By the Division of Banks

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BanksCredit Unions
Mortgages: Lenders & BrokersSmall Loan Agencies
Collection AgenciesSales Finance & Insurance Premium Finance Agencies
Consumer Credit Cost DisclosureMiscellaneous

Banks

96-047 Travelers Check & Official Check Fee Charges to Persons Under 18 Or Over 65 Years of Age

Banks cannot impose any fee, charge or other assessment against the savings or checking account of any persons under 18 or over 65 years of age under Mass. Gen. Laws chapter 167D § 2(1). Also, banks cannot charge a fee for a withdrawal in the form of a certified check, bank check or money order from such accounts under Administrative Bulletin 24-2. It is the position of the Division of Banks that a bank may charge a fee against such accounts in connection with the purchase of travelers checks because it involves a two-step process - 1) the withdrawal of funds; and 2) the purchase of checks. The issuance of travelers checks is an optional service made available by some banks to their customers and is not within the scope of the fee prohibition set forth in Mass. Gen. Laws chapter 167D.

96-053 Out-of-State Bank Authority To Issue Credit Cards

Certain banking institutions, including certain out-of-state savings banks, are exempt from the small loans licensing requirements of Mass. Gen. Laws chapter 140 § 96, under Mass. Gen. Laws chapter 140 § 114A. All credit card issuers whether within or outside of the Commonwealth, however, must file a quarterly report with the Commissioner of Banks relative to the annual percentage rate charged to cardholders, any annual fee assessed, and certain other information, under Mass. Gen. Laws chapter 140 § 114C.

96-071 Savings Bank By-Law Amendments to Improve Corporator Attendance at Annual Meetings

A savings bank corporator who fails to attend two consecutive annual meetings may forfeit his membership by vote of the corporators at their next annual meeting, under Mass. Gen. Laws chapter 168 § 9. A savings bank's by-laws, however, can vary from the statute as long as the by-law provision is not inconsistent with the statute and is not unreasonable.The by-law provision at issue may be viewed as a contractual agreement between the bank and its governing body, the corporators. Any amendments to the by-laws of a savings bank must be made solely by the corporators, under Mass. Gen. Laws chapter 168 § 17. A method of corporator removal requiring action by the corporators through the adoption of a by-law which provides for the automatic cessation of membership when a corporator fails to attend two consecutive annual meetings, is not inconsistent with Mass. Gen Laws chapter 168 § 9. Additionally, such a by-law amendment may be reasonable to accomplish a bank's goal to have active and attentive corporators.

96-084 Authority to Establish Different Rates of Interest on Adjustable Rate Mortgage Loans Based on a Borrower's Credit-Worthiness

The interest rate on an adjustable rate mortgage loan written by a state-chartered bank in the Commonwealth must be based on the sum of the value of a specific index at a particular point in time plus a margin, under Administrative Bulletin 13-2C (Revised 1988). Accordingly, at the time the loan closes, the lender must choose the index, the margin, and the adjustment interval for each adjustable rate mortgage loan and these feature must remain constant for the life of the loan. Any unique combination of the elements of an adjustable rate mortgage loan constitutes a singular loan product under Administrative Bulletin 13-2C § 5.01 (Revised 1988). Although these elements must remain constant once selected, banks retain the authority and flexibility to use different margins, payment caps, and interest caps on each loan product. Therefore, it is the position of the Division of Banks that under Administrative Bulletin 13-2C § 5.01, state-chartered banks have the authority to design separate adjustable rate loan products and price structures based on the mortgage applicant's credit-worthiness. The imposition of a higher interest rate on individual adjustable rate loans, however, cannot be based on a "prohibited basis" under the federal Equal Credit Opportunity Act and Mass. Gen. Laws chapter 151B. Also, no proposed borrower can be misled as to loan products or rates that may be available through advertisements or oral discussions with bank personnel. Any bank basing the interest rate on adjustable rate mortgage loans on the borrower's credit-worthiness must ensure that disparate treatment of similarly situated borrowers does not occur. Accordingly, any such system must be demonstrably and statistically sound.

