The New York Department of Financial Services (DFS) announced last week that it is migrating the administration of its non-mortgage related licenses to the Nationwide Multistate Licensing System (NMLS), joining more than 60 other state financial services regulatory agencies that already administer their non-mortgage licenses via the NMLS.  Effective July 1, new applicants for a money transmitter license will be able to apply via the NMLS, and existing licensees will be able to transition their licenses to the NMLS.  DFS has indicated that ultimately it will manage all non-depository licenses via the NMLS.

The announcement also expressed support for Vision 2020, the Conference of State Bank Supervisors’ recently launched initiative to modernize state regulation for non-banks.

It is no secret that the DFS is not reluctant to launch its own initiatives if it believes that there is a gap in regulation, examination or oversight – their cybersecurity regulations – so the DFS embracing the NMLS is a positive for the industry as it relates to uniformity of the licensing application process.



On May 10, the Conference of State Bank Supervisors (CSBS) announced a series of initiatives (branded as Vision 2020) designed to modernize state regulation of non-banks.  The announcement specifically calls out financial technology firms and appears to be an attempt by state regulators to provide an alternative to the special purpose national bank charter the OCC has proposed to make available to financial technology companies (“fintech charter”).

The CSBS claims that by 2020 state regulators will have adopted “an integrated, 50-state licensing and supervisory system, leveraging technology and smart regulatory policy to transform the interaction between industry, regulators and consumers.”  The CSBS further claims that the Vision 2020 initiatives “will transform the licensing process, harmonize supervision, engage fintech companies, assist state banking departments, make it easier for banks to provide services to non-banks, and make supervision more efficient for third parties.”  Lofty goals to say the least, and ones that the financial services industry most certainly will support.  It remains to be seen, however, whether Vision 2020, which actually includes initiatives that are already in use or have been underway for some time, will move us further towards these goals by 2020, or even later.

Among others, Vision 2020 purports to include the following: 1) a redesign of the Nationwide Multistate Licensing System (NMLS); 2) harmonization of multi-state supervision; 3) formation of a fintech industry advisory panel focused on lending and money transmission, with the goal of identifying challenges related to licensing and multi-state regulation and providing feedback on state efforts to modernize the regulatory structure; 4) enhancing the CSBS regulatory agency accreditation program; 5) facilitate banks providing services to non-banks; 6) increasing efforts to address de-risking; and 7) supporting federal legislation facilitating coordinated supervision of bank third party service providers by state and federal regulators.

It bears noting that the redesign of the NMLS (called NMLS 2.0) has been underway (even if not formally) for some time, and long before the OCC first proposed offering a fintech charter.  Moreover, 62 (and counting) state agencies over more than 40 states and territories already use the NMLS for the administration of non-mortgage licenses. While migration by states to the NMLS for administration of its non-mortgage licenses will no doubt continue, the driver for that was not the need to find a way to regulate fintech companies, but rather the need for significant improvements to NMLS’s functionality and utility.

The CSBS has also been focusing on the harmonization of multi-state supervision for many years.  In the mortgage industry, for example, these efforts have included formation of the Multi-State Mortgage Committee, publication of a model mortgage exam manual, publication of model examinations guidelines, and promotion of model state laws.  Despite these efforts, those in the mortgage industry can attest to the fact that harmonization and uniformity is still more aspirational than a reality.

Some have suggested that Vision 2020 is intended to entice fintech companies to elect state regulation over seeking a fintech charter.  Whether or not that is the case, Vision 2020 certainly is an attempt by the CSBS to make the case that state regulators are in the best position to regulate fintech companies and that they are prepared to modernize and harmonize their laws and regulations.  Given the significant harmonization and modernization work that still remains to be done in the mortgage industry after many years of effort, I have significant reservations about the likelihood of “an integrated, 50-state licensing and supervisory system” by 2020.



