HOUSE OF REPRESENTATIVES STAFF ANALYSIS BILL #: CS/CS/HB 1185 Consumer Protection SPONSOR(S): Commerce Committee, Insurance & Banking Subcommittee, Giallombardo and others TIED BILLS: IDEN./SIM. BILLS: CS/CS/SB 1398 REFERENCE ACTION ANALYST STAFF DIRECTOR or BUDGET/POLICY CHIEF 1) Insurance & Banking Subcommittee 18 Y, 0 N, As CS Fortenberry Lloyd 2) Commerce Committee 19 Y, 0 N, As CS Fortenberry Hamon SUMMARY ANALYSIS The bill makes changes related to consumer protection, including: Mortgage lender locations: allows loan originators to work from a remote location if certain criteria are met . Crowd-funding campaigns: identifies unlawful acts and practices regarding online crowd-funding campaigns related to disasters. Distributed energy generation system (DEGS) disclosures: adds to the information and disclosures that must be provided to customers when they purchase or lease DEGS. Check-cashing businesses: prohibits licensed check-cashing businesses from cashing corporate checks when the total amount of all checks cashed for each payee exceeds 200 percent of the payee’s workers’ compensation policy coverage; makes it a third-degree felony for someone to knowingly cash such checks. Insurance agency and adjusting firm names: Department of Financial Services may disapprove adjusting firm names on the same grounds under which it can disapprove of insurance agency names Public adjusters: significantly alters the requirements for contracts between public adjusters and insureds or claimants; provides for additional disclosures to accompany such contracts; provides for recordkeeping requirements for public adjusters. Insurer advertisements: establishes it is an unfair method of competition, or an unfair or deceptive act or practice, if an insurer fails to disclose a third party that it receives royalties, referral fees, or other money for sponsorship, marketing, or use of third-party branding for a health insurance contract. Insurance coverage for hurricanes: reduces the statutory duration that a hurricane deductible applies; defines hurricane deductible as the deductible applicable to loss caused by a hurricane. Insurer underwriting timeframes: reduces the time that an insurer has to cancel a policy for reasons other than material misstatement, nonpayment of premium, or failure to comply with underwriting requirements from 90 days to 60 days. Annuities: revises the law to reflect the most recent changes to the National Association of Insurance Commissioners’ Annuity Transactions Model Regulation. Service agreements and manufacturer warranties: provides an additional exception to unearned premium reserve requirements for service agreement companies; revises solvency requirements for manufacturers who sell service warranties. Notice of property insurance claims: creates a three-year timeframe for providing notice of a condominium- or homeowners’ association-related loss assessment claim to an insurer where no specific limit currently applies. The bill has no impact on local or state government revenues or expenditures. It has an indeterminate positive and negative direct economic impact on the private sector. Except as otherwise expressly provided, the bill is effective on July 1, 2023. This docum ent does not reflect the intent or official position of the bill sponsor or House of Representatives . STORAGE NAME: h1185c.COM DATE: 4/22/2023 FULL ANALYSIS I. SUBSTANTIVE ANALYSIS A. EFFECT OF PROPOSED CHANGES: Mortgage Lender Locations Background The Office of Financial Regulation (OFR) is responsible for the regulation of banks, credit unions, and other financial institutions, finance companies, and the security industry. 1 OFR is responsible for the administration and enforcement of ch. 494, F.S., relating to loan originators and mortgage brokers. OFR licenses and regulates the practice of these individuals. A loan originator is an individual who, directly or indirectly: 2 Solicits or offers to solicit a mortgage loan; Accepts or offers to accept an application for a mortgage loan; Negotiates or offers to negotiate the terms or conditions of a new or existing mortgage loan on behalf of a borrower or lender; or Negotiates or offers to negotiate the sale of an existing mortgage loan to a noninstitutional investor for compensation or gain. The term loan originator does not include an employee of a mortgage broker or lender who only handles a completed application form or transmits a completed application form to a lender on behalf of a prospective borrower.3 A mortgage broker conducts loan originator activities through one or more licensed loan originators employed by the mortgage broker or as independent contractors to the mortgage broker. 4 In contrast, a mortgage lender makes a mortgage loan or services a mortgage loan for others or, for compensation or gain, directly or indirectly, sells or offers to sell a mortgage loan to a noninstitutional investor. 