Overview
The Division of Banks (DOB) was established under Section 1 of Chapter 26 of the Massachusetts General Laws and operates under the direction of a commissioner of banks who is appointed by the Governor. DOB is a division of the Office of Consumer Affairs and Business Regulation (OCABR) within the Executive Office of Housing and Economic Development (EOHED). According to DOB’s website,
[DOB] is the chartering authority and primary regulator for financial service providers in Massachusetts. DOB’s primary mission is to ensure a sound, competitive, and accessible financial services environment throughout the Commonwealth.
DOB is responsible for the supervision and regulation of non-depository institutions, which included 8,725 licensees and 4,793 branches and agent locations as of January 1, 2019. Non-depository institutions include mortgage lenders, brokers, loan originators, consumer finance companies, money-service businesses (i.e., foreign transmittal agencies, check sellers, and check cashers), debt collectors, and loan servicers. DOB also oversees depository institutions, which include state-chartered banks (cooperative banks, savings banks, and various types of trust companies) and credit unions. As of January 1, 2019, according to DOB’s “Division at a Glance” report, there were 176 depository institutions with 1,313 depository branch office locations holding $399.2 billion in total assets as of December 31, 2018.
DOB has four units: Non-depository Institution Supervision, Depository Institution Supervision, Enforcement and Investigation, and Administration. A policy group chaired by the commissioner of banks and consisting of DOB senior management oversees all regulatory matters, conducts strategic planning, and directs day-to-day operations. OCABR’s Administrative Services Unit performs most of the financial and accounting functions for DOB. DOB’s information technology is managed and maintained by the EOHED Information Technology Department.
DOB received state appropriations of $18,111,512 and $18,507,880 for fiscal years 2018 and 2019, respectively. During our audit period, DOB had approximately 183 employees, including bank examiners, managers, and support employees. It is headquartered at 1000 Washington Street in Boston and has field offices in Woburn, Lakeville, and Springfield.
Secure and Fair Enforcement for Mortgage Licensing Act of 2008
The Secure and Fair Enforcement for Mortgage Licensing Act of 2008 required the establishment of a nationwide licensing and registration system for residential mortgage loan originators. A federal registry called the Nationwide Mortgage Licensing System (NMLS) was created accordingly. NMLS is a Web-based platform that state regulatory agencies use to perform a variety of tasks, such as administering initial license applications and monitoring ongoing compliance with licensing requirements. Licensees (individuals and companies) can use NMLS to apply for, renew, surrender, or amend licenses; register for license examinations in one or more states; and make payments for licenses and examinations. Consumers can use NMLS for such things as determining whether a mortgage loan originator is authorized to conduct business in a particular state.
DOB receives notifications from NMLS regarding any enforcement actions by other states against residential mortgage lenders and brokers that have, or have applied for, active licenses in Massachusetts. DOB updates NMLS when it takes formal enforcement action against any Massachusetts-licensed mortgage lender or broker.
Foreign Transmittal Agencies Overseen by the Non-depository Institution Supervision Unit
According to Section 45.02 of Title 209 of the Code of Massachusetts Regulations, a foreign transmittal agency (FTA) is “a person who engages or is financially interested in the business of receiving deposits of money for the purpose of transmitting the same or equivalents thereof to foreign countries.” The United States Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN) requires FTAs to file reports on certain transactions in NMLS and maintain supporting documentation. FinCEN analyzes these reports to support law enforcement efforts and identify money laundering and related trends and patterns.
FTAs must be licensed by DOB to operate in Massachusetts. DOB management told us that the division reviews FTA record retention policies during the initial licensing process and during examinations. DOB management also stated that DOB examines FTAs every three years, unless it identifies an increased risk (e.g., consumer complaints, notifications from other states), in which case it performs an examination sooner. During an examination, DOB analyzes samples of transaction records to assess an FTA’s compliance with federal and state regulations. DOB requires FTAs to take appropriate and timely corrective action on any reporting or recordkeeping issues. Serious violations could cause an FTA to lose its operating license. As of January 1, 2019, there were 68 licensed FTAs operating 2,497 branches in the Commonwealth.
Examination Process
DOB performs its examinations on a rotating schedule, every three years for mortgage lenders and brokers and every two years for check cashers and FTAs. When following up on prior examination issues, DOB conducts examinations every two years or less for mortgage lenders and brokers and more often for check cashers and FTAs. DOB uses a standard examination template to perform its examinations. DOB determines an entity’s overall consumer protection compliance rating1 by considering the entity’s adherence to consumer protection laws and regulations and the effectiveness of its compliance with those laws and regulations. If an examination ends with a public enforcement action, DOB publishes information about the action on its website in addition to reporting it in NMLS. DOB’s annual report is also published on the website and includes formal and informal enforcement actions DOB has taken.
DOB stores all information about its ongoing and completed examinations on a shared drive that it calls its M drive. Agency staff members can access the drive either through DOB’s internal network or remotely using a drive access process established by DOB. DOB management gives employees access and other privileges, such as the ability to edit information on the drive, based on the employees’ business needs.
Regulatory Management System
DOB uses a software application it calls the Regulatory Management System (RMS) to oversee and manage certain activities of state financial licensees and state-chartered banks and credit unions. RMS includes an integrated complaint tracking system, an education management system, and an examination management system. RMS also includes a subsystem called the Non-Depository Regulatory System, which is a repository and DOB’s system of record to track and record the results of its licensee examinations.
| Date published: | November 18, 2021 |
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