Rhode Island Expands Lender Licensing for Installment Retail Contracts, Allows Remote MLO Work, and Makes Other Changes to Financial Institution Laws | Alston and bird
Rhode Island made a number of amendments to the statutes of financial institutions with the passage of Senate Bill 2794 / House Bill 7781 Sub A. The changes include the scope of licensing requirements applicable to retail contracts installment and remote work authorization for MLOs and other employees. The amendments entered into force upon their adoption on June 29, 2022.
Licensing of retail installment contracts
The law expands the definition of lender to include a person who enters into retail installment contracts, thus requiring a license to create such contracts. Under current law, a “lender” is anyone who makes or funds a loan, and a license is required to engage in such lending activity. The amendment clarifies that a loan is made or funded in Rhode Island if an installment retail contract is created. The amendments define retail installment contracts as “any security agreement negotiated or executed in this state, or under the laws of this state, including, but not limited to, any agreement in the nature of a mortgage , a contract of conditional sale or any other agreement, whether or not evidenced by a written document, to pay the retail purchase price of the goods, or any part thereof, in installments over any period and under which all security is retained or taken by the retailer for payment of the purchase price, or part thereof, of the installment retail contract.” Note that the law previously required a license to purchase or acquire retail installment contracts and defined the term in a separate statutory section.
MLO Remote Work
As in many jurisdictions, Rhode Island has also relaxed the rules for working remotely for employees of a mortgage licensee. Pursuant to the amendments, licensees are no longer required to provide the physical premises to employees, so long as they continue to oversee the services provided by the employee to the licensee. Under the amendments, employees of a licensee, including mortgage originators, can work remotely if certain conditions are met, including that: (1) their residence or other location is identified in the licensee’s records licensee and is within a reasonable distance of a place of business named in the licensee’s license or branch certificate, (2) the licensee maintains policies and procedures for supervision and employs an appropriate monitoring and risk-based monitoring of work performed by employees working remotely; (3) access to the computer system is subject to a comprehensive written information security plan; (4) the in-person interaction with the Customer does not occur at the remote site; and (5) physical records are not kept at the remote location. The law also removes previous prohibitions on carrying out other activities in a licensed location without prior authorization, but adds a prohibition on tying services to the consumer’s obligation to purchase any other product or service from a supplier. specified, including vendors with whom Licensee shares an office. space.
Note that the Rhode Island Division of Banking has also issued guidance stating that MLOs are not required to live within a certain distance of a branch (despite statutory language to the contrary), however, the Division will require the licensed entity to provide evidence of effective supervision of all sponsored mortgage originators.