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Rhode Island Expands Lender Licensing for Retail Installment Contracts, Allows Remote MLO Work, and Makes Other Changes to Financial Institutions Laws

BY: Josh Dhyani
Business People

Rhode Island made a number of amendments to financial institutions statutes with the passage of Senate Bill 2794 / House Bill 7781 Sub A. Changes include the scope of licensing requirements applicable to retail installment contracts and the permissibility of remote work for MLOs and other employees. The changes were effective upon passage on June 29, 2022.

Licensing for Retail Installment Contracts

The law expands the definition of lender to include a person who makes retail installment contracts, thereby necessitating a license to create such contracts. Under existing law, a “lender” is any person who makes or funds a loan, and a license is required to engage in such lending activity. The amendment clarifies that a loan is made or funded within Rhode Island if a retail installment contract is created. The amendments define retail installment contracts to mean “any security agreement negotiated or executed in this state, or under the laws of this state, including, but not limited to, any agreement in the nature of a mortgage, conditional sale contract, or any other agreement whether or not evidenced by any written instrument to pay the retail purchase price of goods, or any part thereof, in installments over any period of time and pursuant to which any security interest is retained or taken by the retail seller for the payment of the purchase price, or any part thereof, of the retail installment contract.” Note that the law previously required a license to purchase or acquire retail installment contracts and defined the term in a separate statutory section.

MLO Remote Work

As with many jurisdictions, Rhode Island has also relaxed rules relating to remote work for employees of a mortgage licensee. Pursuant to the amendments, licensees no longer need to provide the physical premises for employees, as long as they continue to supervise the services provided by the employee to the licensee. Under the amendments, a licensee’s employees, including mortgage loan originators, may work from a remote location if certain conditions are met including that: (1) their residence or other location is identified in the records of the licensee and is within a reasonable distance of a place of business named in the licensee’s license or branch certificate, (2) the licensee maintains policies and procedures for supervision of, and employs appropriate risk-based monitoring and oversight process of work performed by, employees working from remote locations; (3) computer system access is subject to a comprehensive written information security plan; (4) in-person customer interaction does not occur at the remote location; and (5) physical records are not maintained at the remote location. The law also removes previous prohibitions on conducting other business at a licensed location without prior approval but adds a prohibition on tying services to a requirement that the consumer purchase any other product or service from a specified provider including those providers with whom the licensee is sharing office space.

Note that the Rhode Island Division of Banking has also issued guidance clarifying that MLOs are not required to live within a certain distance of a branch office (despite statutory language to the contrary), however, the Division will require that the licensed entity provide proof of effective supervision over all sponsored mortgage loan originators.

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