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Money Transmitter Licensing For Connecticut Debt Management Providers?

The Connecticut Department of Banking (DOB) issued a memo to Connecticut debt management providers on January 6, 2016, advising that both a debt adjuster and a money transmitter license would be required (effective March 1, 2016) (available here). The DOB based their position on a 2012 ruling by the Financial Crimes Enforcement Network (FinCEN) dealing with daily money management services. The 2012 FinCEN ruling (available here) found such activities to be "money transmission" under the Bank Secrecy Act (BSA) (requiring registration as a Money Service Business with FinCEN) because the money management firm did not negotiate with creditors or secure any interest rate reductions or other benefits for customers. The DOB memo relies on this 2012 FinCEN ruling to conclude that debt adjuster activities also involve money transmission under applicable Connecticut law and that dual licensing is required for "persons considered to be money transmitters by FinCEN." Licensed debt adjusters in Connecticut should give consideration to the fact that FinCEN has previously taken the position that debt management providers are not money transmitters under the BSA. Under the BSA, the "money transmitter" definition exempts those who accept and transmit funds or the equivalent of funds "only integral to the sale of goods or the provision of services, other than money transmission services." FinCEN considered this exemption in the context of debt management services in a 2004 ruling (available here) and held that a debt relief provider was not a "money transmitter" under the BSA because any funds transfer activity in the context of debt relief was integral to the separate and principal debt relief activity. Licensed debt adjusters in Connecticut should evaluate the 2004 on-point FinCEN ruling before agreeing to submit to dual licensure under both the debt adjustment and money transmission provisions. Please contact Christopher Rahl for more information concerning this topic.

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Date

01.20.16

Type

Publications

Authors

Rahl, Christopher R.

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