By the Division of Banks

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Banks

96-151 Issuing Electronic Funds Transfer Access Devices

A bank may issue an access device which allows a customer to initiate an electronic funds transfer from his or her bank account(s) in response to a request or application therefor, and upon verification of the customer's identity by any reasonable means, pursuant to Mass. Gen. Laws chapter 167B § 6.

A consumer's present indication of interest in a product or device that is not yet available defeats the protection provided by the statute in requiring a consumer to take affirmative action to receive such an access device that does not currently exist. Accordingly, such an indication on a form executed when an individual opens an account does not constitute a formal request or application for such an access device. A bank, however, could use such a form to survey those consumers interested in receiving a debit card application when and if it becomes available.

Also, a bank cannot notify all potential recipients that an access device will be issued to all account holders, unless they decline in writing, because an access device cannot be issued to a customer without a request or application for such a device, under said statute.

96-169 Prohibitions On Serving As A Director Of A Trust Company

No person may serve as a trust company director if that person is engaged at the same time, individually or as a partner, in the business of making loans secured by stock or bond collateral, or if that person is a director, officer or employee of any person engaged in such business if such business is not subject to the Commissioner of Banks' supervision, under Mass. Gen. Laws chapter 172 § 19. There is no statutory authority to waive this prohibition. Therefore, an employee of an entity engaged in such secured lending which is not subject to the supervision of the Division of Banks cannot simultaneously serve as a trust company director.

96-171 New Hampshire Law Reciprocity

Based on Mass. Gen. Laws chapter 167 § 43A, and New Hampshire's, R.S.A. 390:13 and 384.63a, New Hampshire law is reciprocal to Massachusetts law in that a Massachusetts bank could engage in trust activities in New Hampshire, while a New Hampshire bank could establish trust offices within Massachusetts.

96-172 Disclosure Requirements For Electronic Fund Transfer Services

The terms and conditions of electronic fund transfers involving a consumer's account must be disclosed in writing before the consumer contracts for an EFT service, under Mass. Gen. Laws chapter 167B § 8.

Also, the provisions of Regulation E found at 12 C.F.R. 205.7(a), require a financial institution to make initial disclosures at the time a consumer contracts for an EFT service or before the first electronic fund transfer is made involving the consumer's account. Under Mass. Gen. Laws chapter 167B § 2(b), an Official Board or Staff Interpretation of Regulation E that is similar in substance to a provision of said chapter 167B shall be deemed an advisory ruling of the Division. The Official Staff Commentary on Regulation E states that if the EFT contract is made directly between the consumer and the financial institution, disclosures given before the time of contracting will satisfy the regulation only if they occurred in close proximity thereto. Accordingly, when EFT services are contracted for after the initial opening of an account, EFT disclosures must be provided at that time, unless such contract is executed in close proximity to the date the account is first opened.

96-175 Filing Or Notice Requirements For Leasing Additional Office Space For The Relocation Of A Bank's Mortgage Department.

The Division of Banks' written consent is required to relocate a state-chartered bank's main office to another location within the same city or town, under Mass. Gen. Laws chapter 167C § 2. Similarly, such a bank must obtain the Division's approval pursuant to Mass. Gen. Laws chapter 167C § 3 to establish a branch office or depot. The receipt of deposits is a banking business which would require a location of a state-chartered bank to be authorized as a branch or main office. Accordingly, the establishment of a facility which would house a bank's mortgage department, including the servicing, origination, processing, underwriting and administration of mortgage loans, would not constitute the business of a branch office or a main office relocation under said chapter 167C. Therefore, no application for an approval from the Division would be necessary to establish such an office, nor would there be any notice requirement for such a relocation of a bank's mortgage department. The bank, however, would be restricted from either receiving deposits or issuing withdrawals from such non-branch or main office premises. Also, the Division's approval may be required if the bank's leasehold improvements at the proposed site when added to the amount invested in bank premises, including the cost of alterations and additions in the nature of permanent fixtures, exceed the limit in Mass. Gen. Laws chapter 167F § 2(9).

96-179 Foreign Language Advertisement Disclosure Requirements

A foreign language advertisement must refer to a general type of credit offered by a bank before triggering the disclosures required by Mass. Gen. Laws chapter 167E § 15.

