Chartwell Reports from the 2013 NMLS Annual Conference, Ombudsman Meeting and Training in San Antonio, TX

The fifth NMLS Annual Conference & Training was held February 26 to March 1, 2013 in San Antonio, Texas.  It was attended by more than 570 participants including state and federal regulators, licensees and registrants, members of the media, and education providers.  New and experienced NMLS users exchanged information on system and regulatory compliance issues that affect their organizations.

The fifth NMLS Annual Conference & Training was held February 26 to March 1, 2013 in San Antonio, Texas.  It was attended by more than 570 participants including state and federal regulators, licensees and registrants, members of the media, and education providers.  New and experienced NMLS users exchanged information on system and regulatory compliance issues that affect their organizations.

The types of NMLS licensees vary greatly: mortgage companies, mortgage loan originators, and banks to the new money services businesses including money transmitters, collection agencies, check cashers/sellers, pawnbrokers, consumer finance companies (insurance premium, motor vehicle, retail installment), small loan, and deferred deposit lenders.

After the initial day of regulator and information technology meetings, the conference opened to the public with the Ombudsman meeting. Chartwell participated in the Ombudsman meeting by sharing the following concerns with the regulator panel.

NMLS Ombudsman Meeting

The NMLS Ombudsman provides the industry users of NMLS and other interested parties with a neutral venue to discuss issues or concerns regarding NMLS use and policies governing the System.  The objective of the NMLS Ombudsman is to foster constructive dialogue between industry users of NMLS and state regulators and to help resolve system and regulatory issues through the appropriate party or office.

The current NMLS Ombudsman Timothy Siwy, Deputy Secretary for Non-Depository Institutions, Pennsylvania Department of Banking assists NMLS system users in resolving NMLS policy and operational issues both confidentially through direct communication and through open meetings hosted twice a year. In addition to these regularly scheduled meetings, the NMLS Ombudsman is available to meet on an ad hoc basis throughout the year as needed.

Chartwell offered the following observations and system issues that the company encountered with the NMLS system.

Complications in creating and submitting MU2 forms.  It is sometimes difficult to get all of the individual (MU2) forms completed and attested in a timely manner for the owners, directors, executive officers, and other control persons of the companies as required in the licensing process. Some executives may not be familiar with the licensing process, or they may find all of the personal reporting arduous and time consuming, in addition to setting up an account in the NMLS system.

Chartwell suggested allowing a Power of Attorney to third parties for MU2 attestation, which could include legal counsel, consultants, Executive Assistants, or other persons or organizations that represent the Company or an Executive in the licensing process. This option may help officers and directors who have difficulty completing their MU2 forms and attestations due to scheduling and time constraints.

The regulators had serious reservations about extending a power of attorney due to the legal implications involved in attesting to someone else’s personal information. It was suggested that due to busy schedules, paper MU2 forms would actually be easier for executives and officers to review and sign, particularly those who may not have the time to learn the NMLS system and key in all of the information required.

NMLS users who do not have Social Security Numbers: International companies may have control persons who do not have U.S. Social Security Numbers.  When the NMLS system opened up to license money services businesses in April 2012, it took almost six weeks to receive NMLS accounts and logins for the control persons overseas.  The process has improved since then.  In September 2012, a request for an account with no Social Security Number took only one week.

Document upload issues: It is difficult to match the state requirements with the NMLS system guidelines and requirements when uploading the required documentation. NMLS prefers that users upload into NMLS only documentation that is listed in the document upload section, but some States ask for other items, in particular financial statements for the parent, ultimate parent, and other affiliated companies; agent agreements; and BSA/AML compliance manuals.

Another issue is that some states require state-specific documents and businesses often have just one business plan or BSA/AML compliance manual that addresses several states. The result is that companies may have several copies of the exactly same business plan or manual with a different state-specific title, such as Maryland Business Plan or Kentucky AML/BSA Compliance Manual, uploaded into NMLS.

One final issue raised at the Ombudsman meeting was the concern that expanding NMLS to check cashers and new NMLS industries would dilute or undermine the “NMLS brand” for the mortgage industry.  Many of the mortgage companies use their NMLS number in their advertising to show that the company is licensed.  The Ombudsman meeting was a lively start to the general conference.

NMLS General and Breakout Sessions

The conference general and breakout sessions covered all aspects of State and Federal collaboration, State supervision, and the NMLS system.  In the opening general session, David Bleicken, Deputy Associate Director, Supervision, Enforcement and Fair Lending, Consumer Financial Protection Bureau addressed State and Federal Collaboration and the future of financial services regulation. Other general sessions discussed NMLS developments, such as expansion to other non-depository financial services providers and system development for mortgage loan originators seeking a state licenses.

