Alston & Bird Consumer Finance Blog

State Law

Consumer Finance State Roundup

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The pace of legislative activity can make it hard to stay abreast of new laws.  The Consumer Finance State Roundup is intended to provide a brief overview of recently enacted measures of potential interest.

Since our last update, the following eight states have enacted measures of potential interest to Consumer Finance ABstract readers:

  • Connecticut:  Effective October 1, 2023, Senate Bill 1033 (2023 Conn. Pub. Acts 126) makes various revisions to the Connecticut General Statutes, including mortgage licensing and mortgage servicing statutes.  First, the measure amends licensing requirements under Section 36a-486 (b)(1) to add provisions to prohibit licensed mortgage lenders, mortgage correspondent lenders, mortgage brokers, or mortgage loan originators from using services of a lead generator, unless the lead generator is: (a) licensed under Section 36a-489, or (b) exempt from licensure pursuant to Section 36a-486(5).  (The measure makes corresponding amendments to Section 36a-498e, which addresses prohibited acts.) Second, the measure amends Section 36a-719, which relates to mortgage servicer licensure, to remove requirements relating to in-person (full-time) operations and the geographic location of a qualified individual or branch manager of a mortgage servicer.
  • Connecticut:  Effective October 1, 2023, House Bill 6688 (2023 Conn. Acts 45) (Reg. Sess.)) amends foreclosure mediation and mortgage release provisions of the Connecticut General Statutes.  First, the measure amends Section 49-31o to require a mortgagee that agrees to modify a mortgage pursuant to the Ezequiel Santiago Foreclosure Mediation Program to send the modification of mortgage to the mortgagor for execution at least 15 business days prior to the first modified payment due date under the modification.  The mortgagee (or mortgagee’s attorney) may satisfy this requirement by delivering the modification to: (a) the mortgagor, or (b), if the mortgagor is represented by an attorney, to both the mortgagor and that attorney. Second, the measure amends Section 49-8 to require the mortgagee or a person authorized by law to release the mortgage, to executive and deliver, or cause to be delivered, to the town clerk of the town in which the real estate is situated or, if so requested in writing by the mortgagor or designated representative of the mortgagor, to the mortgagor or the designated representative of the mortgagor.  Third, the measure amends Section 49-8a to require a mortgagee to accept, as payment tendered for satisfaction or partial satisfaction of a mortgage loan, either one of the following forms of payment:  i) a bank check; ii) a certified check; iii) an attorney’s clients’ funds account check; iv) title insurance company check, v) wire transfer; or vi) any other form of payment authorized under federal law.
  • Illinois:  Effective January 1, 2024, House Bill 2325 (Public Act 103-0156) amends the Residential Mortgage License Act of 1987 (“RMLA”) to permit remote work by mortgage loan originators (MLOs), provided that:
    • The RMLA licensee must have in place written policies and procedures for the supervision of MLOs working from a remote location.
    • The licensee must provide MLOs working remotely with access to company platforms and customer information, which access must be in accordance with licensee’s comprehensive written information security plan.
    • An MLO working remotely may not have any in-person customer interaction at their residence, unless that residence is a licensed location.
    • An MLO working remotely must not maintain any physical records at the remote location.
    • An MLO working remotely must keep customer interactions and conversations with consumers confidential and must comply with all federal and state privacy and security requirements (including applicable provisions of the Gramm-Leach Bliley Act and the FTC’s Safeguards Rule).
    • An MLO working remotely must have secure access to the licensee’s system when working from a remote location, such as accessing by utilizing a cloud-base system, vpn, or other compatible system to ensure secure connectivity.
    • The RMLA licensee must ensure that security updates, patches or alterations to security of all devices used at a remote location are installed and maintained.
    • The licensee must be able to remotely lock or erase company-related contents from any device or can otherwise remotely limit all access to a company’s secure systems.
    • The NMLSR record of an MLO working remotely must designate the principal place of business as the mortgage loan originator’s registered location, unless the MLO chooses another licensed branch office as a registered location.

Illinois:  Effective June 9, 2023, Senate Bill 201 (Public Act 103-0061) amends the Mortgage Foreclosure Article of the Code of Civil Procedure (735 Ill. Comp. Stat. 5/1 et seq.).  First, the measure amends provisions related to the delivery of notice of foreclosure and publication of the notice on the county or municipality’s website.  Second, effective until June 1, 2025, the measure adds Section 5/15-1515 to: (a) address the COVID-19 emergency sealing of court file when a foreclosure action is filed with the court; and (b) clarify what actions occurred within the “COVID-19 emergency and economic recovery period.”  The new section applies to any foreclosure action relating to: (a) “residential real estate” (as defined in Section 15-1219); or (b) real estate improved with a one- to six-unit dwelling, for “families living independently of each other in which the mortgagor is a natural person landlord renting the dwelling units, even if the mortgagor does not occupy any of the dwelling units as the mortgagor’s personal residence.”

