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Financial Services Law Insights and Observations

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  • OCC allows Hawaii institutions to temporarily close, SBA offers loans

    On August 10, the OCC issued a proclamation permitting OCC-regulated institutions to close offices in areas affected by the wildfires in Hawaii. In issuing the proclamation, the OCC noted that only bank offices directly affected by potentially unsafe conditions should close, and that institutions should make every effort to reopen as quickly as possible to address customers’ banking needs. The proclamation directs institutions to OCC Bulletin 2012-28 for further guidance on actions they should take in response to natural disasters and other emergency conditions.

    In addition, the Small Business Association (SBA) announced that it is offering low-interest federal disaster loans to Hawaii businesses and residents and California businesses and residents affected by the severe winter storms, straight-line winds, flooding, landslides and mudslides that occurred February 21 – July 10. 

    Interest rates for these loans can be as low as 4% for businesses, 2.375% for private nonprofit organizations and 2.375% (2.5% for Hawaii) for homeowners and renters with terms up to 30 years. Loan amounts and terms are set by SBA and are based on each applicant’s financial condition, with loans up to $500,000 for homeowners to repair or replace damaged or destroyed real estate and $100,000 to repair or replace damaged or destroyed personal property, including personal vehicles. The loans are part of the SBA’s commitment to “providing federal disaster loans swiftly and efficiently, with a customer-centric approach to help businesses and communities recover and rebuild.”

    Find continuing InfoBytes coverage on disaster relief here.

    Bank Regulatory Federal Issues OCC Hawaii California SBA Disaster Relief Consumer Finance

  • FDIC announces Hawaii disaster relief

    On August 11, the FDIC issued FIL-41-2023 to provide regulatory relief to financial institutions and help facilitate recovery in areas of Hawaii affected by wildfires from August 8 and continuing. The FDIC acknowledged the unusual circumstances faced by affected institutions and encouraged those institutions to work with impacted borrowers to, among other things: (i) extend repayment terms; (ii) restructure existing loans; or (iii) ease terms for new loans, provided the measures are done “in a manner consistent with sound banking practices.” Additionally, the FDIC noted that institutions “may receive favorable Community Reinvestment Act consideration for community development loans, investments, and services in support of disaster recovery.” The FDIC will also consider regulatory relief from certain filing and publishing requirements and instructed institutions to contact the San Francisco Regional Office if they expect a delay in making filings or are experiencing difficulties in complying with publishing or other requirements.

    Bank Regulatory Federal Issues Consumer Finance FDIC Disaster Relief Hawaii

  • Hawaii amends money transmitter provisions

    On July 3, the Hawaii governor signed HB 1027 (the “Act”) into law, amending several provisions relating to the Money Transmitters Modernization Act. The Act adds and amends several definitions. Changes include defining “money,” “receiving money or monetary value for transmission,” and “tangible net worth.” The definition of “money transmission” has also been amended to clarify its connection to business done in Hawaii, and “stored value” has been amended to mean monetary value “that represents a claim against the issuer evidenced by an electronic or digital record and that is intended and accepted for use as a means of redemption for money or monetary value, or payment for goods or services.” Stored value does not include “a payment instrument or closed loop stored value, or stored value not sold to the public but issued and distributed as part of a loyalty, rewards, or promotional program.”

    Among the various exemptions, the Act also provides for an exemption for an agent of the payee to collect and process a payment from a payor to the payee for goods or services, other than money transmission services, provided certain criteria is met. Additional exemptions include certain persons acting as intermediaries, persons expressly appointed as third-party service providers to an exempt entity, and registered futures commission merchants and securities broker-dealers, among others. Anyone claiming to be exempt from licensing may be required to provide information and documentation demonstrating their qualification for the claimed exemption.

    The amendments outline numerous licensing application and renewal procedures, including largely adopting the net worth, surety bond, and permissible investment requirements set forth in the Money Transmission Modernization Act. Several other states have also recently enacted provisions relating to the licensing and regulation of money transmitters (see InfoBytes coverage here and here).

    The Act took effect July 1.

    Licensing State Issues Digital Assets Fintech State Legislation Hawaii Money Service / Money Transmitters

  • Hawaii enacts licensing legislation

    On June 17, the Hawaii governor signed two bills into law. HB 2113 permits money transmitter license applicants to submit to either a state or federal criminal history record check, rather than both, upon application. SB 1105 establishes that, in addition to application fees, and any fees required by NMLS, a mortgage loan originator licensee must pay a mortgage loan recovery fund fee of $200, and upon application for renewal of a license, a mortgage loan originator licensee must pay $100. The bill also permits a person aggrieved by the fraud, misrepresentation, or deceit of a mortgage loan originator company licensee to receive restitution payment upon a final court order. The bills are effective July 1.

    Licensing State Issues State Legislation Hawaii Money Service / Money Transmitters Mortgages Mortgage Origination NMLS

  • HUD announces Hawaii and Kansas disaster relief

    Federal Issues

    On February 16, HUD announced disaster assistance for certain areas in Hawaii impacted by severe storms, flooding, and landslides. The disaster assistance supplements state and local recovery efforts in specific counties, and provides foreclosure relief and other assistance to affected homeowners following President Biden’s major disaster declaration on February 15. According to the announcement, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program allows individuals who have lost homes to finance the purchase of a house or refinance an existing house along with the costs of repair through a single mortgage. The program also allows homeowners with damaged property to finance the rehabilitation of existing single-family homes. Furthermore, HUD is allowing applications for administrative flexibility and waivers for community planning and development grantees and public housing authorities.

