Rhode Island 2023 Regular Session

Rhode Island Senate Bill S0696 Compare Versions

Only one version of the bill is available at this time.

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5	5	2023 -- S 0696
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7	7	LC001640
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9	9	S TATE OF RHODE IS LAND
10	10	IN GENERAL ASSEMBLY
11	11	JANUARY SESSION, A.D. 2023
12	12	____________
13	13
14	14	A N A C T
15	15	RELATING TO FINANCIAL INSTITUTIONS -- POWERS AND OPERATION S
16	16	Introduced By: Senator Roger Picard
17	17	Date Introduced: March 22, 2023
18	18	Referred To: Senate Commerce
19	19	(Dept. of Business Regulations)
20	20
21	21	It is enacted by the General Assembly as follows:
22	22	SECTION 1. Section 19-3-3 of the General Laws in Chapter 19-3 entitled "Powers and 1
23	23	Operations" is hereby amended to read as follows: 2
24	24	19-3-3. Maximum aggregate liability of one person or company. 3
25	25	(a) No financial institution shall permit any person or entity to borrow or guaranty an 4
26	26	amount(s), directly or indirectly, in the aggregate, that exceeds fifteen percent (15%) of its 5
27	27	unimpaired capital. In calculating this limitation, a financial institution shall take into account the 6
28	28	credit exposure to any such person or entity arising from derivative transactions. The director shall 7
29	29	have the authority to establish the method for determining the credit exposure and the extent to 8
30	30	which the credit exposure shall be taken into account. As used in this subsection, “derivative 9
31	31	transaction” includes any transaction that is a contract, agreement, swap, warrant, note or option 10
32	32	that is based, in whole or in part, on the value of, any interest in, or any quantitative measure or the 11
33	33	occurrence of any event leading to, one or more commodities, securities, currencies, interest or 12
34	34	other rates, indices or other assets. The director may adopt regulations establishing the method for 13
35	35	determining credit exposure to derivative transaction and the extent to which the credit exposure 14
36	36	shall be taken into account. The director shall apply the limitation included herein to derivative 15
37	37	transaction entered into on or after January 1, 2013. 16
38	38	This limitation shall not include: 17
39	39	(1) Obligations issued by the United States; 18
40	40	(2) General obligations of the state of Rhode Island; 19
41	41
42	42
43	43	LC001640 - Page 2 of 23
44	44	(3) Loans or any portion thereof that are insured or guaranteed by the United States or any 1
45	45	agency thereof; 2
46	46	(4) Inter-bank transactions involving the transfer of immediately available funds resulting 3
47	47	from credits to deposit balances at Federal Reserve banks or from credit to new or existing deposit 4
48	48	balances due from a correspondent depository institution (commonly known as the sale of federal 5
49	49	funds) with a maturity of one business day or less; or 6
50	50	(5) Loans secured by deposits within the financial institution where a perfected interest in 7
51	51	the deposits is on record. 8
52	52	(b) To the extent that a deposit-taking institution regulated by the Federal Office of Thrift 9
53	53	Supervision Reserve Bank and insured by the Federal Deposit Insurance Corporation is expressly 10
54	54	permitted to make loans that would exceed the limitations set forth in this section, the lending 11
55	55	limitations of the Office of Thrift Supervision Reserve Bank shall apply. Nothing herein shall limit 12
56	56	the department of business regulation from taking any action it deems appropriate to maintain 13
57	57	appropriate safety and soundness standards relative to any loan or loans made by any financial 14
58	58	institutions. 15
59	59	SECTION 2. Sections 19-14-1 and 19-14-5 of the General Laws in Chapter 19-14 entitled 16
60	60	"Licensed Activities" are hereby amended to read as follows: 17
61	61	19-14-1. Definitions. 18
62	62	Unless otherwise specified, the following terms shall have the following meanings 19
63	63	throughout chapters 14, 14.1, 14.2, 14.3, 14.4, 14.6, 14.8, 14.10, and 14.11 of this title: 20
64	64	(1) “Bona fide employee” shall mean an employee of a licensee who works under the 21
65	65	oversight and supervision of the licensee. 22
66	66	(2) “Check” means any check, draft, money order, personal money order, or other 23
67	67	instrument for the transmission or payment of money. For the purposes of check cashing, travelers 24
68	68	checks or foreign denomination instruments shall not be considered checks. “Check cashing” 25
69	69	means providing currency for checks. 26
70	70	(3) “Check casher” means a person or entity who or that, for compensation, engages, in 27
71	71	whole or in part, in the business of cashing checks. 28
72	72	(4) “Currency transmission” means engaging in the business of any of the following: 29
73	73	(i) Sale or issuance of payment instruments or stored value primarily for personal, family, 30
74	74	or household purposes; or 31
75	75	(ii) Receiving money or monetary value for transmission or holding funds incidental to 32
76	76	transmission within the United States or to locations abroad by any and all means, including 33
77	77	payment instrument, stored value, wire, facsimile, or electronic transfer, primarily for personal, 34
78	78
79	79
80	80	LC001640 - Page 3 of 23
81	81	family, or household purposes. This includes maintaining control of virtual currency or transactions 1
82	82	in virtual currency on behalf of others. 2
83	83	(5) “Deferred-deposit transaction” means any transaction, such as those commonly known 3
84	84	as “payday loans,” “payday advances,” or “deferred-presentment loans,” in which a cash advance 4
85	85	is made to a customer in exchange for the customer’s personal check or in exchange for the 5
86	86	customer’s authorization to debit the customer’s deposit account and where the parties agree either 6
87	87	that the check will not be cashed or deposited, or that the customer’s deposit account will not be 7
88	88	debited until a designated future date. 8
89	89	(6) [Deleted by P.L. 2019, ch. 226, § 1 and P.L. 2019, ch. 246, § 1.] 9
90	90	(7) “Deliver” means to deliver a check to the first person who, in payment for the check, 10
91	91	makes, or purports to make, a remittance of, or against, the face amount of the check, whether or 11
92	92	not the deliverer also charges a fee in addition to the face amount and whether or not the deliverer 12
93	93	signs the check. 13
94	94	(8) “Insurance premium finance agreement” means an agreement by which an insured, or 14
95	95	prospective insured, promises to pay to an insurance premium finance company the amount 15
96	96	advanced, or to be advanced, under the agreement to an insurer or to an insurance producer, in 16
97	97	payment of a premium, or premiums, on an insurance contract, or contracts, together with interest 17
98	98	and a service charge, as authorized and limited by this title. 18
99	99	(9) “Insurance premium finance company” means a person or entity engaged in the 19
100	100	business of making insurance premium finance agreements or acquiring insurance premium finance 20
101	101	agreements from other insurance premium finance companies. 21
102	102	(10)(i) “Lender” means any person who makes or funds a loan within this state with the 22
103	103	person’s own funds, regardless of whether the person is the nominal mortgagee or creditor on the 23
104	104	instrument evidencing the loan; 24
105	105	(ii) A loan is made or funded within this state if any of the following conditions exist: 25
106	106	(A) The loan is secured by real property located in this state; 26
107	107	(B) An application for a loan is taken by an employee, agent, or representative of the lender 27
108	108	within this state; 28
109	109	(C) The loan closes within this state; 29
110	110	(D) A retail installment contract as defined herein is created; 30
111	111	(E) The loan solicitation is done by an individual with a physical presence in this state; or 31
112	112	(F) The lender maintains an office in this state; 32
