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Financial Services Law Insights and Observations

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  • South Carolina enacts servicemembers civil relief act

    State Issues

    On April 26, the South Carolina governor signed HB 3180 to enact the South Carolina Servicemembers Civil Relief Act, which will “expand and supplement the rights, benefits, and protections of the federal Servicemembers Civil Relief Act (SCRA)” and provide that a violation of the SCRA is a violation of the state’s act. In particular, the Act expands federal SCRA’s definition of “military service” to include South Carolina guardsman who are on state active duty, subject to certain requirements. It also provides that a “dependent of a servicemember engaged in military service has the same rights and protections provided to a servicemember” under both the Act and the SCRA and expands contract termination rights for servicemembers receiving “military orders to relocate for a period of service of at least ninety days to a location that does not support the contract,” encompassing phone, internet, TV, and gym subscriptions. The Act took effect upon signature and is applicable to contracts executed on or after April 26.

    State Issues State Legislation Servicemembers SCRA

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  • Oklahoma permits inter-agency information-sharing agreements

    State Issues

    On April 22, the Oklahoma governor signed HB 1387 to permit the state’s Administrator of Consumer Credit to enter into certain cooperative, coordinating, information-sharing agreements with other agencies in place of conducting a separate examination or investigation. According to the Act, the information-sharing agreements apply to any agency that has “supervisory or regulatory responsibility over any entity that has been or may be licensed by the Department of Consumer Credit or any organization affiliated with or representing one or more” such agency, as well as the Oklahoma State Banking Department. The Act is effective November 1.

    State Issues State Legislation Consumer Finance Examination

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  • Maryland approves bills on debt settlement services, mortgage lenders, and credit service businesses

    State Issues

    On April 18, the Maryland Governor approved several bills concerning debt settlement service providers, mortgage lenders, and credit service businesses.

    Under HB 59, registrants providing debt settlement services are required to apply for a license or renewal and obtain a valid unique identifier issued by the Nationwide Multistate Licensing System and Registry (NMLS) on or after July 1. HB 59 also requires the Office of the Commissioner of Financial Regulation (OCFR) to establish a time period of at least two months within which registrants must transfer licensing information to NMLS. Additionally, registration fees are decreased to $400 from $1,000 for the issuance or renewal of a registration.

    HB 61 amends the Annotated Code of Maryland related to mortgage lenders, loan servicers, and loan originators to, among other things, (i) alter and clarify certain tangible net worth requirements and criteria for mortgage lenders, servicers, and originators; (ii) repeal a provision that requires licensees to reapply for a license should a location change request not be filed in a timely manner with the OCFR; (iii) extend examination cycle periods; and (iv) amend certain expiration provisions related to mortgage loan originator licensees. The amendments take effect October 1.

    Finally, SB 68 amends the definition of a “credit service business” to mean, among other things, any person who represents the ability to provide advice or assistance to consumers concerning improving a consumer’s credit record, establishing a new credit file, or obtaining credit extensions. SB 68 also exempts certain credit services businesses from certain information statement requirements when engaged to obtain an extension of credit for a consumer. Credit services businesses that qualify for an exemption must provide the consumer with certain information concerning the right to file a complaint as well as a copy of the contract before the consumer executes the contract. SB 68 takes effect October 1.

    State Issues State Legislation Licensing Debt Settlement Mortgages Credit Services Business

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  • Arkansas defines blockchain technology

    State Issues

    On April 16, the Arkansas governor signed HB 1944, which defines blockchain technology under the state’s Uniform Electronic Transactions Act (UETA). Under the act, “blockchain technology” is defined as “a shared, immutable ledger that facilitates the process of recording one or more transactions and tracking one or more tangible or intangible assets in a business network.” The act also provides definitions for “blockchain distributed ledger technology” and “smart contract” under the UETA. The act takes effect 90 days after adjournment of the legislature.

    State Issues State Legislation Blockchain Virtual Currency

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  • Oklahoma enacts small lenders act

    State Issues

    On April 18, the Oklahoma governor signed SB 720 to create the Oklahoma Small Lenders Act (the Act) and establish a framework to license and regulate small loan lenders in the state through the Department of Consumer Credit (ODCC). Beginning on January 1, 2020, any licensee under the Deferred Deposit Lending Act (DDLA) may begin an application under the Act and all licenses under the DDLA will be terminated and deemed expired on August 1, 2020. As of August 1, 2020, no lender may make a small loan covered by the Act unless they are properly licensed; and “small loan” is defined as an unsecured loan with a period between 60 days and 12 months that is fully amortized and payable in substantially equal periodic payments and contains no prepayment penalty. A licensee may only charge a maximum of 17 percent as a periodic interest rate, and the maximum aggregated principal loan amount of all small loans outstanding per customer is $1,500. Additionally, the Act outlines requirements for licensure, default procedures, reporting requirements, and penalties for violations.

