Existing federal regulations set forth standards for the safeguarding of customer information by certain businesses over which the Federal Trade Commission has jurisdiction that are engaged in activities that are financial in nature or incidental to such financial activities. (16 C.F.R. Part 314) The standards require such businesses to, among other things: (1) develop, implement and maintain a comprehensive information security program; and (2) notify the Federal Trade Commission of certain unauthorized acquisitions of customer information, which existing federal regulations designate as a “notification event.” (16 C.F.R. §§ 314.2-312.4). Sections 1, 2, 4, 7, 8, 38-41 and 43-47 of this bill specifically require persons that are providers of certain financial services in this State to comply with the requirements set forth in those federal regulations. Additionally, sections 1, 2, 4, 7, 8, 38-41 and 43-47 require such a person to: (1) maintain the information security program required by existing federal regulations as part of the books and records of the person; and (2) notify the Commissioner of Financial Institutions or Commissioner of Mortgage Lending, as applicable, of any notification event in accordance with the regulations adopted by the applicable commissioner. The persons to which the requirements apply include private professional guardians and private professional guardian companies, escrow agents and escrow agencies, mortgage companies, mortgage loan originators, mortgage servicers, foreclosure consultants, foreclosure purchasers, loan modification consultants, persons performing covered services for compensation, collection agencies and collection agents, persons operating deferred deposit loan services, high-interest loan services, title loan services and check-cashing services, consumer litigation funding companies, providers of earned wage access services, trust companies, student loan servicers, private education lenders, money transmitters and their authorized delegates, installment lenders and providers of debt-management services. Sections 3, 5, 32 and 42 of this bill require the Commissioner of Mortgage Lending and the Commissioner of Financial Institutions, as applicable, to adopt regulations establishing procedures and requirements for notifying the applicable commissioner of a notification event pursuant to sections 1, 2, 4, 7, 8, 38-41 and 43-47. Section 33 of this bill applies the definitions in existing law that govern foreclosure consultants, foreclosure purchasers, loan modification consultants and persons performing covered services for compensation to the provisions of section 7. Section 34 of this bill provides that the provisions of section 7 do not apply to certain persons. Existing law provides for the licensure and regulation of mortgage servicers by the Commissioner of Mortgage Lending. (NRS 645F.500-645F.540) Sections 9-31 of this bill set forth certain standards for the financial condition and corporate governance of certain mortgage servicers which are modeled, in general, after the Model State Regulatory Prudential Standards for Nonbank Mortgage Servicers approved by the Conference of State Bank Supervisors. Under sections 26 and 35 of this bill, the standards apply, with certain exceptions, to a “covered institution” which is defined in section 13 to mean, in general, a mortgage servicer that: (1) services 2,000 or more residential mortgage loans; and (2) operates in two or more states, districts or territories of the United States. Section 26 requires a covered institution to: (1) maintain certain quantities of assets for liquidity; and (2) have in place sound cash management and business operating plans. Section 27 requires a covered institution to establish and maintain a board of directors or similar body. Section 28 imposes certain duties on a board of directors or similar body relating to corporate governance and internal audits. Section 29 requires a covered institution to obtain an annual external audit. Section 30 requires a covered institution to: (1) establish a risk management program meeting certain requirements; (2) conduct an annual risk management assessment; and (3) maintain evidence of activities to manage risk performed throughout the year. Section 31 authorizes the Commissioner, under certain circumstances, to: (1) require a covered institution to satisfy additional conditions; and (2) waive or temporarily suspend any or all of the requirements set forth in sections 9-31. Sections 9-24 define words and terms for the purposes of sections 9-31. Section 36 of this bill authorizes the Commissioner of Mortgage Lending to adopt regulations to carry out the provisions requiring compliance with the standards for the safeguarding of customer information and the standards for the financial condition and corporate governance of certain mortgage servicers. Section 37 of this bill authorizes the Commissioner to: (1) investigate a mortgage servicer or applicant for a license as a mortgage servicer to ensure compliance with those provisions; and (2) take certain disciplinary actions against a mortgage servicer or applicant for a license as a mortgage servicer who violates those provisions.

Statutes affected:
As Introduced: 645A.050, 645B.060, 645F.255, 645F.300, 645F.380, 645F.500, 645F.520, 645F.530, 658.105
BDR: 645A.050, 645B.060, 645F.255, 645F.300, 645F.380, 645F.500, 645F.520, 645F.530, 658.105