113	113	(iii) The term “lender” shall also include any person engaged in a transaction whereby the 33
114	114	person makes or funds a loan within this state using the proceeds of an advance under a line of 34
115	115
116	116
117	117	LC001640 - Page 4 of 23
118	118	credit over which proceeds the person has dominion and control and for the repayment of which 1
119	119	the person is unconditionally liable. This transaction is not a table-funding transaction. A person is 2
120	120	deemed to have dominion and control over the proceeds of an advance under a line of credit used 3
121	121	to fund a loan regardless of whether: 4
122	122	(A) The person may, contemporaneously with, or shortly following, the funding of the 5
123	123	loan, assign or deliver to the line of credit lender one or more loans funded by the proceeds of an 6
124	124	advance to the person under the line of credit; 7
125	125	(B) The proceeds of an advance are delivered directly to the settlement agent by the line-8
126	126	of-credit lender, unless the settlement agent is the agent of the line-of-credit lender; 9
127	127	(C) One or more loans funded by the proceeds of an advance under the line of credit is 10
128	128	purchased by the line-of-credit lender; or 11
129	129	(D) Under the circumstances, as set forth in regulations adopted by the director, or the 12
130	130	director’s designee, pursuant to this chapter. 13
131	131	(11) “Licensee” means any person licensed under this chapter. 14
132	132	(12) “Loan” means any advance of money or credit including, but not limited to: 15
133	133	(i) Loans secured by mortgages; 16
134	134	(ii) Insurance premium finance agreements; 17
135	135	(iii) The purchase or acquisition of retail installment contracts or advances to the holders 18
136	136	of those contracts; 19
137	137	(iv) Educational loans; 20
138	138	(v) Any other advance of money; or 21
139	139	(vi) Any transaction, such as those commonly known as “payday loans,” “payday 22
140	140	advances,” or “deferred-presentment loans,” in which a cash advance is made to a customer in 23
141	141	exchange for the customer’s personal check, or in exchange for the customer’s authorization to 24
142	142	debit the customer’s deposit account, and where the parties agree either, that the check will not be 25
143	143	cashed or deposited, or that customer’s deposit account will not be debited, until a designated future 26
144	144	date. 27
145	145	(13) “Loan broker” means any person or entity who or that, for compensation or gain, or 28
146	146	in the expectation of compensation or gain, either directly or indirectly, solicits, processes, 29
147	147	negotiates, places, or sells a loan within this state for others in the primary market, or offers to do 30
148	148	so. A loan broker shall also mean any person who is the nominal mortgagee or creditor in a table-31
149	149	funding transaction. A loan is brokered within this state if any of the following conditions exist: 32
150	150	(i) The loan is secured by real property located in this state; 33
151	151	(ii) An application for a loan is taken or received by an employee, agent, or representative 34
152	152
153	153
154	154	LC001640 - Page 5 of 23
155	155	of the loan broker within this state; 1
156	156	(iii) The loan closes within this state; 2
157	157	(iv) The loan solicitation is done by an individual with a physical presence in this state; or 3
158	158	(v) The loan broker maintains an office in this state. 4
159	159	(14) “Loan-closing services” means providing title services, including title searches, title 5
160	160	examinations, abstract preparation, insurability determinations, and the issuance of title 6
161	161	commitments and title insurance policies, conducting loan closings, and preparation of loan-closing 7
162	162	documents when performed by, or under the supervision of, a licensed attorney, licensed title 8
163	163	agency, or licensed title insurance company. 9
164	164	(15) “Loan solicitation” shall mean an effectuation, procurement, delivery and offer, or 10
165	165	advertisement of a loan. Loan solicitation also includes providing or accepting loan applications 11
166	166	and assisting persons in completing loan applications and/or advising, conferring, or informing 12
167	167	anyone regarding the benefits, terms and/or conditions of a loan product or service. Loan 13
168	168	solicitation does not include loan processing or loan underwriting as defined in this section. Loan 14
169	169	solicitation does not include telemarketing that is defined, for purposes of this section, to mean 15
170	170	contacting a person by telephone with the intention of collecting such person’s name, address, and 16
171	171	telephone number for the sole purpose of allowing a mortgage loan originator to fulfill a loan 17
172	172	inquiry. 18
173	173	(16) “Loan underwriting” shall mean a loan process that involves the analysis of risk with 19
174	174	respect to the decision whether to make a loan to a loan applicant based on credit, employment, 20
175	175	assets, and other factors, including evaluating a loan applicant against a lender’s various lending 21
176	176	criteria for creditworthiness, making a determination for the lender as to whether the applicant 22
177	177	meets the lender’s pre-established credit standards, and/or making a recommendation regarding 23
178	178	loan approval. 24
179	179	(17) “Monetary value” means a medium of exchange, whether or not redeemable in fiat 25
180	180	currency. 26
181	181	(18) “Mortgage loan” means a loan secured in whole, or in part, by real property located 27
182	182	in this state. 28
183	183	(19) “Mortgage loan originator” has the same meaning set forth in § 19-14.10-3(6). 29
184	184	(20) “Nationwide Multistate Licensing System” means a system involving more than one 30
185	185	state, the District of Columbia, or the Commonwealth of Puerto Rico and that is established to 31
186	186	facilitate the sharing of regulatory information and the licensing, application, reporting, and 32
187	187	payment processes, by electronic or other means, for mortgage lenders and loan brokers and other 33
188	188	licensees required to be licensed under this chapter. 34
189	189
190	190
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192	192	(21) “Natural person employee” shall mean any natural person performing services as a 1
193	193	bona fide employee for a person or entity licensed under § 19-14-1 et seq., in return for a salary, 2
194	194	wage, or other consideration, where such salary, wage, or consideration is reported by the licensee 3
195	195	on a federal form W-2 payroll record. The term does not include any natural person or business 4
196	196	entity performing services for a person licensed under the provisions of Rhode Island general laws 5
197	197	in return for a salary, wage, or other consideration, where such salary, wage, or consideration is 6
198	198	reported by the licensee on a federal form 1099. 7
199	199	(22) “Negative equity” means the difference between the value of an asset and the 8
200	200	outstanding portion of the loan taken out to pay for the asset, when the latter exceeds the former 9
201	201	amount. 10
202	202	(23) “Negotiates” shall mean, with respect to a loan, to confer directly with, or offer advice 11
203	203	directly to, a loan applicant or prospective loan applicant for a loan product or service concerning 12
204	204	any of the substantive benefits, terms, or conditions of the loan product or service. 13
205	205	(24) “Nonprofit organization” means a corporation qualifying as a 26 U.S.C. § 501(c)(3) 14
206	206	nonprofit organization, in the operation of which no member, director, officer, partner, employee, 15
207	207	agent, or other affiliated person profits financially other than receiving reasonable salaries if 16
208	208	applicable. 17
209	209	(25) “Operating subsidiary” shall mean a majority-owned subsidiary of a financial 18
210	210	institution or banking institution that engages only in activities permitted by the parent financial 19
211	211	institution or banking institution. 20
212	212	(26) “Oversight and supervision of the licensee” shall mean that the licensee provides 21