5 A mortgage lender may act as a mortgage broker.6 Each mortgage broker and lender must maintain, and transact business from, a principal place of business,7 which is a primary office with a street address or physical location designated on a licensure application.8 A mortgage broker or lender may also operate out of a branch office, 9 but each branch office must be separately licensed10 and operated by a branch manager11 who must be licensed as a loan originator. Currently, mortgage brokers and lenders are not legally authorized to work from remote locations and doing so may result in administrative action by OFR. 1 S. 20.121(3)(a)2., F.S. 2 S. 494.001(18), F.S. 3 Id. 4 S. 494.001(23), F.S. 5 S. 494.001(24), F.S. 6 See s. 494.0073, F.S. 7 Ss. 494.0039, and 494.0073, F.S. 8 S. 494.001(31), F.S. 9 See s. 494.001(3), F.S. 10 Ss. 494.0036(1) and 494.0066(1), F.S. 11 Ss. 494.0035(2) and 494.00665(2), F.S. STORAGE NAME: h1185c.COM PAGE: 2 DATE: 4/22/2023 Effect of the Bill The bill adds a remote location to the definition of a mortgage broker’s or lender’s branch office. It defines a remote location as: A location, other than a principal place of business or a branch office; At which a loan originator of a licensee may conduct business. Licensees may allow loan originators to work from a remote location if: The licensee has written policies and procedures for supervision of loan originators working from a remote location; Access to company platforms and customer information meets the licensee’s comprehensive written information security plan; An in-person customer interaction does not occur at a loan originator’s residence, unless the residence is a licensed location; Physical records are not maintained at a remote location; Customer interactions and conversations about consumers comply with federal and state information security requirements; Loan originators working at a remote location access the company’s secure systems via a virtual private network or comparable system; The licensee ensures that appropriate security updates, patches, or other security alterations used at remote locations are installed and maintained; The licensee has the ability to remotely lock or erase company-related contents of any device or remotely limit access to secure systems; and The Nationwide Multistate Licensing System and Registry’s 12 record of a loan originator who works from a remote location designates the principal place of business as the loan originator’s registered location or the loan originator has elected a licensed branch office as a registered location. The bill changes the locations where a mortgage lender may lawfully conduct business to include a branch office or remote location in addition to a principal place of business. Crowd-funding Campaigns Background Responses to natural disasters, including hurricanes, often include crowd-funding campaigns to raise money to help those who have been affected.13 Unfortunately, some of these campaigns are scams that prey on people’s willingness to help disaster victims. 14 Online crowd-funding platforms receive donations and distribute them without oversight and may be unable to determine whether the funds received were used appropriately.15 Effect of the Bill The bill creates a statutory framework for unlawful acts and practices regarding online crowd-funding campaigns. It provides relevant definitions for crowd-funding campaign, crowd-funding platform, disaster, and organizer. The bill defines crowd-funding campaign as an online fundraising initiative that is: Intended to receive monetary donations; and Created by an organizer in the interest of a beneficiary. 12 The Nationwide Multistate Licensing System is centralized online database that is used by mortgage and finance regulatory agencies to maintain state licensing programs. Rocket Mortgage, What is NMLS?, https://www.rocketmortgage.com/learn/what-is-nmls (last visited Mar. 19, 2023). 13 Florida Department of Financial Services (DFS), Agency Analysis of 2023 House Bill 1185, p. 2 (Feb. 27, 2023). 14 Id. 15 Id. at p. 3. STORAGE NAME: h1185c.COM PAGE: 3 DATE: 4/22/2023 The bill defines an organizer as a person who: Resides or is domiciled in Florida; and Has an account on a crowd-funding platform and has created a crowd-funding campaign either as a beneficiary or on behalf of a beneficiary. The bill requires that a crowd-funding platform do the following for crowd-funding campaigns arising from a disaster: Collect contact information regarding the organizer and retain it for one year after the date of the disaster; Require the organizer to indicate on the crowd-funding campaign the state in which they are located; Cooperate with law enforcement investigations; Clearly display and direct donors to fundraisers that comply with their terms of service; When an organizer arranges a crowd-funding campaign related to a disaster, the organizer must attest that: All information provided in connection with a crowd-funding campaign is accurate, complete, and not likely to deceive. All donations contributed to the campaign will be used solely as described in information provided by the organizer. Distributed Energy Generation System Disclosures Background Under current law, when a customer purchases or leases a distributed energy generation system (DEGS), including solar panels, certain information and disclosures must be provided to the customer, including contact information for the installer, cost and rebate information, and financial considerations.16 However, contact information for the regulator of the system installer is not included.17 Disclosures about how these DEGS may impact a customer’s homeowners’ insurance premiums and coverage or the life of their roof is also not provided. 