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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.
Arizona passes money transmitter licensure legislation
On May 20, the Arizona governor signed SB 1580, which revises provisions related to money transmitters. The bill, among other things, provides that “a person may not engage in the business of money transmission or advertise, solicit or hold itself out as providing money transmission unless the person is licensed." The provision does not apply to “a person that is an authorized delegate of a person licensed under this article that is acting within the scope of authority conferred by a written contract with the licensee,” and to exempt persons provided the person “does not engage in money transmission outside the scope of the exemption.” The bill also creates provisions related to consistent licensure, application for licensure, and information requirements for certain individuals.
Florida amends MSB provisions to define “control persons”
On May 12, the Florida governor signed HB 273, which amends provisions related to money services business activities. The bill, among other things, revises provisions related to prohibited activities without a license and other requirements for written contracts between a money transmitter or payment instrument seller and an authorized vendor, and provides requirements for a money transmitter that receives virtual currency, among other things. The bill also establishes that “each money transmitter that receives virtual currency, either directly or through an authorized vendor, for the purpose of transmitting such virtual currency from one person to another location or person must at all times, until the transmission obligation is completed, hold virtual currency of the same type and amount owed or obligated to the other location or person.” The bill is effective January 1, 2023.
California reinstates single commercial loan licensing exemption under the CFL
On April 28, the California governor signed SB 577, which amends provisions relating to certain financial institutions, including California Financing Law (CFL), Escrow Agent, and Money Transmitter licensees.
The bill reinstates a licensing exemption available to commercial lenders in California. Specifically, the bill reenacted a provision that formerly expired on January 1, 2022. This reinstated provision permits a lender to make a single loan within a 12-month period, if the loan is a commercial loan as defined by the CFL, without having to obtain a CFL license.
The bill also updates contact information to be included on notices posted by California Money Transmitter licensees. Specifically, the bill establishes that California Money Transmitter licensees are required to prominently post, in English and in the same language used by the licensee to conduct business, on the premises of each branch office that conducts money transmission activities a certain notice, including specific contact information for the California Department of Financial Protection and Innovation.
Finally, the bill removes obsolete language from provisions governing criminal and civil background requirements for Escrow Agent licensees.
The bill is effective immediately.
West Virginia updates money transmitter licensing law
Recently, the West Virginia governor signed SB 505, which updates laws regarding licensure and regulation of money transmitters. Among other things, the bill (i) enhances and expands defined terms, including the definition of “control”; (ii) removes the provisional licensing option for check sellers; (iii) gives West Virginia the authority to participate in multistate examinations; (iv) increases the net worth requirement for licensees; (v) sets forth prior approval requirements for a change in control of a licensee; and (vi) requires licensees to maintain specified “permissible investments” at all times. The bill is effective June 7.
North Carolina creates regulatory sandbox
On October 15, the North Carolina governor signed HB 624, which creates a regulatory sandbox program and establishes the North Carolina Innovation Council (Council). Under the North Carolina Regulatory Sandbox Act of 2021, participants will have 24 months from the date an application is approved (unless granted an extension) to test an innovative product or service on consumers in the state without being subject to state laws and regulations that normally would regulate such products or services. The waiver “shall be no broader than necessary to accomplish the purposes” established under the Act. The Act notes that legislative findings determined that existing legal and regulatory frameworks restrict innovation because they “were established largely at a time when technology was not a fundamental component of industry ecosystems, including banking and insurance,” and that innovators would benefit from a flexible regulatory regimen to test new products, services, and emerging technologies. In addition, the Council will provide support for innovation, encourage participation in the regulatory sandbox, and set standards, principles, guidelines, and policy priorities for the types of innovations supported by the regulatory sandbox. The Council will also be responsible for admission into the regulatory sandbox and for assigning selected participants to the appropriate state agency. The program stipulates that innovative products or services may only be offered to state residents, with the exception of products and services associated with a money transmitter, “in which case only the physical presence of the consumer in the [s]tate at the time of the transaction may be required.” The program also allows participants and the applicable state agency to mutually agree to an extension or an increase in the numbers of consumers or dollar limits for a particular product or service. Among other things, participants may also request an extension of not more than 12 months to obtain a license or other authorization required by law to continue to market the product or service. The Act is effective immediately.