213	213	training to the employee, sets the employee’s hours of work, provides the employee with the 22
214	214	equipment required to perform the employee’s duties, and supervises the services provided by the 23
215	215	employee to the licensee. 24
216	216	(27) “Personal money order” means any instrument for the transmission or payment of 25
217	217	money in relation to which the purchaser or remitter appoints, or purports to appoint, the seller as 26
218	218	his or her agent for the receipt, transmission, or handling of money, whether the instrument is signed 27
219	219	by the seller, or by the purchaser, or remitter, or some other person. 28
220	220	(28) “Primary market” means the market in which loans are made to borrowers by lenders, 29
221	221	whether or not through a loan broker or other conduit. 30
222	222	(29) “Principal owner” means any person or entity who or that owns, controls, votes, or 31
223	223	has a beneficial interest in, directly or indirectly, ten percent (10%) or more of the outstanding 32
224	224	capital stock and/or equity interest of a licensee. 33
225	225	(30) “Processes” shall mean, with respect to a loan, any of a series of acts or functions, 34
226	226
227	227
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229	229	including the preparation of a loan application and supporting documents, performed by a person 1
230	230	that leads to, or results in, the acceptance, approval, denial, and/or withdrawal of a loan application, 2
231	231	including, without limitation, the rendering of services, including loan underwriting, obtaining 3
232	232	verifications, credit reports or appraisals, communicating with the applicant and/or the lender or 4
233	233	loan broker, and/or other loan processing and origination services, for consideration by a lender or 5
234	234	loan broker. Loan processing does not include the following: 6
235	235	(i) Providing loan closing services; 7
236	236	(ii) Rendering of credit reports by an authorized credit reporting agency; and 8
237	237	(iii) Rendering of appraisal services. 9
238	238	(31) “Provisional employee” means a natural person who, pursuant to a written agreement 10
239	239	between the natural person and a wholly owned subsidiary of a financial holding company, as 11
240	240	defined in the Bank Holding Company Act of 1956 (12 U.S.C. § 1841 et seq.), as amended, a bank-12
241	241	holding company, savings-bank-holding company, or thrift-holding company, is an exclusive agent 13
242	242	for the subsidiary with respect to mortgage loan originations and the subsidiary: (a) Holds a valid 14
243	243	loan broker’s license; and (b) Enters into a written agreement with the director, or the director’s 15
244	244	designee, to include: 16
245	245	(i) An “undertaking of accountability,” in a form prescribed by the director, or the director’s 17
246	246	designee, for all of the subsidiary’s exclusive agents to include full-and-direct financial and 18
247	247	regulatory responsibility for the mortgage loan originator activities of each exclusive agent as if 19
248	248	said exclusive agent were an employee of the subsidiary; 20
249	249	(ii) A business plan, to be approved by the director, or the director’s designee, for the 21
250	250	education of the exclusive agents, the handling of consumer complaints related to the exclusive 22
251	251	agents, and the supervision of the mortgage loan origination activities of the exclusive agents; and 23
252	252	(iii) A restriction of the exclusive agents’ mortgage loan originators’ activities to loans to 24
253	253	be made only by the subsidiary’s affiliated bank. 25
254	254	(32) “Remote location” means a location meeting the requirements of § 19-14-25(b) at 26
255	255	which an employee of a licensee may provide services for the licensee notwithstanding that the 27
256	256	location differs from the place of business named in the license or a branch certificate issued to the 28
257	257	licensee. 29
258	258	(33) “Retail installment contract” means any security agreement negotiated or executed in 30
259	259	this state, or under the laws of this state, including, but not limited to, any agreement in the nature 31
260	260	of a mortgage, conditional sale contract, or any other agreement whether or not evidenced by any 32
261	261	written instrument to pay the retail purchase price of goods, or any part thereof, in installments over 33
262	262	any period of time and pursuant to which any security interest is retained or taken by the retail seller 34
263	263
264	264
265	265	LC001640 - Page 8 of 23
266	266	for the payment of the purchase price, or any part thereof, of the retail installment contract. 1
267	267	(34) “Sell” means to sell, to issue, or to deliver a check. 2
268	268	(35) “Servicing” means receiving a scheduled, periodic payment from a borrower, pursuant 3
269	269	to the terms of a loan, including amounts for escrow accounts, and making the payments to the 4
270	270	owner of the loan or other third party of principal and interest and other payments with respect to 5
271	271	the amounts received from the borrower as may be required pursuant to the terms of the servicing 6
272	272	loan documents or servicing contract. In the case of a home equity conversion mortgage or a reverse 7
273	273	mortgage, servicing includes making payment to the borrower. 8
274	274	(36) “Simple interest” means interest computed on the principal balance outstanding 9
275	275	immediately prior to a payment for one plus the actual number of days between payments made on 10
276	276	a loan over the life of a loan. 11
277	277	(37) “Small loan” means a loan of less than five thousand dollars ($5,000), not secured by 12
278	278	real estate, made pursuant to the provisions of chapter 14.2 of this title. 13
279	279	(38) “Small-loan lender” means a lender engaged in the business of making small loans 14
280	280	within this state. 15
281	281	(39) “Stored value” means monetary value representing a claim against the issuer that is 16
282	282	stored on an electronic or digital medium and is evidenced by an electronic or digital record, and 17
283	283	that is intended and accepted for use as a means of redemption for money or monetary value or 18
284	284	payment for goods or services. The term does not include stored value that is redeemable by the 19
285	285	issuer exclusively in goods or services; stored value that is redeemable exclusively in goods or 20
286	286	services limited to transactions involving a defined merchant or location or set of locations, such 21
287	287	as a specific retailer or retail chain, college campus, or program points, miles, or other units issued 22
288	288	in connection with a customer affinity or rewards program, even if there is a secondary market for 23
289	289	the stored value. 24
290	290	(40) “Table-funding transaction” means a transaction in which there is a contemporaneous 25
291	291	advance of funds by a lender and an assignment by the mortgagee or creditor of the loan to the 26
292	292	lender. 27
293	293	(41) "Tangible net worth" means the aggregate assets of a licensee excluding all intangible 28
294	294	assets, less liabilities, as determined in accordance with United States generally accepted 29
295	295	accounting principles. 30
296	296	(41)(42) “Third-party loan servicer” means a person or entity who or that, directly or 31
297	297	indirectly, engages in the business of servicing a loan secured by residential real estate located in 32
298	298	Rhode Island, for a personal, family, or household purpose, owed or due, or asserted to be owed or 33
299	299	due, another, or a person or entity that owns the servicing rights to a loan secured by residential 34
300	300
301	301
302	302	LC001640 - Page 9 of 23
303	303	real estate located in Rhode Island whether or not that owner services the loan themselves or 1
304	304	contracts with another person or entity for the servicing. 2
305	305	(42)(43) “Virtual currency”: 3
306	306	(i) Means a digital representation of value that: 4
307	307	(A) Is used as a medium of exchange, unit of account, or store of value; and 5
308	308	(B) Is not legal tender, whether or not denominated in legal tender; and 6
309	309	(ii) Does not include: 7