96-105 Applicability of Mass. Gen. Laws Chapter 167E on Out-of-State Banks

Generally, Mass. Gen. Laws chapter 167E is applicable only to banks as defined therein. In summary, only state-chartered banks are subject to the provisions of Mass. Gen. Laws chapter 167E unless another statutory provision expressly provides otherwise. Accordingly, an out-of-state bank or mortgage company would not be subject to the provisions of Mass. Gen. Laws chapter 167E.


Credit Unions

96-005 Director & Committee Member Expense Report Requirements

Reimbursement of actual expenses incurred by credit union directors or members of any credit union committee is now allowed under Mass. Gen. Laws chapter 171 § 20 as amended by Chapter 266 of the Acts of 1995. Such expenses, however, must be itemized in writing and approved by the board of directors and reported to and approved by the credit union membership. Expenses include an expenditure directly related to the credit union director's appearance at a board or committee meeting for which the director seeks reimbursement. It is the position of the Division of Banks that compensation, paid to credit union officers who are also directors, is separate and distinct from expenses. Accordingly, compensation such as a salary can be paid to a credit union officer who also serves as a director.

The position held by a director as an officer must be identified in the by-laws of the credit union or meet the other provisions set out in the Division's Administrative Bulletin 84-1. Actual expenses incurred should be reasonable and consistent with ordinary business procedures and the established written policy of the credit union. At a minimum, a credit union's policy should require: 1) documented receipts from the entity imposing the cost; 2) signed travel vouchers, if applicable; 3) proper reporting to the I.R.S.; 4) maximum lodging and meal expenses; 5) maximum number of trips for which accompaniment is permitted; 6) whether travel to and from meetings is eligible for reimbursement and rates set for such travel; 7) examples of reimbursable and non-reimbursable costs; and 8) disclosure of the consequences of filing incorrect or fraudulent claims. Aggregate director expenses must also be reasonable in relation to the size of the credit union and its financial condition.

Consequently, a credit union's management and board must establish and adhere to an annual budget for director reimbursements. A designated credit union employee should be responsible for maintaining a separate orderly file for each director containing all expense reimbursement documentation. Individual accounts must be reconciled to the general ledger expense account at least monthly. The policy and expense files must be available for examiner review.

A credit union should establish a dual method for review and reporting. The separate files on reimbursable expenses to be maintained on each director must be available for review under appropriate controls by any member of the credit union. At the annual or special meeting at which such expenses are reported to the membership as a whole, the expenses of the directors may be aggregated and reported by type of expenditure. Such categories may include meetings, travel and events. A credit union may not establish a set fee for reimbursement of directors for meetings since such a fee could not reflect "actual expenses incurred."

Any irregularities found in the reimbursement of directors in a Report of Examination will require restitution of any overpayments resulting from undocumented expenses or other violations of this statute. Any additional regulatory actions for any violations found could be further addressed in a Report of Examination.

96-106 Organization Member Share or Deposit Accounts

An organization member may open a share or deposit account subject to specified limitations based on the credit union's asset size, under Mass. Gen. Laws chapter 171 § 30. An organization member includes any fraternal organization, voluntary association, partnership or corporation, having a usual place of business within the Commonwealth and composed principally of individual members or stockholders who are themselves eligible to membership in a credit union, under the definition provided in Mass. Gen. Laws chapter 171 § 1.

96-107 Central Credit Union Fund Investment Authority

The Central Credit Union Fund (CCUF) is specifically authorized to invest in deposits in state-chartered trust companies, credit unions and savings banks as well as national banks located within the Commonwealth, under Chapter 216 of the Acts of 1932 § 4. The CCUF was granted expanded investment powers by the 1992 amendment passed as Chapter 157 of the Acts of 1992. In particular, the amendment added authority for the CCUF to invest in "other evidences of debt for its own account or for the account of others..." The Division of Banks recognizes that such broad language can refer to any deposit including a certificate of deposit which appears on the liability side of a bank or credit union's balance sheet. Accordingly, it is the position of the Division that the term, "other evidences of debt for its own account or that of its customers" set out in the CCUF's investment authority does include the authority to invest in certificates of deposit in out-of-state banks.