96-180 Using The Word "Bank" In A Corporate Name

It is not permissible for a non-bank corporation that is a subsidiary of a federal savings bank to transact business in the Commonwealth under a name containing the word "bank", "banking" or "bankers", under Mass. Gen. Laws chapter 167 § 37.

96-183 Operating A Loan Production Office

The establishment and operation of a loan production office (LPO) , which conducts only business related to loan production and processing, by a state-chartered bank does not require an application to, or approval from, the Division of Banks, under Mass. Gen. Laws chapter 167C § 3. However, if additional services are provided at the LPO site, the LPO may qualify as a branch, and would therefore need to apply for and receive approval from the Division prior to commencing business. For example, if deposits are received at the LPO site, even on a limited basis, the office would constitute a branch.

96-184 De Novo Interstate Branching Reciprocity Between Massachusetts & Connecticut

In regard to de novo interstate branching, Massachusetts law is reciprocal to that of Connecticut. Therefore, a Connecticut bank may establish a de novo branch in the Commonwealth, pursuant to Mass. Gen. Laws chapter 167 § 39C, under conditions no more restrictive than those that would be imposed by the laws of Connecticut on a Massachusetts-chartered bank.

96-189 Out-of-State Bank Licensing Requirements To Provide Tax Refund Loans

Under Mass. Gen. Laws chapter 140 § 96, entities making loans under $6,000.00 for personal, family or household purposes at interest rates exceeding 12% per annum must obtain a small loan agency license. However, under Mass. Gen. Laws chapter 140 § 114A, trust companies, savings banks, savings and loan associations, credit unions, national banking associations, federal savings banks and federal savings and loan associations, are exempt from the small loan agency licensing requirements but remain subject to the interest rate limitations on loans under $6,000.00 set forth in Mass. Gen. Laws chapter 140 § 100. Accordingly, it is the position of the Division that an out-of-state bank would also not require a small loan agency license to make tax refund loans under $6,000.00. However, such a bank would remain subject to the interest rate limitations of Mass. Gen. Laws chapter 140 § 100. Such loans would also be subject to the regulations at 209 CMR 26.00 et seq., which establish a 23% per annum maximum interest rate, and limit administrative fees to $20.00. Other applicable provisions of Massachusetts law such as Mass. Gen. Laws chapter 140D which governs truth-in-lending should also be reviewed by an out-of-state bank and its counsel.

96-208 Savings Bank Corporator Restrictions

Savings bank corporators are prohibited from serving as credit union officers or directors, under Mass. Gen. Laws chapter 168 § 9. However, an individual who is neither a credit union director or officer, but who is merely an advisory member of a credit union's personnel committee, may be a corporator of a mutual holding company organized under Mass. Gen. Laws chapter 167H.

96-217 Mutual Savings Bank Trustee Restrictions

A trustee of a mutual savings bank is prohibited from serving as a trustee or director of another savings bank, co-operative bank, credit union, savings and loan association, trust company, national bank, or bank holding company or an affiliate, under Mass. Gen. Laws chapter 168 § 10. However, there is no provision in Mass. Gen. Laws chapter 168 prohibiting a trustee from engaging in certain other areas of employment. Nevertheless, a member of a mutual savings bank's board of trustees has a fiduciary responsibility to act in the best interests of the bank, and in so doing should avoid participating in activities or discussions which represent a conflict of interest or give the appearance of a conflict of interest. If such situation does arise, it is appropriate for the trustee to recuse himself from participation in any such discussion relative to a particular subject matter. The determination of whether specific actions constitute a conflict or potential conflict of interest should be made by the full board, including the trustee in question, along with the bank's counsel, if necessary. Full disclosure is also required and is to be recorded in the minutes of the meeting. The Division's Administrative Bulletin 9-1 may also apply in the event a trustee's non-banking services are contracted for by the bank.

