Recently, the Massachusetts Division of Banks announced amendments to 209 CMR 20.00 (Small Loans, Sales Finance Companies, and Insurance Premium Finance Companies), 209 CMR 32.00 (Truth in Lending), and 209 CMR 42.00 (Licensing of Mortgage Lenders and Mortgage Brokers), all of which took effect on October 10.

Small Loans, Sales Finance Companies, and Insurance Premium Finance Companies

The amended rule clarifies the Commissioner of Banking’s authority to review the financial responsibility for applicants seeking a license to make small loans, or to be a sales finance company or a premium finance agency. Under the amendments, rather than requiring a sworn statement that the applicant meets the applicable financial requirements, the commissioner may review “historical net losses, profitability, and any other information” deemed relevant. The new rule also eliminates a prior provision that allowed licensed mortgage lenders in good standing to obtain a small loan license for loans of $6,000 or less through a streamlined letter application process.

Additional changes include a new annual reporting requirement that each licensee file an annual report as requested by the commissioner, and a requirement that licensees notify the commissioner “as soon as” they become aware of a drop in net worth below the statutory minimum. The amendments also expand the list of “[s]ignificant [e]vents” that must be reported to the Division of Banks, including a new requirement to notify the Division of any proposed settlement or final judgment in a class action lawsuit “substantially related to the operation of the licensed business.”

Truth in Lending

The amendments to this rule clarify the variable-rate adjustment notice requirement applicable to depository institutions subject to M.G.L. c. 167E and M.G.L. c. 171. While compliance with the Federal Truth in Lending requirement at 12 C.F.R. 1026.20(c) for providing such notices generally constitutes compliance with the Massachusetts requirement at 209 CMR 32.20(3), the amended rule clarifies that such notices by the above-referenced depository institutions must be provided at least 60 but no earlier than 120 days before the first payment at the adjusted level is due.

Licensing of Mortgage Lenders and Mortgage Brokers

The primary substantive change made to this rule was an updated requirement that licensees disclose their NMLS unique identifier — as opposed to “the type and number of its license(s)” — in writing at the time a fee is paid, a mortgage loan application is provided to a client or mortgage loan applicant, or such application is presented to a client or mortgage loan applicant for signature.