96-110 Credit Union Promotional Contest/Lottery

There is no statute or regulation in credit union law which governs promotional campaigns involving raffles conducted to increase the name recognition of a credit union and improve its community image. Such activity, however, may implicate the criminal statute regarding lotteries, Mass. Gen. Laws chapter 271 § 7, over which the Division of Banks has no jurisdiction.


Mortgages: Lenders & Brokers

See also: Collection Agencies 96-075

Small Loans Agencies 95-063

95-130 Open End Credit Late Charges

Late charges on all mortgage payments not made within fifteen (15) days of the due date, for notes secured by a first or subordinate lien on a dwelling house of four or less separate units and occupied in whole or in part by the mortgagor, are limited to 3% of the overdue principal and interest under Mass. Gen. Laws chapter 183 § 59. Late payment charges on open end home equity loan credit plans written pursuant to Mass. Gen. Laws chapter 140 § 114B, whether secured or unsecured, and not made within fifteen (15) days of the due date are limited to 10% of the outstanding balance or ten dollars ($10), whichever is less.

Where an issue of priority exists between a specific statute and a general statute, the specific statute governs the matter. Mass. Gen. Laws chapter 140 § 114B is a specific statute authorizing open-end home equity credit plans and establishing certain restrictions and limitations on such plans, including the calculation of finance charges and assessments of late charges. Therefore, its provisions would take precedence over those of Mass. Gen. Laws chapter 183 § 59, which is a general statute governing late charges for residential mortgage loans. Accordingly, it is the position of the Division of Banks that the maximum late charge for payments not made within fifteen (15) days of the due date on an open-end credit plan written pursuant to chapter 140 § 114B is 10% of the outstanding balance or ten dollars ($10), whichever is less.

96-048 Mortgage Lender Borrower Notice Requirements

A mortgage lender must inform a mortgage borrower of the status of his or her application no later than twenty-one (21) business days from the date of application, by: approval or denial of the application; notification that the application is not substantially complete pursuant to Mass. Gen. Laws chapter 184

§ 17(D)(d); or notification that the application is substantially complete pursuant to Mass. Gen. Laws

chapter 184 § 17D(e). Additionally, lenders must notify borrowers of their decision on the application no later than thirty (30) days from the date of notice of completeness.

96-056 Limitations on Revisions of Mortgage Terms on Mortgages Which Advance New Funds

Under Mass. Gen. Laws chapter 167E, a revision of mortgage terms in which additional funds are loaned is prohibited unless these funds are advanced pursuant to Mass. Gen. Laws chapter 183 § 28A. Accordingly, a commercial mortgage transaction in which the revision of terms would advance new funds to the borrower in excess of those listed in Mass. Gen. Laws chapter 183 § 28A would have to be closed as a refinanced loan.

96-057 Licensing Requirements for the Secured Financing of Swimming Pools

An entity seeking to close loans for the purchase of swimming pools in its own name which would be secured by a mortgage on the customer's principal residence must be licensed as a mortgage lender under Mass. Gen. Laws chapter 255E if such entity originates five or more such loans in a consecutive twelve (12) month period.

96-061 Record Keeping Requirements & Jurisdiction Over Mortgage Loans on Residential Property Within and Outside of Massachusetts

Mortgage loans, originated by a Massachusetts mortgage lender licensed under Mass. Gen. Laws chapter 255E to its out-of-state employees for property outside Massachusetts, are not subject to the jurisdiction of the Division of Banks. Mortgage loans originated by such an entity to its employees within the Commonwealth would be subject to the jurisdiction of the Division of Banks. Therefore, all books and records for such loans must be maintained in the Commonwealth in a manner consistent with the regulation at 209 CMR 42.09.