96-224 Savings Bank Trustee Restrictions

Any savings bank trustee who seeks, or against whom, an order of relief is entered in a personal capacity pursuant to the United States Bankruptcy Act, or who, on examination on a supplementary process proceeding, has been found unable to pay a judgment, must vacate his or her office as trustee, under Mass. Gen. Laws chapter 168 § 10(5), as amended by Chapter 359 of the Acts of 1996. However, any such trustee who receives a discharge in bankruptcy under Chapter 7, completes all payments pursuant to a plan under Chapter 11 or Chapter 13, or pays the judgment shall again be eligible to serve as such a trustee. It would be within the discretion of a savings bank's board to adopt a policy, as part of the by-laws, which extends Mass. Gen. Laws chapter 168 § 10(5) to non-trustee corporators of the institutions. It is also within the discretion of a bank's board to interpret its own by-law and in so doing to take guidance from the recent statutory amendment. However, the statute itself does not apply to non-trustee corporators of a savings bank.

96-232 Continuing Use Of A Bank's Prior Name After A Merger And Name Change

In a merger or consolidation of savings banks, a new name, or the name of any of the consolidating corporations may be adopted as the name of the continuing corporation and such name must become the name of the continuing corporation upon the approval of the consolidation, under Mass. Gen. Laws chapter 168 § 34. Due to post-merger considerations, the Division would not object to the continued use of prior bank names for a limited period. However, the bank should take reasonable measures to avoid undue customer confusion.


Credit Unions

96-153 Authority To Sell Motor Vehicle Service Contracts & Mechanical Breakdown Insurance

State-chartered credit unions must have specific authority either under Mass. Gen. Laws chapter 171, or another provision of the General Laws, to perform any act, or to provide products or services for its members in connection with the business of the credit union. Such credit unions are authorized to purchase group life insurance and/or group accident and health insurance on the lives of debtors who request such insurance and may pass the premium charges for such coverage to the debtor, under Mass. Gen. Laws chapter 171 § 75. Under section 75A of said chapter, credit unions are also authorized to act as agents or brokers for the Savings Bank Life Insurance Company of Massachusetts. The statute, however, contains no additional authority for a credit union to offer other types of insurance products in connection with its lending activity, nor in any other circumstances. Therefore, based on a review of Mass. Gen. Laws chapter 171, a state-chartered credit union cannot engage in the sale of motor vehicle service contracts or mechanical breakdown insurance either in conjunction with vehicle financing or as a separate product sold to members.

96-185 ATM Approval Requirements For An Out-Of-State Federal Credit Union

Under Mass. Gen. Laws chapter 167B § 3, an out-of-state federal credit union seeking to establish an automated teller machine ("ATM") in the Commonwealth is required to receive approval from the Division of Banks, and demonstrate that the state in which its main office is located would allow a similar Massachusetts institution to establish an ATM in that state.

96-192 Credit Union Board Member Responsibility To Avoid Conflicts Of Interest

Board members of a credit union organized under Mass. Gen. Laws chapter 171, have a fiduciary responsibility to act in the best interests of the credit union, and in doing so should avoid participating in activities which represent a conflict of interest or give the appearance of a conflict of interest. In such a situation, it is appropriate for a Board member to recuse himself or herself from participation in any discussion and/or other Board action relative to the particular subject matter. The analysis of whether specific actions constitute a conflict of interest or potential conflict of interest for a particular Board member is a determination to be made by the Board member involved and the members of the governing Board with assistance of legal counsel for the credit union.

96-195 Permissibility Of Making A Mortgage Loan For A Thirty-Five Year Term

A state-chartered credit union, having shares and deposits which total in the aggregate over $4 million, may make a mortgage loan for a term of thirty-five years under Mass. Gen. Laws chapter 171 § 65(4). Such a loan, however, can only be made for an amount equal to anywhere between 81% and 90% of the property's value, and would be subject to all other requirements found in said chapter 171 § 65(4).

96-205 Releasing A Copy Of A Report Of Examination

The release of a report of examination of a state-chartered credit union is governed by Mass. Gen. Laws chapter 167 § 2. The statute prohibits any person from receiving a report of examination without the Commissioner's approval. Therefore, a credit union must deny any requests for a report of examination, even a request from a former credit union officer, without first obtaining the Commissioner's approval.


Mortgages: Lenders & Brokers

See also: 96-203 Small Loan Agencies

96-142 Proper Methods Of Disclosure And Calculation Of The Annual Percentage Rate For Construction Loans

When a multiple-advance loan to finance the construction of a dwelling may be permanently financed by the same creditor, the construction phase and the permanent phase may be treated as either one transaction or more than one transaction, under 209 CMR 32.17(3)(f)(2). Under 209 CMR 32.28, certain appendices to the federal Regulation Z found at 12 CFR 226 et seq., are incorporated by reference. Part 1 of Appendix D to said Regulation Z, provides for two different methods of disclosure of the construction period. The precise method for calculating the annual percentage rate for a construction loan with permanent financing is also expressly discussed in Part II of Appendix D to said Regulation Z.