18 Effect of the Bill The bill adds to the information and disclosures that must be provided to customers when they purchase or lease DEGS. The customer must be given phone number for the Department of Business and Professional Regulation’s customer contact center. Customers must be informed that they should consider the age and remaining life of their roofs before installing DEGS and that replacement of their roofs may require reinstallation of the DEGS. The bill also requires that customers be given a statement informing them that: Placing DEGS on their roof may impact their future insurance premiums; and Customers are responsible for contacting their insurers prior to entering a purchase or lease agreement for the DEGS to determine whether their current policy or coverage needs modification upon installing the DEGS onto their dwelling. 16 S. 520.23, F.S. 17 DFS, supra, note 13 at p. 3. 18 Id. STORAGE NAME: h1185c.COM PAGE: 4 DATE: 4/22/2023 Check Cashing Background The Office of Financial Regulation (OFR) licenses and regulates check cashers pursuant to ch. 560, F.S. Florida law imposes various requirements on check cashers, including requiring the licensee to maintain copies of each payment instrument cashed. 19 If the payment instrument exceeds $1,000, the following additional information must be maintained: Customer files, as prescribed by rule,20 on all customers who cash corporate payment instruments that exceed $1,000; A copy of the personal identification that bears a photograph of the customer used as identification and presented by the customer; and A thumbprint of the customer taken by the licensee when the payment instrument is presented for negotiation or payment.21 In addition to the information that a licensee must maintain, the following information must be entered into the check cashing database operated by OFR before entering into each check cashing transaction for each payment instrument being cashed if the payment exceeds $1,000: Transaction date; Payor name as displayed on the payment instrument; Payee name as displayed on the payment instrument; Conductor22 name, if different from the payee name; Amount of the payment instrument; Amount of currency provided; Type of payment instrument, which may include personal, payroll, government, corporate, third- party, or another type of instrument; Amount of the fee charged for cashing of the payment instrument; Branch or location where the payment instrument was accepted; The type of identification and the identification number presented by the payee or conductor; Payee’s workers’ compensation insurance policy number or exemption certificate number, if the payee is a business; and Such additional information as required by rule.23 OFR must ensure that the check cashing database provides an interface with the Secretary of State’s database for purposes of verifying corporate registration and articles of incorporation and with the Department of Financial Services’ (DFS) database for purposes of determining proof of coverage for workers’ compensation.24 Effect of the Bill The bill prohibits licensed check cashing businesses from cashing corporate checks when the total amount of all checks cashed for each payee exceeds 200 percent of the payee’s workers’ compensation policy coverage. This change is meant to prevent an employer committing workers’ compensation fraud by: Making a corporate check out to itself or to “cash”; Cashing the check at a check cashing business; and Using the cash to pay employees “off the books” or “under the table”. 19 S. 560.310(1), F.S. 20 R. 69V-560.704, F.A.C. 21 S. 560.310(2)(a)-(c), F.S. 22 The term “conductor” is defined as “a natural person who presents himself or herself to a [check casher] for purposes of cashing a payment instrument.” S. 560.103(9), F.S. The term is used in the context of the cashing of a corporate payment instrument, which is a payment instrument on which the payee is not a natural person (i.e., the payee is a corporate entity). S. 560.103(10), F.S. A check casher may accept or cash a corporate payment instrument from a conductor who is an authorized officer of the corporate payee named on the instrument’s face. S. 560.309(4), F.S. 23 S. 560.310(1)(d), F.S. 24 S. 560.310(5), F.S. STORAGE NAME: h1185c.COM PAGE: 5 DATE: 4/22/2023 By paying employees in cash, the employer would show a smaller amount of payroll and be charged a lesser premium by its workers’ compensation insurer for coverage for its employees. The bill also makes it a third-degree felony for someone to knowingly cash checks in excess of the above amount. Insurance Agency and Adjusting Firm Names Background DFS recently began licensing adjusting firms.25 However, unlike the authority to disapprove names of insurance agencies, DFS does not have the authority to disapprove misleading names of adjusting