96-062 (-050) Mortgage Broker License Requirements for Independent Real Estate Broker Organizations & Real Estate Brokers

An organization of independent real estate broker offices, which earns a fixed annual fee from a licensed mortgage broker in exchange for marketing-related services, would meet the definition of a mortgage broker and thus be required to obtain a license under Mass. Gen. Laws chapter 255E. This requirement is triggered by the compensation being received by the organization for actions which indirectly assist a homebuyer in the placement of a mortgage loan. If the organization distributes funds received from the licensed mortgage broker to the individual real estate broker offices, then the individual offices may have to be licensed as mortgage brokers under the statute. Such persons associated with and working under the direction of a licensed mortgage broker are eligible for an exemption from the mortgage broker license requirements under Mass. Gen. Laws chapter 255E if the regulated licensee completes a Statement of Accountability wherein the licensee agrees to take responsibility for its associates' activities authorized under Mass. Gen. Laws chapter 255E and its implementing regulation, 209 CMR 42.00 et seq.

96-065 Mortgage Broker Licensing Exemption for Certain Non-Profit Organizations

Under Mass. Gen. Laws chapter 255E § 2, any non-profit agency or corporation, incorporated under the laws of the Commonwealth for the purpose of assisting low and moderate income households in the purchase or rehabilitation of family residences of four or less units, and which holds tax exempt status under the provisions of Section 501(c)(3) or (c)(4) of the Internal Revenue Code, is exempt from the licensing requirements of Mass. Gen. Laws chapter 255E.

96-068 Mortgage Payoff Statement Fees

Although Mass. Gen. Laws chapter 183 governs mortgage loans along with other provisions of Massachusetts law, there is no Massachusetts statute or regulation governing the charging of fees for the issuance of mortgage payoff statements. Therefore, the mortgagee may charge a fee for providing the borrower with a payoff statement if the amount of the fee is reasonable in relation to the service provided. As a fee which is not regulated by statute, such a fee would not be required to be disclosed in advance to the borrower.

96-072 Licensing Requirements for Mortgage Servicers

An entity which services, extends, rewrites, modifies or re-documents mortgage loans, but is not a creditor, and is not involved in the exchange of proceeds for a mortgage loan would not qualify under the definitions of Mass. Gen. Laws chapter 255E § 1 as either a mortgage lender or broker. Therefore, such an entity would not require a mortgage lender's license unless such entity engages in making mortgage loans or issuing mortgage loan commitments in its own name.

The servicing of mortgage loans, however, may require such an entity to obtain a collection agency license under Mass. Gen. Laws chapter 93 § 24 et seq., if its activities include collecting principal and interest payments from Massachusetts residents that are more than thirty (30) days past due.

96-080 Mortgage Broker Licensing Requirements

Although an entity does not take mortgage loan applications directly from borrowers and does not fund or service mortgage loans, nor charges a fee to the borrower at the time it initially becomes involved in the application process, but does collect an origination fee at the time the loan closes, such entity would fall within the definition of a mortgage broker under Mass. Gen. Laws chapter 255E § 1. Accordingly, such an entity would have to obtain a mortgage broker's license in order to conduct this type of business on an ongoing basis in the Commonwealth. In the event the entity performs its services less than five (5) times in a consecutive twelve (12) month period, such entity would not be required to obtain a mortgage broker's license.

96-081 Mortgage Lender & Broker Licensing Requirements for Indirect Affiliates of Bank Holding Companies

Bank holding company subsidiaries which are indirect affiliates of national banking associations are not exempt from the licensing provisions of Mass. Gen. Laws chapter 255E.

96-085 Mortgage Loan Prepayment Penalty Notice

Prepayment penalties on mortgage loans secured by first liens on a dwelling house of three or less families, occupied in whole or in part by the mortgagor, are limited by the provisions of Mass. Gen. Laws chapter 183 § 56. This statute, however, does not mandate the form of notice given to a consumer relative to prepayment provisions. Since the mortgage note represents the contract between the parties, any prepayment penalty in connection with the mortgage loan must be included in the note. Additionally, any truth-in-lending and good faith disclosures are given for disclosure purposes only and do not represent the legal obligation of the parties.

