The licensing and regulation by the Department of Financial Institutions of consumer lenders, payday lenders, money transmitters, sales finance companies, collection agencies, mortgage bankers and mortgage brokers, adjustment service companies, community currency exchanges, and insurance premium finance companies; the Nationwide Multistate Licensing System and Registry; modifying and repealing rules promulgated by the Department of Financial Institutions; and granting rule-making authority. (FE)

Under current law, DFI participates in the NMLSR (formerly known as the Nationwide Mortgage Licensing System and Registry) only with respect to the licensing of mortgage loan originators and certain other functions related to mortgage loan originators, mortgage bankers, and mortgage brokers. Current law allows DFI to establish relationships or contracts with the NMLSR or other entities designated by the NMLSR to collect and maintain records and process transaction or other fees related to mortgage loan originators, mortgage bankers, and mortgage brokers. With respect to licensing mortgage loan originators, DFI may require that an applicant submit any form, fee, or other information directly to the NMLSR and may authorize the NMLSR to perform functions related to the licensing of mortgage loan originators. DFI may also provide to the NMLSR information relating to mortgage loan originator licensing or responsibilities. DFI may also rely on the NMLSR to establish application or reporting deadlines for mortgage loan originators and other requirements related to mortgage loan originators. DFI may also use the NMLSR as an agent for requesting and distributing information, including to other governmental agencies. In general, information that is confidential or privileged when it is provided to the NMLSR remains confidential or privileged.

The bill expands DFI's participation in the NMLSR and requires DFI to utilize the NMLSR with respect to the licensing and regulation of licensed financial services providers, including requiring applicants and licensees to provide information directly to the NMLSR and to comply with application and reporting deadlines established by the NMLSR. These applicants and licensees must register with, and maintain a unique identifier issued by, the NMLSR. The bill provides DFI with authority relating to the NMLSR that is additional to the NMLSR authority described above. DFI may require an applicant or licensee to submit identity information, a credit report, an investigative background report, fingerprints for identity verification or a criminal history check, or other personal or professional history information. DFI may report to the NMLSR enforcement actions against or violations by licensed financial services providers, which generally must be kept confidential.

The bill standardizes the license renewal process and renewal period for licensed financial services providers and specifies that the renewal application and related materials or information must be submitted through the NMLSR or as directed by DFI. The bill specifies reasons for which DFI may deny renewal of a license and allows an expired license to be reinstated within two months after the license expires.

The bill requires licensed financial services providers to keep current and accurate all material information on file with DFI and the NMLSR. If the information changes in any material respect, the licensed financial services provider must notify DFI and the NMLSR of the change within 10 days after the change. The bill also requires most licensed financial services providers to submit annual reports and financial statements through the NMLSR or as directed by DFI.

Collection agencies The bill makes various changes relating to DFI's licensing and regulation of collection agencies and their employees.

Under current law, a person may not operate as a collection agency unless the person is licensed as a collection agency by DFI. A “collection agency" is defined as a person engaging in the business of collecting or receiving for payment for others of any account, bill, or other indebtedness, but the definition also contains specific exceptions, including those for attorneys, banks, express companies, health care billing companies, insurers, and real estate brokers and salespersons. A collection agency is subject to regulation by DFI and to certain laws regulating its operations.

Also under current law, a “collector" or “solicitor" is defined as a person employed by a collection agency to collect or receive payment, or to solicit the receiving or collecting of payment, for others of any account, bill, or other indebtedness outside of the collection agency office or the person's home. A collector or solicitor must hold a separate license as a collector or solicitor, which must state the name of the collector's or solicitor's employer. The collector or solicitor must carry this license as a means of identification whenever the collector or solicitor is engaged in business.

The bill makes numerous statutory changes related to the licensing and regulation of collection agencies and their employees, including the following:

1. The bill eliminates the requirement that a collector or solicitor hold a license separate from the license of the collection agency that employs the collector or solicitor. The bill also changes the definition of collector or solicitor to any person who, on behalf of a licensed collection agency, does any of the following: 1) collects, or attempts to collect, for others any account, bill, or other indebtedness; 2) receives payment for others of any account, bill, or other indebtedness; or 3) solicits any account, bill, or other indebtedness for collection by the collection agency. In addition, the bill specifies that a collection agency is responsible for, and must supervise the acts of, its collectors and solicitors and any other person who acts on its behalf.

2. The bill changes the definition of a collection agency by adding exceptions for mortgage bankers licensed by DFI and credit unions and by deleting the exception for express companies. Accordingly, under the bill, licensed mortgage bankers and credit unions are not regulated as collection agencies.

3. The bill specifies that a separate collection agency license is required for each place of business maintained by the collection agency from which the collection agency or its collectors or solicitors engage in the business of collecting or receiving payments for others of any account, bill, or other indebtedness of a person located in this state. The bill also specifies that, if an employee of a licensed collection agency works from the employee's residence, a collection agency license is not required for the employee's residence, but the employee's resident address may not be presented to the public as a location or office of the collection agency and collection agency records may not be maintained at the employee's residence.

4. As described above, the bill requires DFI to use the NMLSR in the licensing and regulation of collection agencies. The bill also modifies license renewal and reporting procedures for collection agencies to conform to the standardized procedures applicable to all licensed financial services providers that use the NMLSR. This change includes changing the collection agency licensing year to a calendar year.