  •  Maine:  Effective September 28, 2023, Senate Paper 449/Legislative Document 1080 (2023 Me. Laws 258) requires supervised lenders or mortgage loan servicers to notify mortgagors of their right to cancel or terminate private mortgage insurance (“PMI”) under the federal Homeowners Protection Act of 1998 (“HOPA”).  Specifically, this measure adds new Section 9-315 to Title 9-A of the Maine Revised Statutes (under the Maine Consumer Credit Code), which:
    • Requires a supervised lender, or a mortgage loan servicer acting on behalf of a supervised lender, must provide an annual written statement to the mortgagor that discloses: (a) the mortgagor’s rights under HOPA to cancel or terminate their PMI; and (b) the address and telephone number that the mortgagor may use to contact the supervised lender or mortgage loan servicer to determine whether the mortgagor may cancel the PMI;
    • Defines the terms “private mortgage insurance” and “residential mortgage transaction”;
    • Incorporates by reference HOPA’s annual notice requirement for a residential mortgage transaction; and
    • Applies to PMI created or renewed, and to residential mortgage transactions entered into, on or after the measure’s effective date.
  • Missouri:  Effective August 28, 2023, Senate Bill 101 amends the Missouri Revised Statutes to add provisions related to lender-placed insurance.  First, the measure’s provisions apply to any insurer or any insurance producer involved in lender-placed insurance, who must comply with all requirements set forth under new Section 379.1859.  Second, the measure requires that lender-placed insurance coverage amounts and premium amounts be based on the replacement cost value of the property, as calculated under new Section 379.1855.  Further, the measure requires that if any replacement cost coverage provided by the insurer is in excess of the unpaid principal balance on the mortgage loan, that excess must be paid to the mortgagor.  Third, the measure adds new Section 379.1857, which prohibits an insurer or an insurance producer from engaging in conduct including: (a) issuing lender-placed insurance if the entity or an affiliate thereof owns, performs servicing for, or owns the servicing right to, the mortgage property; or (b) compensating a lender, insurer, investor, or servicer, including through the payment of commissions, for lender-placed insurance policies issued by the insurer. Fourth, the measure adds new Section 379.1861 to require: (a) lender-placed insurance to be set forth in an individual policy or certificate of insurance; and (b) proof of coverage to be delivered by mail to the mortgagor’s last known address, or delivered in person.
  • New Hampshire:  Effective June 20, 2023, House Bill 520 (2023 N. H. Laws 89) amends provisions related to escrow accounts maintained by licensed nondepository mortgage bankers, brokers, and servicers.  First, the measure amends Section 397-A:9, IV of the New Hampshire Revised Statutes to provide that nondepository licensees that require the maintenance of a mortgagor’s escrow account for loans on single family homes secured by real estate mortgages on property located in New Hampshire must pay interest on moneys held in such account, so as to be consistent with interest rates credited by depository entities.   Second, the measure makes the same amendment to the Depository Bank ACt.  Both types of entities must pay interest on escrow accounts at six-month intervals (beginning April 1 and October 1) “at a rate of not less than the National Deposit Rate for Savings Accounts as published … by the Federal Deposit Insurance Corporation” in January (for the April adjustment) or July (for the October adjustment).
  • Nevada:  Effective October 1, 2023, Senate Bill 276 (2023 Nev. Stat. 534) amends the collection agencies provisions in Chapter 559 of the Nevada Revised Statutes.  First, the measure requires a collection agency to display certain information on its website.  Second, the measure requires a collection agency to maintain: (a) its license number issued by the Commissioner pursuant to Section 649.135; and (b) the certificate identification number of the certificate issued to the entity’s compliance manager under Section 649.225.  Third, the measure sets forth the conditions collections agents must satisfy in order to conduct activity from a remote location.  Specifically, a collection agent engaging in remote work must sign a written agreement that it will:
    • maintain data concerning debtors in a confidential manner, and refrain from printing or otherwise reproducing such data into a physical record while working from the remote location;
    • read and comply with (a) the entity’s security policy, and (b) any policy to ensure the safety of the equipment of the collection agency that the collection agent is authorized to use;
    • review a description of the work that the collection agent is authorized to perform from the remote location and only perform work included in that description;
    • refrain from disclosing to a debtor that the collection agent is working from a remote location or that the remote location is a place of business of the collection agency;
    • authorize the employer to monitor the collection agent’s remote activities (including without limitation, by recording any calls to and from the remote location relating to collection activities); and
    • refrain from conducting any activities related to his or her work with the collection agency with a debtor or customer in person at the remote location.

