NEWS: Last week, Gov. Tony Evers signed into law Senate Bill 668, now 2023 Wisconsin Act 267. The new law, which is quite lengthy, requires the Wisconsin Department of Financial Institutions (DFI) to implement an ABLE (Achieving a Better Life Experience) savings account program to help disabled people.
The new act also makes a long list of changes to the DFI’s regulation of non-depository financial service providers.
ABLE accounts
As explained by Disability Right Wisconsin, ABLE accounts can be used by those with disabilities to save and to pay for expenses like rent for accessible housing, assistive technology, or healthcare and caregiving costs. Importantly, account holders can work, earn, and save without losing access to certain benefits or services that are only available to those with low incomes and limited assets. For example, money in a person’s ABLE account will not affect their eligibility for programs like Social Security Insurance, Medicaid, and food stamps.
To qualify, account holders must meet the Social Security Administration’s strict definition of “disabled.” They also must have incurred their disability before age 26, but that will rise to age 46 on Jan. 1, 2026. Unlike a special needs trust, an ABLE account can be opened by the individual with the disability, giving them more control over the account funds.
Before Wisconsin’s new law was enacted, a Wisconsin resident could establish an ABLE account in another state, but Wisconsin did not have its own ABLE program. According to WisPolitics, Wisconsin had been the only state that had neither established an ABLE program nor tasked a public agency with helping residents open and use ABLE accounts.
The new law directs the DFI to implement an ABLE account program either independently or through a collaborative agreement with another state or states.
The League will alert credit unions when the DFI takes action that opens the door for these accounts to be opened in Wisconsin. For now, no details are available on how the accounts will work here.
You can learn more about ABLE accounts from the ABLE National Resource Center.
Other changes to financial services laws
The new law makes sweeping changes to the DFI’s regulation of non-depository financial service providers.
While these will not impact credit unions directly, they could apply to certain services that CUSOs might offer or to vendors that credit unions use.
The new act is lengthy and complicated, and the following material only summarizes certain aspects of it.
Expanded use of NMLS
The Act authorizes the DFI to require non-depository financial service providers to use the Nationwide Multistate Licensing System (NMLS) for the licensing, renewal, and other regulatory filings the DFI requires.
Current law limits the DFI’s use of NMLS to mortgage loan originators (MLOs), mortgage bankers and mortgage brokers. The change expands that list, requiring use of the NMLS system for consumer lenders, money transmitters, collection agencies, payday lenders, community currency exchanges (check cashers), sales finance companies (companies that acquire motor vehicle installment sales contracts or consumer leases originated by a motor vehicle dealer), adjustment service companies, and insurance premium companies. This is meant to standardize the license renewal process and renewal period for licensed financial services providers.
Depository institutions, including credit unions, are not subject to the “mortgage banker” or “mortgage broker” statutes. See Wis. Stats. §224.72(1r)(a). And credit unions are not considered “consumer lenders.” See Wis. Stats. §138.09(1a)(a).
As explained in The League’s ii Release No. B070, “Credit union MLOs are required to register (with the NMLS). Different, more extensive licensing and registration requirements apply to MLOs employed by CUSOs or other businesses that are not federally regulated financial institutions. Licensing involves education and testing requirements. Reg. G [a federal regulation] does not impose educational and testing requirements on MLOs employed by credit unions. Credit unions and their employees are exempt from Wisconsin MLO licensing requirements, since they are covered by Reg. G. Federal registration and state licensing and registration are both handled through the NMLS registry.”
Regulation of “money transmitters”
The Act repeals Chap. 217 in the Wisconsin Statutes, which governed the licensing and regulation of “sellers of checks.” In its place, Wisconsin has now adopted the Money Transmission Modernization Act, a uniform law (written by legal experts and designed to be adopted by the states), which governs the licensing and regulation of money transmitters.
The new law requires that a person be licensed by the DFI to act as a money transmitter (a term that does not include credit unions and other federally insured financial institutions).
“Money transmission” means 1) selling or issuing payment instruments to a person located in this state; 2) selling or issuing stored value to a person located in this state; or 3) receiving money for transmission from a person located in this state. A “payment instrument” is a written or electronic check, money order, traveler’s check, or other written or electronic instrument for the transmission or payment of money or monetary value, whether or not negotiable. The term does not include stored value products.
Among other things, the new law:
- Requires applicants to submit applications and other information through the NMLS;
- Requires a person or entity seeking control of a money transmitter to apply for a license and meet other conditions;
- Allows a licensee to conduct business through an authorized delegate, which is a person designated by a licensed money transmitter to engage in money transmission on behalf of the licensed money transmitter;
- Requires certain business practices related to sending receipts, refunding money in some circumstances, submitting audited financials, and maintaining a surety bond; and
- Gives the DFI powers to regulate money transmitters, including investigatory and enforcement powers, such as the authority to examine its books, accounts, or records and those of its authorized delegates, and the authority to take possession of an insolvent licensed money transmitter.
The new law makes various changes to the DFI’s licensing and regulation of collection agencies and their employees.
It specifically exempts credit unions from the definition of a collection agency. (A “collection agency” is defined as a person who collects others’ debts, and so credit unions collecting their own debts have never been considered collection agencies.)
Among other things, the new law:
- Removes the requirement that an individual collector hold a license separate from the license of the collection agency that employs them;
- Requires that a separate license be maintained for each business location;
- Expands the reasons why the DFI can suspend or revoke a collection agency’s license;
- Requires a collection agency to deposit and keep in its trust account money due to a claimant or forwarder within 48 hours after collection, while current law requires the money to be deposited promptly; and
- Amends various provisions related to assessing fees to creditors for returning accounts, record retention, identification of trusts accounts, use of “doing business as” names, compliance with federal and state laws, and contracting requirements.
The term “consumer lender” does not include a credit union, bank, savings bank, savings and loan association, or any of their affiliates. Under previous state law, a “consumer lender” had to get a license from the DFI to assess a finance charge for a consumer loan of more than 18% per year.
The new Act makes numerous changes related to the licensing and regulation of consumer lenders. For example, it:
- Defines consumer loan (for purposes of licensed lenders) as “a loan made by any person to a customer that is payable in installments or for which a finance charge is or may be imposed and includes transactions pursuant to an open-end credit plan… other than a seller credit card….;
- Applies to any person who takes an assignment for sale, in whole or in part, of a consumer loan with a finance charge of more than 18% per year, without regard to whether the loan was originally made by a financial institution (though this does not apply to collection agencies, payment processors, and those involved in investment or financing transactions);
- Eliminates provisions related to consumer loan interest rates that apply to certain loans entered into before August 1, 1987, and the requirement that all loans must be consummated at the licensed location; and
- Requires a licensed lender to keep its loan records separate and distinct from the records of any other business of the licensed lender.