Chartwell Compliance once again participated in the Ombudsman meeting this year at the Nationwide Multistate Licensing System and Registry (“NMLS”) Annual Conference and Training on February 16-19, 2015 in San Diego, California as well as the session, Moving Forward: NMLS and Effective Licensing for MSBs, which addressed regulators’ and licensees’ experiences with NMLS.
The NMLS conference is an opportunity for state and federal regulators and industry to come together to exchange information and discuss ways that the system can be improved. The conference included sessions for industry groups such as debt collection, debt management, debt settlement and consumer finance in addition to money transmitters. The NMLS system is a comprehensive platform that enables all licensees in the mortgage industry and money services business (“MSB”) industry to apply, amend, renew and pay for fees online. NMLS allows licensees to disseminate information efficiently and effectively to all participating states in an effort to streamline the filing process.
The MSB industry and regulators have been transitioning and adjusting to NMLS since 2012. Although NMLS rolled out several system enhancements in the document and authorized delegate upload areas over the past year, there are still many fields and regulations in NMLS that do not adequately match or meet the needs of MSBs. In particular, there is a “dormancy” policy, or a 180-day rule whereby NMLS will delete an account after 180 days for company and individual users if a license application is not submitted to at least one state even if you are continually updating the record in preparation for filing. Pending filings do not prevent an account from being deleted; a license application must be submitted to avoid deletion. Records will be deleted after 180 days along with any related accounts including MU2s (personal, executives and officers form). This rule does not take into account the time that it takes for many money transmitters, particularly international applicants, to get a bank account and/or to finalize the required compliance and other state-specific documents. Once the pending filing is deleted, NMLS will not work with companies to restore data and does not maintain an archive of pending filings.
In an effort to address issues and policies that do not meet the needs of the MSB and other expanded industries in NMLS, companies can contact the NMLS Ombudsman—Robert Niemi, Deputy Superintendent for Consumer Finance, Ohio Department of Commerce- Division of Financial Institutions. The NMLS Ombudsman is a resource for System users with the goal of assisting in the resolution of NMLS policy and operational issues. The NMLS Ombudsman is available to discuss matters in a confidential manner and to help assist with the resolution of these matters by identifying options for resolving the issue and/or by directing the issue to the appropriate party or office.
The Ombudsman hosts open meetings twice a year with industry representatives—at the NMLS conference and at the American Association of Residential Mortgage Regulators (AARMR) Conference. The Ombudsman meeting provides the financial services industries and other interested parties with a neutral venue to discuss issues or concerns regarding NMLS use and policies. The objective of the NMLS Ombudsman is to foster constructive dialogue between industry users of NMLS and state regulators to mutually work toward the goal of modern and efficient financial services regulation. In addition to these regularly scheduled meetings, the NMLS Ombudsman is available to meet on an ad hoc basis throughout the year as needed. The NMLS Ombudsman sits on the NMLS Policy Committee and reports directly to the Board of Managers of the State Regulatory Registry LLC.
The NMLS Ombudsman Meeting is an event that is familiar to attendees of the NMLS conference. It is open to the general public, users of NMLS, and participating state regulators. The purpose of this meeting is for industry users to voice their concerns, issues and ways to improve the system, as well as for state regulators to share with the licensees’ changes to their state regulations. One major drawback is that the Ombudsman meeting is dominated by questions on the mortgage industry. More MSBs and other financial industries need to submit questions and issues to the Ombudsman so that they are open for consideration in NMLS policy meetings and at the NMLS conference.
Chartwell addressed the complications in creating and submitting MU2s, such as the difficulties in the process for NMLS users who don’t have social security numbers. In addition, we suggested an enhanced process for uploading financial statements for affiliated companies in a secure manner as well as expansion of permissible document types for NMLS document upload at this year’s Ombudsman meeting. It is difficult to get MU2s completed and attested in a timely manner as required in the licensing process. Many Executives are not familiar with the system and find the process confusing and unwieldy, which can delay the process of submission. If the system allowed third parties, such as attorneys, to obtain a Power of Attorney for MU2 attestation, it would improve the timely completion of attestations.
The process of getting a record started for international companies is usually delayed when control persons do not have U.S. Social Security numbers. These delays in receiving an NMLS account and login information result in longer period of time to complete and submit an application. In addition, to issues raised by Chartwell, other participants on the panel shared issues such as state specific fingerprint cards and the delay in waiting for the state to mail the fingerprint cards to the organization. The other NMLS users agreed that there is a need for an earlier deadline for license renewals for companies that can complete renewals in advance and get them submitted in a timely manner.
While NMLS has been making enhancements to better assist licensees with the filings and uploads, the system continues to present challenges to money transmitters during the renewal process. Many companies licensed across the US are now faced with many renewals occurring at the same time beginning November 1st and ending December 31st of each year. Licensees are overwhelmed with gathering all the requested documentation for each state, uploading documents based on state-specific requirements while mailing in other state-specific required documents, which are not uniform across all states. Managing all the moving parts can be very labor intensive and time consuming, particularly during the renewal period which overlaps the November and December holidays and quarterly reports.
Communication remains a challenge both within the system and when using the NMLS call center. NMLS provides email notifications to assist licensees sort and track submissions. However, the lack of a precise subject line or content, in many of them, does not help convey the intended message. In addition, these emails often alarm control persons, such as when they receive an email stating that their personal MU2 form has been changed, when actually only a MU1 (company) has been changed. Adding a subject line would enhance the email notifications and help licensees better track the emails. The call center is often inconsistent in its guidance and only allows Account Administrators the right to escalate questions to the second tier responders for further clarification or resolution. Incorrect information has significant cost and compliance ramifications for applicants.
The NMLS Ombudsman provides companies with an opportunity for any NMLS user to raise issues concerning NMLS or the state regulation of the financial services managed on NMLS. Even if you cannot attend the Ombudsman meetings, you can contact the following e-mail address: email@example.com and check the NMLS Ombudsman page for updates and summaries and recordings of meetings: http://mortgage.nationwidelicensingsystem.org/contact/Pages/Ombudsman.aspx.
Although the NMLS management and conference administrators continue to address topics of concern for the other regulated industries, the focus continues to be on the mortgage industry. The first step in moving the NMLS focus toward the money services businesses is to make your issues known to the Ombudsman.
Trish Lagodzinski has more than 19 years of experience in government contracting, project management and support. She has assisted with regulatory compliance matters dealing with state money services business licenses and related state and federal compliance regulations for a wide range of non-bank financial services companies. For more information please contact Trish Lagodzinski at firstname.lastname@example.org.
Jennifer Naudin, J.D. is a Senior Compliance Analyst with Chartwell Compliance, where she focuses on state money transmitter licensing. She has 9 years of experience in compliance, lending and money transmission licensing. For more information please contact Jennifer at email@example.com.
Cristiane Fernandes has over 5 years of experience working in the payments industry and the various components of state licensing from, filing license applications and ongoing maintenance of the licenses to the preparation of multi-state exams and conducting various researches. For more information please contact Cristiane at firstname.lastname@example.org.