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Financial Services Law Insights and Observations


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  • 34 state AGs urge inclusion of cannabis banking legislation in Covid-19 relief

    State Issues

    On May 19, a group of 34 state attorneys general wrote to congressional leaders urging the inclusion of the SAFE Banking Act in any future Covid-19 relief package. As previously covered by InfoBytes, the SAFE Banking Act was passed by the House in September 2019 and would provide a safe harbor for depository institutions that provide a financial product or service to a covered business in a state that has implemented laws and regulations that ensure accountability in the marijuana industry. In the letter, the attorneys general outline three reasons legislative action for cannabis banking is needed based on the Covid-19 pandemic: (i) cash-intensive business models could be a target of increased criminal activity; (ii) large cash transactions place the public and government officials at heightened risk of virus exposure; and (iii) tax revenue from over $15 billion in sales in 2019 could provide critical relief for state and local governments. The letter reminds congressional leaders that support for the SAFE Banking Act, or similar legislation, “is not a call for the legalization of medical or retail marijuana in [] jurisdictions that choose not to pursue such an approach,” instead it would be a reflection that “our federalist system of government that is flexible enough to accommodate divergent state approaches.”

    State Issues State Attorney General Covid-19 Federal Issues Federal Legislation Cannabis Banking SAFE Act

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  • CFPB says some organizations won’t need to comply with screening and training requirements for temporary MLOs

    Agency Rule-Making & Guidance

    On November 15, the CFPB issued an interpretive rule, which clarifies the screening and training requirements for mortgage loan originators (MLOs) with temporary authority under Regulation Z. As previously covered by InfoBytes, Section 106 of Economic Growth, Regulatory Relief, and Consumer Protection Act amends the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act) to establish temporary authority, providing a way for eligible MLOs who have applied for a new state loan originator license to act as a loan originator in the application state while the state considers the application. Regulation Z currently requires organizations to perform criminal screenings (including whether the applicant has been convicted of enumerated felonies within specified timeframes) and training requirements before permitting the individual to originate loans. According to the Bureau, Regulation Z is “ambiguous” as to whether these requirements would apply to MLOs with temporary authority and therefore, the interpretive rule clarifies that an organization is not required to conduct the criminal screening or ensure the training of any MLOs with temporary authority under the SAFE Act.

    The interpretive rule is effective November 24, the same day the SAFE Act amendments take effect.

    Agency Rule-Making & Guidance CFPB Mortgages Licensing SAFE Act EGRRCPA Regulation Z

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  • CFPB issues FAQs on SAFE Act amendments

    Agency Rule-Making & Guidance

    On September 25, the CFPB published four FAQs pertaining to compliance with federal SAFE Act amendments created by the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act), which take effect on November 24. According to the Bureau, the Act’s amendments “establish temporary authority, which provides a way for eligible loan originators who have applied for a new state loan originator license to act as a loan originator in the application state while the state considers the application.” Specifically, the FAQs address (i) residential mortgage loan originator categories and requirements; (ii) the temporary authority to act as a loan originator, as added by Section 106 of the Act; (iii) guidance concerning state transitional license availability under the SAFE Act; and (iv) the impact of the Act’s amendments on the permissibility of state transitional licensing under the SAFE Act and Regulation H.

    Agency Rule-Making & Guidance CFPB EGRRCPA Licensing SAFE Act Mortgage Origination

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  • NMLS issues “temporary authority” licensing guidelines for MLOs

    Federal Issues

    On April 4, the Nationwide Multistate Licensing System (NMLS) issued a set of guidelines and FAQs clarifying federal SAFE Act amendments created by the Economic Growth, Regulatory Relief, and Consumer Protection Act (the Act), to establish “temporary authority” provisions for mortgage loan originators (MLOs). According to the guidelines, temporary authority to act as a loan originator while completing state-specific licensing requirements is granted to: (i) qualified MLOs who are changing employment from a depository institution to a state-licensed mortgage company; and (ii) qualified state-licensed MLOs seeking to be licensed in another state. The guidance expands upon temporary authority eligibility requirements; disqualification criteria; and the length of time MLOs may operate under temporary authority.

    The guidelines also emphasize that “any MLO operating under temporary authority is subject to the requirements of the federal SAFE Act, and all applicable laws of the application state, to the same extent as if that MLO was a state-licensed loan originator licensed by the state.” MLOs will be able to apply for a license and become eligible for temporary authority on November 24.

    Federal Issues NMLS Licensing Mortgage Origination EGRRCPA SAFE Act

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  • CFPB issues semi-annual report to Congress

    Federal Issues

    On November 9, the CFPB issued its semi-annual report to Congress, covering the Bureau’s work from October 1, 2017 to March 30, 2018. The report, which is required by the Dodd-Frank Act, addresses, among other things, problems faced by consumers with regard to consumer financial products or services; significant rules and orders adopted by the Bureau; and various supervisory and enforcement actions taken during the majority of acting Director Mick Mulvaney’s tenure. Specifically, the report includes (i) a summary of five “significant” state Attorney General actions pursuant to Section 1042 of the Dodd-Frank Act, which allows states to enforce the federal law; (ii) a review of the Bureau’s fair lending efforts, noting that it “conducted fewer fair lending supervisory events. . .than in the prior period,” but “cleared a substantially higher number of MRAs or MOU items from past supervisory events than in the prior period”; (iii) a discussion of non-prime and secured credit cards marketed to consumers; and (iv) a list of upcoming initiatives, which includes requests for information regarding, among other things, the Bureau’s consumer complaint and consumer inquiry handling processes, the Bureau’s inherited regulations and inherited rulemaking authorities, the Bureau’s adopted regulations and new rulemaking authorities, Bureau rulemaking processes, Bureau public reporting practices of consumer complaint information, Bureau external engagements, the Bureau’s supervision program, and the Bureau’s enforcement processes.

