Current through Register Vol. 50, No. 9, March 1, 2024
RELATES TO:
KRS
12.357, Subchapter 286.4, 286.8-010,
286.8-020, 286.8-030(1), 286.8-032, 286.8-034, 286.8-036, 286.8-060, 286.8-070,
286.8-080, 286.8-090(1), 286.8-140(2)(b), 286.8-255, 286.8-260, 286.8-290,
286.9-010, 286.9-020, 286.9-030, 286.9-040, 286.9-050, 286.9-060, 286.9-071,
286.9-073, 286.9-080
NECESSITY, FUNCTION, AND CONFORMITY:
KRS
286.4-610(1) authorizes the
commissioner to promulgate administrative regulations for the proper conduct of
the consumer loan businesses licensed under KRS Chapter 286.4.
KRS
286.4-430(1) authorizes the
commissioner to establish the form of the application for a license under KRS
Chapter 286.4. KRS
286.8-140(1) authorizes the
commissioner to promulgate administrative regulations necessary to accomplish
the basic purposes of KRS Chapter 286.8.
KRS
286.9-090(1) authorizes the
commissioner to promulgate reasonable administrative regulations for the
enforcement of KRS Chapter 286.9.
KRS
286.9-050 and
286.9-060 authorize the
commissioner to establish the form and materials required to apply for a
license under KRS Chapter 286.9. This administrative regulation establishes
licensing and registration requirements for consumer loan companies, check
cashing and deferred deposit service businesses, mortgage loan companies,
mortgage loan brokers, mortgage loan branches, and mortgage loan originators,
and procedures for using the Nationwide Multistate Licensing System (NMLS) and
Registry.
Section 1. Definitions.
(1) "Audited financial statement" means a
financial statement prepared by a certified public accountant in accordance
with generally accepted accounting principles.
(2) "Nationwide Multistate Licensing System
and Registry" is defined by
KRS
286.8-010(20).
(3) "Surety bond" means a bond provided by a
surety company authorized to conduct business in Kentucky.
Section 2. Consumer Loan Company Licensure. A
person applying for licensure as a consumer loan company shall submit:
(1) A completed NMLS Company Form available
online at
http://mortgage.nationwidelicensingsystem.org;
(2) A completed NMLS Individual Form
available online at
http://mortgage.nationwidelicensingsystem.org;
(3) A Form CL-4, State License Confirmation
Form completed by each state or jurisdiction in which the person is licensed or
registered if the person applying for licensure as a consumer loan company is
licensed or registered in any other state or jurisdiction to operate a business
making loans of $15,000 or less at the time of application;
(4) The nonrefundable application
investigation fee established in
KRS
286.4-440(1); and
(5) The annual license fee established in
KRS
286.4-440(2).
Section 3. Check Cashing and Deferred Deposit
Service Business Licensure.
(1) Initial
Application. A person applying for an initial check cashing license shall
submit:
(a) A completed NMLS Company Form
available online at
http://mortgage.nationwidelicensingsystem.org;
(b) A completed NMLS Individual Form
available online at
http://mortgage.nationwidelicensingsystem.org
for each control person designated on the "direct owners and executive
officers" section of the NMLS Company Form;
(c) The nonrefundable investigation fee
established in KRS
286.9-060(1);
(d) Form COMB-1, State License Confirmation
Form for Check Cashing License or Deferred Deposit Service Business License,
incorporated by reference in
808 KAR 9:050, if the applicant
has a license, registration, or claim of exemption related to the financial
services industry in any other state;
(e) An audited financial statement, which
shall include a balance sheet, income statement, statement of cash flows, and
all relevant notes, dated as of the previous year end. If the applicant is a
startup company, an initial statement of condition and a proforma income
statement shall be submitted instead of the income statement and statement of
cash flows;
(f) Evidence that the
applicant has complied or will comply with all workers' compensation and
unemployment compensation laws of Kentucky; and
(g) One (1) of the following, which shall be
deposited with and made payable to the commissioner:
1. An irrevocable letter of credit in an
amount required by KRS
286.9-040(1)(a);
2. An Electronic Surety Bond, available
online at
http://mortgage.nationwidelicensingsystem.org,
in an amount required by
KRS
286.9-040(1)(b). The name of
the principal insured on the bond shall match exactly the full legal name of
the applicant; or
3. Form COMB-3,
Escrow Agreement for Check Cashing License or Deferred Deposit Service Business
License, incorporated by reference in
808 KAR 9:050, accompanied by:
a. Evidence that the applicant has
established an account in a federally insured financial institution in Kentucky
and has deposited money of the United States in an amount required by
KRS
286.9-040(1)(c);
or
b. A savings certificate of a
federally insured financial institution in Kentucky established by the
applicant that is not available for withdrawal except by direct order of the
commissioner in an amount required by
KRS
286.9-040(1)(d).
