2013 -- S 0810

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LC02108

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STATE OF RHODE ISLAND

IN GENERAL ASSEMBLY

JANUARY SESSION, A.D. 2013

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A N A C T

RELATING TO FINANCIAL INSTITUTIONS -- LICENSED ACTIVITIES

     Introduced By: Senator William A. Walaska

     Date Introduced: April 04, 2013

     Referred To: Senate Commerce

It is enacted by the General Assembly as follows:

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     SECTION 1. Section 19-14-1 of the General Laws in Chapter 19-14 entitled "Licensed

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Activities" is hereby amended to read as follows:

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     19-14-1. Definitions. -- Unless otherwise specified, the following terms shall have the

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following meanings throughout chapters 14, 14.1, 14.2, 14.3, 14.4, 14.6, 14.8 and 14.10 of this

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title:

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      (1) "Check" means any check, draft, money order, personal money order, or other

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instrument for the transmission or payment of money. For the purposes of check cashing,

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travelers checks or foreign denomination instruments shall not be considered checks. "Check

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cashing" means providing currency for checks;

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      (2) "Deliver" means to deliver a check to the first person who in payment for the check

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makes or purports to make a remittance of or against the face amount of the check, whether or not

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the deliverer also charges a fee in addition to the face amount, and whether or not the deliverer

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signs the check;

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      (3) "Electronic money transfer" means receiving money for transmission within the

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United States or to locations abroad by any means including, but not limited to, wire, facsimile or

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other electronic transfer system;

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      (4) (i) "Lender" means any person who makes or funds a loan within this state with the

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person's own funds, regardless of whether the person is the nominal mortgagee or creditor on the

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instrument evidencing the loan;

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      (ii) A loan is made or funded within this state if any of the following conditions exist:

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      (A) The loan is secured by real property located in this state;

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      (B) An application for a loan is taken by an employee, agent, or representative of the

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lender within this state;

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      (C) The loan closes within this state;

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      (D) The loan solicitation is done by an individual with a physical presence in this state;

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or

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      (E) The lender maintains an office in this state.

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      (iii) The term "lender" shall also include any person engaged in a transaction whereby

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the person makes or funds a loan within this state using the proceeds of an advance under a line

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of credit over which proceeds the person has dominion and control and for the repayment of

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which the person is unconditionally liable. This transaction is not a table funding transaction. A

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person is deemed to have dominion and control over the proceeds of an advance under a line of

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credit used to fund a loan regardless of whether:

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      (A) The person may, contemporaneously with or shortly following the funding of the

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loan, assign or deliver to the line of credit lender one or more loans funded by the proceeds of an

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advance to the person under the line of credit;

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      (B) The proceeds of an advance are delivered directly to the settlement agent by the line

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of credit lender, unless the settlement agent is the agent of the line of credit lender;

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      (C) One or more loans funded by the proceeds of an advance under the line of credit is

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purchased by the line of credit lender; or

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      (D) Under the circumstances as set forth in regulations adopted by the director or the

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director's designee pursuant to this chapter;

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      (5) "Licensee" means any person licensed under this chapter;

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      (6) "Loan" means any advance of money or credit including, but not limited to:

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      (i) Loans secured by mortgages;

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      (ii) Insurance premium finance agreements;

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      (iii) The purchase or acquisition of retail installment contracts or advances to the holders

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of those contracts;

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      (iv) Educational loans;

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      (v) Any other advance of money; or

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      (vi) Any transaction such as those commonly known as "pay day loans," "pay day

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advances," or "deferred presentment loans," in which a cash advance is made to a customer in

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exchange for the customer's personal check, or in exchange for the customer's authorization to

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debit the customer's deposit account, and where the parties agree either that the check will not be

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cashed or deposited, or that customer's deposit account will not be debited, until a designated

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future date.

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      (7) "Loan broker" means any person who, for compensation or gain, or in the expectation

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of compensation or gain, either directly or indirectly, solicits, processes, negotiates, places or sells

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a loan within this state for others in the primary market, or offers to do so. A loan broker shall

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also mean any person who is the nominal mortgagee or creditor in a table funding transaction. A

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loan is brokered within this state if any of the following conditions exist:

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      (i) The loan is secured by real property located in this state;

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      (ii) An application for a loan is taken or received by an employee, agent or representative

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of the loan broker within this state;

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      (iii) The loan closes within this state;

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      (iv) The loan solicitation is done by an individual with a physical presence in this state;

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or

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      (v) The loan broker maintains an office in this state.

