SB668: Bill Text

The bill generally requires that a person be licensed by DFI in order to engage in the business of money transmission or advertise, solicit, or hold itself out as providing money transmission (money transmitter). However, certain persons and transactions are exempt from this license requirement, including federally insured financial institutions, government agencies, registered securities broker-dealers, agents of a payee that collect and process payments on behalf of the payee if certain conditions are satisfied, electronic funds transfers of governmental benefits by government contractors, employees and authorized delegates of licensed money transmitters if certain conditions are satisfied, and any other person exempted by DFI, as long as the exempt person does not engage in money transmission outside the scope of the exemption. “Money transmission” means 1) selling or issuing payment instruments to a person located in this state; 2) selling or issuing stored value to a person located in this state; or 3) receiving money for transmission from a person located in this state. “Money transmission” includes payroll processing services. A “payment instrument” is, with specified exceptions such as stored value, a written or electronic check, money order, traveler’s check, or other written or electronic instrument for the transmission or payment of money or monetary value, whether or not negotiable. “Stored value” means monetary value representing a claim against the issuer that is evidenced by an electronic or digital record and is intended and accepted for use as a means of redemption for money or monetary value or payment for goods or services.

Under the bill, an application for a money transmitter license must be made to DFI through the NMLSR. The application must include specified information and be accompanied by an application fee. DFI must promptly notify an applicant when its application is complete and must then investigate the applicant’s financial condition and responsibility, financial and business experience, character, and general fitness. DFI must issue a money transmitter license to the applicant, valid for a calendar year, if the applicant satisfies certain requirements, including requirements related to the applicant’s financial security and that the applicant’s financial condition and responsibility, financial and business experience, competence, character, and general fitness, and the competence, experience, character, and general fitness of persons in control of the applicant, indicate that it is in the interest of the public to permit the applicant to engage in money transmission. DFI must approve or deny an application within 120 days after the date the application is complete, unless DFI for good cause extends the review period. DFI may deny a license application for the same reasons it may suspend a license (discussed below). If DFI denies an application, DFI must provide specific reasons for the denial in a written notice. An issued license may be renewed annually, upon payment of the applicable renewal fee, in accordance with the standardized renewal procedures under the bill for all licensed financial services providers.

The bill allows DFI, after complaint, notice, and hearing, to suspend, revoke, or refuse renewal of a license for specified reasons, including that the licensee no longer meets a requirement for initial granting of the license; the licensee made a material misstatement, or knowingly omitted a material fact, in the application for the license or in information furnished to DFI or the NMLSR; the licensee has engaged in unsafe or unsound practices in connection with, or fraudulent or deceptive conduct or gross negligence relating to, the business of money transmission; or the licensee has violated a law or DFI order applicable to money transmission.

Under the bill, a person or group seeking to acquire control of a licensed money transmitter must apply to DFI, in cooperation with the licensed money transmitter, and obtain DFI’s written approval before acquiring control. “Control” means, among other powers, the power to vote at least 25 percent of the outstanding shares of the licensed money transmitter, to elect a majority of its officers, or to exercise controlling influence over its management or policies. The process and criteria for DFI’s approval to acquire control of a licensed money transmitter are mostly similar to that for issuance of a money transmitter license. The bill specifies various circumstances under which DFI’s approval is not required, although notice may be required to DFI after the acquisition of control. A licensed money transmitter, upon adding or replacing a key individual, must also provide notice of the change to DFI along with certain information. A “key individual” is an individual ultimately responsible for establishing or directing policies and procedures of the licensed money transmitter, such as an officer. DFI may issue a notice of disapproval of a key individual if DFI finds that the competence, experience, character, or integrity of the individual indicates that it is not in the interest of the public or the customers of the licensed money transmitter to permit the individual to be a key individual of the licensed money transmitter.

The bill allows a licensed money transmitter to conduct business through an authorized delegate. An “authorized delegate” is defined as a person designated by a licensed money transmitter to engage in money transmission on behalf of the licensed money transmitter. An authorized delegate of a licensed money transmitter is not required to hold a money transmitter license if the delegate acts within the scope of authority conferred by a written contract with the licensed money transmitter. Before a licensed money transmitter may conduct business through an authorized delegate or allow a person to act as an authorized delegate, the licensed money transmitter must 1) adopt written policies and procedures reasonably designed to ensure that its authorized delegate complies with applicable state and federal law; 2) conduct a reasonable risk-based background investigation sufficient for the licensed money transmitter to determine whether the authorized delegate will likely comply with applicable state and federal law; and 3) enter into a written agreement with the authorized delegate containing specified terms, including appointing the authorized delegate with the authority to conduct money transmission on behalf of the licensed money transmitter; requiring the authorized delegate to fully comply with applicable law pertaining to money transmission; and establishing certain requirements pertaining to the relationship between the licensed money transmitter and the authorized delegate and the duties of the authorized delegate. An application for a money transmitter license must include a list of the applicant’s proposed authorized delegates and a sample contract for these authorized delegates. An authorized delegate of a licensed money transmitter holds in trust for the benefit of the licensed money transmitter all money net of fees received from money transmission. An authorized delegate may not use a subdelegate to conduct money transmission on behalf of a licensed money transmitter. DFI may suspend or revoke the designation of an authorized delegate under specified circumstances.

