Bill Summary – FastDemocracy

HOUSE BILL NO. 5799
     June 06, 2024, Introduced by Reps. Xiong, Tsernoglou, Fitzgerald and Glanville and referred to
        the Committee on Insurance and Financial Services.
          A bill to amend 1988 PA 161, entitled
    "Consumer financial services act,"
    by amending sections 2, 5, 6, and 10g (MCL 487.2052, 487.2055,
2056, and 487.2060g), as amended by 2006 PA 252.
                      THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
       Sec. 2. As used in this act:
       (a) "Applicant" means a person that has applied to the
 commissioner to be licensed under this act.
       (b) "Bureau" means the office of financial and insurance
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 services of the department of labor and economic growth.department
 of insurance and financial services.
       (c) "Business activity" means any activity regulated by under
 any of the financial licensing acts.
       (d) "Class I license" means a license issued under this act
 that authorizes the licensee to engage in all of the activities
 permitted under any of the financial licensing acts.
       (e) "Class II license" means a license issued under this act
 that authorizes all of the activities permitted under a class I
 license except for activities permitted under the sale of checks
 act, 1960 PA 136, MCL 487.901 to 487.916, loan servicing activities
 under the secondary mortgage loan act, 1981 PA 125, MCL 493.51 to
 493.81, or the mortgage brokers, lenders, and servicers licensing
 act, 1987 PA 173, MCL 445.1651 to 445.1684.
       (f) "Commissioner" means the commissioner of the office of
 financial and insurance services director of the bureau or an
 authorized representative of the commissioner.director.
       (g) "Control person" means a director or executive officer of
 a licensee or a person who that has the authority to participate in
 the direction, directly or indirectly through 1 or more other
 persons, of the management or policies of a licensee.
       (h) "Depository financial institution" means a bank, savings
 and loan association, savings bank, or credit union organized under
 the laws of this state, another state, the District of Columbia,
 the United States, or a territory or protectorate of the United
 States, whose deposits are insured by an agency of the federal
 government.
       (i) "Executive officer" means an officer, member, or partner
 of a licensee, including chief executive officer, president, vice
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 president, chief financial officer, controller, compliance officer,
 or any other similar position.
         (j) "Financial licensing acts" means this any of the
 following:
         (i) This act. ; the
         (ii) The regulatory loan act, 1939 PA 21, MCL 493.1 to 493.24.
 ; the
         (iii) The secondary mortgage loan act, 1981 PA 125, MCL 493.51
 to 493.81. ; the
         (iv) The motor vehicle sales finance act, 1950 (Ex Sess) PA 27,
 MCL 492.101 to 492.141. ;
         (v) 1984 PA 379, MCL 493.101 to 493.114. ; the sale of checks
 act, 1960 PA 136, MCL 487.901 to 487.916;
         (vi) Through June 30, 2025, the money transmission services
 act, 2006 PA 250, MCL 487.1001 to 487.1048; and the 487.1047.
         (vii) The money transmission modernization act.
         (viii) The mortgage brokers, lenders, and servicers licensing
 act, 1987 PA 173, MCL 445.1651 to 445.1684.
         (k) "Licensee" means a person that is licensed under this act.
         (l) "Loan servicing activities" means the collection or
 remittance for a lender, noteowner, noteholder, or the licensee's
 own account of 4 or more installment payments of the principal,
 interest, or an amount placed in escrow under a mortgage servicing
 agreement or a mortgage loan subject to the mortgage brokers,
 lenders, and servicers licensing act, 1987 PA 173, MCL 445.1651 to
 445.1684, or a mortgage servicing agreement or secondary mortgage
 loan subject to the secondary mortgage loan act, 1981 PA 125, MCL
 493.51 to 493.81, or an agreement with the mortgagor.
         (m) "Money transmission" means that term as defined in section
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 5 of the money transmission modernization act.
       (n) (m) "Person" means an individual, corporation,
 partnership, association, limited liability company, or any other
 legal entity.
       Sec. 5. (1) An application for a license shall must be
 accompanied by all of the following:
       (a) An annual operating fee as established by the commissioner
 under section 11.
       (b) An application fee as provided in section 11. The
 application fee is not refundable.
       (c) Financial statements, reasonably satisfactory to the
 commissioner, showing that the applicant's net worth exceeds
 $100,000.00 for an applicant for a class I license; $50,000.00 for
 an applicant for a class II license; $1,000,000.00 for an applicant
 that intends to engage in business activity governed by 1984 PA
 379, MCL 493.101 to 493.114; or $100,000.00 plus an additional
 $25,000.00 for each location or authorized delegate, as applicable,
 or $1,000,000.00, whichever is less, for an applicant that intends
 to provide services for money transmission. services as defined in
 section 2 of the money transmission services act.