310	310	(A) A transaction in which a merchant grants, as part of an affinity or rewards program, 8
311	311	value that cannot be taken from or exchanged with the merchant for legal tender, bank credit, or 9
312	312	virtual currency; 10
313	313	(B) A digital representation of value issued by or on behalf of a publisher and used solely 11
314	314	within an online game, game platform, or family of games sold by the same publisher or offered 12
315	315	on the same game platform; 13
316	316	(C) Native digital token used in a proprietary blockchain service platform; or 14
317	317	(D) A gift certificate; store gift card; general-use prepaid card; or loyalty, award, or 15
318	318	promotional gift card, as these terms are defined in federal Regulation E, 12 C.F.R. § 1005.20(a), 16
319	319	without giving effect to any exception as specified in 31 C.F.R. § 1010.100(kkk) or any card, code 17
320	320	or device, or other device that can add funds to those products. 18
321	321	(43)(44) “Writing” means hard-copy writing or electronic writing that meets the 19
322	322	requirements of § 42-127.1-2(7). 20
323	323	19-14-5. Minimum capital. 21
324	324	Each licensee, licensed pursuant to an application for license filed after June 30, 1995, shall 22
325	325	maintain the following minimum-net worth to be evidenced in accordance with regulations 23
326	326	promulgated by the director, or the director’s designee. 24
327	327	(1) Small-loan lenders, the sum of twenty-five thousand dollars ($25,000); 25
328	328	(2) Loan brokers, the sum of ten thousand dollars ($10,000); 26
329	329	(3) Lenders, the sum of one hundred thousand dollars ($100,000); 27
330	330	(4) Currency transmission licensees, the sum of fifty thousand dollars ($50,000). If a 28
331	331	licensee limits its actions to virtual currency, the licensee may include in its calculation of net worth 29
332	332	virtual currency, measured by the average value of the virtual currency in U.S. Dollar equivalent 30
333	333	over the prior six (6) months;: 31
334	334	(i) Shall maintain at all times a tangible net worth of the greater of one hundred thousand 32
335	335	dollars ($100,000) or three percent (3%) of total assets for the first one hundred million dollars 33
336	336	($100,000,000), two percent (2%) of additional assets for one hundred million dollars 34
337	337
338	338
339	339	LC001640 - Page 10 of 23
340	340	($100,000,000) to one billion dollars ($1,000,000,000), and five-tenths percent (.5%) of additional 1
341	341	assets for over one billion dollars ($1,000,000,000); 2
342	342	(ii) Tangible net worth must be demonstrated at initial application by the applicant's most 3
343	343	recent audited or unaudited financial statements pursuant to § 19-14-1; 4
344	344	(iii) Notwithstanding the foregoing provisions of this section, the director shall have the 5
345	345	authority, for good cause shown, to exempt, in part or in whole, from the requirements of this 6
346	346	section any applicant or licensee; and 7
347	347	(5) Third-party loan servicers, the sum of one hundred thousand dollars ($100,000). 8
348	348	SECTION 3. Section 19-14.1-10 of the General Laws in Chapter 19-14.1 entitled "Lenders 9
349	349	and Loan Brokers" is hereby amended to read as follows: 10
350	350	19-14.1-10. Special exemptions. 11
351	351	(a) The licensing provisions of chapter 14 of this title shall not apply to: 12
352	352	(1) Nonprofit charitable, educational, or religious corporations or associations; 13
353	353	(2) Any person who makes less than six (6) loans in this state in any consecutive twelve-14
354	354	month (12) period; there is no similar exemption from licensing for loan brokers for brokering loans 15
355	355	or acting as a loan broker; 16
356	356	(3) Any person acting as an agent for a licensee for the purpose of conducting closings at 17
357	357	a location other than that stipulated in the license; 18
358	358	(4) Regulated institutions and banks or credit unions organized under the laws of the United 19
359	359	States, or subject to written notice with a designated Rhode Island agent for service of process in 20
360	360	the form prescribed by the director, or the director’s designee, of any other state within the United 21
361	361	States if the laws of the other state in which such bank or credit union is organized authorizes under 22
362	362	conditions not substantially more restrictive than those imposed by the laws of this state, as 23
363	363	determined by the director, or the director’s designee, a financial institution or credit union to 24
364	364	engage in the business of originating or brokering loans in the other state; no bank or credit union 25
365	365	duly organized under the laws of any other state within the United States may receive deposits, pay 26
366	366	checks, or lend money from any location within this state unless such bank or credit union has 27
367	367	received approval from the director, or the director’s designee, for the establishment of an interstate 28
368	368	branch office pursuant to chapter 7 of title 19; 29
369	369	(5) Any natural person employee who is employed by a licensee when acting on the 30
370	370	licensee’s behalf; provided that this exemption shall not apply to a mortgage loan originator 31
371	371	required to be licensed under § 19-14-2 or § 19-14.10-4; or 32
372	372	(6) A licensed attorney when performing loan closing services for a licensee or for an entity 33
373	373	identified in subdivision (4) above. 34
374	374
375	375
376	376	LC001640 - Page 11 of 23
377	377	(b) The provisions of this chapter and chapter 14 of this title shall not apply to: 1
378	378	(1) Loans to corporations, joint ventures, partnerships, limited liability companies or other 2
379	379	business entities; 3
380	380	(2) Loans over twenty-five thousand dollars ($25,000) in amount to individuals for 4
381	381	business or commercial, as opposed to personal, family or household purposes; 5
382	382	(3) Loans principally secured by accounts receivable and/or business inventory; 6
383	383	(4) Loans made by a life insurance company wholly secured by the cash surrender value 7
384	384	of a life insurance policy; 8
385	385	(5) Education-purpose loans made by the Rhode Island health and educational building 9
386	386	corporation as vested in chapter 38.1 of title 45 of the Rhode Island student loan authority as vested 10
387	387	in chapter 62 of title 16; 11
388	388	(6) The acquisition of retail or loan installment contracts by an entity whose sole business 12
389	389	in this state is acquiring them from federal banks receivers or liquidators; 13
390	390	(7) Notes evidencing the indebtedness of a retail buyer to a retail seller of goods, services 14
391	391	or insurance for a part or all of the purchase price; 15
392	392	(8) Any municipal, state or federal agency that makes, brokers, or funds loans or acts as a 16
393	393	lender or a loan broker. This exemption includes exclusive agents or exclusive contractors of the 17
394	394	agency specifically designated by the agency to perform those functions on behalf of the agency 18
395	395	and which has notified the director, in writing, of the exclusive agency or contract; or 19
396	396	(9) Notes evidencing the indebtedness of a retail buyer to a retail motor vehicle dealer that 20
397	397	include as part of the amount financed, disclosed in accordance with 12 C.F.R. § 226.18 as 21
398	398	amended, an amount representing negative equity related to the motor vehicle being traded in as 22
399	399	part of the purchase price of the motor vehicle being purchased. 23
400	400	(c) No license to make or fund loans, or to act as a lender or small loan lender shall be 24
401	401	required of any person who engages in deferred deposit transactions (commonly known as “pay-25
402	402	day advance”) while holding a valid license to cash checks pursuant to chapter 14 of this title. 26
403	403	SECTION 4. Section 19-14.10-3 of the General Laws in Chapter 19-14.10 entitled "An 27
404	404	Act Adopting the Federal Secure and Fair Enforcement for Mortgage Licensing Act of 2009" is 28
405	405	hereby amended to read as follows: 29
406	406	19-14.10-3. Definitions. 30