96-166 Exclusion Of A Flood Certification Fee In A Residential Mortgage Loan

The Official Staff Commentary to the federal Regulation Z has been deemed by the Division of Banks to be an advisory opinion for purposes of the Massachusetts Truth-in-Lending statute, under Mass. Gen. Laws chapter 140D § 3(b). Under the federal regulation, 12 CFR 226.4(c)(7), residential mortgage transaction charges are excluded from the finance charge, if the charges are imposed solely in connection with the initial decision to grant credit. This would specifically exclude a fee to determine if flood insurance is required. However, the Commentary also states that the exclusion does not apply to fees for services to be performed during the loan term regardless of when the fee is collected, and it directly names flood insurance as an example of a fee to which this applies. Therefore, the portion of a flood certification fee which is imposed solely in connection with the initial decision to grant credit would be excluded from the calculation of the finance charge. The remaining portion of such a fee, which represents services performed during the life of the loan, must be included in the finance charge for purposes of compliance with the Truth-in-Lending statute.

96-173 License Requirements For Commercial Loan Or Money Brokers

A license is not required to conduct the business of a loan broker or money broker for commercial, industrial or venture capital purposes in making loans greater than $25,000.00, unless such activities are related to a residential mortgage transaction, under Mass. Gen. Laws chapter 255E.

96-176 Collecting A Real Estate Broker's Fee Simultaneously With A Mortgage Broker's Fee

Certain provisions of the Real Estate Settlement Procedures Act (RESPA), 12 U.S.C. § 2601 et seq. and the regulations promulgated thereunder at 24 CFR § 3500 et seq., may be construed as a prohibition to a real estate broker receiving compensation for activities as a mortgage broker. Since RESPA is a federal law, the Division yields enforcement to the U.S. Department of Housing and Urban Development, the agency responsible for enforcing the RESPA regulations.

96-182 Licensing Requirements For An Out-of-State Bank Originating Loans And/Or Lines of Credit Secured By Massachusetts Real Estate

Any bank organized under the laws of any other state is exempt from the Commonwealth's mortgage lender licensing requirements under Mass. Gen. Laws chapter 255E § 2. Therefore, an out-of-state bank would not be required to obtain a mortgage lender's license in order to originate second mortgage loans on residential property located within the Commonwealth. Although Mass. Gen. Laws chapter 140 § 96 could be interpreted to require an out-of-state bank to obtain a small loan agency license in order to make loans under $6,000.00 at an interest rate exceeding 12% per annum, the Division of Bank has not required such licensing. However, a loan made to a Massachusetts resident resulting from a solicitation from outside the Commonwealth is considered a loan made within Massachusetts for regulatory purposes. Therefore, such loans must comply with all other applicable Massachusetts laws, including Mass. Gen. Laws chapters 140D, 183 and 184.

96-200 Guidance For Establishing A Subsidiary Or Affiliate For The Purpose Of Closing Loans

An entity whose sole purpose is to close loans originated by a licensed mortgage lender would not require a license under Mass. Gen. Laws chapter 255E. Such an entity, however, should review Mass. Gen. Laws chapter 140D § 4, and the Federal Reserve Board's Official Staff Commentary on Regulation Z, 12 CFR 226.4, for guidance as to how the attorney's fees charged may be reflected as a finance charge or annual percentage rate in residential mortgage transactions.

96-206 Permissible Origination And Servicing Fees For Mortgage Loans

State-chartered banks are prohibited from charging a fee when a consumer borrower exercises an option contained in loan documents to convert from an adjustable rate mortgage loan to a fixed rate mortgage loan, under Administrative Bulletin 13-2C (Revised 1988). Also, the late charge fee on a mortgage loan secured by a 1-4 family owner-occupied dwelling is limited to 3% of the overdue principal and interest payment. Mass. Gen. Laws chapter 183 § 56 establishes prepayment penalty limitations. Mass. Gen. Laws chapter 140D § 4 determines what fees are included or excluded from a mortgage loan's finance charge for disclosure purposes.

