Chapter
452
2008 -- S 2902
Enacted 07/10/08
A N A C T
RELATING TO FINANCIAL
INSTITUTIONS -- LICENSED ACTIVITIES
Introduced By: Senators Ruggerio, McBurney, Doyle, and Tassoni
Date Introduced: April 01,
2008
It is enacted
by the General Assembly as follows:
SECTION
1. Section 19-14-1 of the General Laws in Chapter 19-14 entitled "Licensed
Activities"
is hereby amended to read as follows:
19-14-1.
Definitions. -- For purposes of this chapter and chapters 14.1, 14.2,
14.3, 14.4,
14.6 and
14.7 of this title:
(1) "Check" means any check, draft, money order, personal money
order, or other
instrument
for the transmission or payment of money. For the purposes of check cashing,
travelers
checks or foreign denomination instruments shall not be considered checks.
"Check
cashing"
means providing currency for checks;
(2) "Deliver" means to deliver a check to the first person who in
payment for the check
makes or
purports to make a remittance of or against the face amount of the check,
whether or not
the
deliverer also charges a fee in addition to the face amount, and whether or not
the deliverer
signs
the check;
(3) "Electronic money transfer" means receiving money for
transmission within the
United
States or to locations abroad by any means including, but not limited to, wire,
facsimile or
other
electronic transfer system;
(4) (i) "Lender" means any person who makes or funds a loan within
this state with the
person's
own funds, regardless of whether the person is the nominal mortgagee or
creditor on the
instrument
evidencing the loan;
(ii) A loan is made or funded within this state if any of the following
conditions exist:
(A) The loan is secured by real property located in this state;
(B) An application for a loan is taken by an employee, agent, or representative
of the
lender
within this state;
(C) The loan closes within this state;
(D) The loan solicitation is done by an individual with a physical presence in
this state;
or
(E) The lender maintains an office in this state.
(iii) The term "lender" shall also include any person engaged in a
transaction whereby
the
person makes or funds a loan within this state using the proceeds of an advance
under a line
of
credit over which proceeds the person has dominion and control and for the
repayment of
which
the person is unconditionally liable. This transaction is not a table funding
transaction. A
person
is deemed to have dominion and control over the proceeds of an advance under a
line of
credit
used to fund a loan regardless of whether:
(A) The person may, contemporaneously with or shortly following the funding of
the
loan,
assign or deliver to the line of credit lender one or more loans funded by the
proceeds of an
advance
to the person under the line of credit;
(B) The proceeds of an advance are delivered directly to the settlement agent
by the line
of
credit lender, unless the settlement agent is the agent of the line of credit
lender;
(C) One or more loans funded by the proceeds of an advance under the line of
credit is
purchased
by the line of credit lender; or
(D) Under the circumstances as set forth in regulations adopted by the director
or the
director's
designee pursuant to this chapter;
(5) "Licensee" means an entity licensed under this chapter;
(6) "Loan" means any advance of money or credit including, but not
limited to:
(i) Loans secured by mortgages;
(ii) Insurance premium finance agreements;
(iii) The purchase or acquisition of retail installment contracts or advances
to the holders
of those
contracts;
(iv) Educational loans;
(v) Any other advance of money; or
(vi) Any transaction such as those commonly known as "pay day loans,"
"pay day
advances,"
or "deferred presentment loans," in which a cash advance is made to a
customer in
exchange
for the customer's personal check, or in exchange for the customer's
authorization to
debit
the customer's deposit account, and where the parties agree either that the
check will not be
cashed
or deposited, or that customer's deposit account will not be debited, until a
designated
future
date.
(7) "Loan broker" means any person who, for compensation or gain, or
in the expectation
of
compensation or gain, either directly or indirectly, solicits, processes,
negotiates, places or sells
a loan
within this state for others in the primary market, or offers to do so. A loan
broker shall
also
mean any person who is the nominal mortgagee or creditor in a table funding
transaction. A
loan is
brokered within this state if any of the following conditions exist:
(i) The loan is secured by real property located in this state;
(ii) An application for a loan is taken or received by an employee, agent or
representative
of the
loan broker within this state;
(iii) The loan closes within this state;
(iv) The loan solicitation is done by an individual with a physical presence in
this state;
or
(v) The loan broker maintains an office in this state.