96-092 Mortgage Loan Execution Policy

Although Mass. Gen. Laws chapter 183 governs mortgage loans along with other provisions of Massachusetts law, there is no Massachusetts statute or regulation which governs the execution of documents in a loan transaction. However, lending institutions may establish their own policies relative to the closing of a particular loan. The Division of Banks has no jurisdiction to render an opinion relative to the necessary formalities of execution for such legal documents in the Commonwealth. Because the Division responds to matters in question only within its jurisdiction, issues of general practice should be resolved by a regulated entity's own counsel.

96-093 Licensing Requirements to Sell Bi-Weekly Mortgage Reduction Programs

Mortgage reduction programs which provide an optional service to mortgagors by establishing an alternative method of payment for existing mortgage loans do not constitute the making of, or issuing commitments for, a mortgage loan. Additionally, these services do not fall within the definition of a mortgage broker under Mass. Gen. Laws chapter 255E. Therefore, such programs are not subject to the mortgage lender and broker licensing requirements of Mass. Gen. Laws chapter 255E.

96-101 Mortgage Lender Licensing Exemption for A Division of A Federal Savings Bank Which Is Not A Legally Separate Entity

An entity making mortgage loans directly as an internal unit of a federal savings bank is exempt from the mortgage lender's licensing requirements of Mass. Gen. Laws chapter 255E. Reference to an internal unit does not affect the exempt status of a federal savings bank. However, it is important that consumers know that they are or will be doing business with such bank and not some other legal entity. Therefore, the identity of such bank as the lender must be clear from all documents, advertisements, stationery, and in all other contexts.

96-103 Licensing Requirements for Entities MakingCommercial Loans Secured By Mortgages on Commercial Property or Combined Commercial/Residential Property

An entity, which makes loans secured by mortgage on commercial property or property which is commercial and residential combined, is not required to obtain a mortgage lender's license under Mass. Gen. Laws chapter 255E. It has been the Division of Banks consistent position that a mortgage lender's license is not required when the loans in question are commercial loans and the security for the loans is not solely 1-4 family owner-occupied residential property.

96-114 (-099) Mortgage Lender Record Keeping Requirements

Licensed mortgage lenders must keep and use within the Commonwealth such books, records and accounts as will enable the Commissioner to determine whether such licensee is complying with applicable statutory provisions and regulations, under Mass. Gen. Laws chapter 255E § 8. Mortgage lenders must retain for a minimum of three (3) years after final payment is made on any mortgage loan or the mortgage loan is sold, copies of the note, settlement statement, truth-in-lending disclosure, correspondence, papers or records relating to the loan and such other documents as the Commissioner may require, under 209 CMR 42.09.

These record keeping requirements are applicable to paid or sold mortgage loans, but not to rejected or withdrawn loans. Currently, the preservation of records required to be retained is permissible using photographic reproduction under Mass. Gen. Laws chapter 255E § 8. Though the current statute and regulations do not address the method of retention applicable to open loan files, it is the position of the Division of Banks that it would be impermissible to maintain open loan files solely on microfilm thereby destroying the original documentation.


Small Loan Agencies

95-063 Licensing Requirements for Marketing, Originating and/or Brokering Open-End Home Equity Lines of Credit

The Small Loans Act ("the Act") is applicable where individual advances on a home equity line of credit are made for $6,000.00 or less regardless of whether the line of credit itself is for an amount in excess of $6,000.00. Therefore, an entity which is not exempt from the licensing requirements of the Act under Mass. Gen. Laws chapter 140 § 114A must be licensed under Mass. Gen. Laws chapter 140 § 96 in order to originate home equity lines of credit on which individual advances may be made of $6,000.00 or less. Therefore, an entity which markets, originates and/or brokers open-end home equity lines of credit and would thus be engaging in aiding and assisting in making small loans for a fee, commission, bonus or other consideration, would require a small loans agency license under Mass. Gen. Laws chapter 140 § 96.

96-026 Small Loans Interest Charges

Entities making loans under six thousand dollars ($6,000) for personal, family or household use at rates which exceed twelve percent (12%) per annum are required to be licensed as a small loans agency, under Mass. Gen. Laws chapter 140 § 96 et seq. Therefore, in order to be exempt from the licensing requirement, the amount of interest and expenses to be paid on any loan equal to or less than six thousand dollars ($6,000) cannot exceed twelve percent (12%) per annum of the sum loaned under Mass. Gen. Laws chapter 140 § 96. It is the position of the Division of Banks that such limitation is to be calculated on a per annum basis as expressly provided for in the statute.