407	407	For purposes of this chapter, the following definitions shall apply: 31
408	408	(1) “Depository institution” has the same meaning as in section 3 of the Federal Deposit 32
409	409	Insurance Act, and includes any credit union. 33
410	410	(2) “Federal banking agencies” means the Board of Governors of the Federal Reserve 34
411	411
412	412
413	413	LC001640 - Page 12 of 23
414	414	System, the Comptroller of the Currency, the Director of the Office of Thrift Supervision, the 1
415	415	National Credit Union Administration, and the Federal Deposit Insurance Corporation. 2
416	416	(3) “Immediate family member” means a spouse, child, sibling, parent, grandparent, or 3
417	417	grandchild. This includes stepparents, stepchildren, stepsiblings, and adoptive relationships. 4
418	418	(4) “Individual” means a natural person. 5
419	419	(5)(i) “Loan processor or underwriter” means an individual who performs clerical or 6
420	420	support duties as an employee at the direction of, and subject to the supervision and instruction of, 7
421	421	a person licensed as a lender or as a loan broker, or exempt from licensing under chapter 14 or 14.1 8
422	422	of this title. 9
423	423	(ii) For purposes of subsection (5)(i), “clerical or support duties” may include subsequent 10
424	424	to the receipt of an application: 11
425	425	(A) The receipt, collection, distribution, and analysis of information common for the 12
426	426	processing or underwriting of a residential mortgage loan; and 13
427	427	(B) Communicating with a consumer to obtain the information necessary for the processing 14
428	428	or underwriting of a loan, to the extent that such communication does not include offering or 15
429	429	negotiating loan rates or terms, or counseling consumers about residential mortgage loan rates or 16
430	430	terms. 17
431	431	(iii) An individual engaging solely in loan processor or underwriter activities shall not 18
432	432	represent to the public, through advertising or other means of communicating or providing 19
433	433	information including the use of business cards, stationery, brochures, signs, rate lists, or other 20
434	434	promotional items, that such individual can or will perform any of the activities of a mortgage loan 21
435	435	originator. 22
436	436	(6)(i) “Mortgage loan originator” means: 23
437	437	(A) An individual who, for compensation or gain or in the expectation of compensation or 24
438	438	gain: 25
439	439	(I) Takes a residential mortgage loan application; or 26
440	440	(II) Offers or negotiates terms of a residential mortgage loan; 27
441	441	(B) Does not include an individual engaged solely as a loan processor or underwriter except 28
442	442	as otherwise provided in § 19-14.10-4(c); 29
443	443	(C) Does not include a person or entity who or that only performs real estate brokerage 30
444	444	activities and is licensed or registered in accordance with Rhode Island law, unless the person or 31
445	445	entity is compensated by a lender, a mortgage broker, or other mortgage loan originator or by any 32
446	446	agent of such lender, mortgage broker, or other mortgage loan originator; 33
447	447	(D) Does not include a person or entity solely involved in extensions of credit relating to 34
448	448
449	449
450	450	LC001640 - Page 13 of 23
451	451	timeshare plans, as that term is defined in 11 U.S.C. § 101(53D), as amended; and 1
452	452	(E) Does not include a person (or its employees) engaged in servicing mortgage loans. For 2
453	453	purposes of this exclusion, “servicing mortgage loans” means, on behalf of the note holder, 3
454	454	collecting and receiving payments, including payments of principal, interest, escrow amounts, and 4
455	455	other sums due, on obligations due and owing to the note holder pursuant to a residential mortgage 5
456	456	loan, and, when the borrower is in default or in reasonably foreseeable likelihood of default, 6
457	457	working with the borrower on behalf of the note holder and pursuant to the contract between the 7
458	458	person servicing mortgage loans and the note holder, to modify but not refinance, either temporarily 8
459	459	or permanently, the obligations, or otherwise finalizing collection of the obligation through the 9
460	460	foreclosure process. 10
461	461	(ii) “Real estate brokerage activity” means any activity that involves offering or providing 11
462	462	real estate brokerage services to the public, including: 12
463	463	(A) Acting as a real estate agent or real estate broker for a buyer, seller, lessor, or lessee of 13
464	464	real property; 14
465	465	(B) Bringing together parties interested in the sale, purchase, lease, rental, or exchange of 15
466	466	real property; 16
467	467	(C) Negotiating, on behalf of any party, any portion of a contract relating to the sale, 17
468	468	purchase, lease, rental, or exchange of real property (other than in connection with providing 18
469	469	financing with respect to any such transaction); 19
470	470	(D) Engaging in any activity for which a person engaged in the activity is required to be 20
471	471	registered or licensed as a real estate agent or real estate broker under any applicable law; and 21
472	472	(E) Offering to engage in any activity, or act in any capacity, described in subsection 22
473	473	(6)(ii)(A), (B), (C), or (D) of this section. 23
474	474	(7) “Nationwide Multistate Licensing System” means a mortgage licensing system 24
475	475	developed and maintained by the Conference of State Bank Supervisors and the American 25
476	476	Association of Residential Mortgage Regulators for the licensing and registration of licensed 26
477	477	mortgage loan originators. 27
478	478	(8) “Nontraditional mortgage product” means any mortgage product other than a thirty-28
479	479	year (30), fixed-rate mortgage. 29
480	480	(9) “Person” means a natural person, corporation, company, limited-liability company, 30
481	481	partnership, association, or any other entity however organized. 31
482	482	(10) “Registered mortgage loan originator” means any individual who: 32
483	483	(i) Meets the definition of mortgage loan originator and is an employee of: 33
484	484	(A) A depository institution; 34
485	485
486	486
487	487	LC001640 - Page 14 of 23
488	488	(B) A subsidiary that is: 1
489	489	(I) Owned and controlled by a depository institution; and 2
490	490	(II) Regulated by a Federal banking agency; or 3
491	491	(C) An institution regulated by the Farm Credit Administration; and 4
492	492	(ii) Is registered with, and maintains a unique identifier through, the Nationwide Multistate 5
493	493	Licensing System. 6
494	494	(11) “Residential mortgage loan” means any loan primarily for personal, family, or 7
495	495	household use that is secured by a mortgage, deed of trust, or other equivalent, consensual security 8
496	496	interest on a dwelling (as defined in § 103(v) of the Truth in Lending Act) or residential real estate 9
497	497	upon which is constructed or intended to be constructed a dwelling (as so defined). 10
498	498	(12) “Residential real estate” means any real property located in Rhode Island upon which 11
499	499	is constructed, or intended to be constructed, a dwelling. 12
500	500	(13) “SAFE Act” means the Secure and Fair Enforcement for Mortgage Licensing Act, 13
501	501	comprising §§ 1501-1517 of the Housing and Economic Recovery Act of 2008, Pub. L. No. 110-14
502	502	289. 15
503	503	(14) “Unique identifier” means a number or other identifier assigned by protocols 16
504	504	established by the Nationwide Multistate Licensing System. 17
505	505	SECTION 5. Section 19-33-8 of the General Laws in Chapter 19-33 entitled "Student Loan 18
506	506	Bill of Rights Act" is hereby amended to read as follows: 19
507	507	19-33-8. Responsibilities of student loan servicers. 20
508	508	(a) A student loan servicer shall provide annually, and at the request of a student loan 21
509	509	borrower, the terms of their loan, progress toward repayment, and eligibility for any loan relief 22
510	510	programs including, but not limited to, income-driven repayment plans, public service loan 23
511	511	forgiveness, forbearance, and deferment. 24