(8) "Personal money order" means any instrument for the transmission
or payment of
money in
relation to which the purchaser or remitter appoints or purports to appoint the
seller as
his or
her agent for the receipt, transmission, or handling of money, whether the
instrument is
signed
by the seller or by the purchaser or remitter or some other person;
(9) "Primary market" means the market in which loans are made to borrowers
by lenders,
whether
or not through a loan broker or other conduit;
(10) "Principal owner" means any person who owns, controls, votes or
has a beneficial
interest
in, directly or indirectly, ten percent (10%) or more of the outstanding capital
stock
and/or
equity interest of a licensee;
(11) "Sell" means to sell, to issue, or to deliver a check;
(12) "Small loan" means a loan of less than five thousand dollars
($5,000), not secured
by real
estate, made pursuant to the provisions of chapter 14.2 of this title;
(13) "Small loan lender" means a lender engaged in the business of
making small loans
within
this state;
(14) "Table funding transaction" means a transaction in which there
is a
contemporaneous
advance of funds by a lender and an assignment by the mortgagee or creditor of
the loan
to the lender;
(15) "Check casher" means a person or entity that, for compensation,
engages, in whole
or in
part, in the business of cashing checks;
(16) "Deferred deposit transaction" means any transaction such as
those commonly
known as
"pay-day loans," "pay-day advances," or "deferred
presentment loans" in which a cash
advance
is made to a customer in exchange for the customer's personal check or in
exchange for
the
customer's authorization to debit the customer's deposit account and where the
parties agree
either
that the check will not be cashed or deposited, or that the customer's deposit
account will
not be
debited until a designated future date;
(17) "Insurance premium finance agreement" means an agreement by
which an insured,
or
prospective insured, promises to pay to an insurance premium finance company
the amount
advanced
or to be advanced, under the agreement to an insurer or to an insurance producer,
in
payment
of a premium or premiums on an insurance contract or contracts, together with
interest
and a
service charge, as authorized and limited by this title;
(18) "Insurance premium finance company" means a person engaged in
the business of
making
insurance premium finance agreements or acquiring insurance premium finance
agreements
from other insurance premium finance companies;
(19) "Simple interest" means interest computed on the principal
balance outstanding
immediately
prior to a payment for the actual number of days between payments made on a
loan
over the
life of a loan;
(20) "Nonprofit organization" means a corporation qualifying as a 26
U.S.C. section
501(c)(3)
nonprofit organization, in the operation of which no member, director, officer,
partner,
employee,
agent, or other affiliated person profits financially other than receiving
reasonable
salaries
if applicable;
(21) "Mortgage loan originator" means a natural person employee of a
lender or loan
broker
that is required to be licensed under Rhode Island general laws section 19-14-1
et seq., or
a
provisional employee as defined herein, and who for or with the expectation of
a fee,
commission
or other valuable consideration (i) advises an applicant about different loan
products
and
their terms and conditions in order to permit the applicant to select and apply
for a particular
loan
product, or (ii) advises persons in completing loan applications by informing
the applicant
regarding
the benefits, terms and/or conditions of a loan product or service, or (iii)
negotiates or
offers
to negotiate the making of a loan with an applicant. A person whose activities
are
ministerial
and clerical is not acting as a mortgage loan originator;
(22) "Mortgage loan" means a loan secured in whole or in part by real
property located
in this
state;
(23) "Loan solicitation" shall mean an effectuation, procurement,
delivery and offer, and
advertisement
of a loan. Loan solicitation also includes providing or accepting loan
applications
and
assisting persons in completing loan applications and/or advising, conferring,
or informing
anyone
regarding the benefits, terms and/or conditions of a loan product or service.
