HOUSE BILL NO. 5798
June 06, 2024, Introduced by Reps. Fitzgerald, Tsernoglou, Glanville and Xiong and referred to
the Committee on Insurance and Financial Services.
A bill to regulate the business of money transmission; to
require the licensing of persons engaged in the business of money
transmission; to prescribe the powers and duties of certain state
and local officers and entities; to prescribe penalties and civil
sanctions; and to repeal acts and parts of acts.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
1 ARTICLE 1
2 SHORT TITLE AND PURPOSE
3 Sec. 1. This act may be cited as the "money transmission
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1 modernization act".
2 Sec. 3. This act is designed to replace existing state money
3 transmission laws currently codified in the money transmission
4 services act, 2006 PA 250, MCL 487.1001 to 487.1047. It is the
5 intent of the legislature that the provisions of this act
6 accomplish all of the following:
7 (a) Ensure states can coordinate in all areas of regulation,
8 licensing, and supervision to eliminate unnecessary regulatory
9 burden and more effectively utilize regulator resources.
10 (b) Protect the public from financial crime.
11 (c) Standardize the types of activities that are subject to
12 licensing or otherwise exempt from licensing.
13 (d) Modernize safety and soundness requirements to ensure
14 customer funds are protected in an environment that supports
15 innovative and competitive business practices.
16 ARTICLE 2
17 DEFINITIONS
18 Sec. 5. As used in this act:
19 (a) "Acting in concert" means persons knowingly acting
20 together with a common goal of jointly acquiring control of a
21 licensee whether or not under an express agreement.
22 (b) "Authorized delegate" means a person a licensee designates
23 to engage in money transmission on behalf of the licensee.
24 (c) "Average daily money transmission liability" means the
25 amount of the licensee's outstanding money transmission obligations
26 in Michigan at the end of each day in a given period of time, added
27 together, and divided by the total number of days in the given
28 period of time. For purposes of calculating average daily money
29 transmission liability under this act for any licensee required to
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1 do so, the given period of time must be the quarters ending March
2 31, June 30, September 30, and December 31.
3 (d) "Bank secrecy act" means the bank secrecy act, Public Law
4 91-508, and the regulations promulgated under that act.
5 (e) "Closed loop stored value" means stored value that is
6 redeemable by the issuer only for goods or services provided by the
7 issuer or its affiliate or franchisees of the issuer or its
8 affiliate, except to the extent required by applicable law to be
9 redeemable in cash for its cash value.
10 (f) "Control" means the power to vote, directly or indirectly,
11 at least 25% of the outstanding voting shares or voting interests
12 of a licensee or person in control of a licensee, the power to
13 elect or appoint a majority of key individuals or executive
14 officers, managers, directors, trustees, or other persons
15 exercising managerial authority of a person in control of a
16 licensee, or the power to exercise, directly or indirectly, a
17 controlling influence over the management or policies of a licensee
18 or person in control of a licensee. A person is presumed to
19 exercise a controlling influence when the person holds the power to
20 vote, directly or indirectly, at least 10% of the outstanding
21 voting shares or voting interests of a licensee or person in
22 control of a licensee. A person presumed to exercise a controlling
23 influence under this subdivision can rebut the presumption of
24 control if the person is a passive investor. For purposes of
25 determining the percentage of a person controlled by any other
26 person, the person's interest must be aggregated with the interest
27 of any other immediate family member, including the person's
28 spouse, parents, children, siblings, mothers- and fathers-in law,
29 sons- and daughters-in-law, brothers- and sisters-in-law, and any
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1 other person who shares such person's home.
2 (g) "Department" means the department of insurance and
3 financial services.
4 (h) "Director" means the director of the department or the
5 director's designee.
6 (i) "Eligible rating" means a credit rating of any of the 3
7 highest rating categories provided by an eligible rating service,
8 whereby each category may include rating category modifiers such as
9 "plus" or "minus" for S&P, or the equivalent for any other eligible
10 rating service. Long-term credit ratings are deemed eligible if the
11 rating is equal to A- or higher by S&P, or the equivalent from any
12 other eligible rating service. Short-term credit ratings are deemed
13 eligible if the rating is equal to or higher than A-2 or SP-2 by
14 S&P, or the equivalent from any other eligible rating service. In
15 the event that ratings differ among eligible rating services, the
16 highest rating applies when determining whether a security bears an
17 eligible rating.