(2) Renewal Application. A licensee applying
for renewal of a check cashing license or deferred deposit service business
license pursuant to KRS
286.9-080(1) shall complete
and submit the following on or before December 31 of each year:
(a) The required updates and attestation
ensuring the accuracy of all information in the person's record maintained by
the
http://mortgage.nationwidelicensingsystem.org;
and
(b) The nonrefundable license
fee established in KRS
286.9-080(1).
(3) Reinstatement Application. A licensee
applying for reinstatement of a check cashing license or deferred deposit
service business license pursuant to
KRS
286.9-080(2) shall complete
and submit the following prior to January 31 of the year that the renewal
application was due:
(a) The required updates
and attestation ensuring the accuracy of all information in the person's record
maintained by the
http://mortgage.nationwidelicensingsystem.org;
(b) The nonrefundable license fee established
in KRS
286.9-080(1); and
(c) The nonrefundable late fee and
reinstatement fee established in
KRS
286.9-080(2).
Section 4. Licensure as a Mortgage Loan
Company or Mortgage Loan Broker.
(1) Initial
Application. A person applying for licensure as a mortgage loan company or
mortgage loan broker shall submit:
(a) A
completed NMLS Company Form as available online at
http://mortgage.nationwidelicensingsystem.org;
(b) A completed NMLS Individual Form as
available online at
http://mortgage.nationwidelicensingsystem.org
for each control person designated on the "direct owners and executive
officers" section of the NMLS Company Form;
(c) An audited financial statement, which
includes a balance sheet, income statement, statement of cash flows, and all
relevant notes, dated the previous year end to the date of submission of the
NMLS Company Form. If the applicant is a startup company, an initial statement
of condition and a proforma income statement shall be submitted instead of the
income statement and statement of cash flows;
(d) An Electronic Surety Bond available
online at
http://mortgage.nationwidelicensingsystem.org
in an amount not less than the amount required by
KRS
286.8-060(1). The name of
the principal insured on the bond shall match exactly the full legal name of
the applicant;
(e) A certified copy
of:
1. If a corporation, the Corporate
Charter or Articles of Incorporation and Bylaws;
2. If a limited liability company, the
Articles of Organization and Operating Agreement; or
3. If a partnership of any form, the
Partnership Agreement;
(f) A Certificate of Authority or a
Certificate of Good Standing issued by the Kentucky Secretary of State dated
not more than sixty (60) days prior to the submission of the NMLS Company
Form;
(g) If applicant will be
operating in Kentucky under a name other than its legal name, a file-stamped
copy of the Certificate of Assumed Business Name issued by the Kentucky
Secretary of State;
(h) If required
to do so by KRS
286.8-032(6), documentation
that a managing principal designated by applicant has successfully completed
the educational training established in
KRS
286.8-260(1);
(i) If the principal office will be located
in a residence, a completed Form ML-6, Disclosure of Location at a Residence
Form; and
(j) The fees established
in KRS
286.8-034(1).
(2) Renewal Application.
(a) A person applying for renewal of a
mortgage loan company or mortgage loan broker license prior to December 1 shall
submit:
1. The required updates and
attestation ensuring that all information in the person's record maintained by
the NMLS operated by the State Regulatory Registry, LLC is correct as available
online at
http://mortgage.nationwidelicensingsystem.org;
and
2. The fee established in
KRS
286.8-034(3).
(b) A person applying for renewal of a
mortgage loan company or mortgage loan broker license through reinstatement
shall submit all materials required by paragraph (a) of this subsection and the
reinstatement fee required by
KRS
286.8-034(6).
(c) The fee established in
KRS
286.8-034(3) shall be
calculated based on data filed by the licensee on the Mortgage Call Reports
(MCRs), which shall be submitted through the NMLS, for the twelve (12) month
period ending September 30. The licensee shall submit the MCR no later than
November 1st of each year. The department shall apply the criteria established
in subparagraphs 1. through 3. of this paragraph if the licensee has not
submitted four (4) quarters of data.
1. If a
licensee has not held a license with the department for twelve (12) months, the
fee shall be based on the volume of loans originated and closed in Kentucky
during the time frame the licensee has held a license in Kentucky.