The Conference of State Bank Supervisors issued a press release this week in which it announced the April 1 release of a new tool within the Nationwide Multistate Licensing System (NMLS) to streamline reporting by money services businesses.  The new tool is called the “Money Services Businesses (MSB) Call Report.”

The press release quotes a Vermont regulator who stated that the call report information “will provide complete and meaningful information on MSBs, including fintech companies licensed to do business as money transmitters, and assist state regulators to better analyze risk, monitor compliance, and make more informed and timely decisions when it comes to MSB supervision.”  The press release also indicated that the new reports “will also provide a unique, detailed snapshot of fintech companies as they mature and evolve.”

Licensees are required to file the new report within 45 days of the end of the first quarter (May 15).   According to the press release, 18 states (covering 25 money transmitter, money service, check casher/seller and currency exchange licenses) have adopted the report for the first quarter of 2017 and seven more states are expected to adopt it in the near future.

The reports include national and state specific MSB activity that is submitted on a quarterly and annual basis.  The MSB Call Report is the first comprehensive report to consolidate state MSB reporting requirements and provide a database of nationwide MSB transaction activity.  More detailed information regarding the MSB Call Report is available on the MSBCR webpage.

A New York lender licensing proposal that threatened to create new regulatory burdens for financial service providers and to potentially adversely affect credit availability to New York residents and businesses, has been removed from a New York State budget bill.  The amended budget bill, S. 2008-C/A. 3008-C, has passed both houses of the New York State Legislature and been delivered to Governor Cuomo for executive action.  The controversial lender licensing proposal, which appeared in Part EE of the initial proposal, has been “intentionally omitted” from the amended budget bill passed by the Legislature.

The proposal would have revised the New York Licensed Lender Law to significantly expand the scope of its licensing requirements.  The proposal would have extended the lender licensing requirement for the first time to: (1) lenders making consumer-purpose loans of $25,000 or less to individuals at interest rates of 16 percent per annum or less; (2) lenders making business-purpose loans of $50,000 or less to corporations, limited liability companies, and certain other business entities (regardless of interest rate); (3) lenders making business-purpose loans of $50,000 or less to individuals and sole proprietorships at interest rates of 16 percent per annum or less; and (4) persons that solicit loans in those amounts and also purchase or otherwise acquire such loans or other “forms of financing”, or arrange or otherwise facilitate the funding of such loans.

The current licensing requirement under the New York Licensed Lender Law is limited to certain loans made at rates of interest that the lender is not otherwise authorized by law to charge without a license.  This interest rate trigger means, for example, that the licensing requirement does not apply to loans made at interest rates of up to 16 percent per annum because a lender is permitted to make such loans pursuant to the New York General Obligations Law.  It also means that loans made by out-of-state state-chartered banks, whose interest rate authority is derived from federal law, do not trigger the lender licensing requirement.  The proposal would have removed the licensing rate trigger from the Licensed Lender Law, thereby significantly expanding its scope.

The Superintendent of the New York Department of Financial Services (NYDFS) recently argued that the OCC proposal to grant special purpose national bank charters to financial technology (fintech) companies would have significant negative effects, including on existing state regulatory regimens applicable to nonbanks, and would encourage fintech companies to engage in regulatory arbitrage to avoid state consumer protection and usury laws.  Although there had been proposals in prior years to repeal the interest rate trigger from the New York Licensed Lender Law and to raise the dollar limits on covered loans, the New York budget bill proposal was viewed as a direct response to the perceived threat of the OCC proposal.  Thus, this may not be the last attempt by the New York authorities to enact legislation to broaden the scope and reach of their licensing and related requirements, should the OCC continue to implement its special purpose charter proposal.

The budget bill also initially contained a proposal that would have empowered the NYDFS to license servicers of student loans made to New York residents.  The proposed student loan servicer licensing requirement, which appeared in Part Z of the initial proposal, also has been “intentionally omitted” from the amended budget bill passed by the Legislature.