Loan
solicitation
does not include loan processing or loan underwriting as defined in this
section. Loan
solicitation
does not include telemarketing which is defined for purposes of this section to
mean
contacting
a person by telephone with the intention of collecting such person's name,
address and
telephone
number for the sole purpose of allowing a mortgage loan originator to fulfill a
loan
inquiry;
(24) "Loan processing" shall mean any of a series of acts or
functions including the
preparation
of a loan application and supporting documents performed by a person which
leads to
or
results in the acceptance, approval, denial, and/or withdrawal of a loan
application, including,
without
limitation, the rendering of services including loan underwriting, taking or
receiving loan
applications,
obtaining verifications, credit reports or appraisals, communicating with the
applicant
and/or the lender or loan broker, and/or other loan processing and origination
services
for
consideration by a lender or loan broker. Loan processing does not include the
following:
(A) The providing of title services, including title searches, title
examinations, abstract
preparation,
insurability determinations, and the issuance of title commitments and title
insurance
policies,
loan closings, preparation of loan closing documents when performed by or under
the
supervision
of a licensed attorney, licensed title agency or licensed title insurance
company;
(B) Rendering of credit reports by an authorized credit reporting agency; and
(C) Rendering of appraisal services.
(25) "Loan underwriting" shall mean a loan process that involves the
analysis of risk
with
respect to the decision whether to make a loan to a loan applicant based on
credit,
employment,
assets, and other factors including evaluating a loan applicant against a
lender's
various
lending criteria for creditworthiness, making a determination for the lender as
to whether
the
applicant meets the lender's pre-established credit standards and/or making a
recommendation
regarding
loan approval;
(26) "Negotiate a loan" shall mean to confer directly with or offer
advice directly to a
loan
applicant or prospective loan applicant for a loan product or service
concerning any of the
substantive
benefits, terms, or conditions of the loan product or service;
(27) "Natural person employee" shall mean any natural person
performing services as a
bona-fide
employee for a person licensed under the provisions of Rhode Island general
laws
section
19-14-1, et. seq., in return for a salary, wage, or other consideration, where
such salary,
wage, or
consideration is reported by the licensee on a federal form W-2 payroll record.
The term
does not
include any natural person or business entity performing services for a person
licensed
under
the provisions of Rhode Island general laws in return for a salary, wage, or
other
consideration,
where such salary, wage, or consideration is reported by the licensee on a
federal
form
1099;
(28) "Bona-fide employee" shall mean an employee of a licensee who
works under the
oversight
and supervision of the licensee;
(29) "Oversight and supervision of the licensee" shall mean that the
licensee provides
training
to the employee, sets the employee's hours of work, and provides the employee
with the
equipment
and physical premises required to perform the employee's duties;
(30) "Operating subsidiary" shall mean a majority-owned subsidiary of
a financial
institution
or banking institution that engages only in activities permitted by the parent
financial
institution
or banking institution;
(31) "Provisional employee" means a natural person who, pursuant to a
written
agreement
between the natural person and a wholly owned subsidiary of a financial holding
company,
as defined in The Bank Holding Company Act of 1956, as amended, a bank holding
company,
savings bank holding company, or thrift holding company, is an exclusive agent
for the
subsidiary
with respect to mortgage loan originations, and the subsidiary: (a) holds a
valid loan
broker's
license and (b) enters into a written agreement with the director or the
director's designee
to
include:
(i) An "undertaking of accountability" in a form prescribed by the
director or the
director's
designee, for all of the subsidiary's exclusive agents to include full and
direct financial
and
regulatory responsibility for the mortgage loan originator activities of each
exclusive agent as
if said
exclusive agent was an employee of the subsidiary;
(ii) A business plan to be approved by the director or the director's designee,
for the
education
of the exclusive agents, the handling of consumer complaints related to the
exclusive
agents,
and the supervision of the mortgage loan origination activities of the
exclusive agents;
(iii) A restriction of the exclusive agents' mortgage loan originators'
activities to loans to
be made
only by the subsidiary's affiliated bank; and
(32) [Effective December 31, 2008; see contingent effective date note.]
"Multi-state
licensing
system" a system involving one or more states, the District of Columbia,
or the
Commonwealth
of Puerto Rico established to facilitate the sharing of regulatory information
and
the
licensing, application, reporting and payment processes, by electronic or other
means, for
mortgage
lenders and loan brokers, and other licensees required to be licensed under
this chapter.