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      (8) "Personal money order" means any instrument for the transmission or payment of

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money in relation to which the purchaser or remitter appoints or purports to appoint the seller as

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his or her agent for the receipt, transmission, or handling of money, whether the instrument is

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signed by the seller or by the purchaser or remitter or some other person;

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      (9) "Primary market" means the market in which loans are made to borrowers by lenders,

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whether or not through a loan broker or other conduit;

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      (10) "Principal owner" means any person who owns, controls, votes or has a beneficial

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interest in, directly or indirectly, ten percent (10%) or more of the outstanding capital stock

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and/or equity interest of a licensee;

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      (11) "Sell" means to sell, to issue, or to deliver a check;

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      (12) "Small loan" means a loan of less than five thousand dollars ($5,000), not secured

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by real estate, made pursuant to the provisions of chapter 14.2 of this title;

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      (13) "Small loan lender" means a lender engaged in the business of making small loans

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within this state;

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      (14) "Table funding transaction" means a transaction in which there is a

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contemporaneous advance of funds by a lender and an assignment by the mortgagee or creditor of

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the loan to the lender;

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      (15) "Check casher" means a person or entity that, for compensation, engages, in whole

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or in part, in the business of cashing checks whose primary business is the cashing of checks,

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drafts or money orders for a fee. A check casher license is not required when a person or entity

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cashes checks, drafts or money orders for free, or when a person or entity cashes checks, drafts or

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money orders as an incident to the conduct of another lawful business (e.g. a store) and not more

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than fifty cents ($.50) is charged. No check casher may apply any funds or currency for a check

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cashing transaction to any payment instrument such as a debit card or check to card where fees

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are not fully disclosed and transparent.

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      (16) "Deferred deposit transaction" means any transaction such as those commonly

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known as "pay-day loans," "pay-day advances," or "deferred presentment loans" in which a cash

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advance is made to a customer in exchange for the customer's personal check or in exchange for

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the customer's authorization to debit the customer's deposit account and where the parties agree

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either that the check will not be cashed or deposited, or that the customer's deposit account will

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not be debited until a designated future date;

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      (17) "Insurance premium finance agreement" means an agreement by which an insured,

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or prospective insured, promises to pay to an insurance premium finance company the amount

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advanced or to be advanced, under the agreement to an insurer or to an insurance producer, in

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payment of a premium or premiums on an insurance contract or contracts, together with interest

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and a service charge, as authorized and limited by this title;

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      (18) "Insurance premium finance company" means a person engaged in the business of

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making insurance premium finance agreements or acquiring insurance premium finance

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agreements from other insurance premium finance companies;

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      (19) "Simple interest" means interest computed on the principal balance outstanding

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immediately prior to a payment for the actual number of days between payments made on a loan

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over the life of a loan;

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      (20) "Nonprofit organization" means a corporation qualifying as a 26 U.S.C. section

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501(c)(3) nonprofit organization, in the operation of which no member, director, officer, partner,

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employee, agent, or other affiliated person profits financially other than receiving reasonable

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salaries if applicable;

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      (21) "Mortgage loan originator" has the same meaning set forth in subdivision 19-14.10-

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3(6);

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      (22) "Mortgage loan" means a loan secured in whole or in part by real property located

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in this state;

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      (23) "Loan solicitation" shall mean an effectuation, procurement, delivery and offer, and

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advertisement of a loan. Loan solicitation also includes providing or accepting loan applications

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and assisting persons in completing loan applications and/or advising, conferring, or informing

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anyone regarding the benefits, terms and/or conditions of a loan product or service. Loan

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solicitation does not include loan processing or loan underwriting as defined in this section. Loan

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solicitation does not include telemarketing which is defined for purposes of this section to mean

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contacting a person by telephone with the intention of collecting such person's name, address and

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telephone number for the sole purpose of allowing a mortgage loan originator to fulfill a loan

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inquiry;

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      (24) "Processes" shall mean, with respect to a loan, any of a series of acts or functions

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including the preparation of a loan application and supporting documents performed by a person

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which leads to or results in the acceptance, approval, denial, and/or withdrawal of a loan

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application, including, without limitation, the rendering of services including loan underwriting,

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obtaining verifications, credit reports or appraisals, communicating with the applicant and/or the

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lender or loan broker, and/or other loan processing and origination services for consideration by a

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lender or loan broker. Loan processing does not include the following:

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      (i) Providing loan closing services;

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      (ii) Rendering of credit reports by an authorized credit reporting agency; and

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      (iii) Rendering of appraisal services.