Breakout sessions included a money services business regulator panel that shared perspectives on recent changes to the regulation of money services businesses and what the industry can expect in the near future.  NMLS staff introduced functionality to allow licensed Money Service Businesses (MSBs) to use the system to report information on agents/authorized delegates, which is now available as of March 18, 2013. A best practices in surety bonds session offered information to both industry and regulator users of NMLS including—online bond forms, digital POAs, and electronic filings.

A breakout session on advance change notifications for material changes addressed the NMLS updates in the 2nd quarter of 2013 to accommodate branch and company address and trade name changes and corporate changes in control.  Industry and regulators reviewed multiple state licensing in NMLS and best practices and challenges.

A panel of money services business industry representatives shared their experiences transitioning onto NMLS and discussed how other recent regulatory changes have impacted their operations.  A breakfast with regulators allowed participants an opportunity to meet with state regulators one-on-one. In addition to the discussion of regulatory compliance and technical aspects of the NMLS system, there were broader themes of building relationships between State and Federal regulators, or “Cooperative Federalism”; fostering constructive dialogue between industry users of NMLS and regulators in light of the changing economic, regulatory and technological environment; and working toward the mutual goal of modern and efficient financial services regulation for regulators and industry.

New States and Licenses in NMLS

Wisconsin Seller of Checks

Wisconsin Department of Financial Institutions is transitioning its Seller of Checks license on a voluntary basis to NMLS starting July 1, 2013. The Wisconsin Seller of Checks license includes transmitting money and/or selling or issuing checks, money orders, traveler’s checks and prepaid cards.

New licenses for Pennsylvania

The Pennsylvania Department of Banking and Securities is accepting new application and transition requests through NMLS starting February 15, 2013 for Check Casher (company and branch) and Retail Grocery Store Check Casher (company).  The NMLS transition is mandatory and paper forms will no longer be accepted.

Companies holding a Check Casher or Retail Grocery Store Check Casher license must submit a license transition request through NMLS by filing a Company (Form MU1) and a Form MU2 for each of its control persons by April 30, 2013. Additionally, for each branch holding a Check Casher or Retail Grocery Store Check Casher, a company must complete and submit a Form MU3 through NMLS by April 30, 2013.

All current licensees should have their Check Casher license numbers or Retail Grocery Store Check Casher registration numbers available when completing and submitting their Form MU1 so they are not charged a new application fee.  Any licensee/registrant that needs to amend or surrender a license/registration or other action previously completed in paper form, from February 15, 2013 onward must complete these actions within NMLS.

If a company already has a record in NMLS, it does not need to re-enter its company information into NMLS. The company will only need to identify the business activities that it conducts, the states in which the various activities are conducted, apply for the appropriate license in Pennsylvania, and complete a few state specific fields.

New Functionality in NMLS—MSB Authorized Agent/Delegate Functionality

Beginning March 18, 2013, NMLS has the following new functions available: Agency Fee Invoicing, Authorized Agents, Implementation of Uniform State Test Content, and Federal Disciplinary Actions in Consumer Access.  NMLS users should consult with the State regulators regarding the authorized agent reporting prior to uploading.

Agency Fee Invoicing.  This functionality will allow state agencies to invoice licensees for various fees through NMLS. Licensees can pay agency invoices through the current NMLS payment process

Authorized Agent Management. Money transmitters will have the ability to submit periodic reports regarding authorized agents to regulators through NMLS. This functionality will assist regulators with the supervision and monitoring of money transmitters and their authorized agents.

Implementation of Uniform State Test Content. NMLS is being updated to allow state regulators to adopt the newly created National Test Component with Uniform State Content in lieu of existing State-specific Test Components to satisfy the SAFE Test State Component Requirement. The new functionality will allow mortgage loan originators to enroll for and take the SAFE Mortgage Loan Originator Test – National Test Component with Uniform State Content and the SAFE Mortgage Loan Originator Test – Stand-alone Uniform State Content.

NMLS Consumer Access – Federal Disciplinary Actions.  NMLS Consumer Access will now include the display of self-reported disciplinary actions for federally registered mortgage loan originators. Disciplinary action information is comprised of details provided by a mortgage loan originator regarding yes responses to Disclosure Questions on an application for federal registration in the Federal Registry of NMLS.

Trish Lagodzinski has more than 19 years of experience in regulatory compliance and government contracting. As a Compliance Specialist at Chartwell Compliance and, previously, Ascella Compliance, she has assisted with regulatory compliance matters dealing with state money services business licenses and associated state and federal compliance regulations for non-bank financial services companies.


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