512	512	(b) A student loan servicer shall establish policies and procedures, and implement them 25
513	513	consistently, in order to facilitate evaluation of private student loan alternative repayment 26
514	514	arrangement requests, including providing accurate information regarding any private student loan 27
515	515	alternative repayment arrangements that may be available to the borrower through the promissory 28
516	516	note, or that may have been marketed to the borrower through marketing materials. 29
517	517	(c) A private student loan alternative repayment arrangement shall consider the 30
518	518	affordability of repayment plans for a distressed borrower, as well as the investor, guarantor, and 31
519	519	insurer guidelines, and previous outcome and performance information. 32
520	520	(d) If a student loan servicer offers private student loan repayment arrangements, a student 33
521	521	loan servicer shall consistently present and offer those arrangements to borrowers with similar 34
522	522
523	523
524	524	LC001640 - Page 15 of 23
525	525	financial circumstances. 1
526	526	(e) If a borrower inquires of a servicer of private student loans about consolidating or 2
527	527	refinancing a federal student loan into a private student loan, the servicer of private student loans 3
528	528	must disclose in advance of the refinancing or consolidation, any benefits or protections exclusive 4
529	529	to federal student loans that may be lost as a result of the consolidation or refinancing. 5
530	530	(f)(1) A student loan servicer shall respond to a written inquiry from a student loan 6
531	531	borrower, or the representative of a student loan borrower, within ten (10) business days after 7
532	532	receipt of the request, and provide information relating to the request and, if applicable, the action 8
533	533	the student loan servicer will take to correct the account or an explanation for the student loan 9
534	534	servicer’s position that the borrower’s account is correct. 10
535	535	(2) The ten-day (10) period described in subsection (f)(1) may be extended for not more 11
536	536	than fifteen (15) days, if before the end of the ten-day (10) period the student loan servicer notifies 12
537	537	the borrower or the borrower’s representative of the extension and the reasons for the delay in 13
538	538	responding. 14
539	539	(3) After receipt of a written request related to a credit reporting dispute on a borrower’s 15
540	540	payment on a student education loan, a student loan servicer shall not furnish adverse information 16
541	541	to a consumer reporting agency regarding a payment that is the subject of the written inquiry. 17
542	542	(g) Except as provided by federal law or required by a student loan agreement, a student 18
543	543	loan servicer shall inquire of a borrower how to apply an overpayment to a student education loan. 19
544	544	A borrower’s direction on how to apply an overpayment to a student education loan shall stay in 20
545	545	effect for any future overpayments during the term of a student education loan until the borrower 21
546	546	provides different directions. For purposes of this section, “overpayment” means a payment on a 22
547	547	student education loan in excess of the monthly amount due from a borrower on a student education 23
548	548	loan, also commonly referred to as a prepayment. 24
549	549	(h) Where a borrower has multiple loans at the same level of delinquency, a student loan 25
550	550	servicer shall apply partial payments in a manner that minimizes late fees and negative credit 26
551	551	reporting by applying such payments to satisfy as many individual loan payments as possible on a 27
552	552	borrower’s account. For purposes of this section, “partial payment” means a payment on a student 28
553	553	loan account that contains multiple individual loans in an amount less than the amount necessary 29
554	554	to satisfy the outstanding payment due on all loans in the student loan account, also commonly 30
555	555	referred to as an underpayment. 31
556	556	(i) In the event of the sale, assignment, or other transfer of the servicing of a student 32
557	557	education loan that results in a change in the identity of the person to whom a student loan borrower 33
558	558	is required to send payments or direct any communication concerning the student education loan, 34
559	559
560	560
561	561	LC001640 - Page 16 of 23
562	562	the following provisions apply: 1
563	563	(1) As a condition of a sale, an assignment, or any other transfer of the servicing of a student 2
564	564	education loan, a student loan lender shall require the new student loan servicer to honor all benefits 3
565	565	originally represented as available to a student loan borrower during the repayment of the student 4
566	566	education loan and preserve the availability of the benefits, including any benefits for which the 5
567	567	student loan borrower has not yet qualified. 6
568	568	(2) A student loan servicer shall transfer to the new student loan servicer all records 7
569	569	regarding the student loan borrower, the account of the student loan borrower, and the student 8
570	570	education loan of the student loan borrower. 9
571	571	(3) The records required under subsection (h)(2) shall include the repayment status of the 10
572	572	student loan borrower and any benefits associated with the student education loan of the student 11
573	573	loan borrower. 12
574	574	(4) The student loan servicer shall complete the transfer of records required under 13
575	575	subsection (h)(2) within forty-five (45) days after the sale, assignment, or other transfer of the 14
576	576	servicing of a student education loan. 15
577	577	(5) The parties shall notify all student loan borrowers impacted by the sale, assignment, or 16
578	578	other transfer of the servicing of a student education loan at least seven (7) days before the next 17
579	579	payment on the loan is due. Notice must include: The identity of the new loan holder and/or 18
580	580	servicer; the effective date of the transfer; the date on which the old servicer will no longer accept 19
581	581	payments; the date on which the new servicer will begin to accept payments; and contact and billing 20
582	582	information for loan payments. 21
583	583	(j) A student loan servicer that services a student education loan shall adopt policies and 22
584	584	procedures to verify that the student loan servicer has received all records regarding the student 23
585	585	loan borrower; the account of the student loan borrower; and the student education loan of the 24
586	586	student loan borrower, including the repayment status of the student loan borrower and any benefits 25
587	587	associated with the student education loan of the student loan borrower. 26
588	588	(k) When a prior student loan servicer receives a payment intended for the new student 27
589	589	loan servicer, the prior student loan servicer must promptly transfer the payment to the new 28
590	590	servicer, along with the date the prior servicer received the payment. 29
591	591	(l) When a new servicer receives a payment from a prior servicer under subsection (j), the 30
592	592	payment must be applied as of the date received by the prior servicer. A student loan servicer must 31
593	593	implement processes and controls to ensure a student loan borrower does not incur additional 32
594	594	interest, fees, or delinquency due to complications related to the sale, assignment, or other transfer 33
595	595	of the servicing of a student education loan. 34
596	596
597	597
598	598	LC001640 - Page 17 of 23
599	599	(m) A student loan servicer shall not withhold student transcripts from borrowers that are 1
600	600	or were delinquent in student loan payments. 2
601	601	SECTION 6. Section 34-25.2-11 of the General Laws in Chapter 34-25.2 entitled "Rhode 3
602	602	Island Home Loan Protection Act" is hereby amended to read as follows: 4
603	603	34-25.2-11. Exemption. 5
604	604	The provisions of this chapter shall not apply to: 6
605	605	(1) Any national bank, federal savings bank, federal credit union, credit union, or financial 7