2. If a licensee does not file the third
quarter MCR, which contains data as of September 30, on or before November 1,
the department shall:
a. Estimate the twelve
(12) month loan volume based on previously filed MCR reports by annualizing the
loan volume contained in the prior three (3) quarterly MCR report;
b. Recalculate the actual renewal fee owed
once the third quarter MCR is filed; and
c. Send a subsequent fee bill to the licensee
for any renewal fee owed based on the actual loan volume reported on the MCR
data versus the amounted estimated by the department using the annualized loan
volume in established in clause a. of this subparagraph.
3. Pursuant to
KRS
286.8-044, the commissioner may pursue an
administrative action against any licensee that:
a. Fails to file a timely and accurate MCR;
or
b. Submits inaccurate filings of
MCR reports resulting in insufficient renewal fee payments.
(3) Change of
address, name, control, or agent for service.
(a) A licensee changing its address, name, or
agent for service of process shall notify the commissioner at least:
1. Ten (10) days prior to the change of
address or name; and
2. Five (5)
days prior to the change of agent for service of process.
(b) A licensee that wants to engage in a
transaction resulting in a change of control shall notify the commissioner at
least thirty (30) days in advance with the information necessary for the
commissioner to determine if the requirements of KRS Chapter 286.8 will be
satisfied upon the change of control. The commissioner shall notify the
licensee if the request is approved or denied within thirty (30) days of a
completed submission of the notice of change of control.
(c) A licensee changing its address, name,
control, or agent for service of process shall update this information in NMLS
within the same time periods established in this section.
Section 5. Registration of a
Mortgage Loan Company Branch.
(1) A mortgage
loan company branch shall not be approved unless it is controlled, managed, and
supervised by the applicant's principal office.
(2)
(a) A
person applying for registration of a branch shall submit:
1. A completed NMLS Branch Form as available
online at
http://mortgage.nationwidelicensingsystem.org;
2. A copy of the lease or deed for the
branch;
3. A completed Form ML-7,
Branch Authorization Form; and
4.
If the branch will be located in a residence, a Form ML-6, Disclosure of
Location at a Residence Form.
(b) An additional fee for branch registration
shall not be required by the department.
(3) A person applying for renewal of a branch
registration through reinstatement shall submit all materials required by
Section 4(2)(a)1. of this administrative regulation.
Section 6. Registration of a Mortgage Loan
Originator.
(1) Initial registration. A person
applying for registration as a mortgage loan originator pursuant to
KRS
286.8-255(2) shall submit:
(a) A completed NMLS Individual Form as
available online at
http://mortgage.nationwidelicensingsystem.org;
(b) A request to submit a Federal Bureau of
Investigation background records check and a credit report to the
department;
(c) Certification that
applicant has successfully completed all education and testing required by
KRS
286.8-255; and
(d) The fee established in
KRS
286.8-255(2)(b).
(2) Renewal registration.
(a) A person applying for renewal of a
mortgage loan originator registration pursuant to
KRS
286.8-255(4) shall submit:
1. The required updates and attestation
ensuring that all information in the person's record maintained by the NMLS
operated by the State Regulatory Registry, LLC is correct as available online
at
http://mortgage.nationwidelicensingsystem.org;
2. A request to submit a Federal Bureau of
Investigation background records check and a credit report to the
department;
3. Certification that
applicant has successfully completed all education and testing required by
KRS
286.8-255 and
286.8-260; and
4. The fee established in
KRS
286.8-255(4).
(b) A person applying for renewal of a
mortgage loan originator registration through reinstatement shall submit all
materials required by paragraph (a) of this subsection and the reinstatement
fee required by KRS
286.8-255(5)(c).
(3) The cost of any Federal Bureau of
Investigation background records check or credit report required by this
section shall be borne by the applicant.
Section 7. Mortgage Loan Originator Bond
Requirements. In addition to the requirements established in this
administrative regulation, an applicant applying for registration, renewal, or
renewal through reinstatement as a mortgage loan originator shall provide proof
that the mortgage loan originator holds or is covered by a bond. If the
mortgage loan originator is procuring his or her own bond, the applicant shall
submit an Electronic Surety Bond available online at
http://mortgage.nationwidelicensingsystem.org
in an amount determined by annual loan origination as follows:
(1) If the annual loan volume of the
applicant is less than $10,000,000, the surety bond shall be in an amount not
less than $15,000; or
(2) If the
annual loan volume of the applicant is $10,000,000 or more, the surety bond
shall be in an amount not less than $20,000.
Section 8. Factors Used to Determine Approval
or Disapproval of an Application.
(1) A
mortgage loan originator applicant seeking registration, renewal, or renewal
through reinstatement under
KRS
286.8-255 shall demonstrate the financial
responsibility, character, and general fitness to command the confidence of the
community and to warrant a determination that the applicant will operate
honestly, fairly, lawfully, and efficiently within the purposes of KRS
Subchapters 286.8 and 286.9.