    State Issues Small Dollar Lending State Legislation Licensing

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  • Arizona exempts GAP waivers from insurance laws

    State Issues

    On April 22, the Arizona governor signed HB 2674, a bill defining the term “guaranteed asset protection waivers” (GAP waivers) and clarifying that GAP waivers are not insurance and are thus exempt from the state’s insurance laws. The Act is effective 90 days after the state’s legislative session adjourns sine die.

    State Issues State Legislation GAP Waivers Auto Finance

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  • Iowa amends permissible interest rates on credit transactions

    State Issues

    On April 15, the Iowa governor signed HF 260, which amends the maximum interest rate and charges permitted under Iowa Code 2019. Specifically, for interest-bearing consumer credit transactions up to $30,000 (increased from $10,000), the interest rate may not exceed the lesser of $30 or ten percent of the financed amount. The amendments also specify the minimum charge creditors are allowed to collect or retain when prepayments are made in full, and stipulate that if a service charge has been collected on an interest-bearing consumer credit transaction then a “creditor shall not collect or retain a minimum charge upon prepayment.” HF 260 takes effect July 1.

    State Issues State Legislation Interest Rate Fees Consumer Lending

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  • Arkansas establishes GAP waiver requirements

    State Issues

    On April 8, the Arkansas governor signed HB 1672, which provides a framework within which guaranteed asset protection (GAP) waivers may be offered in the state. Among other provisions, the act (i) clarifies that GAP waivers are not insurance and are exempt from the state’s insurance laws; (ii) states that persons who market, sell, or offer GAP waivers are exempt from Arkansas’ licensing requirements, provided they comply with the act; (iii) establishes requirements for offering GAP waivers and clarifies that any cost to the borrower for the sale of a GAP waiver, in compliance with TILA, should not be considered a finance charge or interest; (iv) states that neither the extension of credit, nor the sale or lease terms of a motor vehicle, “may be conditioned upon the purchase of a [GAP] waiver;” and (v) clarifies contractual liability coverage, disclosure requirements, and requirements and restrictions for GAP waiver cancellations, including refund provisions. HB 1672 further stipulates that the state’s insurance commissioner may enforce the act’s provisions and impose penalties. The act takes effect 90 days after adjournment of the legislature.

    State Issues State Legislation GAP Waivers Auto Finance Licensing

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  • New Mexico modifies the Service Contract Regulation Act

    State Issues

    On April 4, the New Mexico governor signed SB 350, which amends the state’s Service Contract Regulation Act to prevent providers from including automatic renewal provisions within service contracts unless they are clearly disclosed. The Act defines a service contract as a contract in which a provider is obligated for a specific period to repair, replace, or perform maintenance on property described in the contract, or to reimburse or indemnify the holder for costs to repair, replace, or perform maintenance on that property. Under SB 350, in addition to the automatic renewal requirements, the bill allows a service contract holder to provide notice, at least 30 days in advance, of its intent not to review a service contract. If a holder cancels a service contract, subject to the bill’s timing restrictions, the provider is required to refund the contract holder one hundred percent of the unearned pro rata provider fee, less any claims paid, and the provider may charge an administrative fee of up to 10 percent of the purchase price of the contract. The bill is effective June 14.

    State Issues State Legislation Consumer Finance Service Contracts

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  • New Mexico amends financial lending licensing requirements

    State Issues

    On April 2, the New Mexico governor signed HB 584, which amends the Collection Agency Regulatory Act and the Motor Vehicle Sales Finance Act to, among other things, require sales finance companies obtain a license to conduct business in the state. The bill outlines licensing requirements for such companies. State and national banks authorized to do business in the state are not required to obtain a license under the Motor Vehicle Sales Finance Act, “but shall comply with all of its other provisions.” Under HB 584, the Director of the Financial Institutions Division of the Regulation and Licensing Department may utilize the Nationwide Multistate Licensing System and Registry (NMLS) or other entities designated by the NMLS in order to receive and process licensing applications. The Director is also granted the authority to issue and deny licenses.

    HB 584 also amends definitions used within the state’s Mortgage Loan Originator Licensing Act, and outlines provisions related to (i) licensing, registration, renewal, and testing requirements; (ii) certain exemptions; (iii) the issuance of temporary licenses to out-of-state mortgage loan originators who are both licensed through the NMLS and complete the mandatory education and testing requirements; and (iv) continuing education requirements. HB 584 also grants the Director the authority to establish rules for licensing challenges; “deny, suspend, revoke or decline to renew a licenses for a violation of the New Mexico Mortgage Loan Originator Licensing Act”; and impose civil penalties for violations.

    Furthermore, HB 584 also amends the definitions used within the state’s Uniform Money Services Act and the Collection Agency Regulatory Act by listing licensing application requirements, and granting the Director the same authorities provided above.

    The amendments take effect July 1, 2019.

    State Issues State Legislation Consumer Lending Licensing Auto Finance Mortgages Mortgage Origination Money Service / Money Transmitters Debt Collection NMLS

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