Kansas Passes Law Updating Rules for Mortgage Lenders, Credit Services Organizations, Money Transmitters, and State Chartered Banks

Kansas recently passed Senate Bill 20, which goes into effect July 1, 2017, that makes a number of changes and tweaks affecting state chartered banks and trust companies, licensed mortgage companies, licensed credit services organizations, and licensed money transmitters.

Specifically, the bill amends the Kansas Money Transmitter Act, the Kansas Mortgage Business Act, and the Kansas Credit Services Organization Act.

The changes to the Kansas Mortgage Business Act provide that:

1. An application for a Mortgage Company License will be considered abandoned if the applicant fails to complete the application within 60 days after the Commissioner provides the applicant with written notice of the incomplete application.
2. For purposes of the net worth requirement, mortgage company licensees may use an accounting method other than GAAP. However, should the applicant or licensee choose a different accounting system other than generally accepted accounting principles, the burden to demonstrate that the accounting principles meet or exceed the generally accepted accounting principles is on the applicant or licensee using the alternate accounting principle method.

The changes to the Kansas Credit Services Organization Act provide that:

1. The Commissioner may establish the application fee for a credit services organization license by regulation; previously, an application fee of $100 was established by statute.
2. If a licensed credit services organization cancels its surety bond, such termination does not affect the surety’s liability for violations of the Kansas Credit Services Organization Act occurring prior to the effective date of cancellation, and principal and surety will remain liable for a period of two years from the date of any action or inaction of the principal that gives rise to a claim under the bond.
3. All solicitations and published advertisements concerning a credit services organization directed at Kansas residents, including those on the internet or by other electronic means, must contain the name and license number of the licensee on record with the Commissioner. Each licensee must maintain a record of all solicitations or advertisements for a period of 36 months.  For this requirement, ‘‘advertising’’ does not include business cards or promotional items. Furthermore, solicitations and advertisements may not contain false, misleading, or deceptive information.  Additionally, a licensee may not conduct credit services organization business using any name other than the name or names stated on its license.
4. The annual report filed by licensed credit services organization are confidential and may only be published in composite form.
5. Licensed credit services organizations must notify the regulator within 15 days after (a) the addition or loss of any owner, officer, partner, or director, or (b) a change in the licensee’s name or legal entity status.
6. Under current law, a licensee must disburse any funds paid by or on behalf of a consumer to such consumer’s creditors within 10 calendar days after receiving such funds. As amended, such funds must be disbursed within 20 calendar days, or the latest date before the consumer would incur any fee, charge or penalty due to delay in payment.
7. Licensed credit services organizations may charge consumers: (a) a reasonable fee for providing, among other services, reverse mortgage counseling; (b) up to $30 one time for each insufficient payment; and (c) up to $5 to process a payment made by the consumer through electronic means, if authorized by the consumer, unless the consumer has agreed to make all scheduled payments by electronic means.
8. Examination reports and correspondence regarding such reports made by the Commissioner or the Commissioner’s designees are confidential.
9. The Commissioner is permitted to transition the credit services organization license over to the NMLS.
10. Any person who violates the Kansas Credit Services Organization Act is subject to heightened penalties if such violation is committed against elderly or disabled persons.
11. When a licensee engaging in debt management services prepares an initial budget plan for all of the consumer’s debt obligations, the licensee must include all outstanding debt obligations as listed on the consumer’s credit report as well as any debt obligations identified by the consumer.

The changes to the Kansas Money Transmitter Act add a definition of “service providers” for purposes of people who are exempt from the money transmitter licensing requirement.

The Kansas Banking Code is amended to provide that:

1. Banks are permitted to buy tax credits for certain historic structure rehabilitation expenditures, so long as the total amount of such tax credits do not exceed 25% of the bank’s capital stock.
2. A bank or trust company’s insurance tangible property must be insured against loss.
3. A bank’s investment in foreign bonds cannot exceed 1% of the bank’s capital stock and surplus.
4. Minutes must be made of each stockholders’ meeting of a bank or trust company. The minutes must show any action taken by the stockholders, including the election of all directors.

Senate Bill 20 is available here: http://www.kslegislature.org/li/b2017_18/measures/documents/sb20_enrolled.pdf.