(2) An
applicant shall authorize the commissioner to obtain a credit report containing
a credit score to aid in making this determination.
(3) The applicant shall have met the
requirement of financial responsibility if he or she possessed a credit score
of 600 or higher at the time of application. If the applicant possesses a
credit score of less than 600, the commissioner shall review the applicant's
credit report for the following information to make this determination:
(a) Any outstanding judgments, excluding
judgments arising solely from medical expenses for the applicant or an
immediate family member;
(b)
Outstanding tax liens or other governmental liens, if any;
(c) Foreclosures occurring within five (5)
years of the date of application or renewal, if any;
(d) Bankruptcies occurring within five (5)
years of the date of application or renewal, if any; and
(e) Delinquent accounts occurring within five
(5) years of the date of application or renewal, if any.
(4) The factors of character and general
fitness shall be determined by the commissioner after review of all relevant
information, including information shown on the applicant's credit report, the
applicant's criminal history, and any administrative or civil actions taken
against the applicant.
Section
9. Electronic Submission of Filings and Fees through the NMLS
Operated by the State Regulatory Registry, LLC.
(1) A person applying for licensure,
registration, renewal, or renewal through reinstatement pursuant to Sections 2
through 7 of this administrative regulation shall electronically submit the
following with the State Regulatory Registry, LLC, at
http://www.stateregulatoryregistry.org/NMLS,
as part of the NMLS:
(a) All forms, updates,
attestations, and requests required by Sections 2 through 7 of this
administrative regulation, as applicable;
(b) Fingerprints and any other information or
authorizations necessary to obtain the background records checks and credit
reports established in Section 6 of this administrative regulation;
and
(c) All fees established in
this administrative regulation, as applicable.
(2) All forms, documentation, fees, or
information that are not available for electronic submission directly through
the nationwide Multistate Licensing System and Registry operated by the State
Regulatory Registry, LLC shall be submitted directly to the
department.
(3) Fees assessed by
the State Regulatory Registry, LLC, to process the electronic submissions
established in subsection (1) of this section shall be borne by the
applicant.
Section 10.
Abandoned Applications. If an applicant fails to provide or respond to a
request for additional information from the department within ninety (90) days,
the application shall be deemed incomplete and abandoned. An applicant seeking
licensing or registration after its application has been abandoned shall
reapply and resubmit all required information.
Section 11. Inactive Status for Members of
the Armed Forces.
(1) In addition to the
provisions of KRS
12.357, a member of the Armed Forces who
holds a license or registration in good standing under this administrative
regulation may request that the commissioner place the license or registration
in inactive status during the period of time that the member is mobilized or
deployed, and for a period of six (6) months following termination of the
mobilization or deployment.
(2) To
request inactive status for a license or registration, a person shall complete
Form ML-8, Request for Inactive Status Due to Military Service, and submit it
along with proof of mobilization or deployment to the commissioner for
approval.
(3) A person whose
license or registration has been placed in inactive status shall not engage in
the activity requiring the license or registration under KRS Subchapter
286.8.
(4) The fee established in
KRS
286.8-255(4) shall not
accrue against a person whose license or registration is in inactive
status.
(5) A person may reactivate
an inactive license or registration by submitting a written request to the
commissioner and attaching proof of compliance with
KRS
286.8-255(10) and
286.8-260, if applicable. Upon
receipt of a written request and confirmation of compliance with
KRS
286.8-255(10) and
286.8-260, the commissioner
shall issue an approval for reactivation.
Section 12. Incorporation by Reference.
(1) The following material is incorporated by
reference:
(a) Form CL-4, "State License
Confirmation Form", updated December 2019;
(b) Form ML-6, "Disclosure of Location at a
Residence Form", updated December 2019;
(c) Form ML-7, "Branch Authorization Form",
updated December 2019; and
(d) Form
ML-8, "Request for Inactive Status Due to Military Service", updated December
2019.
(2) This material
may be inspected, copied, or obtained, subject to applicable copyright law, at
the Department of Financial Institutions, 500 Mero St 2SW19, Frankfort,
Kentucky 40601, Monday through Friday, 8 a.m. to 5 p.m. This material may also
be obtained from the department's Web site at http://www.kfi.ky.gov.
STATUTORY AUTHORITY:
KRS
286.4-420,
286.4-425,
286.4-430,
286.4-440,
286.4-450(1)(b),
286.4-480,
286.4-610(1),
286.8-032,
286.8-034,
286.8-100,
286.8-140(1),
(4),
286.8-255,
286.8-285,
286.9-050,
286.9-060,
286.9-070,
286.9-090(1),
286.9-107