(33)
"Negative equity" means the difference between the value of an asset
and the
outstanding
portion of the loan taken out to pay for the asset, when the latter exceeds the
former
amount.
SECTION
2. Section 19-14.1-10 of the General Laws in Chapter 19-14.1 entitled
"Lenders
and Loan Brokers" is hereby amended to read as follows:
19-14.1-10.
Special exemptions. -- (a) The licensing provisions of chapter 14 of
this title
shall
not apply to:
(1) Nonprofit charitable, educational, or religious corporations or
associations;
(2) Any person who makes less than six (6) loans in this state in any
consecutive twelve
(12)
month period; there is no similar exemption from licensing for loan brokers for
brokering
loans or
acting as a loan broker;
(3) Person(s) acting as an agent for a licensee for the purpose of conducting
closings at a
location
other than that stipulated in the license;
(4) Regulated institutions and banks or credit unions organized under the laws
of the
United
States, or subject to written notice with a designated Rhode Island agent for
service of
process
in the form prescribed by the director or the director's designee, of any other
state within
the
United States if the laws of the other state in which such bank or credit union
is organized
authorizes
under conditions not substantially more restrictive than those imposed by the
laws of
this
state, as determined by the director or the director's designee, a financial
institution or credit
union to
engage in the business of originating or brokering loans in the other state; no
bank or
credit
union duly organized under the laws of any other state within the United States
may receive
deposits,
pay checks or lend money from any location within this state unless such bank
or credit
union
has received approval from the director or the director's designee for the
establishment of
an
interstate branch office pursuant to chapter 7 of title 19 of the general laws;
or
(5) Any natural person employee who is employed by a licensee when acting on
the
licensee's
behalf; provided that this exemption shall not apply to a mortgage loan
originator
required
to be licensed under section 19-14-2.
(6) A loan originator employed by an operating subsidiary of a financial
institution or
banking institution
organized under the laws of this state or any state within the United States;
provided,
however, that any such operating subsidiary shall provide an educational
program or
course
that is relevant to the products and services offered by its employees who
solicit loans on
behalf
of such operating subsidiary.
(b) The provisions of this chapter and chapter 14 of this title shall not apply
to:
(1) Loans to corporations, joint ventures, partnerships, limited liability
companies or
other
business entities;
(2) Loans over twenty-five thousand dollars ($25,000) in amount to individuals
for
business
or commercial, as opposed to personal, family or household purposes;
(3) Loans principally secured by accounts receivable and/or business inventory;
(4) Loans made by a life insurance company wholly secured by the cash surrender
value
of a
life insurance policy;
(5) Education-purpose loans made by the Rhode Island health and educational
building
corporation
as vested in chapter 38.1 of title 45 of the Rhode Island student loan
authority as
vested
in chapter 62 of title 16;
(6) The acquisition of retail or loan installment contracts by an entity whose
sole
business
in this state is acquiring them from federal banks receivers or liquidators;
(7) Notes evidencing the indebtedness of a retail buyer to a retail seller of
goods,
services
or insurance for a part or all of the purchase price; or
(8) Any state or federal agency which makes, brokers, or funds loans or acts as
a lender
or a
loan broker. This exemption includes exclusive agents or exclusive contractors
of the agency
specifically
designated by the agency to perform those functions on behalf of the agency and
which
has notified the director, in writing, of the exclusive agency or contract.
(9)
Notes evidencing the indebtedness of a retail buyer to a retail motor vehicle
dealer
that
include as part of the amount financed, disclosed in accordance with 12 C.F.R.
226.18 as
amended,
an amount representing negative equity related to the motor vehicle being
traded in as
part
of the purchase price of the motor vehicle being purchased.
(c) No license to make or fund loans, or to act as a lender or small loan
lender shall be
required
of any person who engages in deferred deposit transactions (commonly known as
"pay-
day
advance") while holding a valid license to cash checks pursuant to chapter
14 of this title.
SECTION
3. This act shall take effect upon passage.
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LC02633
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