    On February 18, HUD announced disaster assistance for certain areas in Kansas impacted by severe storms and straight-line winds. The disaster assistance supplements state and local recovery efforts in specific counties, and provides foreclosure relief and other assistance to affected homeowners following President Biden’s major disaster declaration on February 17. According to the announcement, HUD is providing an automatic 90-day moratorium on foreclosures of FHA-insured home mortgages for covered properties and is making FHA insurance available to victims whose homes were destroyed or severely damaged, such that “reconstruction or replacement is necessary.” HUD’s Section 203(k) loan program allows individuals who have lost homes to finance the purchase of a house or refinance an existing house along with the costs of repair through a single mortgage. The program also allows homeowners with damaged property to finance the rehabilitation of existing single-family homes. Furthermore, HUD is allowing applications for administrative flexibility and waivers for community planning and development grantees and public housing authorities.

    Federal Issues HUD Consumer Finance Mortgages Disaster Relief Hawaii

  • Hawaii enacts installment loan provisions

    Earlier this year, the Hawaii governor signed HB 1192, which amends certain provisions related to small dollar lending requirements. Specifically, the bill sets forth a new licensing requirement for “installment lenders” and specifies various consumer protection requirements. The bill defines installment lender broadly as “any person who is the business of offering or making a consumer loan, who arranges a consumer loan for a third party, or who acts as an agent for a third party, regardless of whether the third party is exempt from licensure under this chapter or whether approval, acceptance, or ratification by a third party is necessary to create a legal obligation for the third party, through any method including mail, telephone, the Internet, or any electronic means.” This language appears to capture loans offered under a bank partnership model under the purview of the new law.

    Further, the bill: (i) caps installment loan amounts at $1,500, and restricts the total amount of changes to no more than 50 percent of the principal loan amount; (ii) limits monthly maintenance fees to between $25 and $35 depending on the installment loan’s original principal amount; (iii) stipulates that the minimum repayment term is two months for installment loans of $500 or less, or four months for loans of $500.01 or more; (iv) states that lenders must “accept prepayment in full or in part from a consumer prior to the loan due date and shall not charge the consumer a fee or penalty if the consumer opts to prepay the loan; provided that to make a prepayment, all past due interest and fees shall be paid first; (v) prohibits a consumer’s repayment obligations to be secured by a lien on real or personal property; (vi) prohibits lenders from requiring consumers to purchase add-on products such as credit insurance; (vii) provides that the maximum contracted repayment term of an installment loan is 12 months; (viii) caps the annual interest rate on installment loans at 36 percent; and (ix) states that any installment loan made without a required license is void (the collection, receipt, or retention of any principal, interest, fees, or other charges associated with a voided loan is prohibited).

    The bill exempts certain financial institutions (e.g., banks, savings banks, savings and loan associations, depository and nondepository financial services loan companies, credit unions) from the installment lender licensing requirements.

    The bill also repeals existing state law on deferred deposits. While HB 1192 became effective July 1, provisions related to the repeal of the existing law on deferred deposits and installment lender licensing requirements are effective January 1, 2022. License applications will be available via the Nationwide Multistate Licensing System.

    Licensing State Issues State Legislation Hawaii Small Dollar Lending Consumer Finance Installment Loans

  • Hawaii extends work from home guidance

    State Issues

    The Hawaii Department of Financial Institutions extended interim guidance permitting certain licensees with a physical presence to reduce hours or work from home to coincide with local mayor’s orders (see previous coverage here, here, here and here). The department explained that licensees may continue work from home status until applicable mayor’s orders are lifted. The department will also continue remote work status.

    State Issues Covid-19 Hawaii Licensing

  • Hawaii regulator extends authorization for reduced office hours, temporary closures

    State Issues

    On October 2, the Hawaii Division of Financial Institutions extended interim guidance allowing Hawaii-located financial institutions to reduce hours or close offices during Hawaii’s Covid-19 state of emergency (see here and here for previous coverage). Similar to previously issued guidance, financial institutions and escrow depositories are required to provide notice of closures or reductions in hours. While mortgage loan originators, mortgage servicers and money transmitters are not required to provide notice, the regulator requests a courtesy notification of any closure or reduction in hours.  The guidance is extended “in accordance with the county emergency orders found on each county website.”

    State Issues Covid-19 Hawaii Financial Institutions Escrow Mortgages Loan Origination Mortgage Origination Mortgage Servicing Money Service / Money Transmitters

  • Hawaii regulator extends guidance permitting licensees to reduce office hours, temporarily close

    State Issues

    On August 13, the Hawaii Division of Financial Institutions extended, until September 30, 2020, interim guidance permitting licensees with locations in Hawaii to reduce hours or close offices during Hawaii’s Covid-19 emergency period. Consistent with the previous guidance, covered here, financial institutions and escrow depositories are required to provide notice of closures or reductions in hours. While mortgage loan originators, mortgage servicers, and money transmitters are not required to provide notice, the regulator requests a courtesy notification of any closure or reduction in hours.

    State Issues Covid-19 Hawaii Licensing Financial Institutions Escrow Mortgages Mortgage Origination Mortgage Servicing Money Service / Money Transmitters

  • Hawaii regulator extends guidance permitting licensees to reduce office hours, temporarily close offices

    State Issues

    On July 2, the Hawaii Division of Financial Institutions extended earlier guidance, previously covered here, that temporarily permits licensees with locations in Hawaii to reduce hours or close offices during Hawaii’s Covid-19 emergency period. Notice of temporary closure or relocation from certain licensees, including escrow depositories and financial institutions, is required.  The guidance is extended to July 31, 2020.

    State Issues Covid-19 Hawaii Licensing Mortgage Licensing Escrow Financial Institutions

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