HB-5324, As Passed House, March 21, 2006
October 18, 2005, Introduced by Reps. Huizenga, Lemmons, III, McConico and Tobocman and referred to the Committee on Banking and Financial Services.
A bill to amend 1988 PA 161, entitled
"Consumer financial services act,"
by amending sections 2, 5, 6, and 10g (MCL 487.2052, 487.2055,
487.2056, and 487.2060g), section 2 as amended and section 10g as
added by 2002 PA 390 and sections 5 and 6 as amended by 1999 PA
275.
THE PEOPLE OF THE STATE OF MICHIGAN ENACT:
Sec. 2. As used in this act:
(a) "Applicant" means a person that has applied to the
commissioner to be licensed under this act.
(b) "Bureau" means the office of financial and insurance
services
of the department of consumer and industry services
labor and economic growth.
(c) "Business activity" means any activity regulated by any of
the
financial licensing acts. identified under subdivision (d).
(d) "Class I license" means a license issued under this act
that authorizes the licensee to engage in all of the activities
permitted
under the regulatory loan act of 1963, 1939 PA 21, MCL
493.1
to 493.25, the secondary mortgage loan act, 1981 PA 125, MCL
493.51
to 493.81, the motor vehicle sales finance act, 1950 (Ex
Sess)
PA 27, MCL 492.101 to 492.141, 1984 PA 379, MCL 493.101 to
493.114,
the sale of checks act, 1960 PA 136, MCL 487.901 to
487.916,
or the mortgage brokers, lenders, and servicers licensing
act,
1987 PA 173, MCL 445.1651 to 445.1684 any of the financial
licensing acts.
(e) "Class II license" means a license issued under this act
that authorizes all of the activities permitted under a class I
license except for activities permitted under the sale of checks
act, 1960 PA 136, MCL 487.901 to 487.916, loan servicing activities
under the secondary mortgage loan act, 1981 PA 125, MCL 493.51 to
493.81, or the mortgage brokers, lenders, and servicers licensing
act, 1987 PA 173, MCL 445.1651 to 445.1684.
(f) "Commissioner" means the commissioner of the office of
financial and insurance services or an authorized representative of
the commissioner.
(g) "Control person" means a director or executive officer of
a licensee or a person who has the authority to participate in the
direction, directly or indirectly through 1 or more other persons,
of the management or policies of a licensee.
(h) "Depository financial institution" means a bank, savings
and loan association, savings bank, or credit union organized under
the laws of this state, another state, the District of Columbia,
the United States, or a territory or protectorate of the United
States, whose deposits are insured by an agency of the federal
government.
(i) "Executive officer" means an officer, member, or partner
of a licensee, including chief executive officer, president, vice
president, chief financial officer, controller, compliance officer,
or any other similar position.
(j)
"Financial licensing acts" means the acts listed in
subdivision
(d) this act; the regulatory loan act, 1939 PA 21, MCL
493.1 to 493.24; the secondary mortgage loan act, 1981 PA 125, MCL
493.51 to 493.81; the motor vehicle sales finance act, 1950 (Ex
Sess) PA 27, MCL 492.101 to 492.141; 1984 PA 379, MCL 493.101 to
493.114; the sale of checks act, 1960 PA 136, MCL 487.901 to
487.916; the money transmission services act, MCL 487.1001 to
487.1048; and the mortgage brokers, lenders, and servicers
licensing act, 1987 PA 173, MCL 445.1651 to 445.1684.
(k) "Licensee" means a person that is licensed under this act.
(l) "Loan servicing activities" means the collection or
remittance for a lender, noteowner, noteholder, or the licensee's
own account of 4 or more installment payments of the principal,
interest, or an amount placed in escrow under a mortgage servicing
agreement or a mortgage loan subject to the mortgage brokers,
lenders, and servicers licensing act, 1987 PA 173, MCL 445.1651 to
445.1684, or a mortgage servicing agreement or secondary mortgage
loan subject to the secondary mortgage loan act, 1981 PA 125, MCL
493.51 to 493.81, or an agreement with the mortgagor.
(m) "Person" means an individual, corporation, partnership,
association, limited liability company, or any other legal entity.
Sec. 5. (1) An application for a license shall be accompanied
by all of the following:
(a) An annual operating fee as established by the commissioner
under section 11.
(b)
An application fee as provided by in
section 11. The
application fee is not refundable.
