Last week was busy for the financial technology industry (Fintechs) and non-bank regulators.
New York joined the Conference of State Bank Supervisors (CSBS) in filing a lawsuit against the Office of the Comptroller of the Currency (OCC), and announced plans to adopt a uniform licensing system for Fintechs. CSBS issued its support of the lawsuit,…
After leaving residential mortgage lenders guessing for many years, the California Department of Business Oversight (“DBO”) finally provided the industry with some guidance on the documentation licensees may use to verify compliance with the state’s per diem statutes.
The California per diem statutes (Financial Code § 50204(o) and Civil Code § 2948.5) prohibit a lender from requiring a borrower to pay interest for more than one day prior to the disbursement of loan proceeds, subject to some limited exceptions.
In 2007, the DBO issued Release No. 58-FS (the “2007 Release”), which provided guidance on acceptable evidence of compliance with Financial Code § 50204(o):
Of course, much has changed since 2007, including the enactment and implementation of TRID, which replaced the HUD-1 with the Closing Disclosure.
Continue Reading Carpe Per Diem Redux — California Clarifies How to Document Compliance
The NMLS Money Services Businesses (MSB) Call Report, described by the Conference of State Bank Supervisors (CSBS) as “a new tool within the Nationwide Multistate Licensing System (NMLS) that will streamline MSB reporting, improve compliance by the industry, and create the only comprehensive database of nationwide MSB transaction activity,” is now live in the NMLS, and the initial report is due May 15, 2017.
Since state regulators decided to transition the licensing of money services businesses on to the NMLS, they have been developing a more uniform report, which standardizes a number of definitions and the categorization of transactions, by which MSBs could report on their money service-related activities through the NMLS. Further, with the development and use of a more standardized MSB report, the need for MSBs to have additional tracking and reporting systems that can slice and dice transactions into each state’s unique buckets is reduced or eliminated.
Consequently, the new MSB Call Report was adopted by CSBS and released in NMLS on April 1, 2017. As a former Assistant Commissioner with the State of Maryland, I served on both the MSB Call Report Working Group and the NMLS Policy Committee (NMLSPC). The NMLSPC was responsible for recommending the approval of the Report, which was envisioned to operate along the lines of the Mortgage Call Report required of mortgage finance licenses, to CSBS.
Continue Reading Money Services Businesses Call Report Q1 Submission Deadline Quickly Approaching
The California Department of Business Oversight* (“DBO”) appears to have backed off of its pronouncement late last year that lenders may not deliver per diem disclosures to all borrowers.
California’s infamous per diem statutes (Fin. Code § 50204(o); Civ. Code § 2948.5) have been the basis of scores of licensing agency examination findings and actions for many years now, resulting in significant refunds and penalties. In fact, just last week the DBO announced that a lender had agreed to pay a settlement of $1.4 million for per diem violations. That is just one of many such settlements that often run into the many hundreds of thousands of dollars or more. One reason for this is the lack of certainty in agency interpretation. Just one example of that uncertainty was addressed by the DBO at the California Mortgage Bankers Association’s (“CMBA’s”) Legal Issues and Regulatory Compliance Conference this past December.
Continue Reading Carpe Per Diem Disclosure — California Department of Business Oversight Clarifies its Position
The 2017 Maryland legislative session ended at midnight last Monday, April 10. Here is a look at legislation affecting financial services businesses that the Governor is expected to sign into law.
HB0182, or as we prefer, the “2017 NMLS Transition Bill,” is intended to transition Maryland’s Check Casher, Collection Agency, Consumer Lender, Credit Service Business, Debt Management Company, Installment Lender, and Sales Finance licenses to the Nationwide Multistate Licensing System (the “NMLS”) effective July 1, 2017.
NMLS was established originally to provide a platform for mortgage licensing. More recently, however, NMLS has been expanded to accommodate other categories of licenses. Pursuant to prior state legislation, the Commissioner transitioned all mortgage lender (which includes mortgage brokers and mortgage servicers) and mortgage loan originator licenses to NMLS in 2009-2010 and money transmitter licenses in 2012. Similar to prior transition legislation, the 2017 NMLS Transition Bill is massive and includes: (i) new and amended definitions (including “branch location” and “control person”), (ii) revisions to the term of the license, (iii) with respect to any information and disclosures provided to NMLS, provisions that continue to apply any privilege arising under federal or state law to that information, (iv) authority to share information with certain officials without the loss of privilege or confidentiality protections provided by federal or certain State laws, and (v) authority to adopt regulations to facilitate the transition to NMLS and more.