The bill imposes various other requirements on licensed money transmitters, including requiring a licensed money transmitter to 1) forward all money received for transmission in accordance with the terms of the agreement between the licensed money transmitter and the sender, subject to limited exceptions; 2) refund to the sender any money received for transmission within 10 days of receipt of the sender’s written request for a refund unless the money was forwarded within 10 days of the date on which the money was received for transmission or unless various other circumstances apply; 3) provide the sender a receipt, for money received for transmission, containing specified information, subject to certain exceptions; 4) submit a quarterly report of condition; 5) submit annually audited financial information that contains specified information and meet certain standards; 6) submit a quarterly report of authorized delegates; 7) report certain events to DFI, including the filing of a bankruptcy petition, a proceeding to suspend or revoke its license in another state, or that the licensed money transmitter, a key individual, or an authorized delegate has been charged with or convicted of a felony; 8) maintain specified records for at least three years and make these records available to DFI upon written request; 9) maintain a tangible net worth of more than $100,000 or an amount determined by formula, whichever is greater, although DFI may exempt a licensed money transmitter from this requirement; 10) maintain a surety bond or other form of security acceptable to DFI in a minimum amount of $100,000 or an amount determined by formula, whichever is greater; and 11) maintain a certain minimum value of permissible investments, specified by investment category, which, if certain events occur such as the filing of a petition for bankruptcy, are held in trust for the benefit of those whose money is outstanding.

The bill provides DFI with various powers relating to the regulation of money transmitters, including investigatory and enforcement powers. Among these powers, DFI may investigate the business of a licensed money transmitter and examine its books, accounts, or records and those of its authorized delegates, and the cost of the examination must be paid by the licensed money transmitter. DFI may issue subpoenas and take testimony. DFI may also accept an audit report made by a third-party for a licensed money transmitter and incorporate the audit report in any report of examination or investigation. DFI may also take possession of an insolvent licensed money transmitter under specified circumstances.

Payday lenders

The bill makes changes relating to DFI’s licensing and regulation of payday lenders. As described above, the bill requires DFI to use the NMLSR in the licensing and regulation of payday lenders. The bill also modifies license renewal and reporting procedures for payday lenders to conform to the standardized procedures applicable to all licensed financial services providers that use the NMLSR. The bill also modifies as a basis for DFI to suspend or revoke a license, in addition to a material misstatement, that the payday lender knowingly omitted a material fact in an application or information furnished to DFI or the NMLSR.

Sales finance companies

The bill makes changes relating to DFI’s licensing and regulation of sales finance companies, which are companies that acquire motor vehicle installment sales contracts or consumer leases originated by a motor vehicle dealer. As described above, the bill requires DFI to use the NMLSR in the licensing and regulation of sales finance companies. The bill also modifies license renewal procedures and creates reporting procedures for sales finance companies to conform to the standardized procedures applicable to all licensed financial services providers that use the NMLSR. The bill modifies as a basis for DFI to suspend or revoke a license, in addition to a material misstatement, that the sales finance company knowingly omitted a material fact in an application or information furnished to DFI or the NMLSR. The bill requires a sales finance company to give DFI notice within 10 days of a change of location.

Adjustment service companies

The bill makes changes relating to DFI’s licensing and regulation of adjustment service companies, which are companies that, for a fee, assist debtors in prorating the income of the debtor to the debtor’s creditors or assume the debtor’s obligations by purchasing the accounts of the debtor. As described above, the bill requires DFI to use the NMLSR in the licensing and regulation of adjustment service companies. The bill also modifies license renewal and reporting procedures for adjustment service companies to conform to the standardized procedures applicable to all licensed financial services providers that use the NMLSR. The bill provides as an additional basis for DFI to revoke a license that the adjustment service company has made a material misstatement, or knowingly omitted a material fact, in an application for a license or in information furnished to DFI or the NMLSR.