(c) Financial statements, reasonably satisfactory to the
commissioner, showing that the applicant's net worth exceeds
$100,000.00
for applicants an applicant for a class I
license; ,
$50,000.00
for applicants an applicant for a class II
license; ,
and
$1,000,000.00 for applicants an applicant that intend
intends to engage in business activity governed by 1984 PA 379, MCL
493.101 to 493.114; or $100,000.00 plus an additional $25,000.00
for each location or authorized delegate, as applicable, or
$1,000,000.00, whichever is less, for an applicant that intends to
provide money transmission services as defined in section 2 of the
money transmission services act. A licensee shall have and continue
to maintain the required net worth while engaging in the business
activities authorized for licensing under this act. The
commissioner may by order establish a higher net worth requirement
for new class I licensees to assure safe and sound operation of the
activities.
(2) Net worth under subsection (1)(c) shall be determined at
the conclusion of the fiscal year of the licensee immediately
preceding the date an application for a license is submitted to the
commissioner or, for corporations not in existence as of the
previous year end, the immediately preceding month end. Net worth
shall be disclosed on a form prescribed by the commissioner or on a
form prepared or reviewed by a certified public accountant and
shall be computed in accordance with generally accepted accounting
principles. The following assets shall be excluded in the
computation of net worth:
(a) That portion of an applicant's assets pledged to secure
obligations of any person other than the applicant.
(b) Receivables from officers or, in the case of a corporate
applicant other than a publicly traded company, stockholders of the
applicant or persons in which the applicant's officers or
stockholders have an interest, except that construction loan
receivables secured by mortgages from related companies are not so
excluded.
(c) An amount in excess of the lower of the cost or market
value of mortgage loans in foreclosure or real property acquired
through foreclosure.
(d) An investment shown on the balance sheet in joint
ventures, subsidiaries, or affiliates that is greater than the
market value of the investment.
(e) Goodwill or value placed on insurance renewals or property
management contract renewals or other similar intangible value.
(f) Organization costs.
Sec.
6. (1) An applicant for a license shall
file furnish a
surety
bond or letter of credit in an amount not less than to
secure its obligations under this act to the commissioner. Except
as provided in this subsection, the principal amount of a surety
bond or letter of credit shall be at least $500,000.00. If the
applicant intends to provide money transmission services as defined
in section 2 of the money transmission services act, the applicant
shall file a surety bond that is in a principal amount as
determined under section 13(5)(b) of the money transmission
services act for a licensee under that act.
(2) The
A surety bond described
in subsection (1) shall run
be payable to the commissioner for the benefit of the people of the
state of Michigan for the use of, and may be sued on by, the state.
The
A surety bond or letter of credit shall remain for the
duration of the licensure period.
(3) The
A surety bond or letter of credit required under
this
section subsection (1) shall be in a form satisfactory to the
commissioner and payable upon demand by the commissioner if he or
she determines that the licensee is not conducting its activities
as required by this act and all of the rules promulgated under this
act, and has failed to pay all money that becomes due to a person
who is an installment buyer under the motor vehicle sales finance
act, 1950 (Ex Sess) PA 27, MCL 492.101 to 492.141, Michigan
residents who purchase checks under the sale of checks act, 1960 PA
136, MCL 487.901 to 487.916, Michigan residents who purchase money
transmission services as defined in section 2 of the money
transmission services act, loan applicants, loan servicing
customers, and borrowers under the secondary mortgage loan act,
1981 PA 125, MCL 493.51 to 493.81, or the mortgage brokers,
lenders, and servicers licensing act, 1987 PA 173, MCL 445.1651 to
445.1684, and the commissioner.
(4) The commissioner shall prioritize and pay claims against a
bond or letter of credit filed with the commissioner under this
section in a manner that, in the commissioner's discretion, best
protects the public interest.
(5) Claims described in subsection (4) may only be filed
against a licensee's bond or letter of credit by the commissioner
on behalf of the bureau and of individuals having claims and who
are, as applicable, the licensee's loan applicants, loan servicing
customers, and borrowers under the secondary mortgage loan act,
1981 PA 125, MCL 493.51 to 493.81, or the mortgage brokers,
lenders, and servicers licensing act, 1987 PA 173, MCL 445.1651 to
445.1684, Michigan residents who purchase checks under the sale of
checks act, 1960 PA 136, MCL 487.901 to 487.916, Michigan residents
who purchase money transmission services as defined in section 2 of
the money transmission services act, or persons who are installment
buyers under the motor vehicle sales finance act, 1950 (Ex Sess) PA
27, MCL 492.101 to 492.141.