No Fee Increase
NMLS was created by Conference of State Bank Supervisors (“CSBS”) and the American Association of Residential Mortgage Regulators and began operations in January 2008. It is owned and operated by the State Regulatory Registry L.L.C., a wholly-owned subsidiary of CSBS. Significantly, the cost to register with NMLS annually is $100 and $20 for each additional branch license/registration. The Commissioner advised that NMLS has agreed to waive the annual fees for Maryland licensees transitioning to the system this fiscal year (July 1, 2017 – June 30, 2018). Although NMLS will resume charging its annual fee for use of the system during the next fiscal year, in an effort to reduce the cost of regulation, the Commissioner proposed and the final bill includes the NMLS processing fee as part of the licensing fee without increasing the current license fee.
No State Criminal Background Check
Applicants for Maryland mortgage lender, check casher, debt management service, and money transmitter licenses and certain other persons are required to submit fingerprints for a national and State criminal history records check (the “CHRC”) as part of the licensing process. Presently, if an individual required to submit fingerprints for a CHRC is within the Maryland borders, the individual can electronically submit fingerprints for the CHRC, but the process is particularly burdensome for those individuals or control persons who are out-of-state. Individuals who are out-of state cannot use the state’s electronic fingerprint submission process without physically entering the state and must submit fingerprints for processing on paper cards through the mail.
According to the bill’s fiscal and policy notes, the Commissioner advised that the state criminal history records check requirement is time-consuming and does not provide a significant benefit. Therefore, HB0182 not only effectively eliminates the state background check requirement at this time, but allows for the use of the NMLS process for the submission of the CHRC.
The bill would have an effective date of July 1, 2017, but stay tuned for notices from the Commissioner to confirm the precise submission dates for new applications, the transition period for current licensees, and transition instructions – specifically as it relates to licenses that are approaching renewal periods.
Continue Reading Maryland Legislative Session Adjourned
A complaint filed March 23 by the bankruptcy trustee for Lam Cloud Management, LLC in the United States Bankruptcy Court for the District of New Jersey challenges two small business financing models: (i) merchant cash advances (“MCAs”); and (ii) small business loans originated under bank partnerships. While disposition of the complaint will take time, and all that is available for now are bare allegations, the complaint is another recent challenge involving usury and bank partner programs and warrants attention from entities involved in small business financing and lending.
Continue Reading NJ Bankruptcy Case Takes Aim at Small Business Financing — Merchant Cash Advances and Bank Partnerships
Financial services providers, marketplace lenders and secondary market purchasers doing business in the state of New York can breathe at least a temporary sigh of relief this week. Controversial changes proposed to the state’s Licensed Lender Law included in a pair of companion budget bills were dropped when these bills were amended on Monday. Assembly Bill 3008 and Senate Bill 2008, as introduced in the legislature on January 23, 2017 would have expanded the scope of consumer and commercial loans, and types of business activities, subject to licensing by the New York Department of Financial Services (the “Department”) under the Licensed Lender Law. If enacted into law, these proposed amendments would have triggered new licensing obligations for companies doing business in the state, potentially reaching marketplace lenders, other Fintech companies and secondary market purchasers.
Continue Reading Controversial Changes to New York’s Licensed Lender Law Dropped from Latest Version of Budget Bills*
Since the 2008 beginning of the Nationwide Multistate Licensing System (f/k/a the Nationwide Mortgage Licensing System) (the “NMLS”), the most unnecessary information licensees or license applicants must provide to establish or maintain an MU1 Account Record is the identification of each affiliate and subsidiary that provides financial services or settlement services. The applicant or licensee…
With all eyes on Washington, DC, and the press abuzz with each movement and action of the newly sworn-in President Trump, Maryland quietly published in the January 20, 2017 issue of the Maryland Register a highly-anticipated request for comment and proposed revisions to its regulations governing a wide range of mortgage finance licensing and practice…
As we reported on January 11th, the December 22nd Memorandum issued by the Kentucky Department of Financial Institutions provides that the state’s Mortgage Licensing and Regulation Act requires licensing of entities holding residential mortgage loan servicing rights. Based on the Memorandum, a license would be needed by March 1, 2017.
As a licensing obligation exists…