Further, the measure requires a collection agent working remotely to complete a program of training regarding compliance with applicable laws and regulations, privacy, confidentiality, monitoring, security, and any other issue relevant to the work the collection agent will perform from the remote location.  A collection agent engaged in remote work must work for the collection agency under direct oversight and mentoring from a supervisor for at least seven days.  Finally, the measure requires a collection agent who works from a remote location to comply with any applicable federal or state laws (e.g., the Fair Debt Collection Practices Act).

  • Nevada:  Effective and January 1, 2024, Senate Bill 355 (2023 Nev. Stat. 527) amends the Mortgage Companies and Mortgage Loan Originators Law (Chapter 645B of the Nevada Revised Statutes) to permit remote operations, among other provisions.  Specifically, the measure adds a new section under which a mortgage company may authorize its employees to conduct mortgage business at a remote location, provided that the entity:
    • has adopted written policies and procedures for the supervision of its employees working at a remote location to ensure that each employee complies with all statutory and regulatory requirements applicable to remote operations;
    • exercises reasonable control and supervision over the activities of its mortgage loan originators; and
    • has adopted a comprehensive written plan for its security and information systems of the mortgage company and any information collected and maintained by the mortgage company regarding customer data, must contain specific provisions for cybersecurity and use of secure connection (i.e. VPN) that meets the criteria specified in the measure, while working from the remote location.

Second, the measure amends Section 645B.080 relating to require a mortgage company to keep and maintain complete and suitable records of all mortgage transactions made by its employee at a remote location in accordance with the requirements established by the Commissioner of Mortgage Lending by regulation.

  • North Carolina:  Effective October 1, 2023, Senate Bill 331 (2023 N. C. Sess. Laws 61) amends the North Carolina Consumer Finance Act (“CFA”).  First, the measure Section 53-165 of the General Statutes by removing the term “cash advance” and definitions for “amount financed” “electronic payment”, “loan amount”, and “servicing loans”.  Second, the measure amends Section 53-166 by increasing the amount that a licensee can lend to a borrower from $15,000 to $25,000.  Third, the measure amends Section 53-168 to:
    • increase application fees for consumer finance licensees from $250 to $500;
    • permit a licensee to post its license on its website; and
    • require at least 30 days’ notice to the Commissioner of Banks for any proposed transfer of a CFA license.

Fourth, the measure amends Section 53-173 to require that interest be computed on the unpaid portion of the amount financed (rather than the principal balance or principal amount).  Fifth, the measure amends Section 53-177 to:

    • increase late fees from $15 to $18;
    • permit a licensee to apply a borrower’s most recent payment to the oldest installment due;
    • prohibit a licensee from collecting more than one late fee per installment owed, whether a partial or full payment was made;
    • permit the collection of late fees on installment payment past due for 10 days or more if the licensee places the borrower in default;
    • permit a licensee to include late payment fees on installment payments past due 10 days or more of the amount of a loan that is refinanced;
    • permit a licensee to include late fees for installment payments past due for 10 or more days in the final balance when a loan reaches maturity; and
    • permit a licensee to assess a deferral charge for each moth of the remaining loan term on each installment owed after the date of deferral.

Sixth, the measure amends Section 53-184 by requiring licensees to:  (a) maintain separate loan ledgers and accounts related to the making and collecting of loans under the CFA; (b) allocate expenses monthly according to generally accepted accounting principles; and (c) retain all required books and records for a period of two years after the last transaction. The amended section also outlines the books and records (general ledger, loan documents, judgements, repossessions) that a licensee must keep.

Rhode Island:   Effective June 14, 2023, companion measures House Bill 5761 (2023 R. I. Pub. Laws 75) and Senate Bill 163 (2023 R. I. Pub. Laws 76) removed the July 1, 2023, sunset date for provisions of the Rhode Island General Statutes requiring a mediation conference coverage prior to mortgage foreclosure.

NY DFS Releases Revised Proposed Second Amendment of its Cybersecurity Regulation

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The New York Department of Financial Services (“NY DFS”) published an updated proposed Second Amendment to its Cybersecurity Regulation (23 NYCRR Part 500) in the New York State Register on June 28, 2023, updating its previous proposed Second Amendment, which was published November 9, 2022. While the language proposed is largely similar to the previous draft, which we previously summarized, NY DFS incorporated a number of changes as a result of the 60-day comment period.