This requires that the 12% limitation be complied with in each year following the date of the loan and not on the basis of an annual percentage rate (APR), calculated in accordance with Mass. Gen. Laws chapter 140D, over the life of the loan.

96-087 Small Loan Agency Record Keeping Requirements

Small loan agencies are required to preserve for two (2) years after the discharge of a loan, all records of final entry including ledger cards, under 209 CMR 12.17. Accordingly, it has been the long-standing position of the Division of Banks that small loan agencies must retain such records within the Commonwealth for the required length of time. The Commissioner of Banks currently has no authority under Massachusetts law to waive the record retention requirements for an entity licensed as a small loan agency.

96-094 Licensing Requirements for Making Loans to Finance the Purchase of Horses

Any person or entity seeking to make loans of six thousand dollars ($6,000.00) or less for personal, family or household purposes at a rate which exceeds twelve percent (12%) per annum, must obtain a small loans agency license from the Division of Banks under Mass. Gen. Laws chapter 140 § 96. Therefore, an entity seeking to make loans over six thousand dollars ($6,000.00) to finance the purchase of horses used for personal, family or household purposes does not require a small loans agency license.

96-109 Business Loan Interest Rate Limitations

The Small Loans Act at Mass. Gen. Laws chapter 140 § 96 et seq. only applies to loans of six thousand dollars ($6,000.00) or less for personal, family, or household purposes. Therefore, a person making a loan under $6,000 to a business entity for purposes other than personal, family or household would not be subject to the small loan licensing requirements, including the twelve percent (12%) annual interest rate limitation.


Collection Agencies

96-064 (-086) License Requirements for Creditors Collecting Debts on Their Own Behalf

An entity, which purchases and then collects debt on its own behalf as a creditor, is not required to obtain a collection agency license under Mass. Gen. Laws chapter 93 § 24. An entity engaging in the collection of debts from persons within the Commonwealth, however, is subject to compliance with the debt collection regulations promulgated by the office of the Attorney General at 940 CMR 7.00 et seq.

96-075 Collection Agency Licensing Requirements

Banks as defined by Mass. Gen. Laws chapter 167 are exempt from the collection agency licensing requirement under Mass. Gen. Laws chapter 93 § 24. Unlike banks, bank holding companies are separate and distinct entities which do not conduct banking business, but which own or control individual banks. Therefore, bank holding companies are not exempt from the collection agency license requirements. National banks and their subsidiaries, however, are exempt from the collection agency licensing requirements under Mass. Gen. Laws chapter 93 § 24.

An entity servicing a mortgage loan on behalf of a secondary market purchaser of that loan is not subject to the collection agency license requirements of Mass. Gen. Laws chapter 93 § 24. When the mortgage indebtedness of a borrower becomes more than 30 days past due, however, it meets the definition of a "debt" under 209 CMR 18.00 et seq. Accordingly, an entity servicing mortgage loans, and engaging in the collection of debt, must obtain a collection agency license.

96-078 Collection Agency License Requirements for Recovering Subrogation Claims

An entity which pursues and recovers, on behalf of another, subrogation claims which do not involve the collection of money owed under an account as a result of a purchase, lease, or loan of goods, services or property as set forth in 209 CMR 18.03, would not be conducting the business of a collection agency as contemplated under Mass. Gen. Laws chapter 93 § 24 and its implementing regulations, 209 CMR 18.00 et seq., governing such entities. Accordingly, such an entity would not be required to obtain a collection agency license.

96-088 Forms & Identification of a Collection Agency

Although a collection agency must maintain an office in the Commonwealth under Mass. Gen. Laws chapter 93 § 24 and its implementing regulation, 209 CMR 18.05, neither the statute nor its regulations preclude a licensed collection agency from sending letters or making telephone calls to Massachusetts debtors from a location outside of Massachusetts. In communicating with debtors, however, a collection agency must only use the exact name in which the Commissioner has granted its license, under 209 CMR 18.13. Accordingly, a collection agency's written communications to debtors, whether sent from its Massachusetts office or an out-of-state office, must reflect a return address of the agency's office in the Commonwealth which is noted on the agency's license.

