Recently, Wisconsin has witnessed the introduction of several legislative bills that propose sweeping reforms in the governance of financial service providers. SB 668, AB 948, and SB 859 are among the prominent ones that have caught our attention.
A Game-Changer for Financial Services
Introduced in November 2023, SB 668 proposes a comprehensive overhaul of the state laws governing financial service providers. The bill’s key elements span across multiple areas, including the use of the NMLS, modernization of money transmission laws, and revisions in the regulation of financial entities like consumer lenders, collection agencies, payday lenders, and more.
Expanded Use of NMLS
The NMLS, currently limited to mortgage loan originators, mortgage bankers, and mortgage brokers, is set to see an extended utilization if SB 668 comes into effect. The bill requires the Wisconsin Department of Financial Institutions (DFI) to leverage the NMLS for the licensing and regulation of a variety of financial service providers, which will bring about standardization in the license renewal process and streamline operations for these providers.
Money Transmitters and Check Sellers
The bill proposes replacing current law provisions related to check sellers with new provisions concerning money transmitters. The new provisions, titled the Model Money Transmission Modernization Law, seek to implement the Conference of State Bank Supervisors’ Model Money Transmission Modernization Act. The proposed law incorporates common exceptions and defines crucial terms related to money transmission.
Consumer lenders are another group set for a significant regulatory overhaul if SB 668 is passed. The bill aims to redefine aspects of consumer lending, specifying activities that mandate licensing, eliminating certain provisions, and requiring lenders to maintain distinct records for loan transactions.
SB 668 also proposes several changes to the regulation of collection agencies, including modification of licensing requirements, expansion of the reasons for license suspension or revocation, and amendments to various operational provisions.
Protecting Student Loan Borrowers
AB 948 and SB 859, while identical in their provisions, represent Wisconsin’s efforts to better protect student loan borrowers. They propose the creation of the Office of the Student Loan Ombudsman and mandate licensing for student loan servicers.
The proposed Office of the Student Loan Ombudsman is designed to assist student borrowers, receive and resolve complaints, and ensure regulatory control over student loan servicers. Key responsibilities also include the submission of an annual report detailing the Office’s actions, effectiveness, and recommendations for improved regulatory control.
Licensing of Student Loan Servicers
The bills require student loan servicers to obtain a license from the proposed Office. The licensing process includes the submission of a written application, a financial statement, and criminal background information. Licenses would be valid until the close of business on September 30 of the first odd-numbered year following issuance and could be renewed for 24 months.
Protecting the Rights of Student Loan Borrowers
The measures propose a set of provisions to safeguard the interests of student loan borrowers. This includes stipulations on how servicers should handle nonconforming payments, requirements for new servicers in the event of a loan servicing transfer, and prohibitions on certain activities by servicers.
The proposed legislation in Wisconsin could significantly reshape the state’s financial services landscape. If passed, these bills will introduce new regulations and compliance requirements for financial service providers.