18 (j) "Eligible rating service" means any nationally recognized
19 statistical rating organization, as that term is defined by the
20 United States Securities and Exchange Commission, and any other
21 organization designated by the director by rule or order.
22 (k) "Federally insured depository financial institution" means
23 a bank, credit union, savings and loan association, trust company,
24 savings association, savings bank, industrial bank, or industrial
25 loan company organized under the laws of the United States or any
26 state of the United States, when such bank, credit union, savings
27 and loan association, trust company, savings association, savings
28 bank, industrial bank, or industrial loan company has federally
29 insured deposits.
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1 (l) "In this state" means at a physical location within this
2 state for a transaction requested in person. For a transaction
3 requested electronically or by phone, the provider of money
4 transmission may determine if the person requesting the transaction
5 is "in this state" by relying on other information provided by the
6 person regarding the location of the individual's residential
7 address or a business entity's principal place of business or other
8 physical address location, and any records associated with the
9 person that the provider of money transmission may have that
10 indicate such location, including, but not limited to, an address
11 associated with an account.
12 (m) "Individual" means a natural person.
13 (n) "Key individual" means any individual ultimately
14 responsible for establishing or directing policies and procedures
15 of the licensee, such as an executive officer, manager, director,
16 or trustee.
17 (o) "Licensee" means a person licensed or required to be
18 licensed under this act.
19 (p) "Material litigation" means litigation, that according to
20 United States generally accepted accounting principles, is
21 significant to a person's financial health and would be required to
22 be disclosed in the person's annual audited financial statements,
23 report to shareholders, or similar records.
24 (q) "Money" means a medium of exchange that is authorized or
25 adopted by the United States or a foreign government. Money
26 includes a monetary unit of account established by an
27 intergovernmental organization or by agreement between 2 or more
28 governments.
29 (r) "Monetary value" means a medium of exchange, whether or
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1 not redeemable in money.
2 (s) "Money transmission" means selling or issuing payment
3 instruments to a person located in this state, selling or issuing
4 stored value to a person located in this state, or receiving money
5 for transmission from a person located in this state. Money
6 transmission includes payroll processing services. Money
7 transmission does not include the provision solely of online or
8 telecommunications services or network access.
9 (t) "MSB accredited state" means a state agency that is
10 accredited by the Conference of State Bank Supervisors and Money
11 Transmitter Regulators Association for money transmission licensing
12 and supervision.
13 (u) "Multistate licensing process" means any agreement entered
14 into by and among state regulators relating to coordinated
15 processing of applications for money transmission licenses,
16 applications for the acquisition of control of a licensee, control
17 determinations, or notice and information requirements for a change
18 of key individuals.
19 (v) "Nationwide multistate licensing system and registry"
20 means the nationwide multistate licensing system and registry
21 developed by the Conference of State Bank Supervisors and the
22 American Association of Residential Mortgage Regulators and owned
23 and operated by the State Regulatory Registry, LLC, or any
24 successor or affiliated entity, for the licensing and registration
25 of persons in financial services industries.
26 (w) "Outstanding money transmission obligations" must be
27 established and extinguished in accordance with applicable state
28 law and means any payment instrument or stored value issued or sold
29 by the licensee to a person located in the United States or
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1 reported as sold by an authorized delegate of the licensee to a
2 person that is located in the United States that has not yet been
3 paid or refunded by or for the licensee, or escheated in accordance
4 with applicable abandoned property laws, or any money received for
5 transmission by the licensee or an authorized delegate in the
6 United States from a person located in the United States that has
7 not been received by the payee or refunded to the sender, or
8 escheated in accordance with applicable abandoned property laws.
9 For purposes of this subdivision, "in the United States" includes,
10 to the extent applicable, a person in any state, territory, or
11 possession of the United States, the District of Columbia, the
12 Commonwealth of Puerto Rico, or a United States military
13 installation that is located in a foreign country.
14 (x) "Passive investor" means a person to which all of the
15 following apply:
16 (i) The person does not have the power to elect a majority of
17 key individuals or executive officers, managers, directors,
18 trustees, or other persons exercising managerial authority of a
19 person in control of a licensee.
20 (ii) The person is not employed by and does not have any
21 managerial duties of the licensee or person in control of a
22 licensee.
23 (iii) The person does not have the power to exercise, directly
24 or indirectly, a controlling influence over the management or
25 policies of a licensee or person in control of a licensee.