Community currency exchanges

The bill makes changes relating to DFI’s licensing and regulation of community currency exchanges, also called check cashers, which cash checks for individuals for a fee. As described above, the bill requires DFI to use the NMLSR in the licensing and regulation of community currency exchanges. The bill also modifies license renewal and reporting procedures for community currency exchanges to conform to the standardized procedures applicable to all licensed financial services providers that use the NMLSR. The bill provides as an additional basis for DFI to revoke a license that the community currency exchange has made a material misstatement, or knowingly omitted a material fact, in an application for a license or in information furnished to DFI or the NMLSR. The bill eliminates a requirement that a community currency exchange’s license be conspicuously posted at its place of business.

Insurance premium finance companies

The bill makes changes relating to DFI’s licensing and regulation of insurance premium finance companies, which are companies that loan money to an insured to finance the payment of insurance premiums. As described above, the bill requires DFI to use the NMLSR in the licensing and regulation of insurance premium finance companies. The bill also modifies license renewal procedures and creates reporting procedures for insurance premium finance companies to conform to the standardized procedures applicable to all licensed financial services providers that use the NMLSR. The bill also provides as an additional basis for DFI to suspend or revoke a license that the insurance premium finance company has made a material misstatement, or knowingly omitted a material fact, in an application for a license or in information furnished to DFI or the NMLSR.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

SB668,,4 The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

SB668,1 Section 1. 49.857 (1) (d) 12. of the statutes is amended to read:

SB668,,6 49.857 (1) (d) 12. A license or certificate of registration issued under ss. 138.09, 138.12, 138.14, 217.06 217.05, 218.0101 to 218.0163, 218.02, 218.04, 218.05, 224.72, 224.725, 224.93 or subch. IV of ch. 551.

SB668,2 Section 2. 73.0301 (1) (d) 6. of the statutes is amended to read:

SB668,,8 73.0301 (1) (d) 6. A license or certificate of registration issued by the department of financial institutions, or a division of it, under ss. 138.09, 138.12, 138.14, 202.12 to 202.14, 202.22, 217.06 217.05, 218.0101 to 218.0163, 218.02, 218.04, 218.05, 224.72, 224.725, 224.93 or under subch. IV of ch. 551.

SB668,3 Section 3. 100.315 (1) of the statutes is amended to read:

SB668,,10 100.315 (1) In this section, “check” has the meaning given in s. 217.02 (2) means any check, draft, money order, traveler’s check, personal money order, or other instrument for the transmission or payment of money.

SB668,4 Section 4. 108.227 (1) (e) 6. of the statutes is amended to read:

SB668,,12 108.227 (1) (e) 6. A license or certificate of registration issued by the department of financial institutions, or a division of it, under ss. 138.09, 138.12, 138.14, 202.12 to 202.14, 202.22, 217.06 217.05, 218.0101 to 218.0163, 218.02, 218.04, 218.05, 224.72, 224.725, 224.93 or under subch. IV of ch. 551.

SB668,5 Section 5. 138.09 (1a) of the statutes is renumbered 138.09 (1c) (a).

SB668,6 Section 6. 138.09 (1c) (a) 3., 4., 5. and 6. of the statutes are created to read:

SB668,,15 138.09 (1c) (a) 3. An individual or entity who, in connection with a securitization, private placement, collateral financing, or other type of investment or financing transaction, lends against or purchases consumer loans or any portion of the outstanding balances of consumer loans, if the following apply:

SB668,,16 a. The consumer loans are serviced by a licensee under this section, either directly or through a contracted party.

SB668,,17 b. The books and records for the consumer loans are maintained by a licensee under this section.

SB668,,18 4. Special purpose vehicles.

SB668,,19 5. Collection agencies licensed under s. 218.04.

SB668,,20 6. Payment processors.

SB668,7 Section 7. 138.09 (1c) (b) of the statutes is created to read:

SB668,,22 138.09 (1c) (b) This section applies to any person who takes an assignment for sale, in whole or in part, of a consumer loan with a finance charge in excess of 18 percent per year, without regard to whether the loan was originally made by an entity listed under par. (a) 1.

SB668,8 Section 8. 138.09 (1d) of the statutes is renumbered 138.09 (1g) (intro.) and amended to read:

SB668,,24 138.09 (1g) (intro.) In this section, “division”:

SB668,,25 (c) “Division” means the division of banking.