Nevada passes licensing provision act
On June 3, the Nevada governor signed into law SB 453, a bill that revises provisions relating to certain persons licensed or certified by the Division of Financial Institutions of the Department of Business and Industry or the Commissioner of Financial Institutions (DFI). The amendments allow DFI to accept licensing applications through the Nationwide Multistate Licensing System & Registry (NMLS) for the following license types: (i) money transmitters; (ii) installment loans; (iii) uniform-debt-management; (iv) deferred deposit, high-interest, title loans, and check-cashing; (v) consumer litigation funding; (vi) private professional guardians; (vii) exchange facilitators; and (viii) collection agencies. Among other things, SB 453 authorizes the NMLS to accept license applications, fees, and renewals, conduct criminal background checks, and accept credit reports on behalf of DFI. SB 453 became effective upon passage and approval.
Arizona amends various financial institution rules
On May 10, the Arizona governor signed into law SB 1463, a bill that makes various changes to the Arizona Department of Insurance and Financial Institutions (DIFI). Among other things, SB 1463 (i) eliminates certain application fees for financial institutions, enterprises, money transmitters, and collection agencies; (ii) establishes nonrefundable fees for advance fee loan brokers and for premium finance company branch offices; (iii) revises the annual assessment and renewal fee structure for enterprises, consumer lenders, premium finance companies, advance fee loan brokers, and collection agencies; (iv) clarifies that licensee name change fees for financial institution and enterprise licensees do not apply to loan originators and appraiser licensees; (v) allows the Deputy Director to engage a contractor for mortgage broker license testing; (vi) stipulates that the Uniform Standards of Professional Appraisal Practice are the standards in Arizona, unless the Deputy Director objects; (vii) requires licensee applicants to pass a written examination under the supervision of DIFI; (viii) requires mortgage brokers, mortgage bankers, or commercial mortgage bankers who are licensed as exempt persons to deposit a surety bond with the Deputy Director in order to do business; (ix) defines the phrase “federally regulated appraisal management company”; (x) modifies the definitions of “consumer loan” and “control”; and (xi) stipulates that a consumer loan made pursuant to a consumer lender license is not a secondary motor vehicle finance transaction. SB 1462 goes into effect 90 days after the Arizona legislature adjourns and will be retroactive to July 1, 2020.
Nebraska amends installment lender and money transmitter licensing requirements
On March 17, the Nebraska governor signed LB 363, which amends certain licensing requirements for installment lenders and money transmitters. Among other things, LB 363 amends provisions of the Nebraska Installment Loan Act related to installment loan licenses and surety bonds to require “any person that holds or acquires any rights of ownership, servicing, or other forms of participation in a loan under the Nebraska Installment Loan Act or that engages with, or conducts loan activity with, an installment loan borrower in connection with a loan under the act” to obtain a license from the department. Additionally, licensees will be required to increase their surety bonds by $50,000 for each branch office licensed under the Nebraska Installment Sales Act. The act also provides that certain licensed persons that operate in the state as a collection agency, credit services organization, or that engage in debt management business are not required to be licensed under the Nebraska Money Transmitters Act. Additional amendments further address the expanded definition of a person engaged in money transmission, as well as investigation and examination authorities. The act takes effect immediately.
Indiana amends certain financial institution and consumer credit provisions
On March 18, the Indiana governor signed House Enrolled Act No. 1353, which amends various provisions concerning financial institutions and consumer credit, including those related to first lien mortgage lenders, credit unions, and surety bond requirements for licensed mortgage loans originators, pawnbrokers, and money transmitters, among others. Among other things, the act also amends a provision in the state statute governing credit unions, which provides that loans made by a credit union to the credit union’s individual officers (and to the immediate family members of an officer, director, or supervisory committee member) must be made in accordance with Regulation O of the Federal Reserve Board. The act also stipulates that required appraisals connected to mortgage loans made to credit union members must be “consistent with the appraisal standards and transaction value limitations” outlined in the National Credit Union Administration’s appraisal regulations. The amendments take effect July 1.