26 (iv) The person does either of the following:
27 (A) Attests to subparagraphs (i), (ii), and (iii), in a form and
28 in a medium prescribed by the director.
29 (B) Commits to the passivity characteristics of subparagraphs
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1 (i), (ii), and (iii), in a written document.
2 (y) "Payment instrument" means a written or electronic check,
3 draft, money order, traveler's check, or other written or
4 electronic instrument for the transmission or payment of money or
5 monetary value, whether or not negotiable. Payment instrument does
6 not include stored value or any instrument to which either of the
7 following applies:
8 (i) It is redeemable by the issuer only for goods or services
9 provided by the issuer or its affiliate or franchisees of the
10 issuer or its affiliate, except to the extent required by
11 applicable law to be redeemable in cash for its cash value.
12 (ii) It is not sold to the public but issued and distributed as
13 part of a loyalty, rewards, or promotional program.
14 (z) "Payroll processing services" means receiving money for
15 transmission under a contract with a person to deliver wages or
16 salaries, make payment of payroll taxes to state and federal
17 agencies, make payments relating to employee benefit plans, or make
18 distributions of other authorized deductions from wages or
19 salaries. Payroll processing services does not include an employer
20 performing payroll processing services on its own behalf or on
21 behalf of its affiliate, or a professional employment organization
22 subject to regulation under other applicable state law.
23 (aa) "Person" means any individual, general partnership,
24 limited partnership, limited liability company, corporation, trust,
25 association, joint stock corporation, or other corporate entity
26 identified by the director.
27 (bb) "Receiving money for transmission" or "money received for
28 transmission" means receiving money or monetary value in the United
29 States for transmission within or outside the United States by
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1 electronic or other means.
2 (cc) "Stored value" means monetary value representing a claim
3 against the issuer evidenced by an electronic or digital record,
4 and that is intended and accepted for use as a means of redemption
5 for money or monetary value, or payment for goods or services.
6 Stored value includes, but is not limited to, prepaid access, as
7 that term is defined by 31 CFR 1010.100. Notwithstanding the
8 foregoing, stored value does not include a payment instrument or
9 closed loop stored value, or stored value not sold to the public
10 but issued and distributed as part of a loyalty, rewards, or
11 promotional program.
12 (dd) "Tangible net worth" means the aggregate assets of a
13 licensee excluding all intangible assets, less liabilities, as
14 determined in accordance with United States generally accepted
15 accounting principles.
16 ARTICLE 3
17 EXEMPTIONS
18 Sec. 7. This act does not apply to any of the following:
19 (a) An operator of a payment system to the extent that it
20 provides processing, clearing, or settlement services, between or
21 among persons exempted by this section or licensees, in connection
22 with wire transfers, credit card transactions, debit card
23 transactions, stored-value transactions, automated clearing house
24 transfers, or similar funds transfers.
25 (b) A person appointed as an agent of a payee to collect and
26 process a payment from a payor to the payee for goods or services,
27 other than money transmission itself, provided to the payor by the
28 payee, provided that all of the following apply:
29 (i) There exists a written agreement between the payee and the
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1 agent directing the agent to collect and process payments from
2 payors on the payee's behalf.
3 (ii) The payee holds the agent out to the public as accepting
4 payments for goods or services on the payee's behalf.
5 (iii) Any payment for the goods and services is treated as
6 received by the payee on receipt by the agent so that the payor's
7 obligation is extinguished and there is no risk of loss to the
8 payor if the agent fails to remit the funds to the payee.
9 (c) A person that acts as an intermediary by processing
10 payments between an entity that has directly incurred an
11 outstanding money transmission obligation to a sender, and the
12 sender's designated recipient, provided that all of the following
13 apply to the entity:
14 (i) It is properly licensed or exempt from licensing
15 requirements under this act.
16 (ii) It provides a receipt, electronic record, or other written
17 confirmation to the sender identifying the entity as the provider
18 of money transmission in the transaction.
19 (iii) It bears sole responsibility to satisfy the outstanding
20 money transmission obligation to the sender, including the
21 obligation to make the sender whole in connection with any failure
22 to transmit the funds to the sender's designated recipient.
23 (d) The United States or a department, agency, or
24 instrumentality thereof, or its agent.
25 (e) Money transmission by the United States Postal Service or
26 by an agent of the United States Postal Service.
27 (f) A state, county, city, or any other governmental agency or
28