(6) Claims filed with the commissioner against a bond or
letter of credit by a loan applicant, loan servicing customer, or
borrower under the secondary mortgage loan act, 1981 PA 125, MCL
493.51 to 493.81, or the mortgage brokers, lenders, and servicers
licensing act, 1987 PA 173, MCL 445.1651 to 445.1684, shall
involve, as applicable, only a mortgage loan, mortgage loan
application, secondary mortgage loan, or secondary mortgage loan
application secured or to be secured by real property used as a
dwelling located in this state. The amount of the claim shall not
exceed actual fees paid by the claimant to the licensee in
connection with a loan application, overcharges of principal and
interest, and excess escrow collections by the licensee.
(7) Before payment of any claim filed under this section,
unless the commissioner waives, in whole or in part, the right to
priority of payment, the commissioner shall be paid in full for
fines and fees due to the bureau and for expenses incurred in
investigating the licensee and in distributing the proceeds of the
bond or letter of credit. In the event that valid claims exceed the
amount of the bond or letter of credit, each claimant except the
commissioner shall
be is entitled only to a pro rata amount of
his or her valid claim.
Sec. 10g. (1) If in the opinion of the commissioner a person
has engaged in fraud or money laundering, the commissioner may
serve upon that person a written notice of intention to prohibit
that person from being employed by, an agent of, or control person
of a licensee under this act or a licensee or registrant under a
financial
licensing act. For purposes of this section, "fraud"
shall
include actionable fraud, actual or constructive fraud,
criminal
fraud, extrinsic or intrinsic fraud, fraud in the
execution,
in the inducement, in fact, or in law, or any other form
of
fraud.
(2) A notice issued under subsection (1) shall contain a
statement of the facts supporting the prohibition and, except as
provided under subsection (7), set a hearing to be held not more
than 60 days after the date of the notice. If the person does not
appear at the hearing, he or she is considered to have consented to
the issuance of an order in accordance with the notice.
(3) If after a hearing held under subsection (2) the
commissioner finds that any of the grounds specified in the notice
have been established, the commissioner may issue an order of
suspension or prohibition from being a licensee or registrant or
from being employed by, an agent of, or control person of any
licensee under this act or a licensee or registrant under a
financial licensing act.
(4) An order issued under subsection (2) or (3) is effective
upon service upon the person. The commissioner shall also serve a
copy of the order upon the licensee of which the person is an
employee, agent, or control person. The order remains in effect
until it is stayed, modified, terminated, or set aside by the
commissioner or a reviewing court.
(5) After 5 years from the date of an order issued under
subsection (2) or (3), the person subject to the order may apply to
the commissioner to terminate the order.
(6) If the commissioner considers that a person served a
notice under subsection (1) poses an imminent threat of financial
loss to applicants for loans, mortgage loans, secondary mortgage
loans, credit card arrangements, or installment sales credit,
borrowers on loans, obligors on installment sale contracts, loan
servicing customers, purchasers of mortgage loans or interests in
mortgage
loans, or purchasers of checks from a licensee money
transmission services as defined in section 2 of the money
transmission services act, the commissioner may serve upon the
person an order of suspension from being employed by, an agent of,
or control person of any licensee. The suspension is effective on
the date the order is issued and, unless stayed by a court, remains
in effect pending the completion of a review as provided under this
section and the commissioner has dismissed the charges specified in
the order.
(7) Unless otherwise agreed to by the commissioner and the
person served with an order issued under subsection (6), the
hearing required under subsection (2) to review the suspension
shall be held not earlier than 5 days or later than 20 days after
the date of the notice.
(8)
If a person is convicted of a felony crime
involving
fraud, dishonesty, money laundering, or breach of trust, the
commissioner may issue an order suspending or prohibiting that
person from being a licensee and from being employed by, an agent
of, or control person of any licensee under this act or a licensee
or registrant under a financial licensing act. After 5 years from
the date of the order, the person subject to the order may apply to
the commissioner to terminate the order.
(9) The commissioner shall mail a copy of any notice or order
issued under this section to the licensee of which the person
subject to the notice or order is an employee, agent, or control
person.
(10) As used in this section:
(a) "Fraud" includes actionable fraud, actual or constructive
fraud, criminal fraud, extrinsic or intrinsic fraud, fraud in the
execution, in the inducement, in fact, or in law, or any other form
of fraud.
(b) "Money laundering" means conduct by 1 or more persons that
conceals the existence, illegal source, or illegal application of
income and then disguises that income to make it appear legitimate.
Money laundering includes, but is not limited to, conduct that
violates any state or federal law that imposes a criminal penalty
for money laundering.
Enacting section 1. This amendatory act does not take effect
unless Senate Bill No.____ or House Bill No. 5328(request no.
03434'05) of the 93rd Legislature is enacted into law.