On February 14, 2019, the Conference of State Bank Supervisors (“CSBS”) announced several actions that it would be taking to modernize and harmonize state licensing, regulation, and supervision of non-depository financial institutions, including mortgage lenders, money services businesses, and consumer finance companies.
The announcement came in response to a list of recommendations issued by the CSBS Fintech Industry Advisory Panel (the “Panel”). The Panel, which was formed in 2017 as part of CSBS’s “Vision 2020” movement to modernize state regulation of nonbanks, consists of 33 leading financial technology companies that represent different sectors, geographies, and business models.
One of the most significant actions that CSBS has committed to taking is to develop a 50-state model law for money services businesses (“MSBs”). Right now, an MSB has to comply with distinct licensing requirements in each state in which it operates; a uniform MSB law could greatly reduce compliance costs and increase efficiency.
CSBS also committed to pressing for a broader adoption of the Nationwide Multistate Licensing System (the “NMLS” or the “System”) by all 50 states. The NMLS is a web-based system that, among other functions, non-depository financial institutions use to apply for certain types of licenses from state agencies. Although the NMLS is the exclusive system that the states have adopted for licensing mortgage companies, the states’ reliance on the NMLS is inconsistent for other types of licenses, such as licenses for money transmission and consumer finance companies. Some states take full advantage of the NMLS’s capabilities and permit all filings to be made through the System, but others have adopted the System for more limited types of activities or require the submission of certain information and documentation, like fingerprints and supplemental questionnaires, outside of the System.
CSBS also plans to rebuild the NMLS altogether. The redesigned platform, dubbed NMLS 2.0, will include a new examination management system (the “State Examination System”) that will facilitate the exchange of information among state agencies. The State Examination System will support examinations of both banks and nonbanks that operate in multiple states, and it is expected to launch as early as the end of this year.
CSBS’s efforts to collaborate with the industry and embrace technological innovation will help the organization, and its members, respond to the rapidly-changing financial services landscape and the entry of non-traditional business models into the space.