95-114 Collection Agency License Applications

The collection agency license application requests specific information relative to the general licensing standards, outlined in the statute, concerning the corporation's directors, senior officers, significant owners, and affiliates (or its "principals"). The application requires that certain information be disclosed to the Division of Banks ("the Division"), prior to licensing and at renewal, relative to formal or informal regulatory action or license action taken against the applicant or its principals. In addition, the Division may request specific disclosure of other pertinent information under 209 CMR 18.04(1). The Division reviews each application for a license in its entirety and in light of the specific facts disclosed during the licensing process as they may apply to the statutory, regulatory, and other standards employed by the Division. A decision on the application is based on the merits of the application, and any additional information submitted with the application, or subsequently, upon the Division's request.


Sales Finance & Insurance Premium Finance Agencies

See also: Consumer Credit Cost Disclosure 96-077

95-083 Premium Finance Agency Agreements & Licensing Requirements

An insurance agent or broker who holds premium finance agreements made and delivered by insureds to him or his order constitutes a premium finance agency as defined by Mass. Gen. Laws chapter 255C § 1. Premium finance agreements include agreements financing both consumer and commercial insurance contracts. Accordingly, such premium finance agencies must be licensed by the Commissioner of Banks under Mass. Gen. Laws chapter 255C § 2, unless specifically exempt.

96-083 Sales Finance License Requirements for Entities Purchasing Automobile Retail Installment Sales Contracts from Sales Finance Companies in the Commonwealth

Any person engaged, in whole or in part, in the business of purchasing retail installment contracts from one or more retail sellers qualifies as a sales finance company under the definition provided in Mass. Gen. Laws chapter 255B § 1, and must obtain a license to carry on such business. The statute also defines a retail seller as a person who sells a motor vehicle to a retail buyer under, or subject to, a retail installment contract. Therefore, an entity which will not be purchasing retail installment contracts from retail sellers, but only from sales finance companies would not be required to obtain a sales finance company license under Mass. Gen. Laws chapter 255B. Such an entity, however, would be classified as a retail installment contract "holder" under Mass. Gen. Laws chapter 255B § 1. As a holder, such an entity would be subject to certain sections of Mass. Gen. Laws chapter 255B applicable to installment contract holders, including sections 11, 15, 17, 18, 19, 19A and 20.


Consumer Credit Cost Disclosure

96-077 Passing the Cost of Vendor's Single-Interest Insurance to the Borrower in a Consumer Credit Transaction

Charges or premiums for insurance, written in connection with any consumer credit transaction, against loss or damage to property may be passed on to the consumer and disclosed as part of the finance charge in the transaction, under Mass. Gen. Laws chapter 140 D § 4(c), and its implementing regulation, 209 CMR 32.04(4)(b). The statute and regulation, however, provide that the premiums for this single-interest insurance may be excluded from the finance charge if (1) the insurance coverage may be obtained from a person of the consumer's choice and this fact is disclosed to the consumer; and (2) if the coverage is obtained from or through the creditor, the premium for the initial term of insurance coverage shall be disclosed. Massachusetts law relative to vendor's single-interest insurance is identical to the federal Regulation Z.

96-091 Interest Rate Advertising Requirements

The Division of Banks views the advertisement of the nominal rate of a loan in much larger type than the annual percentage rate ("APR") as a violation of Regulation Z at 12 CFR 226.24(b), which provides that advertisements may contain "a simple annual rate or periodic rate that is applied in conjunction with, but not more conspicuously than the annual percentage rate."


Miscellaneous

96-074 Credit Counseling/Debt Adjuster Regulations

The Division of Banks has no regulatory jurisdiction over credit services organizations as defined in Mass. Gen. Laws chapter 93 §§ 68A-E. Because no state agency is specified in this law and no regulations have been promulgated, compliance would be enforced by the Commonwealth's Attorney General.