       (2) A licensee shall have and continue to maintain the
 required net worth under subsection (1) while engaging in the
 business activities authorized for licensing under this act.
       (3) The commissioner may by order establish a higher net worth
 requirement under subsection (1) for new class I licensees to
 assure safe and sound operation of the activities.
       (4) (2) Net worth under subsection (1)(c) shall must be
 determined at the conclusion of the fiscal year of the licensee
 immediately preceding the date an application for a license is
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 submitted to the commissioner or, for corporations not in existence
 as of the previous year end, the immediately preceding month end.
       (5) Net worth shall must be disclosed on a form prescribed by
 the commissioner or on a form prepared or reviewed by a certified
 public accountant and shall must be computed in accordance with
 generally accepted accounting principles.
       (6) The following assets shall must be excluded in the
 computation of net worth:
       (a) That portion of an applicant's assets pledged to secure
 obligations of any person other than the applicant.
       (b) Receivables from officers or, in the case of a corporate
 applicant other than a publicly traded company, stockholders of the
 applicant or persons in which the applicant's officers or
 stockholders have an interest, except that construction loan
 receivables secured by mortgages from related companies are not so
 excluded.
       (c) An amount in excess of the lower of the cost or market
 value of mortgage loans in foreclosure or real property acquired
 through foreclosure.
       (d) An investment shown on the balance sheet in joint
 ventures, subsidiaries, or affiliates that is greater than the
 market value of the investment.
       (e) Goodwill or value placed on insurance renewals or property
 management contract renewals or other similar intangible value.
       (f) Organization costs.
       Sec. 6. (1) An applicant for a license shall furnish a surety
 bond or letter of credit to secure its obligations under this act
 to the commissioner. Except as provided in this subsection, the
 principal amount of a surety bond or letter of credit shall must be
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 at least $500,000.00. If the applicant intends to provide services
 for money transmission, services as defined in section 2 of the
 money transmission services act, the applicant shall must file a
 surety bond that is in a principal amount as determined under
 section 13(5)(b) 67 of the money transmission services
 modernization act for a licensee under that act.
       (2) A surety bond described in subsection (1) shall must be
 payable to the commissioner for the benefit of the people of the
 this state of Michigan for the use of, and may be sued on by, the
 this state. A surety bond or letter of credit shall remain remains
 for the duration of the licensure period.
       (3) A surety bond or letter of credit required under
 subsection (1) shall must be in a form satisfactory to the
 commissioner and payable upon on demand by the commissioner if he
 or she the commissioner determines that the licensee is not
 conducting its activities as required by this act and all of the
 rules promulgated under this act, and has failed to pay all money
 that becomes due to a any of the following:
       (a) A person who is an installment buyer under the motor
 vehicle sales finance act, 1950 (Ex Sess) PA 27, MCL 492.101 to
 492.141. , Michigan residents who purchase checks under the sale of
 checks act, 1960 PA 136, MCL 487.901 to 487.916, Michigan residents
       (b) A resident of this state who purchase purchases services
 for money transmission. services as defined in section 2 of the
 money transmission services act,
       (c) A loan applicants, applicant, loan servicing customers,
 customer, and borrowers borrower under the secondary mortgage loan
 act, 1981 PA 125, MCL 493.51 to 493.81, or the mortgage brokers,
 lenders, and servicers licensing act, 1987 PA 173, MCL 445.1651 to
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 445.1684, and the commissioner.
       (4) The commissioner shall prioritize and pay claims against a
 bond or letter of credit filed with the commissioner under this
 section in a manner that, in the commissioner's discretion, best
 protects the public interest.
       (5) Claims described in subsection (4) may only be filed
 against a licensee's bond or letter of credit by the commissioner
 on behalf of the bureau and of individuals having claims and who
 are, as applicable, the licensee's any of the following:
       (a) A loan applicants, applicant, loan servicing customers,
 customer, and borrowers borrower under the any of the following:
       (i) The secondary mortgage loan act, 1981 PA 125, MCL 493.51 to
 493.81. , or the
       (ii) The mortgage brokers, lenders, and servicers licensing
 act, 1987 PA 173, MCL 445.1651 to 445.1684. , Michigan residents
 who purchase checks under the sale of checks act, 1960 PA 136, MCL
 487.901 to 487.916, Michigan residents
       (b) A resident who purchase purchases services for money
 transmission. services as defined in section 2 of the money
 transmission services act, or persons
       (c) A person who are is an installment buyers buyer under the
 motor vehicle sales finance act, 1950 (Ex Sess) PA 27, MCL 492.101
 to 492.141.
