.
    • Regulation of debt collectors as the “larger participant” rule giving the CFPB supervisory authority over debt collectors was issued in October 2012 and took effect on January 2, 2013. The CFPB has started looking at collection practices of creditors when the creditor collects in its own name and through third party collectors.

    In addition, the Conference covered major changes to the NMLS and also included a presentation from the CFPB summarizing the CFPB’s final rules:

    • Advance Change Notification—The NMLS will launch its Advance Change Notice functionality that will allow licensees to provide notice electronically to NMLS participating states of proposed changes to the company and its branches, including, but not limited to: name changes, address changes, and change of control. The initial roll out of this functionality is slated for June 2013.

    • Money Services Regulator Panel—A Money Services Regulator Panel, which included Stephanie Newberg, Deputy Commissioner of the Texas Department of Banking, and Deb Bortner of the Washington Department of Financial Institutions, discussed the benefits and challenges associated with the addition of money services licenses to the NMLS. The NMLS has provided money services business with a streamlined system to apply for licenses and keep regulators updated on license changes; however, licensees continue to struggle with certain aspects of the system (e.g., transmission of materials via the NMLS and confusion with completing certain control person and direct and indirect owner forms, given varying state interpretations).

    • The New System of Dual Regulatory Supervision—A panel, which included Charlie Fields, Director, Non-Depository Entities Division, North Carolina Office of the Commissioner of Banks, Calvin Hagins, Program Manager, Supervision, Fair Lending & Enforcement with the CFPB, and various industry representatives, discussed the coordinated efforts of state regulators and the CFPB to conduct licensee examinations.  The panel focused on (1) examination selection criteria—i.e., how the Multi-State Examination Committee or CFPB may decide to examine an entity, (2) factors weighed by the Multi-State Examination Committee when deciding whether to join CFPB in an examination, (3) CFPB examination process—i.e., CFPB’s preference to collect date on-site while processing and analyzing data off-site, and (4) encouraging entities to engage in “self-regulation” and “self-review.”

    • 2013 Mortgage Final Rules Overview—Kelly Thompson Chochran, Assistant Director for Regulations of the CFPB summarized several recently issued CFPB rules, which are expected to be implemented in the next year, including: the Ability-to-Repay / Qualified Mortgages Final Rule, the Mortgage Servicing Final Rule, and the Loan Originator Compensation, HOEPA, Escrows, and Appraisal Final Rule.

      BuckleySandler recently issued detailed summaries of the CFPB rules.

    For more information about NMLS, visit the NMLS Resource Center, About NMLS.

    CFPB Payday Lending Mortgage Licensing Nonbank Supervision NMLS Money Service / Money Transmitters

  • CFPB Proposes Revised Remittance Transfer Rule

    Consumer Finance

    On December 21, the CFPB proposed revisions to the remittance transfer rule it finalized earlier this year and already once modified. The proposed revisions follow a November 2012 bulletin from the CFPB in which it stated its intent to pursue a fast-track rulemaking to delay the effective date of the rule while addressing certain industry-raised concerns. The proposed revised rule would (i) provide increased flexibility and guidance with respect to the disclosure of taxes imposed by a foreign country’s central government, as well as fees imposed by a recipient’s institution for receiving a remittance transfer in an account, (ii) require disclosure of foreign taxes imposed by a country’s central government, but would eliminate the requirement to disclose taxes imposed by foreign regional, provincial, state, or other local governments, and (iii) require a provider to attempt to recover funds without bearing the cost of funds that cannot be recovered, when the provider can demonstrate that the consumer provided an incorrect account number and certain other conditions are met. The proposed rule also would push back the effective date of the remittance transfer rule from February 7, 2013, to 90 days after the revised rule is finalized. The CFPB is accepting comments on the delayed effective date for 15 days following publication in the Federal Register, and it is accepting comments on the substantive revisions for 30 days following publication in the Federal Register.

    CFPB EFTA Remittance Money Service / Money Transmitters

  • NMLS Publishes 2013.1 Release Portfolio

    Consumer Finance

    On December 21, the NMLS announced that NMLS Release 2013.1 is planned for March 18, 2013. As summarized in the Release Portfolio, the updated systems will (i) allow state agencies to invoice licensees for various fees, (ii) provide money transmitters the ability to submit periodic reports regarding authorized agents, (iii) allow state regulators to adopt the newly created Uniform State Test Component in lieu of existing State-specific Test Components to satisfy the SAFE Test State Component Requirement, and (iv) display through NMLS Consumer Access self-reported disciplinary actions for federally registered mortgage loan originators.

    NMLS Money Service / Money Transmitters

  • DOJ Obtains $100 Million Money Laundering Settlement from Money Services Business

    Consumer Finance

    On November 9, the DOJ announced that a money services business (MSB) agreed to enter into a deferred prosecution agreement (DPA) and pay $100 million for failing to maintain an effective anti-money laundering program and for aiding and abetting wire fraud. The DOJ alleged that over a roughly five year period (2004-2009) the MSB profited on thousands of transactions processed on behalf of agents known to be involved in an international fraud scheme. The MSB’s senior management deferred to sales department executives and ignored recommendations from the MSB’s fraud department that certain agents known to be engaged in fraud be terminated, according to the DOJ. Moreover, the DOJ states that the MSB systematically and willfully failed to meet AML obligations under the Bank Secrecy Act, including by failing to (i) implement policies or procedures to file the required Suspicious Activity Reports (SARs) when victims reported fraud on transactions over $2,000, (ii) file SARs on agents known to be involved in the fraud, (iii) conduct effective AML audits of its agents and outlets, (iv) conduct adequate due diligence on prospective and existing agents by verifying that a legitimate business existed, and (v) sufficiently resource and staff its AML program.

    Pursuant to the DPA, the MSB must (i) create an independent compliance and ethics committee of the board of directors with direct oversight of the chief compliance officer and the compliance program, (ii) adopt a global anti-fraud and anti-money laundering standard to ensure that their agents throughout the world will, at a minimum, be required to adhere to U.S. anti-fraud and anti-money laundering standards, (iii) adopt a bonus system that rates all executives on success in meeting compliance obligations, with failure making the executive ineligible for any bonus for that year, and (iv) adopt enhanced due diligence for agents deemed to be high risk or operating in a high-risk area. The MSB also agreed to retain an independent monitor that will oversee implementation and maintenance of these enhanced compliance obligations, evaluate the overall effectiveness of its anti-fraud and anti-money laundering programs, and report regularly to the DOJ.

    Anti-Money Laundering Bank Secrecy Act DOJ Money Service / Money Transmitters


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