JOINT FAVORABLE REPORT
AN ACT CONCERNING MORTGAGE CORRESPONDENT LENDERS, THE SMALL LOAN ACT, VIRTUAL CURRENCIES AND SECURITY FREEZES ON CONSUMER CREDIT REPORTS.
Joint Favorable Substitute
SPONSORS OF BILL:
Banking committee; Department of Banking
REASONS FOR BILL:
The bill prohibits consumer credit reporting agencies from charging certain protected persons, such as victims of identity theft and senior citizens, fees related to security freezes.
The substitute language embodies several other bills from the Department of Banking. These are as follows:
● A law enacted last year requires licensed mortgage correspondent lenders to obtain an additional mortgage servicer license as of January 1, 2015 if they act as mortgage servicers during the 90-day period they are permitted to hold the residential mortgage loans that they have funded. They are also required to obtain additional bonds and insurance coverage.
These requirements were unintended, and the Department intends to take a "no action" position on the January 1, 2015 licensing requirement (and attendant bonding and insurance requirements) for duly licensed mortgage correspondent lenders when they act as mortgage servicers during the 90 day holding period.
Accordingly, this bill proposes to exempt licensed mortgage correspondent lenders from an additional licensing requirement when they act as mortgage servicers during the 90 day holding period, while continuing to hold them to the other requirements imposed by Public Act 14-89. (Originally SB 920)
● The banking industry has also expressed increased interest in engaging in virtual currencies, such as bitcoin, Ripple, Litecoin, Dogecoin, etc. This has presented a need to amend current money transmission statutes to respond to the many issues that have arisen in the context of these newly developing currencies. (Originally HB 6802).
● The bill also makes it a violation for someone to assist in conduct prohibited by the Small Loan Act. Previously, Connecticut courts have held that loans made in violation of the Small Loan Act are void and the bill codifies this principle in statute. (Originally SB 923).
RESPONSE FROM ADMINISTRATION/AGENCY:
Bruce Adams, Acting Commissioner, Department of Banking
The Department of Banking is in favor of the language exempting duly licensed mortgage correspondent lenders from having to receive an additional mortgage servicer license. The additional license also requires them to meet additional insurance/bonding requirements. These lenders are performing limited servicing on these loans and the additional license is unnecessary.
The Department strongly supports language making small, unsecured loans (known euphemistically as pay day loans, short term loans, or small dollar loans) null and void. The language allows the Department through effective enforcement action to recover the entire value of the loan and interest from loans that are made in violation of the Small Loan Act instead of just the interest and fees. The Department also supports the language making it a violation to assist or aid and abet the servicing of such a loan.
The Department of Banking also supports the language defining “Virtual Currency”. The Department feels that this is necessary in response to an uptick in the number of Virtual Currencies. They also feel that the definition will allow them to adapt to changing technology and properly regulate and certify a rapidly developing area.
The Department strongly supports the language prohibiting consumer credit reporting agencies from charging certain vulnerable groups for credit freezes. The Department notes that Connecticut is one of only 3 states that allow consumer credit reporting agencies to charge victims of identity theft for credit freezes. They also note that other states extend that protection to other groups like minors, senior citizens, persons under guardianship, and victims of domestic abuse.
NATURE AND SOURCES OF SUPPORT:
None expressed (For Substitute HB 6800)
NATURE AND SOURCES OF OPPOSITION:
Jeff Gentes, Attorney, CT Fair Housing Center
The CT Fair Housing Center opposes the language originally in SB 920 amending the statutes governing mortgage servicer licensing to allow for correspondent lenders who may transfer a loan within 90 days to avoid licensing fees. Consumers need to be protected because these lenders have little at stake and helped contribute to the loan origination issues and subprime crisis of the last decade
Reported by: Sara LeMaster