    Notably, the report also discusses the budget for FY 2018, acknowledging the unusual January 2018 request for zero dollars in funding for the Bureau’s quarterly operations (previously covered by InfoBytes here). As for FY 2019, Mulvaney most recently requested nearly $173 million for Q1, which is still significantly below former Bureau Director Richard Cordray’s FY 2017 Q1 request of $217 million.

    Federal Issues CFPB Supervision Enforcement Fair Lending SAFE Act CFPB Succession

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  • Federal Reserve seeks to repeal SAFE Act regulations to reflect CFPB authority

    Agency Rule-Making & Guidance

    On September 21, the Federal Reserve Board (Board) issued a notice of proposed rulemaking seeking comment on the repeal of certain provisions of regulations that incorporate the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act), which the Board states are intended to reflect the transfer of rulemaking authority to the CFPB by the Dodd-Frank Act. Specifically, the Board proposes amending Regulation H (Membership of State Banking Institutions in the Federal Reserve System) and Regulation K (International Banking Operations) to repeal the provisions that incorporate the SAFE Act because of the change in rulemaking authority and because the CFPB finalized a rule that is substantially identical to the Board's regulations. Comments on the proposal are due within 60 days after publication in the Federal Register.

    Agency Rule-Making & Guidance Federal Issues Federal Reserve CFPB SAFE Act Licensing Mortgages

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  • OCC requests comments on registration of mortgage loan originators


    On February 6, the OCC published a notice and request for comment in the Federal Register concerning its information collection entitled, “Registration of Mortgage Loan Originators.” Under the Secure and Fair Enforcement for Mortgage Licensing Act (SAFE Act), any person employed by a regulated entity, who is engaged in the business of residential mortgage loan origination, must register with the Nationwide Mortgage Licensing System and Registry (NMLS), obtain a unique identifier, and adopt policies and procedures to ensure compliance with the SAFE Act’s requirements. The NMLS is structured to, among other things, (i) improve information sharing between regulators; (ii) increase mortgage loan originator accountability; and (iii) provide consumers easy access to background information on mortgage loan originators, including publicly adjudicated disciplinary and enforcement actions. The OCC retains enforcement authority under the SAFE Act for financial institutions (including federal branches of foreign banks) with total assets of $10 billion or less. Comments on the notice must be received by April 9.

    Lending OCC Loan Origination NMLS Mortgages SAFE Act

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  • CFPB Publishes Ninth Semi-Annual Report to Congress

    Consumer Finance

    On June 30, the CFPB published its ninth Semi-Annual Report to Congress covering supervisory and enforcement actions, rulemaking activities, newly designed consumer tools, and published reports from October 1, 2015 through March 31, 2016. The Semi-Annual Report provides an overview of relevant topics addressed in previous CFPB reports and bulletins, including monthly Consumer Complaint reports, Supervisory Highlights, and the February 2016 compliance bulletin regarding Regulation V. The report outlines, among other things, the CFPB’s (i) efforts to monitor the effectiveness of the SAFE Act; (ii) fair lending activities, including its risk-based fair lending prioritization process and recent public enforcement actions; and (iii) ongoing efforts to define larger participants in markets for consumer financial services and products which are subject to the Bureau’s supervisory authority. According to the report, the Bureau’s supervisory actions during the six month period covered in the report provided over $44 million in compensation to over 177,000 consumers, while enforcement actions in the same time period resulted in “approximately $200 million in total relief for consumers who fell victim to various violations of consumer financial protection laws, along with over $70 million in civil money penalties.”

    CFPB Fair Lending Enforcement Consumer Complaints SAFE Act

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  • Illinois Adopts National SAFE MLO Test


    On June 1, the Conference of State Bank Supervisors announced that the Illinois Department of Financial and Professional Regulation (IDFPR) will now use the National SAFE Mortgage Loan Originator (MLO) Test with Uniform State Content, making it the 52nd state agency to adopt the test. Under the new process, Illinois licensees who pass the SAFE MLO Test with Uniform State Content no longer need to take an additional, state-specific test. IDFPR Secretary Bryan Schneider commented on the streamlined test process saying, “[b]y providing a more effective regulatory experience, we foster the creation of a regulatory environment conducive to strong economic growth and opportunity.”

    Mortgage Licensing CSBS SAFE Act

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  • U.S. House Passes SAFE Transitional Licensing Act to Give Greater Job Mobility to Mortgage Loan Originators


    On May 23, the U.S. House of Representatives unanimously passed by voice vote H.R. 2121, the SAFE Transitional Licensing Act of 2015. Congressman Steve Stivers (R-OH) introduced H.R. 2121 in April 2015 with the purpose of “providing regulatory relief for loan originators in an effort to make a smooth employment transition between bank and non-bank entities.” As passed, H.R. 2121 would amend the SAFE Mortgage Licensing Act of 2008 to give eligible mortgage loan originators (MLOs) the ability to continue originating loans while awaiting a decision on their application for a state originator license. This temporary authority would apply when MLOs switch jobs (i) from a depository institution, where a state originator license is not required, to a state-licensed non-bank lender, where such a license is required; or (ii) from a state-licensed lender in one state to a state-licensed lender in another state, where a new state originator license is required. In both cases, this temporary authority would expire upon the grant, denial, or withdrawal of the license application, or, if an application is deemed incomplete, 120 days after the application was submitted.

    U.S. House SAFE Act

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