96-222 Mortgage Lender And Broker Advertisement Disclosure Requirements

Licensed mortgage lenders and brokers are required to disclose their license type and number in all advertisements, under 209 CMR 42.15. No exception is made for nationwide trade publications.

96-228 Open, Closed and Denied Mortgage Loan Record Retention Requirements

Mortgage lenders must retain for a minimum of three years after final payment is made on any mortgage loan or the mortgage loan is sold, whichever occurs first, copies of the note, settlement statement, truth-in-lending disclosure statement, correspondence, papers or records relating to the loan and such other documents as the Commissioner may require, under 209 CMR 42.09. This record retention requirement applies only to licensed mortgage lenders, and not to mortgage lenders that are exempt from the licensing requirements of Mass. Gen. Laws chapter 255E. In regard to loan denials, a lender must retain these records for twenty-five months from the date of the adverse action notice.

96-236 Licensing Requirements For Mortgage Insurers And Their Affiliates

Mortgage insurers and their affiliates that receive fees for referring purchasers to holders of existing mortgage loan portfolios and foreclosed mortgage properties would not require a mortgage lender or broker license under Mass. Gen. Laws chapter 255E because such activities do not involve the origination of residential mortgage loans. The mortgage loans already exist, there is no contact with consumer borrowers, and such transactions are in the nature of investments, not loans.


Small Loan Agencies

See also: 96-165 Sales Finance and Insurance Premium Finance Agencies

96-189 Banks

96-190 Permission To Conduct Business Other Than That Of Lending On Licensed Premises

Effective December 27, 1996, the requirement that a small loan agency obtain permission from the Commissioner of Banks to conduct business on its premises other than that of lending, such as the sale of disability income term insurance, set forth in 209 CMR 12.07, has been repealed. Therefore, a small loan agency may conduct such activity without the Division of Banks' prior approval. However, the Division may review the effect of such additional activities on the safety and soundness of such an agency, and on the general public, during an examination.

96-197 Net Worth Calculation For Small Loan And Collection Agency License Applicants

Each applicant for a small loan agency license, pursuant to Mass. Gen. Laws chapter 140 § 96 et seq., must furnish satisfactory evidence showing that such applicant has a net worth of at least $ 75,000, after all organizational and other initial expenses have been paid, under 209 CMR 12.03.

Similarly, applicants for a collection agency license, pursuant to Mass. Gen. Laws chapter 93 § 24 et seq., must submit detailed financial statements and such other financial information the Division may require, under 209 CMR 18.04.

96-203 (-225) Mortgage Loan Electronic Record Retention Requirements

Small loan agencies are exempt from the mortgage lender licensing requirements under Mass. Gen. Laws chapter 255E. Therefore, the record retention requirements for licensed mortgage lenders in Mass. Gen. Laws chapter 255E § 8 and 209 CMR 42.00 et seq. do not apply to small loan agencies making mortgage loans. The record retention requirements for small loan agencies found in 209 CMR 12.00 et seq., however, would apply to such agencies making mortgage loans. These regulations require that hard copies of mortgage loan records must be available for examination within the Commonwealth. Until new record keeping regulations are promulgated by the Commissioner of Banks, pursuant to Chapter 118 of the Acts of 1996, such records cannot be kept only in electronic form.

96-214 Commercial Loan Broker License Requirements

A person that arranges loans under $6,000.00 for personal, family or household purposes must be licensed as a small loan agency, under Mass. Gen. Laws chapter 140 § 96. Therefore, a commercial loan broker that assists equipment buyers in the purchase, financing, and leasing of heavy trucks and equipment would not require a small loan agency license because such trucks and equipment are not being used for personal, family or household purposes.

96-223 Small Loan Agency License Requirements For Out-Of-State Entities Making Auto Loans

An out-of-state entity which makes loans of $6,000.00 or less at a rate exceeding 12% per annum would require a small loan agency license under Mass. Gen. Laws chapter 140 § 96. Also, under the statute, when an application for a loan is made by any person within Massachusetts and the money is advanced or furnished by any person outside the Commonwealth, the transaction is deemed a loan made within Massachusetts. Thus, a loan solicitation from outside Massachusetts that results in a loan being made to a resident of Massachusetts would be governed by Massachusetts law.