Below we outline some of the key revisions to the proposed Second Amendment of NY DFS’s Cybersecurity Regulation compared to the previously issued version from November 9, 2022:

  • Risk Assessment (§§ 500.01 & 500.09). NY DFS previously proposed (in the November 2022 draft) to revise the definition of “Risk Assessment,” which NY DFS has repeatedly emphasized is a core and gating requirement for compliance with the Cybersecurity Regulation, permitting covered entities to “take into account the specific circumstances of the covered entity, including but not limited to its size, staffing, governance, businesses, services, products, operations, customers, counterparties, service providers, vendors, other relations and their locations, as well as the geographies and locations of its operations and business relations.” By contrast, the newly proposed definition more formally defines the components of and inputs to the risk assessment: “Risk assessment means the process of identifying, estimating and prioritizing cybersecurity risks to organizational operations (including mission, functions, image and reputation), organizational assets, individuals, customers, consumers, other organizations and critical infrastructure resulting from the operation of an information system. Risk assessments incorporate threat and vulnerability analyses, and consider mitigations provided by security controls planned or in place.” The revised definition omits the explicit reference to tailoring and customization currently found in § 500.09.  The removal of this language and codification of the risk assessment’s general parameters suggests that although risk assessments can and should be customized to some extent, NY DFS may expect risk assessments to address a more standard set of components that as a general framework is not open to customization.
    • In addition, NY DFS removed the requirement that Class A companies (which are generally large entities with at least $20M in gross annual revenue in each of the last two fiscal years from business operations in New York, and over 2,000 employees, on average over the last two years, or over or over $1B in gross annual revenue in each of the last two fiscal years from all business operations) use external experts to conduct a risk assessment once every three years.
  • Multi-factor Authentication (“MFA”) (§ 500.12). NY DFS continues to stress the importance of MFA in the newly revised draft of the proposed Second Amendment by broadening the requirement (relative to the current MFA requirements and proposed draft from November 2022) and bringing it in alignment with the FTC’s amended Safeguards Rule. In the revised language, MFA is explicitly required to “be utilized for any individual accessing any of the covered entity’s information systems,” (with limited exceptions, outlined below); NY DFS removed from § 500.12(a), (1) the pre-requisite that MFA be implemented based on the covered entity’s risk assessment, and (2) the option of implementing other effective controls, such as risk-based authentication. By doing so, NY DFS appears to strongly recommend MFA implementation across the board, despite retaining the limited exception if the CISO approves in writing a reasonably equivalent or more secure compensating controls (and such controls must be reviewed periodically, and at least annually).
    • For covered entities that fall under the limited exemption set forth in § 500.19(a), which are generally smaller covered entities (based on number of employees and/or annual revenue), MFA must at least be utilized for (1) remote access to the covered entity’s information systems, (2) remote access to third-party applications that are cloud-based, from which nonpublic information is accessible, and (3) all privileged accounts other than service accounts that prohibit interactive logins. As with all other covered entities, the CISO may approve, in writing, reasonably equivalent or more secure compensating controls, but such controls must be reviewed periodically, and at least annually.
  • Incident Response Plan (“IRP”) and Business Continuity and Disaster Recovery Plan (“BCDR”) (§ 500.16). NY DFS added an additional requirement that a covered entity’s IRP include requirements to address the root cause analysis of a cybersecurity event, describing how the cybersecurity event occurred, the business impact from the cybersecurity event, and remediation steps to prevent reoccurrence. NY DFS clarified that the IRP and BCDR must be tested at least annually, and must include the ability to restore the covered entities “critical data” and information systems from backup (but NY DFS does not define “critical data”). As noted in our previous summary, the concept of BCDR is new as of the Second Amendment and not currently in effect in the existing regulation.
  • Annual Certification of Compliance (§ 500.17(b)). NY DFS maintains its current requirement of an annual certification of compliance by a covered entity, but has adjusted the standard for certification from “in compliance” to a certification that the covered entity “materially complied” with the Cybersecurity Regulation during the prior calendar year.  Although NY DFS does not define material compliance, this revision should provide some flexibility for covered entities to complete the certification.  Going forward, covered entities would be presented with two options: (i) submit a written certification that it “materially complied” with the regulation (§ 500.17(b)(1)(i)(a)); or (ii) a written acknowledgment that it did not “fully comply” with the regulation (§ 500.17(b)(1)(ii)(a)), while also identifying “all sections…that the entity has not materially complied with” (§ 500.17(b)(1)(ii)(b)).  It is unclear how NY DFS intends for covered entities to parse the distinction between material compliance and a lack of full compliance, but the requirement for the covered entity to list each section with which it was not in material compliance suggests that it may expect a section-by-section analysis of material compliance for purposes of completing the certification process.
  • Penalties (§ 500.20). Interestingly, NY DFS added that it would take into consideration the extent to which the covered entity’s relevant policies and procedures are consistent with nationally-recognized cybersecurity frameworks, such as NIST, in assessing the appropriate penalty for non-compliance with the Cybersecurity Regulation.  DFS maintains its proposed amendment that a “violation” is: (1) the failure to secure or prevent unauthorized access to an individual’s or entity’s NPI due to non-compliance or (2) the “material failure to comply for any 24-hour period” with any section of the regulation.