606	606	institution, or regulated institution as defined under § 19-1-1, or their wholly-owned subsidiary; 8
607	607	and 9
608	608	(2) The Federal Housing Administration, the Department of Veterans Affairs, or other state 10
609	609	or federal housing finance agencies. 11
610	610	SECTION 7. Section 19-14.3-2 of the General Laws in Chapter 19-14.3 entitled "Currency 12
611	611	Transmissions" is hereby repealed. 13
612	612	19-14.3-2. Securities in lieu of bonds. 14
613	613	In lieu of the required surety bond or bonds, or of any portion as required by chapter 14, 15
614	614	the applicant may deposit with the director, or the director’s designee, with the financial 16
615	615	institutions, credit unions, or national banks in this state that the applicant may designate and the 17
616	616	director, or the director’s designee, may approve, United States government/agency obligation or 18
617	617	state obligations, to an aggregate amount, based upon principal amount or market value, whichever 19
618	618	is lower, of not less than the amount of the required surety bond. The securities shall be deposited 20
619	619	and held to secure the same obligations as would the surety bond, but the licensee shall be entitled 21
620	620	to receive all interest and dividends thereon, shall have the right, with the approval of the director, 22
621	621	or the director’s designee, to substitute other securities for those deposited, and shall be required to 23
622	622	substitute securities on the written order of the director, or the director’s designee. 24
623	623	SECTION 8. Chapter 19-14.3 of the General Laws entitled "Currency Transmissions" is 25
624	624	hereby amended by adding thereto the following sections: 26
625	625	19-14.3-2.1. Maintenance of permissible investments. 27
626	626	(a) A licensee shall maintain at all times permissible investments that have a market value 28
627	627	computed in accordance with United States generally accepted accounting principles of not less 29
628	628	than the aggregate amount of all of its outstanding money transmission obligations. 30
629	629	(b) Except for permissible investments enumerated in § 19-14.3-2.2(a), the director, or 31
630	630	designee, with respect to any licensee, may by rule or order limit the extent to which a specific 32
631	631	investment maintained by a licensee within a class of permissible investments may be considered 33
632	632	a permissible investment, if the specific investment represents undue risk to customers, not 34
633	633
634	634
635	635	LC001640 - Page 18 of 23
636	636	reflected in the market value of investments. 1
637	637	(c) Permissible investments, even if commingled with other assets of the licensee, are held 2
638	638	in trust for the benefit of the purchasers and holders of the licensee's outstanding money 3
639	639	transmission obligations in the event of insolvency, the filing of a petition by or against the licensee 4
640	640	under the United States Bankruptcy Code, 11 U.S.C. Section 101-110, as amended or recodified 5
641	641	from time to time, for bankruptcy or reorganization, the filing of a petition by or against the licensee 6
642	642	for receivership, the commencement of any other judicial or administrative proceeding for its 7
643	643	dissolution or reorganization, or in the event of an action by a creditor against the licensee who is 8
644	644	not a beneficiary of this statutory trust. No permissible investments impressed with a trust pursuant 9
645	645	to this section shall be subject to attachment, levy of execution, or sequestration by order of any 10
646	646	court, except for a beneficiary of this statutory trust. 11
647	647	(d) Upon the establishment of a statutory trust in accordance with subsection (c) of this 12
648	648	section or when any funds are drawn on a letter of credit pursuant to § 19-14.3-2.2(a)(4), the 13
649	649	director, or designee, shall notify the applicable regulator of each state in which the licensee is 14
650	650	licensed to engage in money transmission, if any, of the establishment of the trust or the funds 15
651	651	drawn on the letter of credit, as applicable. Notice shall be deemed satisfied if performed pursuant 16
652	652	to a multistate agreement or through the National Multistate Licensing Service (NMLS). Funds 17
653	653	drawn on a letter of credit, and any other permissible investments held in trust for the benefit of the 18
654	654	purchasers and holders of the licensee's outstanding money transmission obligations, are deemed 19
655	655	held in trust for the benefit of such purchasers and holders on a pro rata and equitable basis in 20
656	656	accordance with statutes pursuant to which permissible investments are required to be held in this 21
657	657	state, and other states, as applicable. Any statutory trust established hereunder shall be terminated 22
658	658	upon extinguishment of all of the licensee's outstanding money transmission obligations. 23
659	659	(e) The director, or designee, by rule or by order may allow other types of investments that 24
660	660	the director, or designee, determines are of sufficient liquidity and quality to be a permissible 25
661	661	investment. The director, or designee, is authorized to participate in efforts with other state 26
662	662	regulators to determine that other types of investments are of sufficient liquidity and quality to be 27
663	663	a permissible investment. 28
664	664	19-14.3-2.2. Maintenance of permissible investments. 29
665	665	(a) The following investments are permissible under § 19-14.3-2.1: 30
666	666	(1) Cash including demand deposits, savings deposits, and funds in such accounts held for 31
667	667	the benefit of the licensee's customers in a federally insured depository financial institution and 32
668	668	cash equivalents including ACH items in transit to the licensee and ACH items or international 33
669	669	wires in transit to a payee, cash in transit via armored car, cash in smart safes, cash in licensee-34
670	670
671	671
672	672	LC001640 - Page 19 of 23
673	673	owned locations, debit card or credit card-funded transmission receivables owed by any bank, or 1
674	674	money market mutual funds rated "AAA" by S&P, or the equivalent from any eligible rating 2
675	675	service; 3
676	676	(2) Certificates of deposit or senior debt obligations of an insured depository institution, as 4
677	677	defined in Section 3 of the Federal Deposit Insurance Act, 12 U.S.C. Section 1813, as amended or 5
678	678	recodified from time to time, or as defined under the federal Credit Union Act, 12 U.S.C. Section 6
679	679	1781, as amended or recodified from time to time; 7
680	680	(3) An obligation of the United States or a commission, agency, or instrumentality thereof; 8
681	681	an obligation that is guaranteed fully as to principal and interest by the United States; or an 9
682	682	obligation of a state or a governmental subdivision, agency, or instrumentality thereof; 10
683	683	(4) The full drawable amount of an irrevocable standby letter of credit for which the stated 11
684	684	beneficiary is the director, or designee, that stipulates that the beneficiary need only draw a sight 12
685	685	draft under the letter of credit and present it to obtain funds up to the letter of credit amount within 13
686	686	seven (7) days of presentation of the items required by subsection (a)(4)(iii) of this section; 14
687	687	(i) The letter of credit must: 15
688	688	(A) Be issued by a federally insured depository financial institution, a foreign bank that is 16
689	689	authorized under federal law to maintain a federal agency or federal branch office in a state or 17
690	690	states, or a foreign bank that is authorized under state law to maintain a branch in a state that: 18
691	691	(I) Bears an eligible rating or whose parent company bears an eligible rating; and 19
692	692	(II) Is regulated, supervised, and examined by United States federal or state authorities 20
693	693	having regulatory authority over banks, credit unions, and trust companies; 21
694	694	(B) Be irrevocable, unconditional and indicate that it is not subject to any condition or 22
695	695	qualifications outside of the letter of credit; 23
