Chapter 268

2015 -- S 0456 Enacted 07/15/2015

A N   A C T

RELATING TO FINANCIAL INSTITUTIONS -- LICENSED ACTIVITIES

Introduced By: Senator Michael J. McCaffrey

Date Introduced: February 26, 2015

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. [Effective July 1, 2015.] -- Unless otherwise specified, the

following terms shall have the following meanings throughout chapters 14, 14.1, 14.2, 14.3, 14.4,

14.6, 14.8, 14.10, and 14.11 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 any person 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 transaction, such as those commonly known as "payday loans,"

"payday loans", "payday advances," "payday advances", or "deferred-presentment loans,"

"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 who or 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 "payday loans," "payday loans", "payday advances," "payday advances", or

"deferred-presentment loans," "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. § 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" has the same meaning set forth in § 19-14.10-3(6);

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

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

that 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,

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:

(i) Providing loan closing services;

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

(iii) 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) "Negotiates" shall mean, with respect to a loan, 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 bona fide employee for a person licensed under § 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, 12 U.S.C. § 1841, et seq., 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 were 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; and

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

be made only by the subsidiary's affiliated bank.

(32) "Multi-state licensing system" means 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;

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

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

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

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

attorney, licensed title agency, or licensed title insurance company;

(35) "Servicing" means receiving a scheduled scheduled, periodic payment from a

borrower borrower, pursuant to the terms of a loan, including amounts for escrow accounts, and

making the payments to the owner of the loan or other third party of principal and interest and

other payments with respect to the amounts received from the borrower as may be required

pursuant to the terms of the servicing loan documents or servicing contract. In the case of a home

equity conversion mortgage or a reverse mortgage, servicing includes making payment to the

borrower;

(36) "Third-party loan servicer" means a person who or that, directly or indirectly,

engages in the business of servicing a loan made to a resident of Rhode Island, or a loan secured

by residential real estate located in Rhode Island, Rhode Island for a personal, family, or

household purpose, owed or due due, or asserted to be owed or due due, another or a person or

entity that owns the servicing rights to a loan secured by residential real estate located in Rhode

Island whether or not that owner services the loan themselves or contracts with another person or

entity for the servicing; and

(37) "Writing" means hard-copy writing or electronic writing that meets the

requirements of § 42-127.1-1 et seq.

SECTION 2. This act shall take effect on July 1, 2015.

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