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      (25) "Loan underwriting" shall mean a loan process that involves the analysis of risk

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with respect to the decision whether to make a loan to a loan applicant based on credit,

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employment, assets, and other factors including evaluating a loan applicant against a lender's

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various lending criteria for creditworthiness, making a determination for the lender as to whether

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the applicant meets the lender's pre-established credit standards and/or making a recommendation

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regarding loan approval;

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      (26) "Negotiates" shall mean, with respect to a loan, to confer directly with or offer

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advice directly to a loan applicant or prospective loan applicant for a loan product or service

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concerning any of the substantive benefits, terms, or conditions of the loan product or service;

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      (27) "Natural person employee" shall mean any natural person performing services as a

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bona-fide employee for a person licensed under the provisions of Rhode Island general laws

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section 19-14-1, et. seq., in return for a salary, wage, or other consideration, where such salary,

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wage, or consideration is reported by the licensee on a federal form W-2 payroll record. The term

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does not include any natural person or business entity performing services for a person licensed

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under the provisions of Rhode Island general laws in return for a salary, wage, or other

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consideration, where such salary, wage, or consideration is reported by the licensee on a federal

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form 1099;

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      (28) "Bona-fide employee" shall mean an employee of a licensee who works under the

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oversight and supervision of the licensee;

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      (29) "Oversight and supervision of the licensee" shall mean that the licensee provides

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training to the employee, sets the employee's hours of work, and provides the employee with the

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equipment and physical premises required to perform the employee's duties;

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      (30) "Operating subsidiary" shall mean a majority-owned subsidiary of a financial

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institution or banking institution that engages only in activities permitted by the parent financial

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institution or banking institution;

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      (31) "Provisional employee" means a natural person who, pursuant to a written

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agreement between the natural person and a wholly owned subsidiary of a financial holding

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company, as defined in The Bank Holding Company Act of 1956, as amended, a bank holding

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company, savings bank holding company, or thrift holding company, is an exclusive agent for the

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subsidiary with respect to mortgage loan originations, and the subsidiary: (a) holds a valid loan

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broker's license and (b) enters into a written agreement with the director or the director's designee

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to include:

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      (i) An "undertaking of accountability" in a form prescribed by the director or the

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director's designee, for all of the subsidiary's exclusive agents to include full and direct financial

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and regulatory responsibility for the mortgage loan originator activities of each exclusive agent as

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if said exclusive agent was an employee of the subsidiary;

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      (ii) A business plan to be approved by the director or the director's designee, for the

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education of the exclusive agents, the handling of consumer complaints related to the exclusive

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agents, and the supervision of the mortgage loan origination activities of the exclusive agents;

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      (iii) A restriction of the exclusive agents' mortgage loan originators' activities to loans to

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be made only by the subsidiary's affiliated bank; and

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      (32) "Multi-state licensing system" means a system involving one or more states, the

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District of Columbia, or the Commonwealth of Puerto Rico established to facilitate the sharing of

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regulatory information and the licensing, application, reporting and payment processes, by

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electronic or other means, for mortgage lenders and loan brokers, and other licensees required to

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be licensed under this chapter.

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      (33) "Negative equity" means the difference between the value of an asset and the

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outstanding portion of the loan taken out to pay for the asset, when the latter exceeds the former

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amount.

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      (34) "Loan closing services" means providing title services, including title searches, title

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examinations, abstract preparation, insurability determinations, and the issuance of title

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commitments and title insurance policies, conducting loan closings, and preparation of loan

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closing documents when performed by or under the supervision of a licensed attorney, licensed

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title agency, or licensed title insurance company.

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     SECTION 2. This act shall take effect upon passage.

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LC02108

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EXPLANATION

BY THE LEGISLATIVE COUNCIL

OF

A N A C T

RELATING TO FINANCIAL INSTITUTIONS -- LICENSED ACTIVITIES

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     This act would redefine a check casher as a person or entity whose primary business is

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the cashing of checks, drafts or money orders for a fee and would exempt persons or entities

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cashing checks, drafts or money orders for a fee or as an incident to the conduct of another lawful

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business and not more than fifty cent ($0.50) is charged from the requirement of a check casher

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license.

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     This act would take effect upon passage.

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LC02108

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