SB668,9 Section 9. 138.09 (1g) (a), (b), (d), (e), (f), (g), (h) and (i) of the statutes are created to read:

SB668,,27 138.09 (1g) (a) “Business” includes any of the following activities:

SB668,,28 1. To make a consumer loan that has a finance charge in excess of 18 percent per year. A person makes a consumer loan within the meaning of this section if the person is named as the lender in the consumer loan agreement.

SB668,,29 2. To take an assignment, in whole or in part, of a consumer loan in which a customer is being assessed a finance charge in excess of 18 percent per year.

SB668,,30 3. Except as provided in sub. (3) (cm), to directly collect payments from, or enforce rights against, a customer relating to a consumer loan in which a customer is being assessed a finance charge in excess of 18 percent per year.

SB668,,31 (b) “Consumer loan” means a loan made by any person to a customer that is payable in installments or for which a finance charge is or may be imposed, and includes transactions pursuant to an open-end credit plan, as defined in s. 421.301 (27), other than a seller credit card, as defined in s. 421.301 (41).

SB668,,32 (d) “Licensee,” except in sub. (3) (e) 1. g., means a person licensed under this section.

SB668,,33 (e) “Nationwide multistate licensing system and registry” has the meaning given in s. 224.35 (1g) (b).

SB668,,34 (f) “Payment processor” means a person who facilitates the purchase of, or payment of a bill for, a good or service through a clearance and settlement system by agreement with the licensee. Payment processor does not include a collection agency, as defined in s. 218.04 (1) (a), a debt collector, as defined in s. 427.103 (3), or any person who directly performs any of the activities set forth in par. (a).

SB668,,35 (g) Except in sub. (9) (a), “service” or “servicing” means collecting or receiving payments of principal, interest, and other amounts on consumer loans and undertaking other tasks related to the administration of consumer loans, including negotiating a modification or extension of consumer loans, under the direction and control of the licensee.

SB668,,36 (h) “Special purpose vehicle” means an entity that, in connection with a securitization, private placement, collateral financing, or other type of investment or financing transaction, is administered by a duly chartered financial institution under a management agreement for the purpose of purchasing, making loans against, or pooling receivables, general intangibles, and other financial assets, including consumer loans or the outstanding balances of consumer loans.

SB668,,37 (i) “Unique identifier” has the meaning given in s. 224.35 (1g) (e).

SB668,10 Section 10. 138.09 (1m) (a) of the statutes is renumbered 138.09 (1m) (a) 1. and amended to read:

SB668,,39 138.09 (1m) (a) 1. Before any person may do business under this section, charge the interest authorized by sub. (7), or assess a finance charge on a consumer loan in excess of 18 percent per year, that person shall first obtain a license from the division.

SB668,,40 2. Applications for a license shall be in writing and upon forms provided for this purpose made in the form and manner prescribed by the division.

SB668,,41 3. An applicant at the time of making an application shall pay to the division a nonrefundable $300 fee for investigating the application and a $500 annual license fee for the period terminating on the last day of the current calendar year. If the cost of the investigation exceeds $300, the applicant shall upon demand of the division pay to the division the amount by which the cost of the investigation exceeds the nonrefundable fee.

SB668,11 Section 11. 138.09 (1m) (b) 1. (intro.) of the statutes is amended to read:

SB668,,43 138.09 (1m) (b) 1. (intro.) Except as provided in par. (c), an application under par. (a) 2. for a license shall contain the following:

SB668,12 Section 12. 138.09 (1m) (b) 2. c. of the statutes is created to read:

SB668,,45 138.09 (1m) (b) 2. c. The division may disclose information to the nationwide multistate licensing system and registry as provided in s. 224.35.

SB668,13 Section 13. 138.09 (1m) (d) and (e) of the statutes are created to read:

SB668,,47 138.09 (1m) (d) The division shall utilize the nationwide multistate licensing system and registry, and the provisions of s. 224.35 shall apply, with respect to applicants and licensees under this section.

SB668,,48 (e) An applicant or licensee under this section shall register with, and maintain a valid unique identifier issued by, the nationwide multistate licensing system and registry.

SB668,14 Section 14. 138.09 (2) of the statutes is amended to read:

SB668,,50 138.09 (2) The division may also require the applicant to file with the division, and to maintain in force, a bond in which the applicant shall be the obligor, in a sum not to exceed $5,000 with one or more corporate sureties licensed to do business in Wisconsin, whose liability as such sureties shall not exceed the sum of $5,000 in the aggregate, to be approved by the division and filed in a form and manner acceptable to the division, and such bond shall run to the state of Wisconsin for the use of the state and of any person or persons who may have a cause of action against the obligor of the bond under the provisions of this section. Such bonds shall be conditioned that the obligor will conform to and abide by each and every provision of this section, and will pay to the state or to any person or persons any and all moneys that may become due or owing to the state or to such person or persons from the obligor under and by virtue of the provisions of this chapter.