       (6) Claims filed with the commissioner against a bond or
 letter of credit by a loan applicant, loan servicing customer, or
 borrower under the secondary mortgage loan act, 1981 PA 125, MCL
 493.51 to 493.81, or the mortgage brokers, lenders, and servicers
 licensing act, 1987 PA 173, MCL 445.1651 to 445.1684, shall must
 involve, as applicable, only a mortgage loan, mortgage loan
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 application, secondary mortgage loan, or secondary mortgage loan
 application secured or to be secured by real property used as a
 dwelling located in this state. The amount of the claim shall must
 not exceed actual fees paid by the claimant to the licensee in
 connection with a loan application, overcharges of principal and
 interest, and excess escrow collections by the licensee.
       (7) Before payment of any claim filed under this section,
 unless the commissioner waives, in whole or in part, the right to
 priority of payment, the commissioner shall must be paid in full
 for fines and fees due to the bureau and for expenses incurred in
 investigating the licensee and in distributing the proceeds of the
 bond or letter of credit. In the event that valid claims exceed the
 amount of the bond or letter of credit, each claimant except the
 commissioner is entitled only to a pro rata amount of his or her
 the claimant's valid claim.
       Sec. 10g. (1) If, in the opinion of the commissioner, a person
 has engaged in fraud or money laundering, the commissioner may
 serve upon that the person with a written notice of intention to
 prohibit that person from being employed by, an agent of, or
 control person of a licensee under this act or a licensee or
 registrant under a financial licensing act.
       (2) A notice issued under subsection (1) shall must contain a
 statement of the facts supporting the prohibition and, except as
 provided under subsection (7), set a hearing to be held not more
 than 60 days after the date of the notice. If the person does not
 appear at the hearing, he or she the person is considered to have
 consented to the issuance of an order in accordance with the
 notice.
       (3) If, after a hearing held under subsection (2), the
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 commissioner finds that any of the grounds specified in the notice
 have been established, the commissioner may issue an order of
 suspension or prohibition from being a licensee or registrant or
 from being employed by, an agent of, or control person of any
 licensee under this act or a licensee or registrant under a
 financial licensing act.
       (4) An order issued under subsection (2) or (3) is effective
 upon service upon the person. on the date that the person is served
 with the order. The commissioner shall also serve a copy of the
 order upon on the licensee of which to whom the person is an
 employee, agent, or control person. The order remains in effect
 effective until it is stayed, modified, terminated, or set aside by
 the commissioner or a reviewing court.
       (5) After 5 years from the date of an order issued under
 subsection (2) or (3), the person subject to the order may apply to
 the commissioner to terminate the order.
       (6) If the commissioner considers that a person served a
 notice under subsection (1) poses an imminent threat of financial
 loss to applicants for loans, mortgage loans, secondary mortgage
 loans, credit card arrangements, or installment sales credit,
 borrowers on loans, obligors on installment sale contracts, loan
 servicing customers, purchasers of mortgage loans or interests in
 mortgage loans, or purchasers of services for money transmission,
 services as defined in section 2 of the money transmission services
 act, the commissioner may serve upon the person with an order of
 suspension from being employed by, an agent of, or control person
 of any licensee. The suspension is effective on the date the order
 is issued and, unless stayed by a court, remains in effect pending
 the completion of a review as provided under this section and the
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 commissioner has dismissed the charges specified in the order.
       (7) Unless otherwise agreed to by the commissioner and the
 person served with an order issued under subsection (6), the
 hearing required under subsection (2) to review the suspension
 shall must be held not earlier than 5 days or later than 20 days
 after the date of the notice.
       (8) If a person is convicted of a crime involving fraud,
 dishonesty, money laundering, or breach of trust, the commissioner
 may issue an order suspending or prohibiting that person from being
 a licensee and from being employed by, an agent of, or control
 person of any licensee under this act or a licensee or registrant
 under a financial licensing act. After 5 years from the date of the
 order, the person subject to the order may apply to the
 commissioner to terminate the order.
       (9) The commissioner shall mail a copy of any notice or order
 issued under this section to the licensee of which the person
 subject to the notice or order is an employee, agent, or control
 person.
       (10) As used in this section:
       (a) "Fraud" includes actionable fraud, actual or constructive
 fraud, criminal fraud, extrinsic or intrinsic fraud, fraud in the
 execution, in the inducement, in fact, or in law, or any other form
 of fraud.
       (b) "Money laundering" means conduct by 1 or more persons that
 conceals the existence, illegal source, or illegal application of
 income and then disguises that income to make it appear legitimate.
 Money laundering includes, but is not limited to, conduct that
 violates any s