The revised proposed Second Amendment are subject to a 45-day comment period, ending August 14, 2023.

Georgia, Florida, Connecticut Enact Commercial Financial Disclosure Laws

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A&B Abstract:

Georgia, Florida, and Connecticut are among a growing list of states, including California, New York, Utah, and Virginia, that have enacted laws requiring consumer-style disclosures for commercial financing transactions. These laws are part of a burgeoning trend by state legislatures to impose burdensome disclosures, like those required by the federal Truth in Lending Act (TILA), on providers of small-balance commercial loans and financings. These laws apply to business-purpose transactions but not to transactions having a consumer, family, or household purpose.

The Georgia Law

On May 1, 2023, Georgia amended its Fair Business Practices Act to require certain providers of commercial financings of $500,000 or less to furnish various disclosures to small-business borrowers before the consummation of the transactions. The statute, known as Senate Bill 90, applies to covered commercial financings consummated on or after January 1, 2024.

The Georgia law requires providers of commercial credit in amounts of $500,000 or less to provide TILA-like disclosures to small-business borrowers before the consummation of the transaction but does not specify the time period. The Georgia law defines “provider” as “a person who consummates more than five commercial financing transactions” in Georgia during any calendar year, including participants in commercial purpose marketplace lending arrangements. “Commercial financing transactions” include both closed-end and open-end commercial loans as well as accounts receivable purchase transactions but do not include real-estate-secured transactions.

Exemptions

The Georgia law exempts federally insured depository institutions and their subsidiaries, affiliates, and holding companies; Georgia-licensed money transmitters; captive finance companies; and institutions regulated by the federal Farm Credit Act. The law also exempts purchase money obligations.

Required Disclosures

The Georgia law requires providers of commercial financing transactions to furnish the following information prior to consummation:

  • Total funds provided to the business.
  • Total funds disbursed.
  • Total amount paid to the provider.
  • Total dollar cost of the transaction.
  • Payment schedule.
  • Costs associated with prepayment.

Penalties

Providers who violate these disclosure requirements face civil penalties ranging from $500 per violation to $20,000 with possible additional penalties for continued violations. Notably, violations do not affect the enforceability of the transactions, and there is no private right of action under the law.

The Florida Law

On June 26, 2023, Florida enacted the Florida Commercial Financing Disclosure Law, which requires covered providers to furnish consumer-oriented disclosures to businesses for certain commercial non-real-estate-secured financing transactions exceeding $500,000. The Florida law takes effect July 1, 2023 and becomes mandatory for transactions consummated on or after January 1, 2024.

The Florida law applies to providers of commercial financing transactions and defines “provider” as a “person who consummates more than five commercial financings” in Florida during any calendar year. “Commercial financing transactions” include commercial loans, open-end lines of credit, and accounts receivable purchase transactions. The Florida law exempts the following entities and transactions: federally insured depository institutions, their subsidiaries, affiliates, and holding companies; licensed money transmitters; real-estate-secured loans; loans exceeding $500,000; leases; and certain purchase money transactions.

Required Disclosures

The provider is required to disclose in writing the following at or before the consummation of a commercial financing transaction:

  • The total amount of funds provided to the business.
  • The total amount of funds disbursed to the business if less than the total amount of funds provided because of any fees deducted or withheld at disbursement and any amount paid to a third party on behalf of the business.
  • The total amount to be paid to the provider.
  • The total dollar cost of the commercial financing transaction, calculated by subtracting the total amount of funds provided from the total amount of the payments.
  • The manner, frequency, and amount of each payment or, if there are variable payments, an estimated initial payment and the methodology used for calculating it.
  • Certain information about prepayments.

Prohibited Acts

The Florida law prohibits a broker arranging a consumer financing transaction from engaging in any of the following acts:

  • Assessing, collecting, or soliciting an advance fee from a business to provide services to a broker. However, this prohibition would not preclude a broker from soliciting a business to pay for, or preclude a business from paying for, actual services necessary to apply for commercial financial products, such as a credit check or an appraisal of security, if certain conditions are met.
  • Making or using any false or misleading representations or omitting any material facts in the offer or sale of the services of a broker or engaging in any act that would “operate as fraud or deception upon any person in connection with the offer or sale of the services of the broker, notwithstanding the absence of reliance by the business.”
  • Making or using any false or deceptive representations in its business dealings.
  • Offering the services of a broker by any advertisement without disclosing the actual address and telephone number of the business of the broker.