SB668,15 Section 15. 138.09 (3) (b) of the statutes is repealed and recreated to read:

SB668,,52 138.09 (3) (b) A license may be renewed or reinstated as provided in s. 224.35 (7). A license that is not renewed or reinstated by the end of the reinstatement period provided in s. 224.35 (7) shall be deemed to have expired on December 31 of the year immediately preceding the reinstatement period, unless the initial license date is between November 1 and December 31, in which instance the initial license term shall run through December 31 of the following year.

SB668,16 Section 16. 138.09 (3) (c) of the statutes is amended to read:

SB668,,54 138.09 (3) (c) Such A license shall not be assignable and shall permit operation under it only at or from the location specified in the license at which location all loans shall be consummated, but this provision shall not prevent the licensee from making loans under this section which are not initiated or consummated by face to face contact away from the licensed location if permitted by the division in writing or by rule or at an auction sale conducted or clerked by a licensee.

SB668,17 Section 17. 138.09 (3) (cm) of the statutes is created to read:

SB668,,56 138.09 (3) (cm) Notwithstanding par. (c), a licensee may contract with a person that is not licensed under this section to service a consumer loan on behalf of the licensee. The licensee is responsible for violations of this section committed by the contracted party with respect to the servicing of that loan, except where the contracted party holds a license issued by the division that would subject it to regulatory discipline for violations of this section. The licensee’s responsibility for the contracted party, as set forth in this paragraph, does not create a private right of action against the licensee.

SB668,18 Section 18. 138.09 (3) (d) of the statutes is amended to read:

SB668,,58 138.09 (3) (d) A separate license shall be required for each place of business maintained by the licensee. Whenever a licensee shall change the address of its place of business to another location within the same city, village or town the licensee shall at once give written notice thereof to the division, which shall replace the original license with an amended license showing the new address, provided the location meets with the requirements of par. (e) or to the nationwide multistate licensing system and registry, as directed by the division, in a form and manner acceptable to the division. No change in the place of business of a licensee to a different city, village or town shall be permitted under the same license.

SB668,19 Section 19. 138.09 (3) (e) 1. a. and f. of the statutes are amended to read:

SB668,,60 138.09 (3) (e) 1. a. A business engaged in making loans for business or agricultural purposes or exceeding $25,000 in principal amount, except that all such loans having terms of 49 months or more are subject to sub. (7) (gm) 2. or 4.

SB668,,61 f. A seller of checks money transmitter business under ch. 217.

SB668,20 Section 20. 138.09 (3) (e) 3. of the statutes is created to read:

SB668,,63 138.09 (3) (e) 3. Any licensee operating under this section shall keep the records affecting loans made pursuant to this section separate and distinct from the records of any other business of the licensee.

SB668,21 Section 21. 138.09 (3) (f) of the statutes is amended to read:

SB668,,65 138.09 (3) (f) Every Each licensee shall make an annual report to the division for each calendar year on or before March 15 of the following year. The report shall include business transacted by the licensee under the provisions of this section and shall give all reasonable and relevant information that the division may require. The reports shall be made in the form and manner prescribed by the division. Any licensee operating under this section shall keep the records affecting loans made pursuant to this section separate and distinct from the records of any other business of the licensee and submit financial statements as provided in s. 224.35 (8).

SB668,22 Section 22. 138.09 (3) (g) of the statutes is created to read:

SB668,,67 138.09 (3) (g) Each licensee shall keep current and accurate all material information on file with the division and the nationwide multistate licensing system and registry as provided in s. 224.35 (6).

SB668,23 Section 23. 138.09 (4) (a) 4. of the statutes is created to read:

SB668,,69 138.09 (4) (a) 4. The licensee has made a material misstatement, or knowingly omitted a material fact, in an application for a license or in information furnished to the division or the nationwide multistate licensing system and registry.

SB668,24 Section 24. 138.09 (4) (e) of the statutes is created to read:

SB668,,71 138.09 (4) (e) The division may report any enforcement action, any violation of this section or of an administrative rule or order, or other relevant information to the nationwide multistate licensing system and registry. Except as provided in s. 224.35 (4) (b) and (c), these reports to the nationwide multistate licensing system and registry shall be confidential and are not subject to public copying or inspection under s. 19.35 (1).

SB668,25 Section 25. 138.09 (6) of the statutes is amended to read: