CR 22-020 Rule Text

Clearinghouse Rule CR 22-020

ORDER OF THE

DEPARTMENT OF FINANCIAL INSTITUTIONS,

DIVISION OF BANKING

REPEALING, AMENDING AND CREATING RULES

The Wisconsin Department of Financial Institutions, Division of Banking by this order creates an order to repeal s. DFI-Bkg 76.11; to renumber s. DFI-Bkg 75.01 (1); to amend ss. DFI-Bkg 75.08 (1) (c) 3. and DFI-Bkg 75.08 (2) (a) 4.; and to create ss. DFI-Bkg 73.001, 73.06, 73.07, 73.08, 73.09, 75.01 (1g), (1r), (6m), (7m), (8g), (8m), and (10), 75.11, 75.12, 75.13, 76.001, 76.14, 76.15, 76.16, and ch. DFI-Bkg 79 of the Wisconsin Administrative Code relating to use of the Nationwide Multistate Licensing System and Registry by applicants for, and holders of, licenses under s. 138.14 (payday lenders), ch. 217 (sellers of checks), ch. 218, subch. I (sales finance companies), and s. 218.02 (adjustment service companies) of the Wisconsin Statutes.

The scope statement for this rule was authorized by the Division of Banking on December 15, 2021; approved by the Governor on January 27, 2022; published in Administrative Register No. 794A2 on February 14, 2022; and approved by the Division of Banking on the date signed below.

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ANALYSIS

1.   Statutes interpreted:

Chapter 217, Subchapter I of Chapter 218, and Sections 138.14 and 218.02 of the Wisconsin Statutes.

2.   Statutory authority:

Subsection 138.14 (8) (b), subsection 217.10 (3), subsection 218.0152 (3), and subsection 218.02 (9) (a) of the Wisconsin Statutes.

3.   Explanation of agency authority:

The Division of Banking, a division of the Department of Financial Institutions, licenses and regulates payday lenders pursuant to section 138.14 of the Wisconsin Statutes. Applications for licenses under that section “shall be made in the form and manner prescribed by the division,” Wis. Stat. § 138.14(4)(a)1., and the division has the authority to “promulgate such rules as it considers necessary for the administration of this section,” id. § 138.14(8)(b).

The division also licenses and regulates sellers of checks pursuant to chapter 217 of the Wisconsin Statutes. Applications for licenses under that chapter “shall contain such information and be in such form as the division prescribes,” Wis. Stat. § 217.05(1), and the division has the authority to “make such rules not inconsistent with this chapter as it deems necessary for the administration of this chapter,” id. § 217.10(3).

The division also licenses and regulates sales finance companies pursuant to chapter 218, Subchapter I of the Wisconsin Statutes. Applications for licenses under that subchapter shall be made “in such form and with such information as the licensor shall require,” Wis. Stat. § 218.0114(4), and the division (as licensor) has the authority to “promulgate such rules as it considers necessary or proper for the effective administration and enforcement” of that subchapter, id. § 218.0152(3).

The division also licenses and regulates adjustment service companies pursuant to section 218.02 Sof the Wisconsin Statutes. Applications for licenses under that section shall be “in a form to be prescribed by the division,” Wis. Stat. § 218.02(2)(a)1., and the division has the authority to “make such rules and require such reports as the division deems necessary for the enforcement of this section,” id. § 218.02(9)(a).

4.   Related statutes or rules:

The language of these proposed rules, which require utilization of the Nationwide Multistate Licensing System and Registry (NMLS) for payday lenders, sellers of checks, sales finance companies, and adjustment service companies licensed with the division, is derived from existing statutory language requiring utilization of the NMLS for mortgage loan originators licensed with the division. See Wis. Stat. §§ 224.725(2)(a), 224.725(2)(c), 224.728.

5.   Plain language analysis:

The proposed rules would modernize the division’s licensing system for payday lenders, sellers of checks, sales finance companies, and adjustment service companies by requiring utilization of the NMLS. The NMLS is a national database developed by the Conference of State Bank Supervisors and the American Association of Residential Mortgage Regulators that streamlines licensing, renewal, and other regulatory filings for both licensees and regulators. The system also facilitates cooperation among state regulators, which should reduce red tape and redundant work for both regulators and licensees who do business in multiple states.

6.   Summary of, and comparison with, existing or proposed federal regulation:

The NMLS is a system developed by and for state financial regulators for the purpose of administering state licensing and regulatory requirements. There is no overlapping federal regulation.

Federal law does, however, contemplate and facilitate use of the NMLS by state regulators. Title 12, Section 5110 of the U.S. Code, for example, requires the federal Department of Justice to provide criminal history information to state officials responsible for regulating financial service providers, and to utilize the NMLS as a channeling agent of the states for requesting and distributing this information.

7.   Comparison with rules in adjacent states:

Each of our neighboring states utilizes NMLS for the licensing of financial services providers.

Minnesota and Iowa have expressly authorized NMLS utilization for these license types by statute or rule. See Iowa Code §§ 533D.3.7 (authorizing use of NMLS for delayed deposit service providers, known under Wisconsin law as “payday lenders”); 533C.202.6 (same for money transmitters, known under Wisconsin law as “sellers of checks”); 533A.2.7 (same for debt management companies, known under Wisconsin law as “adjustment service companies”); Minn. Stat. §§ 47.60, subd. 7 (authorizing use of NMLS for payday lenders); 53C.02(f) (same for sales finance companies); 53B.07, subd. 6 (same for money transmitters); 332B.04, subd. 8 (same for debt settlement companies, known under Wisconsin law as “adjustment service companies”).

Illinois and Michigan grant their financial regulators broad discretion over licensing applications and processes, see, e.g., 205 Ill. Comp. Stat. § 665/4, and those regulators have also opted to utilize NMLS for comparable license types. See Ill. Dep’t of Fin. & Prof. Reg., IDFPR’s Financial Institutions Announce Enhanced Participation in NMLS (press release Aug. 11, 2016), at https://www.idfpr.com/News/2016/08112016IDFPRFinancialInsEnhancedPartNMLS.asp; Ill. Dep’t of Fin. & Prof. Reg., Illinois Debt Settlement Application Checklist (Feb. 1, 2019), at https://mortgage.nationwidelicensingsystem.org/slr/PublishedStateDocuments/IL_Debt_Settlement_Consumer_Protection_License-New_App-Checklist.pdf; Mich. Dep’t of Ins. and Fin. Servs., Licensing – Consumer Finance and Mortgage, at https://www.michigan.gov/difs/0,5269,7-303-79189_23034---,00.html (utilizing NMLS for various consumer finance licenses); Mich. Dep’t of Ins. and Fin. Servs., Money Transmission Services, at https://www.michigan.gov/difs/0,5269,7-303-79189_43095---,00.html (same for money transmitters).

8.   Summary of factual data and analytical methodologies:

The proposed changes are based on the input and experience of Division of Banking staff in regulating adjustment service companies, payday lenders, sales finance companies, and sellers of checks in this state, as well as legal counsel’s review of the administrative rules and statutes at issue and communications with the Conference of State Bank Supervisors. The nature of these changes, which are primarily procedural rather than substantive, did not demand or lend itself to analysis of field data.