96-231 Small Loan Agency License Requirements For A Secondary Market Student Loan Purchaser

Any person engaged in the business of making loans of $6,000.00 or less, upon which the amount paid for interest and expenses exceeds 12% per annum in the aggregate on the sum loaned, must obtain a small loan agency license under Mass. Gen. Laws chapter 140 § 96. Under the statute, an entity buying or endorsing of notes or the furnishing of guarantee or security for compensation is considered to be engaging in the business of making small loans. Therefore, only to the extent that interest rates for student loans to be purchased by an entity on the secondary market do not exceed 12% per annum on the sum loaned would such entity not be required to obtain a small loan agency license.


Collection Agencies

See also: 96-197 Small Loan Agencies

96-127 Collection Agency License Requirements For Licensed Mortgage Lenders And Their Parent Corporations

Entities which are not specifically exempt under Mass. Gen. Laws chapter 93 § 24 must be licensed as collection agencies in order to collect debts from Massachusetts consumers. Because mortgage loan servicers are not specifically exempt from this statute, they are required to obtain a collection agency license to engage in the collection of debts in the Commonwealth, as defined in 209 CMR 18.03. However, recent proposed amendments to 209 CMR 18.00 et seq., provide for a simplified collection agency application process for certain licensees under the jurisdiction of the Division of Banks, such as mortgage lenders licensed under Mass. Gen. Laws chapter 255E and small loan agencies licensed under Mass. Gen. Laws chapter 140 § 96.

96-152 Use Of A Collection Agency's Shortened Name On Correspondence

In communicating with debtors, collection agencies must use only the name in which the Commissioner of Banks has granted their license, under 209 CMR 18.13. The Division of Banks will not object to the shortened name of the collection agency appearing on the remittance portion of a collection letter, provided the full name of such collection agency appears at the top of each such letter.

96-174 Collection Agency License Requirements For Non-Profit Corporations

Any person or entity engaging in the collection of another person's debt from consumers in the Commonwealth is subject to the collection agency licensing requirements under Mass. Gen. Laws chapter 93 § 24. For purposes of the statute, any indebtedness over 30 days past due constitutes debt, under 209 CMR 18.00 et seq. An entity which is not specifically exempt by the statute must be licensed as a collection agency to collect such debt. Accordingly, even a non-profit corporation which intends to collect any such debt would require a collection agency license.

96-201 Out-Of-State Collection Agency Licensing And Debt Collection Requirements

Any person directly or indirectly conducting a collection agency or engaging in the business of collecting or receiving payment for others of any account, bill, or other indebtedness or in soliciting the right to collect or receive payment for others must obtain a license under Mass. Gen. Laws chapter 93 § 24 et seq. Also, a collection agency engaged mainly or preponderantly in the collection of debt of consumer debtors must maintain an office in the Commonwealth under 209 CMR 18.05. Therefore, an out-of-state collection agency seeking to conduct business in Massachusetts would require a license as well as a Massachusetts office where its records may be examined by the Commissioner of Banks. However, such an agency would not have to accept debt payments locally.

96-202 Collection Agency License Requirements For Mortgage Servicers

An entity which is not specifically exempt, under Mass. Gen. Laws chapter 93 § 24 et seq., must obtain a collection agency license in order to collect debt from Massachusetts consumers. The statute does not exempt mortgage servicers from the licensing requirements. However, amendments to 209 CMR 18.00 et seq., which provide for a simplified collection agency license application process for other licensees under the Division of Banks' jurisdiction, have recently been proposed, and took effect on December 27, 1996.

96-212 Collection Agency Use Of Multiple Names Under An Existing License

All collection agency licenses must plainly state the name and business address of the licensee, under Mass. Gen. Laws chapter 93 § 24A. No statutory authority exists for a collection agency to maintain multiple licenses for a single legal entity, or to maintain a business under an existing license while using a trade name for part of its business. Thus, a collection agency cannot operate part of its business under one name, while conducting the rest of its business under another.