5. The bill specifies that the annual license fee applies for each place of business that is required to be separately licensed. The bill also specifies that if an applicant for an initial collection agency license fails to complete the application within 60 days after DFI provides written notice that it is incomplete, the application is considered abandoned, although the applicant may submit a new application.

6. The bill expands the reasons that DFI may suspend or revoke a collection agency license to include the following: the collection agency has violated DFI's rules related to collection agencies; and the collection agency 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.

7. The bill specifies that a collection agency must deposit and maintain in its trust account money due to a claimant or forwarder within 48 hours after collection, while current law requires the money to be deposited promptly.

8. The bill specifies that a collection agency may forward printed collection notices to a debtor that are unsigned.

9. The bill creates statutory provisions relating to collectors or solicitors that are similar to provisions that currently appear in DFI's rules. A collector or solicitor may use an alias in oral or written communications with a debtor, but the alias must include a first and last name and the collector or solicitor may not have more than one alias. A collector or solicitor may only change an alias for good cause and if DFI is first notified of the change.

10. The bill modifies current law provisions relating to a collection agency's change of business location. The bill requires a collection agency to give written notice to DFI at least 30 days prior to changing its business location, but deletes the requirement that the collection agency obtain approval from DFI.

11. The bill gives DFI discretion to determine whether to report to the district attorney for prosecution violations of law relating to a collection agency.

The bill also modifies and repeals various DFI rules related to collection agencies, including the following:

1. The bill prohibits, with an exception, a licensed collection agency from contracting for or assessing a fee, commission, or other charge to a creditor for returning any account to the creditor that is not in the actual process of collection.

2. The bill requires a licensed collection agency's trust checking account to be identified as a “trust account.” For the purpose of determining that funds are maintained in a trust account sufficient to pay creditors or forwarders, amounts collected by a third party, but not yet deposited into the trust account, are not considered trust funds. Third-party payment processors may not be given authority to withdraw funds from a collection agency's trust account.

3. The bill requires a licensed collection agency, in the records that it must keep at its office, to maintain a list of all collectors and solicitors employed by the collection agency that includes specified information about each collector or solicitor.

4. The bill includes the following requirements related to a licensed collection agency's use of a trade name (commonly referred to as a “doing business as” or “d/b/a” designation): 1) a licensed collection agency may not conduct business under a name other than a name listed on its license; 2) before using a trade name, the collection agency must obtain approval of the use of the trade name from DFI; and 3) the trade name may not include a corporate identifier.

5. The bill specifies that, in attempting to collect an alleged account, bill, or other indebtedness, a licensed collection agency may not violate any federal or state statute, rule, or regulation that relates to practice as a collection agency.

6. The bill defines “terminated,” for purposes related to the termination of a collection agency license, to include a license that is surrendered, revoked, or expired.

7. The bill specifies that a collection agency must enter into a written agreement with the creditor not only before accepting accounts for collection from the creditor but also before earning or collecting a fee or commission.

8. The bill includes restrictions on the ability of a collection agency and its client to modify the meaning of the defined term “actual process of collection” for purposes of a collection agency's duty upon receiving a written request from a creditor or forwarder for the return of an account not in the actual process of collection.

9. The bill changes the date by which a licensed collection agency must provide a remittance statement and remit money due to creditors or forwarders, establishing the deadline as the last day of the month following the close of the month during which the collection was effected instead of 30 days from the close of the month during which the collection was effected.

10. The bill repeals a rule relating to the use of an alias by a collector or solicitor, but incorporates similar provisions into the statutes.

11. The bill makes other changes to DFI's rules to retain consistency with the statutory changes in the bill.

Licensed lenders The bill makes various changes relating to DFI's licensing and regulation of certain consumer lenders.

Under current law, a lender other than a bank, savings bank, savings and loan association, credit union, or any of its affiliates (financial institution) generally must obtain a license from DFI to assess a finance charge for a consumer loan that is greater than 18 percent per year. This type of lender is generally referred to as a “licensed lender." A “consumer loan” is not defined in provisions governing licensed lenders, but the Wisconsin Consumer Act (WCA) defines a consumer loan as a loan made to an individual for personal, family, or household purposes that is payable in installments or for which a finance charge may be imposed and includes most transactions under an open-end credit plan such as most credit card debt.

The bill makes numerous changes related to the licensing and regulation of licensed lenders, including the following:

1. The bill creates a definition of consumer loan for purposes of licensed lenders that is similar to the WCA definition of consumer loan.

2. The bill specifies that provisions governing licensed lenders apply 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 a financial institution. The bill also specifies that provisions governing licensed lenders do not apply to collection agencies, payment processors, and certain persons involved in investment or financing transactions.

3. The bill specifies that the following activities are doing business that require a person to be licensed as a licensed lender: a) making a consumer loan that has a finance charge in excess of 18 percent per year; b) taking an assignment of a consumer loan in which a customer is assessed a finance charge in excess of 18 percent per year; or c) directly collecting payments from or enforcing rights against a customer relating to a consumer loan in which a customer is assessed a finance charge in excess of 18 percent per year.

4. The bill specifies that a licensed lender may contract with a person that is not a licensed lender to service a consumer loan on behalf of the licensed lender, but the licensed lender generally is responsible for violations of law committed by the contracted party with respect to the servicing of the consumer loan. “Service” is defined to include collecting or receiving payments of principal, interest, and other amounts on consumer loans and undertaking other tasks related to the administration of consumer loans under the direction and control of the licensed lender.