Penalties 

Like the Georgia law, the Florida law punishes violations with civil fines ranging from $500 per incident to $20,000 with possible additional penalties for “aggregated violations.” Notably, violations do not impair the enforceability of the transactions or create a private right of action.

The Connecticut Law

On June 28, 2023, Connecticut enacted “An Act Requiring Certain Financing Disclosures,” which requires (1) lenders offering certain types of commercial purpose “sales-based financing” in amounts of $250,000 or less to provide specified consumer-like disclosures to applicants; and (2) mandates that lenders offering such credit register annually with the Connecticut Department of Banking starting by October 1, 2024. The Connecticut law authorizes the state banking commissioner to adopt promulgating regulations, and the law takes effect on July 1, 2024.

The Connecticut law applies to providers of commercial financings and defines “provider” as “a person who extends a specific offer of commercial financing to a recipient and includes, unless otherwise exempt … a commercial financing broker.”

“Commercial financing” means any extension of sales-based financing by a provider not exceeding $250,000. Under the statute, “sales-based financing” is a “transaction that is repaid by the recipient to the provider over time” (1) as a percentage of sales or revenue, in which the payment amount may increase or decrease according to the recipient’s sales or revenue, or (2) according to a fixed payment mechanism that provides for a reconciliation process that adjusts the payment to an amount that is a percentage of sales or revenue.

Notably, the Connecticut law exempts the following entities and transactions:

  • Banks, bank holding companies, credit unions, and their subsidiaries and affiliates.
  • Entities providing no more than five commercial financing transactions in a 12-month period.
  • Real-estate-secured loans.
  • Leases.
  • Purchase money obligations.
  • Technology service providers acting for an exempt entity as long as they do not have an interest in the entity’s program.
  • Transactions of $50,000 or more to motor vehicle dealers or rental companies.
  • Transactions offered in connection with the sale of a product that the person manufactures, licenses, or distributes.

Required Disclosures

The Connecticut law requires that before making a “specific offer” (i.e., a binding offer of credit) providers must furnish certain disclosures to borrowers, in a form prescribed by the state banking commissioner, including:

  • The total amount of the commercial financing.
  • The disbursement amount, which is the amount paid to the recipient or on the recipient’s behalf, excluding any finance charges that are deducted or withheld at disbursement.
  • The finance charge.
  • The total repayment amount, which is the disbursement amount plus the finance charge.
  • The estimated repayment period.
  • A payment schedule.
  • A description of fees not included in the finance charge such as draw fees, and late charges.
  • A description of any collateral requirements.
  • Information about brokerage compensation.

The Connecticut banking commissioner is expected to promulgate implementing regulations and model disclosures before the effective date of July 1, 2024.

Registration Requirement

The Connecticut law requires providers and brokers to register with the state banking commissioner by October 1, 2024 and to qualify to “do business” in the state. The registration must be renewed annually.

Penalties

The statute authorizes the banking commissioner to impose civil penalties of up to $100,000 for violations of the law as well as enjoin those violating the statute.

Takeaway

The three state laws recently enacted in Georgia, Florida, and Connecticut are part of a growing trend among states to regulate small-balance commercial non-real-estate-secured loans. The burdens imposed by the laws will be the lenders’ cross to bear unless they can avoid triggering the coverage of the statutes.

Consumer Finance State Roundup

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The pace of legislative activity from this year’s current session can make it hard to stay abreast of new laws.  The Consumer Finance ABstract’s “Consumer Finance State Roundup” is intended to provide a brief overview of recently enacted measures of potential interest.  

During this current legislative session, the following three states have enacted measures of potential interest to Consumer Finance ABstract readers:

  • Colorado:  Effective August 8, 2023, Senate Bill 248 (2023 Colo. Sess. Laws 360) amends collection agency licensure requirements under the Colorado Fair Debt Collection Practices Act.  First, the measure amends Section 5-16-119 of the Colorado Revised Statutes to allow licensees to work from remote locations under certain conditions.  Specifically, the licensee must: (a) ensure that no in-person customer interactions are conducted at the remote location; (b) not designate the remote location as a business location to the consumer; (c) maintain appropriate safeguards for licensee data and consumer data, information, and records, including utilizing a secure VPN for secure access; (d) employ appropriate risk-based monitoring and oversight processes of work performed from a remote location that includes maintaining records of the monitoring and oversight processes; (e) ensure that consumer information and records are not maintained at a remote location; (f) provide appropriate employee training to ensure employees keep conversations confidential about and with consumers that are conducted from a remote location, and ensure that employees work in an environment that is conducive to ensure privacy and confidential conversations; and (g) ensure that consumer and licensee information and records are available for regulatory oversight and examination.  Second, the measure defines “remote location” as “a private residence of an employee of a licensee or another location selected by the employee and approved by the licensee.”
  • Colorado:  Effective June 7, 2023, House Bill 1266 (2023 Colo. Sess. Laws 440) amends the reverse mortgages provisions of the Colorado Revised Statutes to address an exception to repayment requirements of reverse mortgage transactions when a subject property is uninhabitable.  First, the measure defines the term “force majeure” in Section 11-38-102, describing certain criteria that would designate a subject property as uninhabitable as a principal residence of the reverse mortgage borrower.  Second, the measure amends Section 11-38-107 to create exceptions to repayment requirements of a reverse mortgage transaction when a home is not occupied due to a “force majeure”.   When the home is temporarily uninhabitable, the measure establishes that the reverse mortgage will not become due and payable to the lender (to the extent allowable by HUD’s regulations and policies), provided that all of the following conditions are met:  (a) the borrower must be engaged in repairing the home with the intent to reoccupy the home as a principal residence, or must sell the home; (b) the borrower must stay in communication with the lender while the home is being repaired and must reasonably respond to any lender inquiries; (c) the borrower must comply with all other terms and conditions of the reverse mortgage; and (d) the repairing or rebuilding of the home must not reduce the lender’s security.  Further, the amended section requires the lender to disclose these requirements to the borrower at closing.
  • Nebraska:  Effective June 7, 2023, Legislative Bill 92 amends various provisions of the Nebraska Revised Statutes, including the Nebraska Residential Mortgage Licensing Act (the “Mortgage Act”) and the Nebraska Installment Loan Act (the “Installment Act”).  First, the measure amends Section 45-735 under the Mortgage Act, to authorize the Department of Banking and Finance (“Department”) to adopt and promulgate rules, regulations, and orders to regarding the use of remote work arrangements conducted outside of a main office location or branch office by employees or agents, including mortgage loan originators, of licensed mortgage bankers, registrants, or installment loan companies.  (Current law prohibits a mortgage loan originator from conducting mortgage loan origination activities at any location that is not the main office of a licensed mortgage banker, registrant, or installment loan company, or a branch office of a licensed mortgage banker or registrant.)  Second, the measure amends the Installment Act by: (a) in Section 45-1002, adding definitions for the terms “consumer” and “loan”; (b)in Section 45-1003, adding a licensure requirement  for persons that are not financial institutions; and (c) in in Section 45-1006, permitting the Director of the Department to waive hearing requirements for any applicant that does not originate loans under the statute.
  • Texas:  Effective September 1, 2023, House Bill 219 adds provisions relating to lien release to Chapter 343 of the Texas Finance Code.  First, this measure requires that no later than the 60th day after receiving the correct payoff amount for a home loan from a mortgagor, a mortgage servicer or mortgagee must: (a) deliver to the mortgagor a release of lien for the home loan; or (b) file the release of lien with the appropriate county clerk’s office for recording in the real property records of the county.  Second, the measure requires a mortgage servicer or mortgagee to deliver or file the release of lien not later than the 30th day after receipt of the written request from the mortgagor, if on or before the 20th day after the date of the home loan payoff, the mortgagor delivers a written request to the mortgage servicer or mortgagee for the release of lien to be delivered to the mortgagor or filed with the county clerk.  Third, the measure requires a mortgage servicer or mortgagee to comply with these new requirements only if the entity has the authority to deliver or file a release of lien for the home loan. Fourth, in the event of a conflict between the new requirements and a home loan agreement entered prior to the measure’s effective date, the provisions of the home loan agreement would prevail.  Fifth, the measure provides relevant definitions, namely:  (a) that the terms “mortgage servicer”, “mortgagee” and “mortgagor” have the same meaning as under  Section 51.0001 of the Texas Property Code; and (b) the term “release of lien” means “a release of a deed of trust or other lien securing a home loan”.