96-220 Collection Agency License Requirements For Entities Collecting Their Own Debt

Entities engaged in the collection of debt for others in Massachusetts are required to obtain a collection agency license, under Mass. Gen. Laws chapter 93 § 24. Conversely, entities collecting their own debt are not required to be licensed under Mass. Gen. Laws chapter 93 § 24, but are subject to the Massachusetts Attorney General's debt collection regulations found at 940 CMR 7.00 et seq.

96-227 Licensing Requirements To Collect Subrogation Claims

In the instance that an insurance carrier pays for damages caused by an uninsured party and then proceeds with a subrogation claim against that party, such a subrogation claim does not fall within the definition of debt under Mass. Gen. Laws chapter 93 § 24 and 209 CMR 18.00 et seq.


Sales Finance and Insurance Premium Finance Agencies

96-165 License Requirements To Make Loans SecuredBy Autos For Purposes Other Than Purchasing An Auto & To Purchase Existing Loans Secured By Personal Property

In the event that an entity anticipates making loans for under $6,000.00 at an interest rate exceeding 12% per annum, whether or not they are secured by motor vehicles, that entity would be required to obtain a small loan agency license under Mass. Gen. Laws chapter 140 § 96. Also, if such entity intends to purchase existing consumer loans secured by personal property which fall under the definition of a retail installment sales agreement or revolving credit agreement, under Mass. Gen. Laws chapter 255D § 1, such entity would require a retail installment sales finance company license under said chapter. The Division of Banks is currently reviewing its administrative and regulatory procedures to potentially reduce the burden on such multiple licensing.

96-168 The Prohibition on the Payment of Fees for the Referral of Business to an Insurance Premium Finance Agency

Insurance premium finance agencies, licensed under Mass. Gen. Laws chapter 255C, and their employees, are prohibited from paying or allowing, or offering to pay or allow in any manner whatsoever to an insurance agent or broker or any employee of an insurance agent or broker, or any other person, any rebate whatsoever, either from the charge for financing specified in the premium finance agreement or otherwise, and giving or offering to give any other valuable consideration or inducement of any kind directly or indirectly. Accordingly, a Massachusetts-licensed insurance premium finance agency cannot pay a fee for business acquired from an agent.

96-186 Sales Finance Company License Requirements

A person or entity licensed under Mass. Gen. Laws chapter 255D as a sales finance company which purchases non-motor vehicle retail installment sales contracts, must obtain a separate license pursuant to Mass. Gen. Laws chapter 255B in order to purchase motor vehicle retail installment sales contracts.

96-233 Sales Finance Company Office Requirements

Sales companies licensed under Mass. Gen. Laws chapters 255B and 255D must maintain an office in the Commonwealth. Chapter 118 of the Acts of 1996 recently authorized the Division of Banks to promulgate regulations which may modify the physical location and record keeping requirements of such sales finance companies. Until such new regulations have been adopted, licensees must comply with the existing provisions of Mass. Gen. Laws chapters 255B and 255D, and the existing regulations promulgated thereunder.


Consumer Credit Cost Disclosure

96-204 Truth-In-Lending Disclosure Requirements For Discounted Open-End Home Equity Lines

When an ad for an open-end home equity line of credit states an initial annual percentage rate (APR) that is not based on the index and margin used to make later rate adjustments in a variable rate plan, the ad must also state the period of time such rate will be in effect, and with equal prominence to the initial rate, a reasonably current (APR) that would have otherwise been in effect using the index and margin, under 209 CMR 32.16(4)(b). Therefore, an ad which states an initial APR numerically, but describes the reasonably current APR using the word "Prime", would violate 209 CMR 32.16 (4)(b). Based on the wording of the regulation, the reasonably current APR should also be stated numerically.


Miscellaneous

96-193 Medical Savings Accounts

The Health Insurance Portability and Accountability Act of 1996 ("the Act")(P.L. 104-191) provides a tax savings incentive in the form of a medical savings account (MSA). The purpose of an MSA is to defer federal taxation on money saved and used to pay for qualified medical expenses. Under the Act, an MSA must be structured as a trust administered by a trustee which need not be a bank. It is well-settled law that a consumer may contract to pay over his or her funds to an entity, and for such funds to be maintained and/or invested for the benefit of the consumer without that relationship triggering federal or state banking laws. Accordingly, the Division of Banks has determined that opening a medical savings account would not constitute a banking transaction governed by the banking laws of the Commonwealth.