696	696	(C) Not contain reference to any other agreements, documents or entities, or otherwise 24
697	697	provide for any security interest in the licensee; and 25
698	698	(D) Contain an issue date and expiration date, and expressly provide for automatic 26
699	699	extension, without a written amendment, for an additional period of one year from the present or 27
700	700	each future expiration date, unless the issuer of the letter of credit notifies the director, or designee, 28
701	701	in writing by certified or registered mail or courier mail or other receipted means, at least sixty (60) 29
702	702	days prior to any expiration date, that the irrevocable letter of credit will not be extended. 30
703	703	(ii) In the event of any notice of expiration or non-extension of a letter of credit issued 31
704	704	under subsection (a)(4)(i)(D) of this section, the licensee shall be required to demonstrate to the 32
705	705	satisfaction of the director, or designee, fifteen (15) days prior to expiration, that the licensee 33
706	706	maintains and will maintain permissible investments in accordance with § 19-14.3-2.1(a) upon the 34
707	707
708	708
709	709	LC001640 - Page 20 of 23
710	710	expiration of the letter of credit. If the licensee is not able to do so, the director, or designee, may 1
711	711	draw on the letter of credit in an amount up to the amount necessary to meet the licensee's 2
712	712	requirements to maintain permissible investments in accordance with § 19-14.3-2.1(a). Any such 3
713	713	draw shall be offset against the licensee's outstanding money transmission obligations. The drawn 4
714	714	funds shall be held in trust by the director, or designee, or the designated agent, to the extent 5
715	715	authorized by law, as agent for the benefit of the purchasers and holders of the licensee's 6
716	716	outstanding money transmission obligations. 7
717	717	(iii) The letter of credit shall provide that the issuer of the letter of credit will honor, at 8
718	718	sight, a presentation made by the beneficiary to the issuer of the following documents on or prior 9
719	719	to the expiration date of the letter of credit: 10
720	720	(A) The original letter of credit including any amendments; and 11
721	721	(B) A written statement from the beneficiary stating that any of the following events have 12
722	722	occurred: 13
723	723	(I) The filing of a petition by or against the licensee under the United States Bankruptcy 14
724	724	Code, 11 U.S.C. Section 101-110, as amended or recodified from time to time, for bankruptcy or 15
725	725	reorganization; 16
726	726	(II) The filing of a petition by or against the licensee for receivership, or the commencement 17
727	727	of any other judicial or administrative proceeding for its dissolution or reorganization; 18
728	728	(III) The seizure of assets of a licensee by the director, or designee, pursuant to an 19
729	729	emergency order issued in accordance with applicable law, on the basis of an action, violation, or 20
730	730	condition that has caused or is likely to cause the insolvency of the licensee; or 21
731	731	(IV) The beneficiary has received notice of expiration or non-extension of a letter of credit 22
732	732	and the licensee failed to demonstrate to the satisfaction of the beneficiary that the licensee will 23
733	733	maintain permissible investments in accordance with § 19-14.3-2.1(a) upon the expiration or non-24
734	734	extension of the letter of credit. 25
735	735	(iv) The director, or designee, may designate an agent to serve on the director's behalf as 26
736	736	beneficiary to a letter of credit so long as the agent and letter of credit meet requirements established 27
737	737	by the director, or designee. The director's agent may serve as agent for multiple licensing 28
738	738	authorities for a single irrevocable letter of credit if the proceeds of the drawable amount for the 29
739	739	purposes of subsection (a)(4) of this section are assigned to the director. 30
740	740	(v) The director, or designee, is authorized and encouraged to participate in multistate 31
741	741	processes designed to facilitate the issuance and administration of letters of credit, including, but 32
742	742	not limited to, services provided by the NMLS and State Regulatory Registry, LLC. 33
743	743	(5) One hundred percent (100%) of the surety bond provided for under chapter 14.3 of title 34
744	744
745	745
746	746	LC001640 - Page 21 of 23
747	747	19 that exceeds the average daily money transmission liability in this state. 1
748	748	(b) Unless permitted by the director, or designee, by rule or by order to exceed the limit as 2
749	749	set forth herein, the following investments are permissible under § 19-14.3-2.1 to the extent 3
750	750	specified: 4
751	751	(1) Receivables that are payable to a licensee from its authorized delegates in the ordinary 5
752	752	course of business that are less than seven (7) days old, up to fifty percent (50%) of the aggregate 6
753	753	value of the licensee's total permissible investments; 7
754	754	(2) Of the receivables permissible under § 19-14.3-2.2(b)(l), receivables that are payable 8
755	755	to a licensee from a single authorized delegate in the ordinary course of business may not exceed 9
756	756	ten percent (10%) of the aggregate value of the licensee's total permissible investments. 10
757	757	(3) The following investments are permissible up to twenty percent (20%) per category and 11
758	758	combined up to fifty percent (50%) of the aggregate value of the licensee's total permissible 12
759	759	investments: 13
760	760	(i) A short-term (up to six (6) months) investment bearing an eligible rating; 14
761	761	(ii) Commercial paper bearing an eligible rating; 15
762	762	(iii) A bill, note, bond, or debenture bearing an eligible rating; 16
763	763	(iv) U.S. tri-party repurchase agreements collateralized at one hundred percent (100%) or 17
764	764	more with U.S. government or agency securities, municipal bonds, or other securities bearing an 18
765	765	eligible rating; 19
766	766	(v) Money market mutual funds rated less than "AAA" and equal to or higher than "A-" by 20
767	767	S&P, or the equivalent from any other eligible rating service; and 21
768	768	(vi) A mutual fund or other investment fund composed solely and exclusively of one or 22
769	769	more permissible investments listed in subsections (a)(1) through (a)(3) of this section. 23
770	770	(4) Cash (including demand deposits, savings deposits, and funds in such accounts held for 24
771	771	the benefit of the licensee's customers) at foreign depository institutions are permissible up to ten 25
772	772	percent (10%) of the aggregate value of the licensee's total permissible investments if the licensee 26
773	773	has received a satisfactory rating in its most recent examination and the foreign depository 27
774	774	institution: 28
775	775	(i) Has an eligible rating; 29
776	776	(ii) Is registered under the Foreign Account Tax Compliance Act; 30
777	777	(iii) Is not located in any country subject to sanctions from the Office of Foreign Asset 31
778	778	Control; and 32
779	779	(iv) Is not located in a high-risk or non-cooperative jurisdiction as designated by the 33
780	780	Financial Action Task Force. 34
781	781
782	782
783	783	LC001640 - Page 22 of 23
784	784	SECTION 9. This act shall take effect upon passage. 1
785	785	========
786	786	LC001640
787	787	========
788	788
789	789
790	790	LC001640 - Page 23 of 23
791	791	EXPLANATION
792	792	BY THE LEGISLATIVE COUNCIL
793	793	OF
794	794	A N A C T
795	795	RELATING TO FINANCIAL INSTITUTIONS -- POWERS AND OPERATION S
796	796	***
797	797	This act would amend outdated provisions of the banking statutes and the home loan 1
798	798	protection act, add consumer protections, including minimum capital requirements and limits on 2
799	799	investments, for currency transmitters including crypto currency, add a consumer protection for 3
800	800	student loan borrowers and remove the provision allowing deposit of securities in lieu of bond. 4
801	801	This act would take effect upon passage. 5
802	802	========
803	803	LC001640
804	804	========
805	805