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“New Rhode Island Banking Regulations to Promote Uniformity”

Rhode Island has repealed certain banking regulations and replaced them with new regulations in order to promote uniformity.

June 2015

David J. Pellegrino

Rhode Island has repealed certain banking regulations and replaced them with new regulations in order to promote uniformity.  Banking Regulations 98-14 “Licensees”, 98-14.1 “Lenders and Loan Brokers”, and 98-14.4 “Check Cashing” are repealed effective June 11, 2015. The repealed regulations are replaced with Regulation 6 “Lenders, Loan Brokers, Small Loan Lenders and Mortgage Loan Originators” and Regulation 8 “Check Cashers”.  The new regulations are important supplements to the detailed information about statewide licensing requirements found on the National Mortgage Licensing System (“NMLS”) website.

Regulation 6

The contents of repealed Regulations 98-14 “Licensees” and 98-14.1 “Lenders and Loan Brokers” addressing the licensing requirements for Lenders, Loan Brokers and Small Loan Lenders as defined by Rhode Island law are consolidated into new Regulation 6.  Regulation 6 provides for licensing of Lenders, Loan Brokers, and Small Loan Lenders through NMLS.[1]  Regulation 6 contains capital requirements, bond requirements, and qualifications for “Qualified Individuals” or “Branch Managers”.  Managerial oversight is explained, along with net branching (prohibited in Rhode Island), criminal background checks and the requirement that each lender designate an insurance claim agent.  The criteria for reporting a change in ownership is included, as well as language required in licensee advertising.

Regulation 6, Section 5, Paragraph H “Insurance Claim Agent” explains the requirement under Rhode Island General Laws §§ 5-38-26 and 27-5-3.3 that each lender designate an agent within Rhode Island who can endorse insurance proceeds checks on the lender’s behalf. Lenders are required to submit a copy of the designation agreement at the time of application and must keep the information current during licensure.   A new provision provides that “A lender that has not and will not be included as a loss payee on any insurance policy may be exempted from the provisions of R.I. Gen. Laws §§ 5-38-26 and 27-5-3.3.  An applicant that wishes to obtain an exemption must clearly state in its business plan that it is not a loss payee on any insurance policy and must upload a statement that it will not be designated as a loss payee on any insurance policy.  A lender that obtains an exemption should expect that compliance will be evaluated on examination.” 

Regulation 6, Section 6 contains certain requirements for the licensing of Mortgage Loan Originators.  Sponsorship of Mortgage Loan Originators, criminal background checks, financial responsibility and surety bond requirements are also addressed.

Regulation 6, Section 7, “Financial Responsibility” describes the standards by which the Division of Banking will evaluate an applicant’s financial responsibility, including the procedure by which applicants who have been denied licensing due to a finding that the applicant, an officer, director, owner, manager or control person of the applicant is not financially responsible.    

Regulation 6, Section 8, “Criminal Backgrounds” provides guidance on the implementation of Rhode Island General Laws § 19-14.10-6 and the federal SAFE Act (the Secure and Fair Enforcement for Mortgage Licensing Act) which provides that an applicant is not eligible for licensure if he has been convicted of, or pled guilty or nolo contendere to, a felony in a domestic, foreign or military court for certain designated time periods.  Instructions are included for applicants or management and control persons who have convictions in other areas. Certain “aggravating factors” and “mitigating factors” are explained which may be considered in the denial or renewal of a licensing application or renewal.

Regulation 6, Section 9 “Books Accounts and Records” provides that each lender, loan broker and small loan lender must document and maintain a record of all actions from solicitation to application of the “final disposition of each financing request received.”  The required documents must be kept on file for a minimum of three (3) years from the application date for loan brokers, and for a minimum of three (3) years from the date a loan is paid in full or sold for lenders and small loan lenders.

Regulation 8

Effective June 11, 2015, Check Cashers will be guided by Regulation 8, replacing repealed Regulation 98-14.4.  Regulation 8 is intended to carry out the provisions of Rhode Island General Laws §§ 19-14.4-1 through 19-14.4-10 entitled “Check Cashing”.  Check Cashing includes deferred deposit lending whereby a Check Casher may defer the deposit of a personal check written by a customer for a fee. Deferred deposit lending is also known as "payday lending".

Regulation 8 provides for licensing of Check Cashers through the NMLS system; it explains the interpretation of “Community” for purposes of the licensing process, and “Qualified Individual or Branch Manager” criteria are included as well.  Criminal background checks, the notification and approval process that is required when there is a change in ownership of the Check Casher, and the criteria for advertising are also included in Regulation 8. 

Section 6 of Regulation 8 sets forth the Security Measures that are required so that Check Casher licensees can provide for the safety and security of their customers.  The types of required alarm systems, surveillance cameras, bullet proof glass and partitions that must be installed at the licensed location are explained, in addition to the requirements for a security program that must be adopted and implemented.

Regulation 8 sets forth the amount of liquid assets that must be on hand at all times, the requirement that cash sheets must be prepared daily, and a log sheet must be maintained.  Provisions for dishonored checks, inventory and reconciliation, altered checks, money laundering and financial statements are included.  Currency and foreign transactions reporting, record keeping requirements and a provision requiring the posting of the charges for check cashing are included.

[1] Note that the NMLS internet-based licensing system is NOT limited to license applications and renewals for mortgage lenders, mortgage brokers and mortgage loan originators.  Rhode Island licenses and renewals for Check Cashers, Electronic Money Transfer Licenses, Lenders, Loan Brokers, Sales of Check Licenses, Small Loan Lenders and Third Party Loan Servicers are administered on the NMLS.  The NMLS is also utilized for Debt Collector, Debt Management Service and Exempt Company registrations in Rhode Island.

RI Banking Reg 6 6-11-15

RI Banking Reg 8 6-11-15


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