 

Consumer Finance State Roundup

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The pace of legislative activity from this year’s current session can make it hard to stay abreast of new laws.  The Consumer Finance ABStract’s “Consumer Finance State Roundup” is intended to provide a brief overview of recently enacted measures of potential interest.  For this first installation, we are including additional measures enacted during the current legislative session that will take effect in short order:

During this current legislative session, the following five states have enacted measures of potential interest to Consumer Finance ABstract readers:

  • Arkansas:  Effective July 31, 2023, House Bill 1439 (2023 Ark. Acts 325) amends the Fair Mortgage Lending Act to clarify the sponsorship process and amend licensing requirements.  First, the measure defines the term “[s]ponsor” to mean “a mortgage broker or mortgage banker licensed under [the Act] that has assumed the responsibility for and agrees to supervise the actions of a loan officer or transitional loan officer.”  Second, the measure clarifies that the termination of a sponsorship of a loan officer or transitional loan officer license under the Act extinguishes the right of that individual to engage in any mortgage loan activity.  Finally, the measure amends provisions related to renewal of a loan officer license to change a license status from “approved-inactive” to “approved” so long as, prior to the loan officer license termination, a licensed mortgage broker or mortgage banker meets certain requirements.

 

  • Arkansas:  Effective July 31, 2023, Senate Bill 321 (2023 Ark. Acts 360) amends provisions of the Arkansas Code relating to collection agencies.  Among other provisions, the measure amends Section 17-24-101 to clarify that the term “collection agency” means any person or entity that “(1) Engages in the collection of delinquent accounts, bills, or other forms of indebtedness owed or due or asserted to be owed or due to another; (2) Uses a fictitious name or any name other than its own to collect their own accounts receivable; (3) Solicits claims for collection; or (4) Purchases and attempts to collect delinquent accounts or bills.”

 

  • Montana:  Effective July 1, 2023, House Bill 30 (2023 Mont. Laws 4) amends the Montana Mortgage Act (“Act”) to adopt prudential standards for non-bank mortgage servicers and allow remote work for mortgage loan originators (“MLOs”), among other provisions.  First, the measure establishes capital and liquidity requirements for servicers. Second, the measure requires certain entities (that are “covered institutions”) to establish and maintain corporate governance standards, including for internal and external audits and risk management.  Third, the measure amends the definition of “mortgage servicer” to add the servicing of forward mortgages and home equity conversion mortgages or reverse mortgages for receiving payments. Fourth, the measure requires a licensee under the Act to have one MLO serve as a designated manager responsible for mortgage origination activity across the entire entity;.  Finally, the measure requires a licensee under the Act to file a written report with the Department of Administration within 15 business days after learning of a cybersecurity incident affecting business operations or potentially exposing personal information of customers.  For a detailed summary analysis on the measure’s provisions addressing remote work by MLOs, please see our previous post.

 

  • North Dakota:  Effective August 1, 2023, Senate Bill 2090 amends the North Dakota Code with respect to the licensing of residential mortgage lenders and money brokers.  First, the measure enacts a new Chapter 13-12 of the North Dakota Century Code to address the licensing of residential mortgage lenders.  Under current law, mortgage lender licensing falls within the scope of the money broker statutes in Chapter 13-04 of the Code.  Second, the measure provides that any residential mortgage lender that holds a valid North Dakota money broker license as of August 1, 2023, will not be required to obtain a residential mortgage lender license under new Section 13-12-03 until December 31, 2023.

 

  • Ohio:  Effective December 29, 2023, Senate Bill 131 (2022 Ohio Laws 156) amends mortgage (and other industry) licensing standards to address license reciprocity requirements.  Under the Ohio Residential Mortgage Lending Act (Ohio. Rev. Code § 1322.01 et seq.), the measure provides for an applicant to obtain a registration for a mortgage lender or broker or a license for a mortgage loan originator (“MLO”) by reciprocity under Section 1322.10 or Section 1322.21, respectively, of the Ohio Revised Code if the applicant: (i) holds a license or certificate of registration in another state; or (ii) has satisfactory work experience, a government certification, or a private certification (as described in that chapter) as a mortgage broker, mortgage lender, or MLO in a state that does not issue that license or certificate of registration.

 

  • Virginia:  Effective July 1, 2023, House Bill 2389 (2023 Va. Acts 573) amends provisions of the Mortgage Lenders and Mortgage Brokers Act (Va. Code Ann. § 6.2-1600 et seq.) to permit licensed mortgage lenders and mortgage brokers to allow employees and exclusive agents to work from a remote location provided that certain criteria are met.   Specifically, the measure adds to Section 6.2-1607 a list of conditions that must be met in order for a licensee’s employees to work from a remote location, including that: (a) the licensee has written policies and procedures for the supervision of employees or exclusive agents working from a remote location; (b) access to the licensee’s platforms and customer information through a VPN or comparable system, and is in accordance with the licensee’s comprehensive written information security plan; (b) no in-person customer interaction occurs at an employee’s or exclusive agent’s residence, unless such residence is an approved office; and (d) the licensee employs appropriate risk-based monitoring and oversight processes, and any employee or exclusive agent who works from a remote location must comply with the licensee’s established practice.